Traditional strategies to improve efficiency are failing in the Knowledge Economy.

It is really amazing and sad (and frustrating for some of us who can see the light) how much Company Boards concerned with cutting costs while sustaining growth can repetitively miss the most effective way to do this in the Knowledge Economy we leave in: leveraging the organizational Knowledge through the development of a knowledge-sharing culture to foster creativity and innovation. Traditional means of cost cutting are increasingly reaching their limits and sometimes even become counter-productive. For instance, the still somewhat popular engineering tools designed to map, understand and control organizational processes – to eventually simplify/standardise them to cut costs and improve efficiency - are all failing to meet their objectives. They at best provide a partial understanding of what is really going on, and at worse end up being themselves more complex and costly to manage than what they are supposed to represent. The key problem of these tools is that they miss a vital part of organizational processes: the human aspects (social, political, hierarchical, geographical, knowledge, skills, competences, etc…). Another example of a management tool usually not adapted to the Knowledge Economy is MBO or Management By Objectives. When managers’ performance is evaluated solely on annual objectives, they will naturally tend to focus their attention and efforts on these objectives and not be concerned with anyone else’s. In other words, MBO can have adverse effects on collaboration. Of course, there are ways to alleviate this problem such as including a knowledge-related objective for each manager. Assuming it is measurable, this objective would however probably drive the only knowledge-related activity a manager will carry out effectively, so not vey productive from a KM point of view. Cost-cutting is still too often synonymous of redundancies, recruitment freeze, modest salary increase, low (or no) bonuses, etc… Of course, who is making the most sacrifices and suffers the most: the workforce (the human capital). The problem with this is that it affects negatively what is increasingly the most important asset to an organization: its people knowledge and experience. Instead of sending the message that their very existence is a reason for lower margins, they should be asked and given the suitable environment to actively and creatively work out ways to cut costs and/or increase efficiency/effectiveness with same resources. A suitable environment means enabling a knowledge sharing culture. Peter-Anthony Glick http://leveragingknowledge.blogspot.com

Business Intelligence for simulating the future

Chris Caren (Microsoft’s general manager of Office business applications) had recently this to say about Business Intelligence: The latest three trends are: 1. BI products are usually considered as too hard for everyone to use and too expensive to roll out to as many people as one would want to. 2. Standardising onto one or two BI product lines that can serve all the needs of different types of user. 3. A change in the way people are thinking about BI: from a report-centric, historical view of the business, to a metrics-centric view – involving dash-boards and scorecards – of where the company is heading. I believe these three points are all valid and important but the last one is the key to success. The first two are more about technology, the last one is first about a change of approach and a change of objectives. It implies the realization that successful organizations will be the ones that focus on simulating the possible future rather than analysing the past. Peter-Anthony Glick http://leveragingknowledge.blogspot.com

Seven lessons learned with Knowledge Management initiatives

If a shared information repository contains mostly information that people are used to find elsewhere, you’re wasting your time, it won’t be used. “[...] make sure the system is easy and comfortable to use – in fact, easier and more comfortable than ignoring the system.” R. Buckman For an individual (or a group) to contribute information, he/she must expect and obtain at least as much in return. A deep cultural change in the organization can only succeed with a top-down approach. Start small with “quick wins” and build on their growing reputation. Pilot each new solution with welcoming teams and individuals. Keep the most resistant groups for last, they’ll follow when every one else is on board. The “correct” level of information categorization depends on the tool, on the purpose and on the intended user community: Too much categorization adds unnecessary complexity and stifles creativity; too little leads to unproductive chaos. Peter-Anthony Glick http://leveragingknowledge.blogspot.com

Systems thinking for Knowledge Management

Consider the above “Strategic Capability” diagram (L. Baird and J. Henderson, The Knowledge Engine, Berrett-Koehler Publishers, 2001, first edition page 14). 

  Business Intelligence (BI) needs to provide the right Knowledge to drive the strategy and use the strategy to direct Knowledge Management (KM) initiatives: 

The Focus stage above. 

The BI Reflect stage must rely heavily on Knowledge generated at the operational level (this same Knowledge is considered as “only” Information at the Strategic Level). Reflecting is about aggregating and simplifying this “operational Knowledge”, making sense of it strategically to produce “strategic Knowledge”. “Making sense of Information” means here to be able to use it in various pre-defined contexts and run simulations. These simulations are to assist the strategic decision-makers in assessing which strategies have the most suitable potential-to-risk ratio. 

