Role of Information Technology in Successful Knowledge Management Initiatives

Atreyi Kankanhalli, Fransiska Tanudidjaja, Juliana Sutanto and Bernard C.Y. Tan Department of Information Systems National University of Singapore 3 Science Drive 2, Singapore 117543, Republic of Singapore

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Communications of the ACM

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Please address all correspondence on this paper to Bernard C.Y. Tan (Dr.) Phone and Fax: (65) 6874-6868; Email: btan@comp.nus.edu.sg

Role of Information Technology in Successful Knowledge Management Initiatives

The growing importance of knowledge as a critical business resource has compelled executives to examine the knowledge underlying their businesses, giving rise to knowledge management (KM) initiatives. Given that advances in information technology (IT) have made it easier to acquire, store, or disseminate knowledge than ever before, many organizations are employing IT to facilitate sharing and integration of knowledge. But considering the complexity of KM initiatives and the variety of IT solutions available on the market, executives must often confront the challenging task of deciding what type of IT solutions to deploy in support of their KM initiatives. This paper aims to shed light on the IT-KM match by investigating the role of IT in successful KM initiatives.

There are two basic approaches to KM for which IT can provide support: codification and personalization (Hansen et al. 1999). With the codification approach, more explicit and structured knowledge is codified and stored in knowledge bases. The main role of IT here is to help people share knowledge through common storage so as to achieve economic reuse of knowledge. An example of such IT tools is electronic knowledge repositories. With the personalization approach, more tacit and unstructured knowledge is shared largely through direct personal communication. The main role of IT here is to help people locate each other and communicate so as to achieve complex knowledge transfer. Examples of such IT tools are knowledge expert directories and video-conferencing tools. Both these KM approaches are fundamental to understanding the role of IT in KM.

Organizations Studied and Industry Classification Among the 20 winners of Most Admired Knowledge Enterprises (MAKE) 2002 award (http://www.knowledgebusiness.com/uploads/2002_Global_MAKE_Summary.pdf), 12

organizations (see Table 1) have been chosen for this study because information on their KM initiatives is available and they represent a variety of industry contexts. The KM initiative in each organization was analyzed to better understand the role of IT in these initiatives. These organizations can be classified along two dimensions (product-based

versus service-based and high versus low volatility context). This classification is important because it defines the competitive bases of organizations, thereby dictating appropriate KM approaches and the role of IT in KM.

Product-based and service-based industries have different competitive bases. Competition in product-based industries includes the physical products themselves, the services that accompany products, and the processes of marketing the products. However, competition in service-based industries depends mainly on the services offered. Therefore, in productbased industries, there are more diverse areas where knowledge can be utilized to gain and sustain competitive advantage, compared to service-based industries. For example, as a manufacturer of computing and imaging products, Hewlett Packard can leverage its sales knowledge to support sales personnel or enhance product development. But a service-based organization like Ernst and Young mainly leverages its service knowledge to provide cost-effective services to its clients.

The volatility dimension reflects the rapidity of change in the business environment and thus the extent to which knowledge can be economically reused. Business environment refers to market conditions as well as the technological, regulatory, and socio-cultural context. In a high volatility context, knowledge is time-sensitive. Currency of knowledge is paramount. Stored knowledge needs to be refreshed continuously. For example, in Microsoft, where software life cycle is short, an up-to-date expert directory is used to rapidly provide software development teams with people who have the desired expertise (Clayton and Foster 2000). Conversely, in a low volatility context, knowledge is less time-sensitive and stored knowledge tends to be useful over a relatively longer time span without updates. Table 1 classifies the 12 organizations under study using these two dimensions.

Low volatility context Productbased British Petroleum Buckman Laboratories Shell Ernst and Young KPMG Siemens Business Services

High volatility context Hewlett Packard Microsoft Siemens Infineon Technologies Xerox McKinsey Skandia

Servicebased

Table 1. Industry Classification of the 12 Organizations

Product-Based Organizations in Low Volatility Context British Petroleum, Buckman Laboratories, and Shell are examples of such organizations. Buckman Laboratories produces chemicals for papermaking and water treatment. The papermaking and water treatment industries use fairly standard chemicals manufactured by well-established processes. Thus, it is difficult for Buckman Laboratories to compete solely on the basis of products. British Petroleum and Shell manufacture petroleum and petrochemicals obtained by oil exploration and refining. In the petroleum industry, these products are subject to regulation of quality, quantity, and price. Such regulatory pressures and the nature of commodity markets make it difficult for British Petroleum and Shell to compete on basis of products. In short, product-based organizations in low volatility context usually do not compete on the basis of products alone. Instead, these organizations often compete on other bases (e.g., services that accompany products). For instance, Buckman Laboratories changed its strategy from merely selling products to solving chemical treatment problems for customers (Fulmer 1999). Similarly, British Petroleum and Shell recognized oil exploration as a source of competitive advantage because drilling for oil is an expensive undertaking.

