Helping people FEEL the value of KM – the KM "test drive"

If you want someone to buy something, they need to be convinced that it is worth the investment. If your product is a good one, then you can convince people by letting them try before they buy.

That’s why Apple allows you to play with all its products in the Apple store. That’s why cheese-stalls in the market give away free samples. That’s why car salesmen let you take a test-drive in that new Mercedes.

KM, Before and After

But how can you test-drive knowledge management?

For the past 20 years, we have been running a knowledge Management exercise called Bird Island which acts as a KM test-drive. The purpose of the exercise is to allow people to experience personally the value of Knowledge Management by seeing (and feeling) the impact it has on their performance.

The exercise is a simple one – the delegates are divided into teams, given a small set of materials, and asked to build as tall a tower as possible (with some environmental constraints). Then knowledge is brought into the equation, first through an after action review within the team, secondly through a peer assist with another team, and finally through presentation of a best practice knowledge asset showing the secrets of building the tallest towers from previous courses.

Armed with a full set of knowledge, they build the tower again, and frequently treble or quadruple their previous performance. 

Behind the exercise is a very simple KM system;

  • Every time a team makes a new modification and improvement to the tower design, we photograph it 
  • We update the Best Practice knowledge asset to include the new modification 
  • We present the updated knowledge asset in the next training course 
  • People use this as the basis for their own design, and often innovate even further (and the innovations feed the next improvement cycle). 

It is the emotional impact in the exercise that sells KM.

This impact comes at three points:

  1. When a team with a small tower, who have defined what they think is the limit of possibility for tower height,  holds a peer assist with a team which has already exceeded that limit. You can almost hear the minds opening at this point.
  2. When the teams are shown a picture of the current world record tower, which is FAR beyond their perceived limits. You can definitely hear minds opening here, and at this point I tell them that the only thing the winning team had which the current teams don’t yet have, is knowledge. Everything else is equal – knowledge is the only difference.
  3. When the teams look in wonder and pride at their second towers, built with a full set of knowledge, which are usually close to the world record, and sometimes set a new record.

This is the KM test drive; it’s an emotionally engaging mind-opener for the participants, and never fails to convert people to the value of KM. 

View Original Source (nickmilton.com) Here.

The value of mentoring programs in KM – quantified story number 129

Mentoring is a valuable component of KM when it comes to onboarding new staff. A recent article tells us just how valuable it is. 

Image from wikimedia commons

The article is entitled “The secrets of leveling up junior employees“, is written by Miriam Kharbat, and it deals with the software industry (but is applicable to other industries as well. Miriam describes the value of mentorship in transferring knowledge to new staff, and makes the following points:

  • Mentorship can be beneficial for both parties Miriam quotes a  2006 Sun Microsystems study which found that mentors were promoted six times more often than those not in the program, and mentees were promoted five times more often than those not in the program. 
  • They also found that retention rates were 72% higher for mentees and 69% higher for mentors than for employees who did not participate in the mentoring program.
  • Start mentorship by giving the junior staff real tasks. Miriam describes asking new staff to download the source code, run it on their local machine and update any dead links or new issues to the knowledge base or ReadMe file.
  • Listen carefully, explain simply, and beware of the curse of knowledge.
  • Teach them where to look for, and ask for, answers. Show them the knowledge base and get them into the community of practice. 
  • Conduct reviews of real work. Miriam suggests code reviews, and says that “Code reviews can be an excellent opportunity for knowledge sharing. They are a great way to teach best practices and good programming patterns. During a code review, ask questions and suggest alternatives. If you think something is not correctly implemented, explain why you think your way is better. Learn to understand the difference between personal preference and essential changes.”
  • Let the mentee drive the schedule of mentorship, but if you haven’t heard from them in a while, check in to see if everything is OK. 

Mentoring new staff, as a component of the KM framework, therefore not only benefits the organisation by getting new staff up to speed quickly, it also benefits the mentor and the mentee as well. 

View Original Source (nickmilton.com) Here.

What KM can learn from business start-ups 2 – an effective business model

Yesterday I started a set of blog posts likening KM implementation to a business start-up. Here is number 2 in the series. 

