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of Knowledge


Essentials Series

The Essentials Series was created for busy business advisory and corporate professionals.The books in this series were designed so that these busy professionals can quickly acquire knowledge and skills in core business areas.

Each book provides need-to-have fundamentals for those professionals who must:

• Get up to speed quickly, because they have been promoted to a new position or have broadened their responsibility scope

• Manage a new functional area

• Brush up on new developments in their area of responsibility

• Add more value to their company or clients

Other books in this series include:

Essentials of Accounts Payable, Mary S. Schaeffer Essentials of Capacity Management, Reginald Tomas Yu-Lee Essentials of Cash Flow, H. A. Schaeffer, Jr.

Essentials of Corporate Performance Measurement, George T.

Friedlob, Lydia L.F. Schleifer, and Franklin J. Plewa, Jr.

Essentials of Cost Management, Joe and Catherine Stenzel Essentials of CRM: A Guide to Customer Relationship Management, Bryan Bergeron

Essentials of Credit, Collections, and Accounts Receivable, Mary S. Schaeffer

Essentials of Financial Analysis, George T. Friedlob and Lydia L. F. Schleifer

Essentials of Intellectual Property, Paul J. Lerner and Alexander I. Poltorak

Essentials of Patents, Andy Gibbs and Bob DeMatteis Essentials of Payroll Management and Accounting, Steven M. Bragg Essentials of Shared Services, Bryan Bergeron Essentials of Supply Chain Management, Michael Hugos Essentials of Trademarks and Unfair Competition, Dana Shilling Essentials of Treasury and Cash Management, Michele Allman-Ward and James Sagner

For more information on any of the above titles, please visit



of Knowledge


Bryan Bergeron

John Wiley & Sons, Inc.

Copyright © 2003 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-750-4470, or on the web at Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, e-mail:

Limit of Liability/Disclaimer of Warranty:While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data

Bergeron, Bryan P.

Essentials of knowledge management / Bryan Bergeron.

p. cm. -- (Essentials series)

Includes index.

ISBN 0-471-28113-1 (pbk. : alk. paper)

1. Knowledge management. I. Title. II. Series.

HD30.2 .B463 2003



Printed in the United States of America.

10 9 8 7 6 5 4 3 2 1

To Miriam Goodman







Over view



Knowledge Organizations



Knowledge Workers















Getting There


Fur ther Reading


Glossar y






E ssentials of Knowledge Management is a practical survey ofthe field of Knowledge Management (KM)—a business optimization strategy that identifies, selects, organizes, distills, and packages information essential to the business of the company in a way that improves employee performance and corporate competitiveness. The preservation and packaging of corporate knowledge (i.e., information in the context in which it is used) is especially relevant today, given that the majority of the service-oriented workforce is composed of knowledge workers. To compete successfully in today’s economy, organizations have to treat the knowledge that contributes to their core competencies just as they would any other strategic, irreplaceable asset.

The aim of this book is to examine approaches to Knowledge Management that contribute to corporate competitiveness, and those that don’t. The book assumes an intelligent CEO-level reader, but one who is unfamiliar with the nuances of the KM field and needs to come up to speed in one quick reading. After completing this book, readers will understand how their business can be optimized using KM techniques and strategies. Moreover, readers will be able to converse comfortably with KM professionals, understand what to look for when hiring KM

staff and consultants, and understand the investment and likely returns on various KM approaches. To illustrate the practical, business aspects of Knowledge Management in an easily digestible fashion, each chapter contains a vignette that deals with key technical, cultural, or economic issues of the technology.


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Reader Return on Investment

After reading the following chapters, the reader will be able to:

• Understand Knowledge Management from historical, economic, technical, and corporate culture perspectives, including what KM is and isn’t.

• Have a working vocabulary of the field of Knowledge Management and be able to communicate intelligently with KM professionals and vendors.

• Understand the trade-offs between the commercial options available for a KM implementation.

