Transcript Creating Value With Knowledge Management

Creating a Value Proposition With
Knowledge Management
Points for discussion
Patrick Callioni
Canberra 2 April 2002
Purpose of presentation
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To discuss the significance of knowledge
management to the future of Australia
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To discuss measurement issues with
knowledge management
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To discuss how to create a value proposition for
knowledge management
The context
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“The Newtonian God - ‘the God who made a clockwork
universe, wound it, and withdrew’ - is dead.” Richard Hames
Burying the 20th Century (1997).
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“When a human society reaches the limits of its stability, it
becomes supersensitive and is highly responsive to the
smallest fluctuation. Then the system responds even to
subtle changes in values, beliefs, worldviews and
aspirations.” Ervin Laszlo Macroshift (2001)
The National Office for the Information
Economy
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We must position the Australian economy as a
knowledge and service economy of the twentyfirst century
Our international competitiveness is high and
we rank highly in international benchmarking
studies that measure countries against criteria
related to information economy capacity
Our focus in tools that can help us do this,
which are largely information management tools
Measurement: Why it is important
“Each day, their organisations’ operations consume
public resources. Each day these operations produce
real consequences for society – intended or not. If the
managers cannot account for the value of these efforts
with both a story and demonstrated accomplishments,
then the legitimacy of their enterprise is undermined
and, with that, their capacity to lead.”
MH Moore, Creating public value, Harvard University Press 1995, p. 57.
Measuring knowledge and information
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Information is an inert substance, with no inherent
power of action, motion, or resistance; one must
add something to make it useful and that something
is belief (in the form of expectations), derived from
experience (or knowledge = information + belief)
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To create value in the information economy…we
need knowledge and the capacity to manage that
knowledge…to manage information and belief
systems
Creating a value proposition with KM
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There are three sets of issues
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First, measuring the cost of KM (and the cost of
adding or subtracting to KM)
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Second, measuring the value of KM to tangibles
such as profit and loss statements
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Third, measuring the value of KM to intangibles,
such as service, satisfaction, perceptions,
expectations, emotions, response time, quality,
cycle-time, innovation and so on
Creation of value
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Value is a word that requires context to be
understood
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In most cases, the point of reference will be that
of a shareholder or of a stakeholder
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….but most of us occupy more that one vantage
point and value to a shareholder may be ruination
to an environmentalist…who may be the same
person
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Understanding beliefs and belief states is crucial
A value creation model
Organisation is
accountable for
...
Measured how?
By whom?
Why? (Primary
reason)
Customer/client
... quality service
The customer
Self interest
Shareholder/owner
... return on
investment
... meeting policy
objectives,
delivering services
according to
prescribed
minimum standards
... satisfying policy
interests
Personal
satisfaction; return
custom
Size of return on
investment
Complaints, legal
action
The shareholder
Self-interest
The regulator(s), the
Minister, the
Government,
Parliament,
To satisfy own
accountabilities
Regulator(s)
Surrogates (lobby
groups et al)
Community
... being a good
corporate citizen
Partner (supplier)
... meeting agreed
(mutual) obligations
Satisfaction of
own
clients/customers
Amount of tax
paid, management
of the environment,
how employees are
treated
Personal
satisfaction
Its clients/customers
To satisfy own
accountabilities
The community,
opinion leaders
Self interest
The supplier
Self interest
Value creation model is fractal…..
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The model can be used at the organisational
level or…
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...at any level below or above…
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such as, for example, a division, team or
individual…
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...or a community, industry, region or state…
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...and beyond.
Creating a value proposition with KM (cont.)
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The value proposition is the business case for
action (and investment)
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It is the logical link between action and return: If
we do A, then B will happen, and the return on B
will be higher than either the cost of A or the
potential risk of not making B happen
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We need to know who is measuring value to
know what to measure and how
Using the model
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Whose point of view is important here?
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When you can answer that question, you can
use the model to understand what that “actor”
values and.....why…
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...and then...
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…how it might best be measured...
Where to from here?
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The major issues are issues of measurement
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and, in particular, the management of
intangibles
The importance of intangibles
Tangibles explain less than 20% of the value of most
publicly listed firms. Time Warner has only 6.49% of
its value attributable to tangibles…for every $1 of
true value, only $0.065 cents is being measured and
managed by conventional management practices.
For Oracle Corporation, tangibles account for only
4% of its value. For General Electric (worth over
US$450 billion), tangibles account for less than 11%
of its value (Standards Institute)
[email protected]
www.noie.gov.au