Picture by Tumisu (pixabay.com) on Needpix

In many ways, the initial implementation of Knowledge Management within an organisation is like the launch of a new product into a market by a start-up organisation, and there are many lessons KM can learn from start-ups; their failures and their successes.

(If you want to make a bad pun, you could call KM implementation a “Smart-up”).

This blog series uses this analogy to inform KM implementation by reviewing 5 common reasons for start-up failure and suggesting ways in which KM programs can avoid these failure modes. These common reasons are taken from  a great article by David Skok , and are as follows:

  1. Little or no market for the product; 
  2. The business model fails; 
  3. Poor start-up management team; 
  4. Running out of cash; 
  5. Product problems.

Failure of the business model

The business model for a start-up fails if the cost of acquiring new customers exceeds the value each customer brings. If this happens, the start-up will lose more and more money until the investors remove their support.

As David Skok says, “One of the most common causes of failure in the startup world is that entrepreneurs are too optimistic about how easy it will be to acquire customers. They assume that because they will build an interesting web site, product, or service, that customers will beat a path to their door. That may happen with the first few customers, but after that, it rapidly becomes an expensive task to attract and win customers, and in many cases the cost of acquiring the customer (CAC) is actually higher than the lifetime value of that customer (LTV)”.

KM also has a business model. KM receives funding from senior managers, who are  the investors in the “KM start-up”. Those investors want a return on their investment, in whatever way they define “return”. The KM Implementation must deliver more value to the business than it costs (e.g. deliver a positive ROI), and those costs include the costs of the KM team, KM software, and the costs of implementation, roll-out and support (“acquiring the KM customers”).  This positive return must be documented and justified in order that senior management do not remove their support and their money.

In addition, KM is a long term commitment; survey data shows that it takes over a decade before KM is fully integrated in the majority of companies. This is a long time to take KM value on faith, and the viability of the business model needs to demonstrated on a regular basis throughout that decade if funding is to be secured.

Also, during that time there may well be a change in senior management, and the new bosses may need convincing that KM has a positive business model for the organisation. You need to have your evidence ready that KM is a wise investment. Internal reorganisation, and a change in investor, is one of the most common reasons for KM failure, and you need to protect against this.

In order to demonstrate a positive return on investment, the KM implementation team needs to:

  • Understand the metrics that will convince senior management that KM is delivering a return on investment. Know what they want to see from KM, and know how this will be demonstrated or measured 
  • Conduct short term pilot projects throughout the implementation that deliver demonstrable value, as proofs of concept that KM has a positive business model. These pilot projects should solve business problems, and ideally should impact business metrics. Early in KM implementation the KM Framework will still be in process of development, so use a Minimum Viable Framework – one that does just enough to deliver real value. The pilot will also deliver practical lessons that allow you to elaborate the framework.
  • Collect and regularly report all examples of value delivered through KM, in the form of success stories and/or metrics. These will not only allow you to demonstrate a positive business model to your sponsors, showing that KM delivers more value than it costs; it will also provide valuable marketing collateral for further KM roll-out. 

Bear in mind the business model for KM, and how you will demonstrate that it is viable. Without this demonstration, you are vulnerable to losing your funding. 

View Original Source (nickmilton.com) Here.

Why "Knowledge for action" is better than "knowledge for storage"

Knowledge has to lead to action in order to add value. 

call to action by Sean MacEntee on Flickr

As the blogger Bill Wilson says (in the context of root cause analysis) “Learning without action is mere mental trickery, while action without learning is simply useless physical exercise”.  If knowledge management is to deliver more than mere mental trickery and to live up to its promise of adding value, then it must lead to action.

A few years ago we worked with a client who was developing a lesson learning system from projects. The collection of lessons has been going well, but the client had the firm view that lessons should be stored in a library that future projects could review if they wanted. For them, the knowledge would be stored “for future reference”.

Of course, few people have time to read through the lessons, and there are now so many lessons that reading through them is becoming more and more daunting. 
We are now helping the client to move to a different philosophy, where lessons are forwarded to the owners of the organisational processes, so they can continue to update the processes, procedures and guidance in the light of the new learning. This is “knowledge for action”, and if we assume that people follow the updated guidance, it should result is less “useless physical exercise” and to more efficient ways of working.