• Understand the significance of Knowledge Management on the company’s bottom line.

• Understand the relationship between Knowledge

Management and other business optimization strategies.

• Understand how KM professionals work and think.

• Have a set of specific recommendations that can be used to TEAMFLY

establish and manage a KM effort.

• Understand the technologies, including their trade-offs, that can be used to implement Knowledge Management in the corporation.

• Appreciate best practices—what works, why it works, and how to recognize a successful KM effort.

Organization of This Book

This book is organized into modular topics related to Knowledge Management. It is divided into eight chapters.

Chapter 1: Overview

The first chapter provides an overview of the key concepts, terminology, and the historical context of practical Knowledge Management in the workplace. It illustrates, for example, how every successful organization uses Knowledge Management to some degree, albeit perhaps not in a x


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sophisticated, formalized way. This chapter also differentiates between knowledge as an organizational process versus simply a collection of data that can be stored in a database.

Chapter 2: Knowledge Organizations

Taking the perspective of the corporate senior management, this chapter explores the implications of embracing Knowledge Management as an organizational theme. It explores the role of chief executive as chief knowledge officer, how any KM initiative is primarily one of corporate culture change, what can be expected through application of KM strategies in a large organization, general classes of KM initiatives—including gaining knowledge from customers, creating new revenues from existing knowledge, and capturing individual’s tacit knowledge for reuse—as well as a review of the predictors of a successful initiative.

Chapter 3: Knowledge Workers

This chapter explores Knowledge Management from the employees’ perspective. Topics include dealing with employee resistance to the increased overhead of not only performing their jobs but taking time to document their behavior for others, addressing the potential reward for a job well done with decreased job security, the importance of creating employee recognition and reward systems to encouraging employee participation in a KM initiative, and ways to use KM techniques to enhance employee effectiveness.

Chapter 4: Process

This chapter focuses on Knowledge Management as a process. Topics include process reengineering, competency measurement, how to best apply collaborative systems, approaches to unobtrusive knowledge capture, filtering and refining knowledge, methodologies for applying knowledge for decision support, and how Knowledge Management relates to traditional business processes and business models.


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Chapter 5: Technology

This chapter explores the many computer and communications technologies that can be used to enhance the organizational and behavioral aspects of a Knowledge Management initiative. Included are a survey of technologies for knowledge collection (e.g., data mining, text summarizing, the use of intelligent agents, and a variety of information retrieval methodologies), knowledge storage and retrieval (e.g., knowledge bases and information repositories), and knowledge dissemination and application (e.g., intranets and internets, groupware, decision support tools, and collaborative systems).

Chapter 6: Solutions

This chapter looks at the various solutions offered by vendors in the Knowledge Management market.Topics include defining assessment metrics of performance, industry standards and best practices, and how to assess the impact of a KM initiative on qualitative factors surrounding organization-wide change of corporate vision, values, and behaviors.

Chapter 7: Economics

This chapter explores the financial aspects of Knowledge Management, from a return-on-investment perspective. Topics include pricing models for information infrastructure development, overhead costs, contractual issues, and hidden costs of Knowledge Management, and how to justify the cost of investing in new technologies. The chapter also explores the knowledge economy in terms of the knowledge value chain.

Chapter 8: Getting There

The final chapter provides some concrete examples of the resources, time, and costs involved in embarking on a practical Knowledge Management effort. Topics include implementation challenges, working with vendors, achieving employee buy-in, including how to shift corporate xii

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culture from knowledge sequestering to knowledge sharing, employee education, realistic implementation timelines, and managing risk. The chapter ends with a look to the future of Knowledge Management as it relates to information technology, process, and organizational change.

Further Reading

This section lists some of the more relevant works in the area of Knowledge Management, at a level appropriate to a chief executive or upper-level manager.


The glossary contains words defined throughout the text as well the most common terms a reader will encounter in the Knowledge Management literature.