How should the operational Knowledge be structured to enable these strategic simulations? 

I have been recently introduced by Dennis Sherwood (author of “Seeing the Forest for the Trees – A Manager’s Guide to Systems Thinking”, Nicholas Brealy Publishing, 2002) to Systems Thinking in the organizational context. I strongly recommend Dennis’ book but in a few words, “the essence Systems Thinking is that the complexity of the real world can best be tamed by seeing things in the round, as a whole. […] Taking a broad view, however, is not at the expense of missing the detail […]. Nor is it a question of broad brush versus detail; rather, it is one of taking a broad view in the context of the right detail, of truly […] seeing the forest for the trees.” The idea here is then to illustrate operational Knowledge in a systemic form (a causal loop more precisely) where all stakeholders are linked up through a network of inputs and outputs. These ins and outs are to represent the influences these stakeholders have on each other. Influences are either positive or negative (never neutral). These systems include levers and outcomes. The levers are the variables for defining an initial context for the simulation. The outcomes give the results of the simulation. Various off-the-shelves software will enable you to relatively easily design such an organizational system. 

However, the complexity isn’t with the technical design but rather with defining the relationships between stakeholders, or in other words, with having a clear understanding of how the organization operates. Building effective organizational systems must therefore involve experienced individuals from different key functional areas in the organization. No single individual can have the required knowledge to do this alone. 

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Business Intelligence needs to get more strategic.

I would like to focus in the next few posts on a specific knowledge-related activity: Business Intelligence (BI). 

 I will start by quoting the following article. It introduces very well what BI can ultimately enable at the retail end of a supply chain. A question I am asking myself is: If relatively mass market companies eventually manage to provide tailored products and services to individuals, how will luxury market companies respond to maintain their competitive advantage in terms of personalized products and /or services? 

<< Science fiction business is not so alien : The futuristic technology used by shops in the film Minority Report is not very far from current reality>> James Murray, IT Week, 28 Feb 2006 

 When starting work on his 2002 sci-fi film Minority Report, one of director Steven Spielberg’s first acts was to invite a team of scientists, philosophers and designers to a “think tank summit” to envisage how the world would look in 2054. […] the summit proved pretty effective and the depiction of a dystopian society where all advertising is tailored to the individual customer is looking more prophetic with each passing year. Minority Report’s vision of a world where people walk into Gap to be faced by holographic staff who greet them by name and ask how they’re getting on with their past purchases is intended as a nightmare scenario […]. 

But the fact Gap, as well as Guinness, Bulgari and Lexus, agreed to be involved suggests that this concept of individualised marketing is less a horror story, more a model of corporate efficiency. The fictional systems that in Minority Report allow firms to tailor adverts to customers’ tastes are only an extreme version of analytical business intelligence (BI) tools that are already available and being embraced by many firms. 

Even before 19th century department store mogul John Wanamaker complained, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half,” firms were looking for ways to guarantee returns on marketing. But in the last few years, evolving analytical reporting tools coupled with an exponential increase in computing power have resulted in BI systems that provide an answer to this age-old dilemma. The latest generation of BI tools can analyse massive data warehouses to give firms a much better insight into customers’ habits and work out which buyers to target with which products. 

Online vendors such as Amazon were among the first to use this functionality to recommend items based on preferences of similar customers, but such systems are now being widely used in traditional shops to optimise pricing and marketing. Applying the same BI capabilities to internal data has also given firms real-time information on supply chains and performance, allowing them to optimise processes. For example, several US clothing firms now analyse demographic and sales data in such depth that they can tweak supply chains so that the right clothes always go to the right stores. New York gets extra Armani suits and Florida receives all the surplus XXL Bon Jovi T-shirts. This level of insight may make privacy advocates nervous, but according to recent reports, the way BI systems help optimise almost every aspect of companies’ operations – from production, through the supply chain to marketing – means those with a BI strategy are already outperforming those without […]. >> 

 Link to complete article: http://www.itweek.co.uk/itweek/comment/2151089/science-fiction-business-alien 

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