This philosophy is that wherever possible, every piece of new knowledge should lead to an action. The action might be;

  • Fix a problem,
  • Investigate further (especially if the learning is not yet clear),
  • Document a new procedure, process or guidance document,
  • Update an existing documented procedure, process or guidance document,
  • Update a training course or other training or e-learning material,
  • Circulate the lesson for others to decide on an action.
Communities of practice, as well, should focus on creating and managing actionable knowledge. Actionable knowledge can be stored on the community wiki, and includes

  • Advice and guidance
  • Good practices
  • Improved practices
  • Solutions to problems
  • Answers to questions
  • New approaches
  • Recommendations
  • Tips and Tricks
Non-actionable knowledge is
  • Interesting articles
  • Links to interesting articles
  • Musings
  • Quotes and aphorisms
  • Descriptions of what you are doing (unless you analyse this to bring out actionable learning)
  • Descriptions of what you have done (unless you analyse this to bring out actionable learning)
  • Large document stores
Communities that circulate non-actionable knowledge, or “knowledge for interest” are classified as Communities of Interest rather than communities of practice, the clue being in the title. 

CoPs deliver more value when they focus on solving the problems of the members than when they circulate “interesting links and ideas”. CoPs that operate through a Pull process – where members with problems or issues ask questions and receive recommendations and support from other members – know they are adding value.  Each answered question represents a solved problem; knowledge which the person who asked the question can immediately put into action.

So when you are sharing knowledge in a CoP, ask yourself whether you are sharing “something that others will find interesting” or “something that will help people do their job better” – something actionable.

And when you are designing lesson learning systems, make sure each lesson leads to action, rather than being retained “for interest”.

We recommend “knowledge for action” rather than “knowledge for storage” as being a far more effective system.

View Original Source (nickmilton.com) Here.

How to identify a knowledge "near miss"

In organisational safety management, they identify a “near miss” as evidence that safety practices need to be improved.  We can do the same in knowledge management.

Image from safety.af.mil

I have often used Safety Management as a useful analogue for KM, and here’s another good crossover idea.

In safety management they identify safety breaches (accidents, injuries, “lost time incidents”) as metrics and indicators that safety management needs to be improved.

They also track “near misses” – incidents where nobody was harmed, but only by luck, or “unplanned events that did not result in injury, illness or damage – but had the potential to do so“. A hammer dropped from height and landing a few feet away from a worker on the ground, a bolt blown past someone’s head by an escape of compressed gas, a near collision between two aircraft, all are examples of near misses indicating that safety management needs to be improved. 

In KM we can  track lost knowledge incidents, where time, money or effort was wasted because knowledge should have been available but “got lost” along the way. The knowledge is or was once available to the organisation, but failed to reach the person who needed to act upon it, with resulting cost to the organisation in terms of recovery cost, rework, lost sales, delay etc. If you are lucky you can quantify this cost as part of the Cost of Lost Knowledge, aka the Cost of Ignorance, and use this in your KM business case.

But we can also track Knowledge Near Misses. This is where the knowledge was not lost and no cost therefore incurred, but it was only found or transferred by lucky chance.

I heard a great example recently in a client organisation (and I paraphrase below).

The organisation was planning an activity. It seemed a little risky but quite doable, and there was management pressure to go ahead. They were discussing this activity in a meeting, and someone from another part of the business who happened to be in the meeting by chance (he was not invited to discuss this particular activity) spoke up and said “I was part of a team that tried this before. It was a complete disaster, and we are still recovering from the mess it created”.

The lessons from this previous project had not been captured, they were not in the lessons database, and the project report was not findable but buried in a mass of project files on a hard drive somewhere. Had that person not by chance been at the meeting, the “complete disaster” would most likely have been repeated with resulting costs in manpower, money and reputation.

This was a knowledge near miss. This event did not result in cost to the organisation through lost knowledge, but had the potential to do so, and was only avoided through luck. With a proper KM framework in place, and followed by all staff in a systematic way, this knowledge would not have been lost, and the planned activity could have been assessed in the full light of historic lessons.