How to Use This Book

For those new to Knowledge Management, the best way to tackle the subject is simply to read each chapter in order; however, because each chapter is written as a stand-alone module, readers interested in, for example, the economics of Knowledge Management can go directly to Chapter 7, “Economics.”

Throughout the book, “In the Real World” sections provide real-world examples of how Knowledge Management is being used to improve corporate competitiveness and ability to adapt to change.

Similarly, a “Tips & Techniques” section in each chapter offers concrete steps that the reader can take to benefit from a KM initiative. Key terms are defined in the glossary. In addition, readers who want to delve deeper into the business, technical, or corporate culture aspects of Knowledge Management are encouraged to consult the list of books and publications provided in the Further Reading section.



I would like to thank my enduring editorial associate, Miriam Goodman, for her assistance in creating this work. In addition, special thanks are in order to my editor at John Wiley & Sons, Sheck Cho, for his insight and encouragement.


C H A P T E R 1


Readers prepared to add a powerful new tool to their arsenal of competitive business strategies may be surprised to discover that Knowledge Management (KM) has more to do with ancient civilizations than with some recent innovation in information technology (IT).

Consider that, since antiquity, organized business has sought a competitive advantage that would allow it to serve customers as efficiently as possible, maximize profits, develop a loyal customer following, and keep the competition at bay, regardless of whether the product is rugs, spices, or semi-conductors. Beginning about 15,000 years ago, this advantage was writing down the selected knowledge of merchants, artisans, physicians, and government administrators for future reference. Writing was used to create enduring records of the society’s rules, regulations, and cumulative knowledge, including who owed and paid money to the largest enterprise of the time—the government.

In Mesopotamia about 5,000 years ago, people began to lose track of the thousands of baked-clay tablets used to record legal contracts, tax assessments, sales, and law. The solution was the start of the first institution dedicated to Knowledge Management, the library. In libraries, located in the center of town, the collection of tablets was attended to by professional knowledge managers. An unfortunate side effect of this concentration of information was that libraries made convenient targets for military conquest.

Even though war had the effect of spreading writings and drawings to new cultures, access to the information they contained was largely 1

E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t restricted to political and religious leaders. Such leaders represented the elite class, who either understood the language in which the scrolls or tablets were written or could afford to have the works translated into their native tongue. Things improved for the public in the West a little over five centuries ago, with the invention of movable type and the printing press.With the Renaissance and prosperity came a literate class and the practice of printing in the common tongue instead of in Latin.

In the world of commerce, the expertise of many professions continued to be passed on through apprenticeship, sometimes supplemented by books and other forms of collective memory. This concentration of knowledge limited actual manufacturing to relatively small shops in which skilled craftsmen toiled over piecework. Things changed with the introduction of the assembly line as a method of production. The industrial revolution was possible largely because rows of machines—not an oral or written tradition—provided the structural memory of the process involved in the production of guns, fabrics, machinery, and other goods whose design enabled mass production. No longer was a lengthy apprenticeship, or literacy, or even an understanding of the manufacturing process required for someone to quickly achieve acceptable performance at a task. Anyone, including women and children with no education, could learn to refill a bobbin with yarn, keep a parts bin filled, or operate a machine in a few hours—and keep at it for 12 hours at a time, seven days a week. For the first time, productivity could be measured, benchmarks or standards could be established, and processes could be optimized. As a result, productivity increased, goods became more plentiful, and they could be offered to the masses at an affordable price while maintaining a healthy profit margin for the company and its investors.

However, knowledge of the overall process and how individual workers contributed to the whole was closely held by a handful of assembly-line designers and senior management.


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Modern business in the postindustrial U.S. service economy is largely a carryover from this manufacturing tradition, especially as it relates to accounting practices and corporate valuation. For example, the government, a silent partner in every business venture, recognizes the purchase price and depreciation schedule of physical assets, but not the processes or knowledge held in the minds of workers. Similarly, the manner in which employees are assigned positions in the modern corporation reflects the industrial era in which individual workers have little knowledge of—or voice in—the overall business model. It’s common, for example, for large rooms crammed with cubicles to house hundreds of workers who mindlessly process printed or electronic documents. These workers manipulate and validate data, according to easily learned rules established by management. As a result, the knowledge of the overall process resides in the minds of senior management, and employees for the most part are treated as if they were easily replaceable assembly-line workers in a manufacturing plant.

