Managerial Auditing Journal

Knowledge management: learning for organisational experience

Yasar F. Jarrar
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 Knowledge management: learning for organisational
experience

Yasar F. Jarrar
Centre for Business Performance, Cranfield School of Management, Cranfield, UK

Keywords Within this context, KM means the

Information, Knowledge and knowledge ``strategies and processes of identifying,
Knowledge management, Learning management capturing, and leveraging knowledge to help
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Abstract The importance of intellectual capital and the the firm compete'' (APQC, 1997). In general,
Both intellectual capital and the management of knowledge are strongly knowledge management is the process of
management of knowledge are emerging themes in today's organisational continually managing knowledge of all kinds
strongly emerging themes in
world (Chase, 1997). Many authors and to meet existing and emerging needs, to
today's organisational world. Many
authors and practitioners note that practitioners (Quinn et al., 1996; Martinez, identify and exploit existing and acquired
the emerging patterns are that 1998; Numri, 1998; Albert and Bradley, 1997) knowledge assets and to develop new
intellectual capital will replace note that the emerging patterns are that opportunities. It is a systematic process of
natural resources, commodities, intellectual capital will replace natural underpinning, observation, instrumentation,
finance, technology and production
resources, commodities, finance, technology and optimisation of the firm's knowledge
processes as the key factor
influencing competitive advantage. and production processes as the key factor economies. Its overall purpose is to maximise
However, knowledge management influencing competitive advantage. This is the enterprise's knowledge-related
(KM) is still in its infancy. Aims to because, with the exception of intellectual effectiveness and returns from its knowledge
identify the critical success factors
capital, everything else (IT, materials, end assets and to renew them constantly.
and best practices of KM through
analysing the experiences of technical information) is available to
several organisations. Starts by everyone on more or less the same terms. So
defining what is meant by it does not come as a surprise to find many
``knowledge'' and ``knowledge
Identifying best practices
organisations have already embarked on
management'', and overviews the
some form of ``knowledge management The best practices presented in this paper are
methodology used for identifying
best practices. The second part is system''. A report by Business Intelligence based on a wide literature survey, and a
concerned with presenting a (quoted in Numri, 1998), claimed that systematic analysis of a 40 cases of KM
systematic and critical review of successful knowledge management (KM) applications in organisations that reported
the published experiences of 40 successful initiatives. These cases were
programmes can produce returns of
organisations in KM. The analysis
examined the methodologies hundreds or even thousands of per cent. Still, analysed using the format shown in Figure 1.
pursued, IT support used, the same report emphasised that KM is a The organizations included Ove Arup,
structures employed, results very young discipline. Cap Gemini, KPMG, BT, McDonald's, Oracle,
achieved, and the perceived critical In order to successfully manage Saatchi & Saatchi, 3COM, Nortel, Kodak,
success factors. This analysis
allowed the proposal of several
knowledge, it is prudent to clearly define it. DHL International, IBM, Royal Mail, Skandia
``best practices'' for successful KM, The definition of knowledge adopted here is Life, Xerox, Nationwide Building Society,
which are presented and discussed. ``information combined with experience, Rolls Royce, Honda Motor Europe,
context, interpretation, and reflection. It is a Boston Consulting Group, among others. The
high-value form of information that is ready approach was to analyse the methodologies
to apply to decisions and actions'' (Albert and pursued, IT used, and results achieved, in
Bradley, 1997). Business knowledge generally order to identify the success factors.
is of two types; codified knowledge (can be
written down, transferred, and shared. It is
definable and can be protected by the legal Knowledge Management
system) and tacit knowledge (know-how, and Framework
is by nature difficult to describe. It can be
demonstrated but rarely codified, and resides In total, 40 case studies have been analysed.
