The quest for knowledge, power and ROI

"Knowledge is power," English philosopher Francis Bacon once wrote. Yet in today's information age, enterprises still struggle to turn their distributed data into useful and powerful knowledge bases.

Several years ago a few opportunistic software companies took notice of this, and the knowledge management (KM) industry was born. In theory, enterprise KM systems track resources, documents and people skills, creating a company-wide, long-term memory independent of employees.

The industry's identity crisis may force some to write off investing in KM, but experts believe its return on investment (ROI) potential may be high if implemented correctly.

The knowledge

Jonathan Spira, chairman and chief analyst of New York-based analyst firm Basex Inc., said that before an implementation, it is important to realize that there is no such thing as KM in a box.

"KM isn't really a tool or set of tools; it's a discipline. If you imagine a database containing millions of entries...even if you look at some (information) that makes sense, it might be out of context with data in other systems," said Spira. "You need some way to bring this information together contextually."

Spira said KM can do that, but it is difficult to find a starting place. A number of preexisting technologies often fall under the KM umbrella, such as document management, content management, communities, portals, search engines, user profiling and customer relationship management (CRM).

The variety of vendor offerings is also confusing. In July, Basex surveyed the marketing efforts of 36 major KM vendors -- including Lotus Software, IT Factory, Interwoven and Siebel -- and found only 25% considered themselves to be KM vendors.

Another cornerstone of knowledge management involves capturing what Delphi Group senior advisor Larry Hawes calls tacit knowledge -- information that exists solely in peoples' minds.

"What KM software needs to do is facilitate that (process) by making it easier to capture and share tacit knowledge in document form, or by making it easier to find an individual that has that knowledge and collaborate with them, potentially online," said Hawes.

The power

Director of business intelligence Tony Souza recently oversaw a J.D. Edwards-based KM implementation at his company, Ontario Store Fixtures Inc. (OSF) in Toronto. The retail store interiors manufacturer was using several complex reporting tools to compile data on sales order management, enterprise resource planning (ERP) and financials.

Since none of the company's systems were linked, every basic data mining project required heavy in-house development. Last year, the company decided to undertake a KM implementation based on its J.D. Edwards ERP system.

Souza said customizing communications between separate systems is usually the sticky point in an implementation, but leveraging his preexisting ERP system saved OSF the trouble of staring from scratch.

After installing a new data warehouse and integrating its financial systems, the company added sales order, manufacturing and document management software. Today, Souza said his company has a powerful end-to-end view of its workflow processes.

OSF's goal is to increase workflow efficiency by 95% through the combination of distributed data and tacit knowledge. Better message management is one example. "When messages sat in somebody's inbox, tasks didn't get pushed through the system. Now we've put gates at each end of the processes, so messages aren't allowed to sit there for longer than a given period," he said.

The ROI

Today, a year after it began, Souza's company considers its KM implementation a success. However, he said the project could have quickly gone awry with expensive customization if he had chosen systems that did not complement his existing platforms and back-end systems.

Souza said that even though it is difficult to measure ROI on a KM implementation, OSF gained an advantage over competitors because its information is readily available in many ways.

"If you're able to either integrate your information with suppliers or provide customers better information about what's going on with the status of their transactions, that makes your business more competitive," said Souza. "It's hard to put an exact dollar figure on that, but that doesn't mean it's not important."

Hawes said the best KM ROI metric might be measuring a company's internal awareness and market responsiveness before and after an implementation.

Regardless, Spira cautioned that expecting an immediate ROI is unwise, especially because it takes time and effort before employees will embrace a philosophy that centralizes the data and knowledge that once solidified their corporate worth.

"There's no company that doesn't bring its own culture and baggage" to a KM implementation, Spira said. "Approach the decision to adopt a KM mentality as you would any other strategic change. Don't let the optimism of the dot-com era make you expect a three-month return."

FOR MORE INFORMATION:

The Best Web Links on knowledge management

A WhatIs.com definition of knowledge management

IBM, Microsoft detail plans to marry knowledge management, business intelligence