One way to decide how much effort to put into KM in your project.

How much of your project spend should be on KM?

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That’s an interesting question, and one way to answer it is to look at the value of the knowledge in proportion to the value of the project itself (please note this argument only really works for projects that deliver a value stream).

Take for example a large construction and engineering project – the first of its kind in a new location. The project will create two things –

  1. An income stream for the owner
  2. Knowledge, which can be used to reduce cost for future projects
Let’s assume some facts for our imaginary project. Let’s assume it’s a big one but not quite a megaproject.
  1. Budget of $500 million
  2. Timescale 2.5 years
  3. Net Present Value (NPV) $1 billion
  4. Work-hour estimate 10 million
  5. 2 similar projects planned
  6. Conservative estimate of the value of the knowledge – $50 million (5% cost saving on 2 follow-on projects of the same size and scope through effective KM and lesson learning)
So if the value of the knowledge is $50 million and the value of the project is $1 billion, then logically you would expect the investment in KM to be in the same ration to the spend on the project – ie 5%. You would expect a total KM spend of $25 million (3% of $500m) producing lessons, guidance and other knowledge for the improvement of the two follow-on projects. 
Now a lot of the work on the main project would  be done by contractors, and you would need to make sure that they also were spending their share on KM.  Its also possible that you could discount the cost or materials, and instead look at time and labour costs.  The project management team itself might be, say 20 people, working 10,000 days over the life of the project. By the same logic, you would want 500 days (or 1 person full time) spent by the project management team on knowledge management. 
In most projects, the team would spend nowhere near this. They might have a one-day lessons learned meeting halfway through the project (1 day for 20 people is 20 workdays) and another one-day meeting at the end (another 20 workdays). That is a massive under-investment of time and resource, given the value of the knowledge. Instead they should spend 5% of their time on KM, or 2 hours a week.
For your organisation,you can do the math. Work out the value of the knowledge vs the value of the projects, and see what investment in KM would  be appropriate. 
It might surprise you – it surely will surprise your management, because in our (Knoco) experience, the vast majority of projects under-resource KM, compared to the value it delivers.

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Shared by: Nick Milton

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