with its holder. It gets transferred through The findings resulted in a framework for KM
Managerial Auditing Journal demonstration and on-the-job training). (Figure 2). The four main building blocks of
17/6 [2002] 322±328 the framework are presented in the following
# MCB UP Limited sections. Each block is presented through a
The current issue and full text archive of this journal is available at
[ISSN 0268-6902] set of proposed best practices. These factors
[DOI 10.1108/02686900210434104] http://www.emeraldinsight.com/0268-6902.htm
were common to all successful projects, but,
[ 322 ]
 Yasar F. Jarrar Figure 1
Knowledge management: Framework for case study analysis
learning for organisational
experience
Managerial Auditing Journal
17/6 [2002] 322±328

Figure 2
Set strategic priority and management
Knowledge management framework
commitment for KM
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Overall, most of the successful cases analysed

gave an urgent strategic priority to KM by
tying it to something which will benefit from,
and give leverage to, the knowledge effort
(e.g. the aim might be to take an existing
strength and build it into a strategic
competitive advantage, or to share learning
around a group's subsidiaries by building a
best-practice database). Thus, the framework
proposes this strategic urgency as a best
practice and starting point. From the cases
analysed, ``giving KM a strategic priority''
was embodied in three main areas:
1 Aligning KM's goals and practices with
organisational business strategy. KM
solutions involve long-term, strategic
because this was an exploratory effort, commitment, and must be linked to
associating these factors with effectiveness organisational goals and objectives in
in KM was hypothesised. order for long-term value to be realised.
Moreover, and from the analysis The practices to achieve this alignment
undertaken, the main benefits of KM were included:
perceived to be: . Formally define knowledge and its role
. contributes to increased competitiveness; in business and industry.
. improved decision making and avoidance . Assess their competitors' and
of wasted time ``reinventing the wheel''; suppliers' strategies and knowledge
. increased responsiveness to customers; assets and identify gaps with own.
. encourages employees who are not . Assemble the new knowledge portfolio
natural networkers to engage in in an intellectual capital addendum to
knowledge sharing and discourages the annual report
information hoarding; . Continuously assess the development
. improves support among colleagues of intellectual capital.
because they value the knowledge and 2 Link KM to value creation. The aim of any
help they receive; KM initiative should be value creation.
. improved efficiency of people and Successful organisations focus their KM
operations and better products and activities on enhancing the ability of their
services; human resource to increase either or both
. greater innovation. their rate of knowledge creation and the
fit of their new knowledge to the firm's
Clearly, these benefits are tempting for any needs. The case study analysis clearly
organisation as they hold tangible identified the fact that if KM initiative
improvements as well as intangible ones. was not started with clear goals for bottom
The following sections present identified line value creation, it will be a waste of
best practices for successfully implementing money and time (although it might
KM (based on the framework shown in produce very impressive databases).
Figure 2). Ernst & Young (Davenport et al., 1998)
[ 323 ]
 Yasar F. Jarrar spends 6 percent of its revenues on KM organisational knowledge. An organisation
Knowledge management: and actively attempt to demonstrate must identify its knowledge assets as a first
learning for organisational economic returns by measuring the step to develop plans for acquiring, retaining,
experience
amount of knowledge reused in the form building, and leveraging those assets on a
Managerial Auditing Journal
17/6 [2002] 322±328 of proposals, presentations, and continuous basis. All organisations that
deliverables and the contributions of its valued knowledge saw it as imperative to
knowledge repository to closing sales. know how and where to access it, and
3M's (Graham and Pizzo, 1996) successful attempts so far have started by
management is vigilant about linking classifying intellectual portfolio by
continuous learning and innovation to producing an organisational ``knowledge
revenues (a corporate target demands that map'' (Bontis, 1996). Organisations like
30 percent of 3M's annual sales come from Chevron and Hughes Space &
products less than four years old). Communication, undertook knowledge
Attribution of causal relationships mapping and produced guides to inhouse
between increased organisational experts (a ``yellow pages'' directory that
learning and performance improvements directs the user to the people in the firm who
is always risky, given the difficulty of know about particular topics of interest).
