Evaluating Knowledge Management

Topic -7
Introduction
Introduction
 Innovation – generation of new knowledge or new linkages
between existing knowledge
– a large body of accumulated experiences, both positive
and negative, based on what has and has not worked in the past
– Creativity often involves lateral thinking such as seeing
an analogy in a completely different context
 Reuse - the basis for organizational learning and should be viewed
more as a dissemination of innovation
Introduction
 Innovation – generation of new knowledge or new linkages
between existing knowledge
– a large body of accumulated experiences, both positive
and negative, based on what has and has not worked in the past
– Creativity often involves lateral thinking such as seeing
an analogy in a completely different context
 Reuse - the basis for organizational learning and should be viewed
more as a dissemination of innovation
KM Measurement
 KM - Management of knowledge resources and processes with an
objective to improve competitive advantages and organizational
performance
 Performance measurement is crucial in KM as it serves as the
foundation that enables an organization to evaluate, control, and
improve its knowledge processes.
 Measuring knowledge as an intangible capital will be difficult
KM Metric
The Benchmarking Method
 Benchmarking is the search for industrywide best practices that
lead to superior performance.
 a study of similar companies to determine how things are done
best in order to adapt these methods for their own use
 know the best to become the best
KM Metric
 Two general types of benchmarking:
– Internal benchmarking, which involves comparisons against
other units within the same organization or a comparison of a
single unit over different time periods;
– external benchmarking, which involves a comparison with other
companies.
 KM Metric
 The Benchmarking Method
 Benefits of benchmarking ( Tiwana, 2000)
– Overall productivity of knowledge investments.
– Service quality.
– Customer satisfaction and the operational level of customer
service.
– Time to market in relation to other competitors.
– Costs, profits, and margins.
– Distribution.
 KM Metric
 Benchmarking can help an organization evolve to higher maturity
levels.
– a learning organization by identifying where it stands with respect
to KM in relation to the competition.
 KM Metric
 The Benchmarking Method
 Key benchmarking steps
1. Determine what to benchmark: which knowledge processes,
products, services? Why? With what scope?
2. Form a benchmarking team.
3. Select a benchmarking short list—which companies will you be
benchmarking against?
4. Collect and analyze data.
5. Determine what changes should be made as a result of the metrics
obtained.
6. Repeat when an appropriate amount of time has lapsed to measure
progress.
 KM Metric
 The Benchmarking Method
 Benchmarking is of greatest value
– when a company has clearly identified its strategic objectives
and they have thought long and hard about which best practices
might or might not be transferable and effective within their own
particular context, with its own KM drivers and constraints.
 Tools
– Knowledge Management Assessment Tool (KMAT)
 KM Metric
 The Balanced Scorecard Method (BSC)
• a measurement and management system that enables
organizations to clarify their vision and strategy and to translate them
into action.
• provides feedback on both the internal business processes and
external outcomes in order to continuously improve strategic
performance and results.
 KM Metric
• A conceptual framework for translating an organization’s vision into
a set of performance indicators distributed among four dimensions:
Financial, Customer, Internal Business Processes, and Learning and
Growth.
• To measure an organization’s progress toward achieving its vision
• To measure the long-term drivers of success
 KM Metric
The Balanced Scorecard Method (BSC)
• Balance is achieved
– through the four perspectives,
– through the decomposition of an organization’s vision into
business strategy and then into operations, and
– through the translation of strategy into the contribution each
member of the organization must make to successfully meet its goals.
 KM Metric
• The BSC translates the organization’s strategy into four dimensions
with a balance between:
1. Internal and external measures.
2. Objective and subjective measures.
3. Performance results and drivers of future results.
KM Metric
 KM Metric
The Balanced Scorecard Method (BSC)
• Financial dimension - measures such as operating income, return on
capital employed, and economic value added.
• Customer dimension - measures as customer satisfaction, retention,
and market share in targeted segments.
• Internal business process dimension - measures such as cost,
throughput, and quality.
• Learning and growth dimension - measures such as employee
satisfaction, retention, and skill sets.
 KM Metric
The Balanced Scorecard Method (BSC)
• Financial dimension - measures such as operating income, return on
capital employed, and economic value added.
• Customer dimension - measures as customer satisfaction, retention,
and market share in targeted segments.
• Internal business process dimension - measures such as cost,
throughput, and quality.
• Learning and growth dimension - measures such as employee
satisfaction, retention, and skill sets.
KM Metric
 KM Metric
The Balanced Scorecard Method (BSC)
Each dimension of the BSC can be further expanded to include
objectives, metrics, targets, and initiatives.
• Objectives are the major goals to be achieved (e.g., profitable
growth).
• Metrics are the parameters that will be monitored in order to
measure progress toward these stated goals (e.g., growth in net
margin).
 KM Metric
• Targets are the specific thresholds to be met for each metric
(e.g., 2% or greater growth in net margin).
• Initiatives describe the actions, projects, programs, and so on to be
put into place in order to be able to meet the stated goals.
 KM Metric
 The Balanced Scorecard Method (BSC)
• performance improvement metric
• an effective strategic management system
• applicable to both profit and nonprofit organizations
• applicable to both private- and public-sector companies.
 significant advantages
– The translation of abstract goals into action items that can be
continuously monitored.
 KM Metric
– It provides objective measures of the current situation.
– It also helps initiate the changes required to move from the
current to the desired future state of the company.
 drawbacks
– This is a much more difficult technique to use than benchmarking.
– Each BSC must be developed “from scratch” because it is
customized to individual organizations.
 Tools - Six Sigma and QPR
 KM Metric
The House of Quality Method
• show the connections between true quality, quality characteristics,
and process characteristics
• Quality Function Deployment (QFD)
– links the customer’s needs with marketing, design, development,
engineering, manufacturing, and service functions
– used for service and software products as well
– maximizing customer satisfaction (positive quality)
 KM Metric
– delivering value by seeking out both spoken and unspoken needs,
translating these into design targets, and communicating the targets
throughout the organization
– allows customers to prioritize their requirements
 KM Metric
The House of Quality Method
 KM Metric
The House of Quality Method
• The goals and objectives are placed to the left of the house.
– Increase the number of communities of practice by 3.
– Decrease the number of customer complaints by 50%.
– Decrease the number of unsolved problems by 60%.
– Decrease the time to market for newly developed products and
services by 40%.
• Priorities are next assigned to each of these goals by placing
weights to the right of the house.
• Useful metrics can then be listed on top of the house (the ceiling).
 KM Metric
The House of Quality Method
• At the center of the matrix,
– the level of correlation between the metrics and the performance
outcomes
– numerical correlations or low-moderate-high type values
• By analyzing these correlations,
– zoom in on those aspects of KM that are more likely to have an
impact on overall company performance
– contribute more significantly to progress made toward the stated
goals
 KM Metric
The House of Quality Method
• Using indicators and other useful to analyze KM effectiveness.
These indicators include:
– Competence development expenses ($ per employee).
– Employee satisfaction.
– Time spent on systematic packaging of know-how for future reuse
when a project has been completed.
– Training expenses per employee.
– Information-gathering expenses per existing customer.
– Total number of patents held.
 KM Metric
– Employee attrition rate.
– Dollar figure value of loss per employee who leaves (and who
leaves for a competing firm).
– Expense of reinventing solutions per year.
– Number of ideas implemented compared to those suggested (e.g.,
suggestion box)