At higher levels of the knowledge worker hierarchy, university degrees and certificates from various organizations or guilds provide the self-imposed labels that managers and professionals use to qualify for one of the predefined positions in the matrix of the organization. These knowledge workers have more of an overall picture of the business than lower-level front-line workers do, but there is likely duplication of mis-takes in different departments since these workers may not have a process in place to share knowledge of best practices. For example, professionals in multiple departments with the organization may be experimenting with outsourcing, each discovering independently that the promised savings are far less that the popular business press suggests.

Despite the parallels in front-line employees working with data instead of textiles or iron, the reality of the modern corporate workplace also contrasts sharply with what was considered by employees and man-3

E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t agement as a permanent condition until only a few decades ago. The situation of lifetime employment offered by large manufacturing plants in the steel, petroleum, and automobile industries during the latter half of the twentieth century is virtually unheard of today, even with labor unions.

Given the volatility of the economy and mobility of the workforce, new entrants into the workforce can expect to work with five or more firms during their lifetimes. Even in Japan, where lifetime employment was once an unwritten rule, major corporations routinely downsize thousands of workers at a time.

While industrialization may have been detrimental to the environment and some social institutions, it isn’t responsible for the current pressure on businesses to be more competitive. Rather, economic volatility, high employee turnover, international shifts in political power, global competition, and rapid change characterize the modern economic environment. As a result, the modern business organization can’t TEAMFLY

compete effectively in the marketplace without skilled managers and employees and without methods for managing their knowledge of people, and all the processes and technologies involved in the business, including information technology.

E X H I B I T 1 . 1













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Managing information throughout the ages, whether expressed in the form of figures cut into clay tablets, rows of machines on a factory floor, or a roomful of cubicles in which service providers handle electronic documents, entails a web of eight interrelated processes (see Exhibit 1.1). Consider the eight processes in the context of a multimedia production company:

1. Creation/acquisition. The multimedia—some combination of images, video, and sound—is either authored from scratch or acquired by some means. For example, the multimedia company many create a series of images depicting a new manufacturing process for a client.

2. Modification. The multimedia is modified to suit the immediate needs of the client. For example, the raw multimedia may be reformatted for use in a glossy brochure.

3. Use. The information is employed for some useful purpose, which may include being sold and distributed. For example, the brochure is printed for distribution by the client.

4. Archiving. The information is stored in a form and format that will survive the elements and time, from the perspectives of both physical and cultural change. The multimedia included in the brochure may be burned onto a CD-ROM and stored in a fireproof safe off site, for example.

5. Transfer. The information is transferred from one place to another.

The electronic files of the brochure may be distributed via the Internet to clients in corporate offices around the globe.

6. Translation/repurposing. The information is translated into a form more useful for a second group of users or for a new purpose.

The images used in the brochure are translated into web-5

E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t compatible images to create an online brochure on the client’s intranet web site.

7. Access. Limited access to the translated or original information is provided to users as a function of their position or role in the organization. For example, managers in the client’s organization with the access codes and passwords to the password-protected web site can view the online brochure that describes the new manufacturing process.

8. Disposal. Information with no future value is discarded to save space and reduce overhead.When multimedia for a second brochure is created by the multimedia company, the files relating to the online and printed brochures are purged from the electronic system.

However, printed and CD-ROM copies of the information are saved for reference or for the historical record.

In addition to these individual steps, there is an underlying process for tracking the information in the system. For example, it’s possible for the original information to be archived while a modified version is being translated for another purpose.