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conducting controlled experiments. Andersen Consulting (Ives and Gersting,

However, linkages showing the quality 1998) charted the key business processes or
effects of KM can be reinforced through areas covered by the knowledge management
what Davenport et al. (1998) labelled system, how knowledge flows among these
``anecdote management''. Several areas, and the key knowledge requirements
organisations justify and continue to for each step within each of the flows. This
support KM based on anecdotes that can clear, up-front definition for users of what to
be traced back to value propositions or do and what not to do avoids wasting
business unit measures. A typical organisational resources on unfocused
example is: ``We had a critical problem activities. Furthermore, knowledge mapping
that was going to prevent us from could result in immediate benefits. In the
launching the new product on time. We case of Dow Chemical (Caulkin, 1997;
posted a question to the knowledge base Davenport et al., 1998), just by arranging such
and got an answer from another engineer a ``knowledge map'' and understanding
who had just solved a similar problem. We where all their patents lay, they saved $4
made the fix and got the product out on million during the first year, expected to
time, saving us millions in lost revenue'' generate more than $100 million in the
(Ives and Gersting, 1998). second.
3 Senior management support. This is a
common cliche for all change and Managing knowledge
improvement programmes, but still not Once an organisation's knowledge assets
common practice. Again, most of the cases have been identified, it can engage in
analysed cited this factor as crucial for managing that knowledge. Regarding the
KM success. The types of support needed KMS itself, at first glance, such a system
include (Caulkin, 1997; Ives and Gersting, appears disarmingly simple. Construct a
1998) sending messages that KM and knowledge database of useful information
organisational learning are critical to the already present somewhere in the
company's success, providing funding and organisation, make it available, perhaps via
other resources for infrastructure and intranet, and stand back and admire the
direct modelling of the desired behaviour. results. BT (Caulkin, 1997) claimed a first
year cost saving of £150 million from
Define and understand organisational compiling an electronic internal telephone
knowledge directory. As expected, the reality is more
For a successful start to KM, an organisation complex. It is believed that for organisations
should engage in a clear understanding of to master KM, ``they must possess all the
how, and where, knowledge is developed in extraordinary `-ing skills' (Roos and Von
the company. Organisations like Skandia and Krogh, 1996), like capturing, combining,
Dow Chemical have pursued this step and retaining, repeating, rehearsing, connecting,
gone as far as developing their own models destroying, distributing, and sustaining
for defining organisational knowledge. Other knowledge''. Clearly what is required is a
organisations can learn from these best comprehensive KMS which has been divided
practices (to avoid re-inventing the wheel) into two main areas in the proposed model.
and start by clearly defining what knowledge Hard issues in KM include: collect, share and
means to them. This can be achieved by present, and measure knowledge, and soft
studying the definitions and mapping the issues knowledge environment which
[ 324 ]
 Yasar F. Jarrar include: creation, development, and sharing. a process in place for capturing best
Knowledge management: Both aspects are equally as important and practices, sharing information from
learning for organisational should be treated as so.
experience one project to another, and
documenting innovative ways of
Managerial Auditing Journal KM ± hard aspects
17/6 [2002] 322±328 solving client problems. The creation
This area focuses on presenting the best
of such knowledge repositories is not
practice in building an infrastructure and
tools that would ensure the success of KM. just about collecting data. The
From the case study analysis undertaken, the knowledge collected must be directly
following best practices are proposed: related to a business process. Broad-
1 Establish a process to transfer learning based employee participation in
within the organisation (best practice determining what knowledge is
database). Sharing insights and best essential, is critical in determining
practices is a behaviour that is critical to what types of information should be
the success of any KMS, yet it is counter to collected and shared. In Dow
the culture found in most organizations Chemical's (Petrash, 1996) experience,
(Torrey et al., 1998). Within this area of it was more difficult determining
knowledge transfer, two aspects emerged which in-house know-how added value
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as patterns for success from the case study and which did not. They tackled this by
analysis: creating knowledge repositories, setting up teams and establishing a
and creating transfer and access channels. single criterion to determine value.