You can find another KM near miss story here

The knowledge near miss is a useful metric which provides evidence of the value of, and need for, effective KM.

View Original Source (nickmilton.com) Here.

Quantified Knowledge Management success story number 128; €136 million in one year at Continental

Here is another in our series of success stories quantified benefits, this time from Continental. 

The Tyre manufacturer Continental has a number of Knowledge Management initiatives under way, including

  • The collaboration platform ConNext, which links wikis, blogs, and community forums.
  • More than 16,000 communities, some of which are more like small working groups, while others have several thousand members.
  • Lesson learning
  • The innovation platform Contivation, for collaborative development of new ideas.
Innovation is one of Continental’s three value creation streams, and gets a lot of attention. As their knowledge management page reports regarding the use of Contivation,

Some 420,000 suggestions were received in 2017, for example, of which more than 360,000 were implemented. This not only resulted in savings of more than €136 million, but is also a testament to the active engagement of our employees with the company and its values.

One of the things to note here is the rate of implementation – nearly 86%. This is at the high end of implementation rates for schemes such as this.

View Original Source (nickmilton.com) Here.

What is the limit to KM’s value delivery?

Why is knowledge management not infinitely valuable?  It’s because the value it delivers cannot exceed the “Cost of not-knowing”

See text for explanation
I was asked a question a few years back by someone challenging stories of KM value. “If Shell could deliver $200m per year through KM” he asked – “why not spend twice as much on KM and deliver $400 million?”

The answer is that there is no linear relationship between KM spend and value delivery, because KM delivers value through removing inefficiencies. Specifically the value of KM comes through reducing “the cost of not-knowing“, which is a finite quantity for any organisation. This represents the maximum value KM can deliver.

KM is like Lean – it adds value by eliminating waste; the waste time and money that comes through not knowing, and the results of the bad decisions made through absence of knowledge that should have been available.

The “cost of not knowing” manifests itself in many ways;

  • People using inefficient approaches, when efficient approaches are available elsewhere or have been used before;
  • People repeating studies which others have already completed;
  • People reinventing approaches which have already been perfected elsewhere or in the past;
  • People making mistakes, when the knowledge to avoid those mistakes already exists (or used to exist, but has been lost);
  • People attempting things by means which others have already proven impossible;
  • People being unduly conservative, when others have already discovered how much you can push the envelope.

The cost of not knowing is a finite number, and is the difference between the current cost of operations and the cost of operations assuming everyone had access to the best knowledge. Defining or estimating your own “cost of not knowing” is an important step for any organisation, and most companies are surprised by how large this cost is, and how much value KM can deliver.

Expenditure in KM can never release more value than the cost of not knowing, and the cost of not knowing can probably never be fully eliminated, as shown in the picture here. The relationship between the investment and the value will be something like the red line in the figure. More and more KM spend will get you closer and closer to eliminating this cost, but I suspect you never remove it completely. Increased investment results in decreasing ROI.  If your company has a required ROI for its investments, then the ideal KM spend is when the investment is such that the delivered value just meets this ROI.

The picture of course is an academic exercise – the cost of not knowing, and the ROI from KM, are both poorly defined figures which cannot be estimated on the scale of an organisation beyond an order of magnitude.

Shell’s $5m investment in KM reduces the cost of not knowing by $200m, which may be a substantial proportion of their Cost of not-knowing. They would not add another $200m by spending another $5m, and it may be that their $5m spend is the optimal balance. However the recent Shell job advertisement targeting $1 billion in value, suggests there is a lot more value still to come.

The value of KM is not infinite. It cannot exceed the “Cost of not-knowing”. However that value can still be very large, and worthy of major investment. 

View Original Source (nickmilton.com) Here.

You can’t do KM without a budget

One of my Knoco colleagues was in a KM workshop a while ago with a client, and raised the issue of the KM Budget. One of the people in the room said “What? Does Knowledge Management need a budget?” 

My colleague was taken aback, but was able to point out that Yes, KM needs a budget, all KM programs have a budget, the budget will be substantial, but the rate of return will be even greater.

