Knowledge Management Class08

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Knowledge Management Class08

• KMS metrics / KMS success
• R19-22O12G13
• And failure R23
• Metrics
• Skandia
• Balanced Scorecard
• ROI - knowledge management system audits
• Mitre Corp.
• Other
• Success (and failure) factors

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Part 5 Keeping Score
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R19 You Get What You Measure

• Why measure?
• Deciding what to measure
• Using established organizational measures
• Addressing the skeptics
• Combining numbers and words
• Communicating your measures

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Measure

• The right things
• Leading indicator
• predictive
• performance drivers (Balanced Scorecard)
• Can be changed
• Lagging indicator
• Shows the outcome
• Measures results
• Easier to develop
• Cannot be changed

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Indicators

• Keep the number down
• Even the Balanced Scorecard should have 24 or
  less
• Measure things that are already measured
• Include a story (explanation) with results (helps
  sell the KMS)

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The Least You Need to Know

• The goal of measurement is to produce information
  in context for an actionable understanding
• Dont measure everything. Measure enough to give
  you the information needed for an actionable
  understanding
• If your organization has an existing measurement
  system, consider linking to that, not growing
  your own
• Its best to combine facts with words, like
  anecdotes and sound bites
• Developing good measures is insufficient you
  also must communicate both the measures and the
  results
• Craft a communications strategy for your measures

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R20 Developing Measures

• Determining your goals and your audience
• Developing an operational definition
• Specifying how and what data will be collected
• Graphically displaying your measures
• Evaluating your measures

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What is Success?
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What is Success?

• To Whom?

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Measures

• Be careful
• Consider
• Your audience
• How to collect data
• Accuracy
• Precision

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The Least You Need to Know

• For measurement, you need clear and measurable
  goals and an identifiable audience
• Measures must be reliable and valid. Develop
  detailed specifications for what data will be
  collected and how
• Measures should be displayed in a variety of ways
  and with enough context to explain them
• Monitor and evaluate how your measures are
  working
• Developing a list of measures is a process of
  trial and error. You need to periodically
  reassess your measurement team, dropping some
  measures while adding others

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R21 A Sampler of Measurement Approaches

• Calculating financial measures
• Creating (balanced) scorecards
• Valuing knowledge assets
• Measuring the maturity of your knowledge
  management effort
• Surveying your employees opinions about KM

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MITRE

• Audit Benefits and Costs Estimated
• Benefits 60 million plus
• Costs 8 million minus

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Balanced Scorecard

• Most business intelligence BI (OLAP, data
  mining, portal, enterprise information system,
  etc.) firms have information about the Balanced
  Scorecard
• E.g., Cognos (cognos.com)
• Also see the Balanced Scorecard Cooperative Web
  site (www.bscol.com)
• Also see the Balanced Scorecard Institute Web
  Site (www.balancedscorecard.org)

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Balanced Scorecard

• A performance measurement approach that focuses
  on linking an organizations mission and strategy
  to specific measures
• It measures
• Financial results
• Customers
• Internal business processes
• Learning and growth

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www.balancedscorecard.org
Balthus, The Street
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Balanced Scorecard

• The balanced scorecard is a management system
  (not only a measurement system) that enables
  organizations to clarify their vision and
  strategy and translate them into action. It
  provides feedback around both the internal
  business processes and external outcomes in order
  to continuously improve strategic performance and
  results. When fully deployed, the balanced
  scorecard transforms strategic planning from an
  academic exercise into the nerve center of an
  enterprise.

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Balanced Scorecard
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Learning and Growth Perspective

• Includes employee training and corporate cultural
  attitudes related to both individual and
  corporate self-improvement
• In a knowledge-worker organization, people -- the
  only repository of knowledge -- are the main
  resource
• In the current climate of rapid technological
  change, it is becoming necessary for knowledge
  workers to be in a continuous learning mode

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• Government agencies often find themselves unable
  to hire new technical workers and at the same
  time is showing a decline in training of existing
  employees
• This is a leading indicator of 'brain drain' that
  must be reversed
• Metrics can be put into place to guide managers
  in focusing training funds where they can help
  the most
• In any case, learning and growth constitute the
  essential foundation for success of any
  knowledge-worker organization