A study by Davenport et al. (1998) found Similarly, Hughes Space and
three basic knowledge repositories: Communications (Bontis, 1996) has
. External knowledge (competitive editorial teams that analyse and store
intelligence) ± by definition, the easiest knowledge posted by individuals on its
to acquire and organise. Web site in order to be shared by all
. Structured internal knowledge (e.g. areas. Buckman Labs (Martinez, 1998)
research reports, marketing material, ensures its knowledge system contains
and methods) ± HP (Davenport et al., validated knowledge through ``Content
1998) used artificial intelligence experts'' who monitor the information
software to manage such knowledge. that is placed on the network.
They created an ``electronic sales
In the case of creating transfer and access
partner'' which contained technical
channels, the case study review has
product information, sales and
marketing information, customer highlighted the following best practices
account information, etc. Sales support for designing an effective system for
area reported having phenomenal knowledge connectivity, access, and
feedback from both submitters (of transfer:
knowledge) and users.
. Minimise the number of transmissions
. Informal internal knowledge ± the most of knowledge between individuals to
important area, and most difficult to achieve the least distortion.
manage. It mainly deals with tacit
. Provide 24 hour access to every
knowledge. To transfer tacit knowledge employee from any location.
from individuals into a repository,
. Allow and encourage each person to
organisations usually use some sort of contribute and make the system easy to
community-based electronic use.
discussion and ``lessons learnt''
. Design a system that is flexible and
databases. For many companies the automatically updated as questions
issue is not acquiring or retaining and answers are given.
organisational knowledge, instead it is
. Design multiple channels for
figuring out how to more effectively knowledge transfer, ranging from
capture and share the knowledge that intranet to face-to-face. Each has its
already exists within a department, benefits and techniques and times to be
division, or even employees' minds. used.
Chevron, (Stivers and Joyce, 1997) for 2 Utilise Information Technology capability
example, saved over $20 million a year (databases, intranets, etc.). Relying on IT
by comparing information on the as a driver and tool for most
operation of gas compressors in fields organisational work is becoming common
from all over the world. A recent practice. The IT available to support KM
survey of consulting firms by is vast and growing rapidly: Internet,
Consultants News (Stivers and Joyce, intranet, LAN, expert systems, artificial
1997) showed that about 75 percent of intelligence, voice recognition, laptops,
firms surveyed, reported that they had palmtops, mobile phones, etc. Among the
[ 325 ]
 Yasar F. Jarrar case studies, the most common uses of IT planning or whether it is a case of
Knowledge management: for KM included: holding face-to-face jumping on the bandwagon. These
learning for organisational meetings for knowledge exchange across activities can turn into a complete time
experience
geographical distances, electronic data and money wasting exercise, and not add
Managerial Auditing Journal
17/6 [2002] 322±328 interchange, databases of best practices value to the company if they are not
and knowledge warehouses, integrating measured, and thus controlled, properly.
an organisation's communications and Without feedback on its performance, the
computing technologies, creating a system runs the risk of becoming another
presence on the internet (reach a huge fad. Still, a KM project's benefits for the
customer base and service them), and business are usually indirect, and
linking new locations (and businesses) establishing the link between knowledge
into the network. However, it has be and financial performance is, at best,
stressed here that although IT is a crucial tricky. Economic returns on knowledge
enabler, it should be designed and used for are difficult to quantify and compare
connecting, not collecting. KM should across organisations. Organisations have
always be 90 percent people and 10 percent so far looked at certain indicators of
technology. success and tried to tie them with the new
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3 Employ a special team to design and discipline. Again, this is an area still
manage the overall process. A process like under study and one can not predict if
KM is too crucial to be left unmanaged or these indicators will persist, they include
even managed by several distinct (Davenport et al., 1998; Bontis, 1996;
functions. Its success requires having a Caulkin, 1997):
central authority (team, individual) to . Growth in the resources attached to the
manage the overall process. Companies project, including people, money, and
serious about KM often created formal so on.