If there is anyone else still out there who still doesn’t realise that KM needs a budget, here is an introduction.

Why do you need a KM budget?

Because to deliver Knowledge Management requires not only new technology, new processes, new roles and new governance, but also a program of cultural change. A delivery person or team is needed to run the implementation project, they need to be paid and (in larger organisations) to be able to travel to the different offices, and therefore the project needs a budget. You can get a certain amount of the way in KM through goodwill and people volunteering their time, but this is not sustainable. And ISO 30401:2018, the KM standard, requires that Top Management shall be responsible, among other things, for ensuring that the resources needed for the knowledge management framework are available. This includes a budget.

What are the main costs the budget will cover?

Some of the main expediture items will be as follows ;

  • Salaries of the KM team, with their main tasks being 
    • Researching and drafting the KM framework, strategy and implementation plan
    • Developing the change management and communication strategy
    • Delivering early quick wins
    • Working with the business to deliver pilot projects
    • Rolling out the KM framework
  • Travel budget (if this is a global implementation)
  • Purchase of technologies (this should be no more than a quarter of the budget at most)
  • Service of an experienced trusted consultant

How big should the budget be?

Participants in our global Knowledge Management surveys were asked to specify the scale of their annual KM budget. 118 participants (20%) did not know this, and 51 preferred not to quote a figure. The mean KM budget of the remainder of the respondents was $785,000.

Obviously the budget will be bigger the bigger the company, with an average “budget per staff member” of $3000 (although there are economies of scale for large organisations).  The budget also increases as the KM implementation continues, as shown in the figure below.

The graph will give you benchmark figures, but you will need to work out your budget yourself, from the bottom up.

How long will you need a budget for?

The KM budget will be needed for as long as KM is important and is delivering value, which will be for as long as Knowledge is important to your organisation. Even when implementation is over you will need an ongoing “operational budget” for KM, to pay for a team to manage, monitor, and support the application of the KM Framework.

How do you justify the budget?

You do this by knowing what value KM will deliver, and by estimating the “size of the prize.” Then, once KM is under way, you demonstrate the value.

Yes, KM needs a budget, and for large organisations this will be  large budget, but KM should more than pay its way.

View Original Source (nickmilton.com) Here.

How to estimate the size of the KM prize

I blogged last week about the importance of knowing the value KM will deliver. But how do you do this?

As I said in last week’s post; if you understand the value that Knowledge Management can bring, then you understand how much you can justify investing. The larger the scale of the KM prize, the larger the KM budget can be in order to deliver that value.

We know from our Knowledge Management survey that the average KM budget is $950k and the average delivered value is $93 million, but how can you estimate in advance what value Knowledge Management may deliver for you?

Generally KM delivers value by reducing waste, or through eliminating the cost of lost knowledge, and this can be done in a number of ways, as discussed below.

Reduction of the learning curve

Knowledge management can add value through reducing or eliminating learning curves, which equates to removing the cost of re-learning. If you have historic data on learning curves, then you can use this to estimate the value of eliminating that curve. Typically a learning curve represents 10% to 15% of a project expenditure, and with large projects, this can be a large prize.  In other cases, the value comes through learning to do things more quickly – developing new products, for example.

Learning curves apply to any repeat activity; for example setting up a branch office, hiring new staff, conducting an assessment.  You generally eliminate learning curves through effective lesson-learning, and through systematic project pre-learning.

Exchange of effective practice

An alternative value-adding mechanism is the transfer of effective practices across multiple sites, which equates to removing the cost of not knowing, or not sharing, better practices.

Imagine you are working in a business with multiple operating or manufacturing sites. Operations cost, and manufacturing cost, will vary from site to site, Knowledge Management gives you the opportunity to reduce these costs, by sharing learnings and good practice from low cost sites, to improve the performance of high cost sites. In order to estimate the size of the prize, you need

  • A good set of benchmark data on current operational costs, broken down as far as possible into the different factors 
  • An estimate of how effective KM could be in normalising those costs 
  • A desire across the business to improve. The high cost sites need to want to improve. The low cost sites need to want to help them. 