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• Kaplan and Norton emphasize that 'learning' is
  more than 'training'
• It also includes things like mentors and tutors
  within the organization, as well as that ease of
  communication among workers that allows them to
  readily get help on a problem when it is needed
• It also includes technological tools what the
  Baldrige criteria call "high performance work
  systems" (e.g., the Intranet)

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Business Process Perspective

• Refers to internal business processes
• Metrics based on this perspective allow managers
  to know how well their business is running, and
  whether its products and services conform to
  customer requirements (the mission)
• These metrics have to be carefully designed by
  those who know these processes most intimately
  with our unique missions these are not something
  that can be developed by outside consultants

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• In addition to the strategic management process,
  two kinds of business processes may be identified
• Mission-oriented processes
• Support processes

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Processes

• Mission-oriented processes are the special
  functions of government offices, and many unique
  problems are encountered in these processes
• Support processes are more repetitive in nature,
  and hence easier to measure and benchmark using
  generic metrics

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Customer Perspective

• Recent management philosophy has shown an
  increasing realization of the importance of
  customer focus and customer satisfaction in any
  business
• These are leading indicators if customers are
  not satisfied, they will eventually find other
  suppliers that will meet their needs

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• Poor performance from this perspective is thus a
  leading indicator of future decline, even though
  the current financial picture may look good
• In developing metrics for satisfaction, customers
  should be analyzed in terms of kinds of customers
  and the kinds of processes for which we are
  providing a product or service to those customer
  groups

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Financial Perspective

• Kaplan and Norton do not disregard the
  traditional need for financial data
• Timely and accurate funding data will always be a
  priority, and managers will do whatever necessary
  to provide it
• In fact, often there is more than enough handling
  and processing of financial data

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• With the implementation of a corporate database,
  it is hoped that more of the processing can be
  centralized and automated
• But the point is that the current emphasis on
  financials leads to the "unbalanced" situation
  with regard to other perspectives
• There is perhaps a need to include additional
  financial-related data, such as risk assessment
  and cost-benefit data, in this category

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For more, also see

• http//www.quickmba.com/accounting/mgmt/balanced-s
  corecard/
• http//www.netmba.com/accounting/mgmt/balanced-sco
  recard/
• Kaplan and Nortons book and articles

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Willi Baumeister, Standing Figure with Blue Plane
(Stehende Figur mit blauer Flache), 1933
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KMS Must Measure ROI

• Knowledge (intellectual) assets are tricky to
  value

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KM Valuation Process Steps

• Identify opportunities
• Scope the project
• Develop an operational model
• Discover value drivers
• Develop valuation framework
• Test and refine scenarios

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The Least You Need to Know

• The balanced scorecard is a performance
  measurement approach that focuses on linking an
  organizations mission and strategy to the
  measures.
• The balanced scorecard measures not only
  financials, but also three additional
  perspectives customers, internal business
  processes, and learning and growth

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Least continued

• The Lincoln Re KM valuation approach (Clare and
  Detore) gives a rigorous approach for measuring
  returns on investment in knowledge assets
• And it gives a framework for developing a KM
  strategy

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Least continued

• Some organizations base measures on models of
  maturity in their knowledge management efforts
• Some organizations also use employee surveys to
  assess some aspects of KM such as culture and
  barriers to KM
• Surveys measure peoples perceptions, not
  necessarily reality

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R22 Measuring Intellectual Capital

• How to measure intellectual capital
• Learning about the Intangible Assets Monitor
• Consider the Skandia Navigator
• Understanding the Intellectual Capital Index
• Changing the mental models

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4 Measures of Intellectual Capital

• Direct intellectual capital method (DIC)
• Market capitalization method (MCM)
• Return on assets method (ROA)
• Scorecard method (SC)

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Direct intellectual capital method (DIC)

• DIC measures estimate the value of intangible
  assets
• First identify various components
• Then evaluate them

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Market capitalization method (MCM)

• Calculated by estimating the difference between a
  firms market capitalization and its
  stockholders equity
• Some methods
• Market to book value
• Tobins q ratio of the firm divided by the
  replacement cost of its assets

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Return on assets method (ROA)

• (Average pretax earnings/Average tangible assets)
  for a specific period of time
• Compare to industry average
• Multiply difference by average tangible assets
• Get an average annual earning from the intangibles

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Scorecard method (SC)

• Identify various components of intangible assets
• Generate indicators (indexes)
• Report on scorecards (or as graphics)

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Intangible Assets Monitor (Sveiby)

• Three categories
• Human competence
• External structure
• Internal structure

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Celemi Intangible Assets Monitor

• Measure along the dimensions of
• Growth/renewal
• Efficiency
• Stability
• Colors indicate status relative to targets

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Skandia Navigator

• Measures are in 5 Components
• Financial
• Customer
• Process
• Renewal and development
• Human

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Discussion

• How do these all relate to our professional
  lives, in terms of intangibles like
  growth/renewal, etc.?