KM functions. A Chief Knowledge Officer . Growth in the volume of knowledge
(CKO) or Chief Learning Officer (CLO) is content and usage (that is, the number
not rare, but still not common. For of documents or accesses for
example, a job function at Philip Morris repositories or participants for
(Allee, 1997) is Knowledge Champion, discussion-oriented projects).
Monsanto (Allee, 1997) has a Director of . Human capital development ± Skandia
Knowledge Management, and Andersen (Bontis, 1996) tracks the development
Consulting has a centralised KM unit. In of its human capital by using indices
most cases, such a knowledge leader sets such as an empowerment index that
the course and attends to the knowledge taps into its employees' motivation,
creation process, and some firms had support, awareness and competence.
multiple levels of new roles, from CKOs to Other ratios include training expenses
knowledge project managers to knowledge per employee, employee turnover,
report editors and knowledge network average years of service and education
facilitators. levels.
4 Developing techniques for valuing . Some evidence of financial return
intellectual capital and KM. Despite the either for the KM activity itself (e.g. it
strategic importance of intellectual was a profit centre) or for the larger
capital, accountants, analysts, markets, organisation. Booz Allen (Caulkin,
and managers, still do not adequately 1997) claimed that in answer if their
value and measure its worth. ``At present, KMS works, the internal rate of return
investment in fixed capital equipment is they save in the form of Consultancy
valued more highly than investment in hours is 1,000 per cent. At a low level
human capital and networks. This means they measure how intensively people
that intellectual capital leading to use the database, at a high level they
development opportunities is often have had extraordinary good
overlooked and/or under-exploited'' profitability.
(Albert and Bradley, 1997). However, for 5 Evaluate the relative worth of intellectual
more and more companies the value of capital ± using monitary values if at all
intellectual capital (the gap between book possible, or company developed indices or
value and market value) is now simply too matrices. Organisations have assembled
large to be categorised as ``goodwill''. their knowledge portfolio in an
There is a danger in not paying enough intellectual capital addendum to their
attention to measuring and valuing annual report and continuously assess the
intellectual capital. Organisations are, its development, i.e. treating knowledge
and will be, undertaking KM activities, like any other asset on the balance sheet.
whether based on good reasoning and Skandia internally audits its intellectual
[ 326 ]
 Yasar F. Jarrar capital every year for inclusion in its so hoard it. The new equation is
Knowledge management: annual report to stockholders. At Celemi knowledge = power, so share it and it will
learning for organisational (Mullin, 1996), determining the figures for multiply. Organisations have
experience
intangibles was largely a matter of experimented with a few approaches like
Managerial Auditing Journal
17/6 [2002] 322±328 organising current information on making knowledge related employee
employees' education and experience, the behaviour a specific target of their
company's records with key clients, and projects. A large consulting firm
its investment in IT. In the process the (Davenport et al., 1998) in trying to change
company determined that the value of its their employees' perceptions of their jobs
tangible assets ($3.4 million as reflected on from deliverers of consulting services to
the traditional balance sheet) is less than creators and distributors of management
half that of its intangible assets, for which knowledge, made contributions to the
it has determined a value of $8.4 million. firm's structured knowledge base a
significant factor in compensation.
Knowledge environment 2 Align reward system (rewards for
``One of the most important factors for a KM systemising/advancing KM). Successful
project's success, and most difficult to create, organizations overhauled the job
is organisational culture'' (Davenport et al.,
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descriptions and performance review

1998). The case study analysis has revealed forms so that they are explicit about
that for best results, the organisational contributing knowledge and its value to
culture must have most of the following the company. Successful knowledge
ingredients: sharing must be linked to a company's
. Employees are bright, intellectually reward system, such as Federal Express
curious, and, willing and free to explore. pay-for-knowledge programme (Allee,
. Senior management encourages 1997). At Ernst & Young and McKinsey
knowledge creation and use, and and Co., part of each consultant's
demonstrates commitment. compensation is based on knowledge
. People are not inhibited in sharing sharing activities. Similarly, 25 percent of
knowledge, and do not fear that it will cost the customer-support worker's
them their jobs. performance evaluation at Lotus
. People have a positive orientation to Development is based on knowledge
knowledge; in certain cases, culture sharing.
seemed to inhibit the project's objective
(e.g. some engineers saw the use of an Knowledge creation and development
existing design as a sign of weakness).