Given this historical perspective on information, society, and business, let’s begin the exploration of contemporary Knowledge Management with a definition, a review of KM principles, and a vignette to illustrate the concepts as they apply to business.


The Holy Grail of Knowledge Management is the ability to selectively capture, archive, and access the best practices of work-related knowledge and decision making from employees and managers for both individual and group behaviors. For example, a manager may have knowledge of how to quickly procure parts from a supplier (individual behavior) as 6

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Knowledge Management

in the Field

One of the pioneers in the modern business knowledge management arena is the American Productivity and Quality Center (APQC).

For several decades prior to APQC’s 1995 Knowledge Management Symposium, held in conjunction with Arthur Andersen Companies, most KM work was conducted in academic laboratories. Much of this work was performed in specific areas. For example, throughout the 1980s, research in Knowledge Management in medicine was carried out in the Decision Systems Group at Harvard Medical School, with funding from the National Library of Medicine.

Today, many of the Fortune 1000 companies have ongoing KM projects aimed at general and specific business functions. A partial list of these companies includes:

Air Products & Chemicals Inc.

Union Pacific Railroad

Allstate Insurance Company


Army Medical Depar tment

U.S. Census Bureau

Bank of America

U.S. Depar tment of the

Navy—Acquisition Reform

Best Buy


BHP Billiton

U.S. Depar tment of Veterans



Corning Inc.

U.S. General Ser vices

Deere & Co.


Dell Computer

U.S. National Security Agency

Depar tment of National

U.S. Naval Sea Systems

Defense, Canada


Intel Corp.

U.S. Social Security


Nor throp Grumman

World Bank

Raytheon Company


Schlumberger Oilfield Ser vices

Xerox Connect

Shell E&P

Siemens AG



E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t I N T H E R E A L W O R L D ( C O N T I N U E D ) Within these and other companies, the roles of Knowledge Management range from supporting customer relationship management (CRM) at Xerox to configuring custom computers at Dell Computer.

In addition, there are a numerous KM initiatives in the knowledge-intensive vertical markets, including medicine, law, engineering, and information technology.

well as how to work with other managers in getting policies pushed through the corporate hierarchy (group behavior).

In practice, most KM practices fall short of this ideal. This is primarily because it’s virtually impossible to capture the thoughts, beliefs, and behaviors of a manager or employee in a way that is both economical and complete enough to provide another person—or machine—with enough quality information to make the same decisions, exhibit the same leadership principles, or perform the same complex tasks at the same level of performance. One of the first challenges in understanding exactly what practical Knowledge Management involves is agreeing on a definition. Part of the confusion arises because of how the term

“Knowledge Management” is used by vendors who sell products that have very little to do with the ideal and more to do with relabeling products initially directed at other markets. There is also confusion caused by terminology borrowed from the academic community regarding the use of knowledge in artificial intelligence research, much of which doesn’t apply to Knowledge Management.

This book defines Knowledge Management from a practical business perspective.

Knowledge Management (KM) is a deliberate, systematic business optimization strategy that selects, distills, stores, organizes, packages, and communicates information essential to the business of a 8

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company in a manner that improves employee performance and corporate competitiveness.

From this definition, it should be clear that Knowledge Management is fundamentally about a systematic approach to managing intellectual assets and other information in a way that provides the company with a competitive advantage. Knowledge Management is a business optimization strategy, and not limited to a particular technology or source of information. In most cases, a wide variety of information technologies play a key role in a KM initiative, simply because of the savings in time and effort they provide over manual operations.

Knowledge Management is agnostic when it comes to the type and source of information, which can range from the mathematical description of the inner workings of a machine to a document that describes the process used by a customer support representative to escalate customer complaints within the business organization. Consider the example of the legal firm, whose senior partners create written templates (the information) for ease of creating specific documents. Such a firm has a KM system that can vastly increase its productivity. If the templates are moved to a word processing system, then the ease of creating a new legal document may be enhanced by several orders of magnitude.