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The Least You Need to Know

• The Measurement of intellectual capital focuses
  on the intangible assets of an enterprise
• A balanced scorecard method concentrates on
  producing indicators or indexes for a range of
  intangible asset components. The indictors or
  indexes may be reported as scorecards or graphics

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Least continued

• An index is an aggregation of information.
• Must be carefully developed weighing the
  components
• Communicating results
• How well does the index really measure the right
  things?

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Least continued

• Scorecard approaches include
• The Intellectual Asset Monitor (Sveiby)
• The Skandia Navigator
• The Intellectual Capital Index
• Implementing measurement of intellectual capital
  requires an understanding of your organizations
• Readiness
• Cultural enablers
• Barriers
• The use of change management methodology

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Part 6 Settling In for the Long Haul
Degas, Edgar, Laundress (Silhouette), c. 1874
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R23 Where Did We Go Wrong?

• Implementing IT for the right reasons
• Understanding the importance of critical
  differences
• Building broad support
• Recognizing unrealistic timelines

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The Least You Need to Know

• Information technology, no matter how good, is
  NOT KM
• Must consider potential differences in culture,
  organizational subcultures, and language.
  Adjustments may be required.
• And worry about standardization
• Need broad organizational support from leaders at
  multiple levels
• Spell out to your sponsors exactly what they must
  do. Make sure they have enough time.
• Implementing KM takes time. Unrealistic deadlines
  lead to failure

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O12 Measuring the Impact of Transfer
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Outcomes Realized via KM
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Buckman Laboratories
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Refer to

• Turban, Aronson, Liang, 2005
• Rumizen
• Balanced Scorecard Organization Web site
  (www.bscol.com)

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G13. Metrics and Taming Wicked Problems

• Some problems are so complex that you have to be
  highly intelligent and well informed just to be
  undecided about them Laurence J. Peter
• Cognitive Mapping / Banxia Software Corp., Fran
  Ackermann

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KM Metrics

• Quantitative
• Qualitative

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Taming the Wicked Problem

• Five Taming Technique that dont work (also see
  Chapter 2 of Turban, Aronson, and Liang DSSIS,
  s7th ed., p. 70 next page)
• Redefine the problem
• Declare victory
• Rig the metrics
• Stay in your foxhole
• Go shopping (for software, etc.)

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The Seven Deadly Sins of Decision Making (Common
Pitfalls)

• We already have all the answers (there is no
  attempt to seek outside information or expertise)
• Asking the wrong questions (you need the right
  information to make an informed decision)
• Old demon ego (a decision maker feels he/she is
  right, and refuses to back down from a bad policy
  or decision)
• Flying-by-the-seat-of-your-pants saves
  moneydoesnt it (by not seeking out information,
  an organization saves moneyand makes bad
  decisions)

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• All aboard the bandwagon if it works for them,
  itll work for us (copying someone elses ideas
  involves really understanding why and how they
  work)
• Hear no evil (discourage and ignore negative
  advice kill the messenger with the bad news)
• Hurry up and wait no decision can be the same as
  a bad decision (procrastination is not
  necessarily a good management technique)

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• Of course, all of these lead to faulty decisions
  that lead to unnecessary and high costs for firms
  and individuals (like getting fired)
• Many of these sins clearly involve behavioral
  issues and lack of information and expertise that
  lead to less objectivity in the decision making
  process.

DSS in Focus 2.15, Chapter 2 of Turban, Aronson,
and Liang, DSSIS, s7th ed., p. 70 original
source Sawyer, D.C. Getting it Right Avoiding
the High Cost of Wrong Decisions, Boca Raton,
FL St. Lucie Press, 1999.)
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Case Study Taming a Wicked ERP Problem

• Also Hersheys Chocolate ERP case

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END OF PPT PRESENTATION

• END OF PPT PRESENTATION