. Recruit the best people. Most of the case
studies analysed have made this area a
To establish such a culture, a few best central aim for their recruiting activities.
practices have been concluded and suggested In order to recruit top talent, Genetech
as follows: (Allee, 1997) lets its scientists publish
1 Knowledge sharing. Information sharing their findings immediately in leading
is critical because intellectual assets journals. In the past, the usual two year
increase in value with use. Properly delay made it impossible for the scientists
stimulated, knowledge and intellect grow to be the first in their field, which is
exponentially when shared. However, important for career recognition.
competition among professionals often . Intensive development for new recruits.
inhibits sharing. The reasons for this On-the-job training, mentoring. Theory
reluctance originate from old habits of (Quinn et al., 1996) suggests that
hoarding knowledge. Possible reasons are: professional know-how is developed most
. Fear of layoffs ± reluctance to share rapidly through repeated exposure to the
information about mistakes. complexity of real problems (preferably
. Competition among professionals and customer driven). On-the-job training,
the difficulty of assigning credit to mentoring, and peer pressure can force
intellectual contributions. professionals to the top of their knowledge
. Reluctance to share positive potential.
knowledge, believing that employee's . Constantly increase professional
value and, therefore, job security was challenges. This practice is essential for
tied to their personal expertise. knowledge creation and development
Getting people to share their knowledge since heightened professional challenges
requires not only new processes but also a act as the main motivator for continuous
new covenant between employer and improvement. In most of the cases
employees (Hibbard and Carrillo, 1998). analysed, leaders tended to be demanding,
This requires an overhaul of the old visionary, and often set almost impossible
knowledge equation: knowledge = power, ``stretch goals''.
[ 327 ]
 Yasar F. Jarrar Chase, R. (1997), ``The knowledge-based
Knowledge management: Conclusions organisation: an international survey''.
learning for organisational Journal of Knowledge Management, Vol. 1
experience The success of a corporation lies more in its
intellectual and systems capabilities than in No. 1, pp. 38-49.
Managerial Auditing Journal Davenport, T., De Long, D. and Beers, M. (1998),
17/6 [2002] 322±328 its physical assets. It is believed that in this
evolving knowledge environment, both ``Successful knowledge management
projects'', Sloan Management Review, Winter,
individuals and organisations will have one
pp. 43-57.
source of competitive advantage: intellectual
Graham, A. and Pizzo, V. (1996), ``A question of
capital. This represents an individual's (or
balance ± case studies in strategic knowledge
organisation's) accumulated knowledge and
management'', European Management
know-how, coupled with the ability to decant
Journal, Vol. 14 No. 4, pp. 338-46.
this into a system to create value. The paper
Hibbard, J. and Carrillo, K. (1998), ``Knowledge
has presented a study that analysed the revolution'', Informationweek, Issue 663,
experiences of organizations who had pp. 49-54.
successes with their KM initiatives. The Ives, B. and Gersting, A. (1998), ``Implementing
analysis resulted in a high level framework knowledge management ± lessons learned'',
for KM implementation, and a culmination of Knowledge Management, February/March.
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best practices. It is noted to remember Martinez, M. (1998), ``The collective power'', HRM
however, that successful KM is 10 percent Magazine, February, pp. 88-94.
systems and IT and 90 percent people and Mullin, R. (1996), ``Knowledge management: a
culture, and the statement so often cultural evolution'', Journal of Business
articulated ``the most important resource of Strategy, September/October, pp. 56-9.
an organisation is its people'' is increasingly Numri, R. (1998), ``Knowledge intensive firms'',
meaningful, not merely as rhetoric but also Business Horizons, Vol. 41 No. 3. pp. 26-31.
in practice. Petrash, G. (1996), ``Dow's journey to a knowledge
value management culture'' European
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