Lecture 11 Measurement

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Lecture 11Measurement
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Learning Outcomes

• To comprehend the dilemma of measurement in KM
• To compare different philosophies on the subject
• To review measurement frameworks and tools

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Evidence

• Many leading organisations now recognise the
  fundamental business importance of knowledge and
  would accept the argument that issues such as
  profit and loss, survival and extinction could
  well be determined by their ability to manage it
• Martin, 2000

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Contradiction

• Few managers grasp the true nature of the
  knowledge-creating company let alone how to
  manage it
• Nonaka, 1991
• Few can clearly articulate its value or figure
  out how to capture and share the knowledge that
  already exists but is locked within a department,
  a division, or even the minds of individual
  workers
• Hiebeler, 1997

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• A Contemporary Dilemma?
• How can accounting systems capture changes
  brought about by the development of intangibles
• Lev Baruch, 1998

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The measure of measure

• Overtime the notion of measure began to change,
  to lose it subtlety, and to become relatively
  gross and mechanical
• David Bohm
• it is decided that which cannot be measured
  and reduced to numbers is not real
• Galileo Galilei
• You can measure anything and everything
• Senior Post Office Executive

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Toward a New Philosophy and PracticeIdeas from
Max de Pree

• Why measure?
• Essential for the health of the organization
• For Maturity and Growth
• For seeing our potential can we reach it?
• Renewal and abandonment
• Create a sense of communal responsibility

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Evolution of Measures
Throughout the evolution, Understanding
improves Skyrme, 1998
4 Value
3 Management
2 Metrics
1 Language
Roos, quoted in Skyrme, 1998
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Items that cannot be put on a spreadsheet

• Intrinsic motivation, co-operation and other
  human attributes that make results happen
• The capacity of a company for discovery and
  innovation of key new products
• The benefits of education and training
• The fundamental capacity of an organization to
  shape its future
• Fifth Discipline Fieldbook

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Intellectual Assets

• Human Capital - the capabilities of the
  individual that are needed to provide solutions
  to customers
• Customer Capital - depth (penetration), width
  (coverage), attachment (loyalty) profitability
  of the customers
• Structural Capital - the capabilities of the
  organisation to meet market needs

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Investments Required

• Management time to identify, prioritise, and
  develop knowledge assets
• Integration with main business processes
• Tools to enable global sharing
• Collaborative working environment
• New roles and responsibilities

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Knowledge Value Drivers

• Move from value chain thinking to value network
• Goods, services and revenues
• Knowledge
• Intangible value and benefits

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Knowledge Value Opportunities

• Customer Intimacy
• Intellectual Property
• Processes and Product Quality
• Knowledge-based Products
• Rapid Response

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Some Measurement Methods

• Balanced Scorecard
• Competency Models
• Benchmarking
• Business Worth

• Brand Equity Valuation
• Colorised Reporting

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Performance Measurement

• Late 80s/early 90s saw development of balanced
  multi-dimensional, multi-facet performance
  measurement frameworks
• Emphasis on non-financial, external and future
  looking performance measures

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Traditional v Innovative

• Traditional Performance
• Measurement Systems
• Based on cost/efficiency
• Trade-off between performances
• Profit-orientated
• Short-term orientation
• Prevalence of individual measures
• Prevalence of functional measures
• Comparison with standard
• Aim at evaluating

• Innovative Performance
• Measurement Systems
• Value-based
• Performance compatibility
• Customer-orientated
• Long-term orientated
• Prevalence of team measures
• Prevalence of transversal measures
• Improvement monitoring
• Aim at evaluating and involving

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Benchmarking

• Benchmarking is the search for industry best
  practices that will lead to superior performance
• Camp, 1989
• A process that facilitates learning and
  understanding of the organisation and its
  processes
• Fernandez et al., 2001

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Evolution of Benchmarking
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Structured Process

• Five generic stages
• Planning
• Analysis and data collection
• Comparison and results
• Change
• Verification and Maturity
• Fernandez et al., 2001

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Making Knowledge Visible

• Knowledge Activities Networks, communities,
  symbols, signals
• Knowledge Outcomes Cycle time, product
  development, patents
• Knowledge Investments Training, RD, Knowledge
  oriented technologies
• Prusak, 1999

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Viewpoint 1 Just Do It

• Management energy is better spent creating and
  using the forces that will drive overall
  performance and deliver value to the companys
  key constituencies
• Knowledge is only relevant when it is used it
  has no intrinsic value. This is why initiatives
  to assign value to a companys inventories of
  knowledge are so misguided
• Pasternack Viscio, Booz Allen, 1998

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Viewpoint 2 Do It and Measure

• What you can measure, you can manage, and what
  you can manage, you can measure
• We see intellectual capital as a language for
  thinking, talking and doing something about the
  drivers of companies future earnings
• Intellectual capital is concerned with managing
  and measuring knowledge and other intangibles

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Business Intelligence Findings

• There are those whose natural instinct is a
  desire to measure if you can measure you can
  manage
• on the other hand, as companies focus more on
  fast-paced innovation then intuition and moving
  in the right direction seem to be more important
  than precise measurement
• Skyrme, 1998, Measuring the Value of Knowledge

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Leadership, not justification

• The differences of attitude between measurers and
  doers
• The former get bogged down in developing ROI
  cases
• The latter, working with a vision, commitment and
  motivation, simply start investing in Knowledge
  Management. They recognise it as crucial to
  their future
• Skyrme, 1998

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APQC on Measurement

• Two Schools
• Nurturers and Quantifiers
• Two Types of Measures
• Business Results
• Tools and Applications
• CONK Cost of Not Knowing
• Customer Retention Rates
• Number of calls resolved first time
• ODell Grayson, 1998

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APQC Examples of Measures

• revenue from new products
• Time-to-market cycle
• Number of product launches per year
• Cost per unit
• Productivity and yields
• ODell Grayson, 1998

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How Do I Select Pilot Projects?

• Choose those which
• Advance your business performance
• Have a high probability of success
• Can explore emerging technologies
• Can build credibility
• ODell Grayson, 1998

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Cranfield Survey 1998 The Next Three Years

• Companies prepared to spend money on KM, even
  though they still lack proven solutions and
  experience
• 90 plan to exploit knowledge
• The drivers better business, competitive gain
  and greater profits
• 85 agreed if we knew what we know, we would
  be far more productive
• Murray Myers, 1999

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• Benchmarking KM
• Assessment Tool