As another example, consider a small business owner who moves her bookkeeping from bound journals to a computerized system. Unlike the paper-based system, the electronic system can show, at a glance, the percentage of revenue spent on advertising and revenue relative to the same period last year—all in intuitive business graphics.

A marketing and communications company that takes all copy and images that have been used in previous advertising campaigns and digitizes them so that they can be stored on CD-ROM instead of in a filing cabinet isn’t in itself practicing Knowledge Management. However, if 9

E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t the company takes the digitized data and indexes them with a software program that allows someone to search for specific content instead of manually paging through hundreds of screens, it is practicing Knowledge Management.

Given the range of business activities that can be considered examples of Knowledge Management, one of the most confusing aspects of the practice is clarifying exactly what constitutes knowledge, information, and data. Although the academic community has spent decades debating the issue, for our purposes, these definitions and concepts apply:

Data are numbers. They are numerical quantities or other attributes derived from observation, experiment, or calculation.

Information is data in context. Information is a collection of data and associated explanations, interpretations, and other textual material concerning a particular object, event, or process.

Metadata is data about information. Metadata includes descriptive summaries and high-level categorization of data and information. That is, metadata is information about the context in which information is used.

Knowledge is information that is organized, synthesized, or summarized to enhance comprehension, awareness, or understanding. That is, knowledge is a combination of metadata and an awareness of the context in which the metadata can be applied successfully.

Instrumental understanding is the clear and complete idea of the nature, significance, or explanation of something. It is a personal, internal power to render experience intelligible by relating specific knowledge to broad concepts.

As shown in Exhibit 1.2, the concepts defining knowledge are related hierarchically, with data at the bottom of the hierarchy and under-10

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E X H I B I T 1 . 2








standing at the top. In general, each level up the hierarchy involves greater contextual richness. For example, in medicine, the hierarchy could appear as:

Data. Patient Temperature: 102° F; Pulse: 109 beats per minute; Age: 75.

Information. “Fever” is a temperature greater than 100° F;

“tachycardia” is a pulse greater than 100 beats per minute;

“elderly” is someone with an age greater than 75.

Metadata. The combination of fever and tachycardia in the elderly can be life threatening.

Knowledge. The patient probably has a serious case of the flu.

Instrumental understanding. The patient should be admitted to the hospital ASAP and treated for the flu.

In this example, data are the individual measurements of temperature, pulse, and patient age, which have no real meaning out of context.


E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t However, when related to the range of normal measurements (information), the patient is seen in the context of someone who is elderly with a temperature and tachycardia. In the greater context of healthcare (metadata), the combination of findings is viewed as life threatening. A clinician who has seen this pattern of patient presentation in the past diagnoses the patient as having the flu (knowledge). In addition, given the patient’s age and condition, the clinician determines (understanding) that the patient should be admitted to the hospital and treated for the flu.

Taking an example from a sales agent working for a life insurance company, the knowledge hierarchy associated with a potential customer of a life insurance policy could read as:

Data. Marital status: Single; Annual Income: $32,000; Age: 25.

Information. Death risk is greater for single males than married males; median income is an annual income greater than $19,000; and “young adult” applies to age less than 25.

Metadata. The prospect represents a moderate to low risk.

Knowledge. Given that the prospect has no dependents, insurance has no value to him unless the policy can be used as an investment vehicle.

Instrumental understanding. The prospect should be sold a $100,000 cash value life insurance policy.

In both examples, more than simply grouping data or information is involved in moving up the hierarchy. Rather, there are rules of thumb or heuristics that provide contextual information. In the case of life insurance, the heuristics for risk assignment might be:

Low risk. Age less than 28, marital status single or married.

Moderate risk. Age 28 to 54, marital status married.

High risk. Age 55 or greater, marital status single or married.


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As these risk heuristics illustrate, a challenge in creating heuristics is guaranteeing completeness and gracefully handling exceptions. In this case, there is no classification for a 30-year-old single applicant. Similarly, should a 55-year-old marathon runner be considered in the same high-risk category as a 75-year-old overweight smoker?