As an example, in the 90s we worked with the refineries in BP to help reduce the costs of Planned Shutdowns. Historical data showed that if all refineries could reach the level of top quartile, there was a prize of £30m available. The business estimated that enhanced KM (i.e. an improvement on the existing level of knowledge sharing) could deliver $5m of this, while no knowledge sharing could lose $10m. This return more than justified an investment of $230,000 in a community of practice, an online knowledge base, and a series of Retrospects and Peer Assists.

More effective innovation

Many organisations struggle with effective innovation, especially those which run a reactive innovation system which waits for individuals to submit ideas which are then passed through an ideas funnel. Bringing in a structured creative innovation process such as Deep Dive is a big investment (a full innovation process make take a team of 6 to 10 for 3 months) but can solve really big business problems in startling ways. The size of the prize here is the value of the business solution, whether it is a new class of product, or an innovative solution to a massive business issue. It is delivered through removing the cost not ineffective innovation.

Ineffective provision of Knowledge to Customers

The most effective and efficient way of getting knowledge top customers is to provide that knowledge to the customer online, making sure it is accurate, findable and easily usable. If this is not the case, and the customer needs to call your support centre, or call out an engineer, than this is additional cost which KM can eliminate. There will also be a cost associated with the loss of customers disgruntled by their lack of access to knowledge.

Reducing duplication

In any siloed enterprise, there is likely to be duplication of effort, because people do not know what the others are doing (again, the cost of not knowing). As well as delivering large value through the means described above, KM will deliver more modest value through elimination of duplication, as the Communities of Practice begin to discuss what they are doing, and so recognise and eliminate duplication.  To estimate the size of this prize you will need to do a survey across a subset of the organisation in order to estimate what work is currently being duplicated. 

View Original Source (nickmilton.com) Here.

Why it’s important to know the value KM will deliver

Why is it important to understand the business value of Knowledge Management? The answer is a simple one – if you understand the value, you understand how much you can justify investing.

A couple of days ago we discussed KM metrics, including the Impact (or value) metric. But why is this so important? Here is one answer.

Introducing Knowledge Management requires investment. It requires new processes, new technologies, new roles, new governance, and (in particular) investment in an organisation-wide change program. No budget holder will accept that investment if they don’t think there will be value gained in return.

 An illustration of this comes from the Drilling function of an oil company, where a drilling team were planning a campaign on a new field. They studied historical data from learning curves on nearby fields, and worked out that if they could eliminate the learning curve on their new campaign through knowledge management and through access to prior knowledge, this would be worth $100 million in savings.

 They put together an excellent and comprehensive program of learning activities, and employed three full-time learning engineers with Knowledge Management roles to capture and re-use lessons from operations. Almost inevitably, they immediately began to face cost challenge.

How could they justify these extra staff, they were asked, when the whole program was facing cost pressure? As the team leader reported “We were criticized for team size. “Why do you need so many people”? It would have been very easy for our manager to say “you are going to have to conform to the rest of the world out there (and reduce team size) “. However instead, the team leader was able to justify the investment in knowledge management roles and processes, because he understood the scale of the prize. He understood the value of learning and knowledge management. He knew that an investment of 3 extra people was justified if it would deliver a prize of $100 million.

Knowing the Scale of the Prize

Knowledge management programs often struggle to get support and funding because management don’t realise the value of KM. If organisations realised how much value KM can deliver, then KM would be a no-brainer.

 So our advice to clients usually is to form a reliable and justified estimate, as early as you can in your Knowledge Management activity, of the scale of the prize. The prize will come through better decisions, improved process, accelerated or eliminated learning curves, and continually improved performance.  Please note that the scale of the prize from “finding better knowledge and making better decisions” is orders of magnitude greater than the scale of the prize from “finding documents faster”, as discussed here.

Most of the time, the potential value which can be delivered from Knowledge Management is startlingly large.

Then once you and your management understand the scale of that prize, you know how much you can invest to deliver it, and you personally will be better placed to meet challenges to that investment. You will be able to respond, as the drilling team leader did, “We need these three KM roles, because they are busy delivering a $100 million prize”.

View Original Source (nickmilton.com) Here.