The example also illustrates the contribution of beliefs to knowledge, in that knowledge can be thought of as facts, heuristics, and beliefs.

For example, there may be no basis for assigning married prospects to the moderate risk category other than hearsay that married men may live longer than single men. Similarly, in business, there exist beliefs and prejudices that may or may not be based in reality but nonetheless affect business decisions. Since these beliefs may be associated with beneficial outcomes, it’s important somehow to incorporate beliefs in the concept of business knowledge.

Although the concept of knowledge is roughly equivalent to that of metadata, unlike data, information, or metadata, knowledge incorporates awareness—a trait that implies a human, rather than a computer, host. Although artificial intelligence (AI) systems may one day be capable of awareness and perhaps even understanding, the current state of technology limits computers to the metadata level. Even though the concept of Knowledge Management probably would be better labeled Metadata Management, the latter term is unwieldy and potentially more confusing than simply referring to the concept of Metadata Management as Knowledge Management.

Returning to the wording in the definition of Knowledge Management offered earlier, it is important to note that the process is selective, in that only the important facts and contextual information is saved.

Some sort of filter mechanism must be in place to avoid collecting a 13

E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t massive amount of information that is too expensive to store and can’t be easily searched or retrieved efficiently.

Similarly, the KM process involves distillation of data to information and of information to knowledge. This step further clarifies and limits the amount of data that must be stored. Before the information can be stored in some type of memory system, however, it has to be organized in a way that facilitates later retrieval. Organization usually involves deciding on a representation language and a vocabulary to identify concepts. For example, in the risk assignment for insurance policy prospects, does the designation “single” apply to recently divorced prospects as well? Furthermore, the concept of Low Risk can be represented mathematically, as in:


Or in simple text prose:


Low Risk is assigned to prospective customers less than 28 years of age who are married or single.

Storage is most often accomplished using several forms of information technology, typically including PCs and servers running database management software. However, data sitting in a repository is of no value unless it’s put to use. As such, Knowledge Management is a two-way process, in that data are first captured, manipulated, and stored, and then the resulting information is packaged or reformatted to suit the needs of the user. As an example of this packaging, consider the example of risk assignment for insurance prospects. The original materials and process description may be reformatted as a graphical decision tree, as in Exhibit 1.3.

Similarly, the text originally generated by managers may be simplified in both organization and vocabulary for easier access by line workers. For 14


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E X H I B I T 1 . 3

Low Risk

< 28

Medium Risk






?? Risk

> 55


High Risk

example, an engineering white paper on calibrating a computer monitor might state:

The display’s gamma should be adjusted to match the Pantone 145. . . .

However, a customer support representative who has to walk customers through the calibration process is more likely to understand—

and be able to communicate to the customer—something like this: The display’s color display curve (see photo) should be adjusted so that the color displayed on the monitor is as close to the supplied color patch as possible. . .

This packaging, or formatting, of information in a form most intelligible for its intended consumer can be performed semiautomatically with software tools such as synonym generators, or manually through an editorial review process. Finally, for the information to be useful, it has to be communicated to the intended recipient. Having a wealth of process and factual data in a sophisticated but dormant information system is like having a massive book library and not using it.


E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t From the business perspective, Knowledge Management is useful only if information is used in a directed manner, such as to improve employee performance. If the information is useful, it should directly impact employee behavior and be reflected in increased efficiency, effectiveness, or diligence. Ultimately, the improvement in corporate competitiveness from the corporate perspective is the rationale for investing in Knowledge Management.

Intellectual Capital

In traditional management of early twentieth century that dealt with the optimum utilization of labor, parts, and other physical resources, capital was considered limited to the factories, machines, and other human-made inputs into the production process. In the modern corporation with a KM initiative, the concept of capital is extended to include ephemeral intellectual capital and its impact on individual and organizational behavior. Although intellectual capital can be lumped E X H I B I T 1 . 4