Knowledge needed to sustain these diverse bases of competition is often tacit and fuzzy. Thus, these organizations have mainly adopted the personalization approach to KM and have deployed IT to support face-to-face communication and communities of practice (COP), which are informal networks of people who share similar work roles and common context. For example, Buckman Laboratories has spent $7,500 per employee each year,

for its more than 1,200 employees, to facilitate a global e-communication network (KNetix) that links specialists to field staff (Fulmer 1999). KNetix has several forums to support COP devoted to various business areas (e.g., TechForum has about 20 sections devoted to areas such as pulp and paper, and industrial water treatment). Likewise, British Petroleum has invested $434,000 to develop Connect, a knowledge yellow pages that helps employees to locate required expertise (Huang and Pan 2000). In addition, global community knowledge is assembled across the organization to leverage expertise on maintenance of oil drilling platforms and reservoir modeling. Shell has an Expertise Directory that acts as a clearing-house and signpost for both knowledge seekers and contributors. To facilitate communication among its subsidiaries, Shell developed Global Networks, which comprised collaboration tools like LiveLink and Microsoft Exchange (Arjan 2000). Although these organizations have invested heavily in IT to support the personalization approach to KM, they also practice the codification approach to a lesser extent. For example, Shell Global Networks has different degrees of codification for its three forums (Earl 2001). The best practice forum has a greater degree of codified knowledge whereas the discussion forum has minimal codified knowledge.

Product-Based Organizations in High Volatility Context Hewlett Packard, Microsoft, Siemens Infineon Technologies, and Xerox are examples of such organizations. These organizations produce high technology products (computing hardware and software). They operate in rapidly changing environments where rate of innovation and speed of new product development is crucial. To perform well, technical knowledge must be transferred to product development teams in a timely manner. Following launch of products, knowledge needed by sales teams should be disseminated swiftly to gain competitive advantage.

Knowledge shared during the creation of high technology products is typically too tacit to be codified. The effort needed to codify the knowledge and answer each possible query may be substantial (Hansen et al. 1999). Hence, it is more effective to share knowledge via the personalization approach. Towards this direction, Siemens Infineon Technologies makes use of telephone, electronic mails, and video-conferencing tools for knowledge

sharing (Davenport and Probst 2000). At Hewlett Packard, physical transfer of people across geographical locations facilitates such knowledge exchange (Hansen et al. 1999). The main role of IT is to provide yellow pages that map topics with experts. Examples of such IT include Connex in Hewlett Packard and Knowledge Map in Siemens Infineon Technologies. Employees in both organizations use such systems to locate colleagues with relevant expertise on specific problems and then utilize more personal forms of communication to gain knowledge from the experts.

In contrast, knowledge needed by sales teams (e.g., market characteristics, product capabilities, and service tips) can be more readily codified and thereby cost effectively disseminated to sales teams. Thus, the codification strategy to KM can be employed for such functions. For example, Hewlett Packard uses its Electronic Sales Partners as a knowledge base of technical product details, sales and marketing tactics, and customer account history for its sales force (Teigland et al. 2000). Xerox deploys the Eureka knowledge repository to provide its service engineers with access to technical tips for servicing photocopier machines (Hickins 1999). In Microsoft, the Internal Technical Education knowledge repository (comprising online learning, live class schedules, and white papers) provides knowledge and training to its field sales force (Clayton and Foster 2000).

Service-Based Organizations in Low Volatility Context Siemens Business Services and the financial services and tax consultancy units of Ernst and Young and KPMG typify such organizations. They provide consultancy services that are relatively stable over time. For example, as a main component of their businesses, the above units of Ernst and Young and KPMG provide consultancy services on operational issues (e.g., tax, audit, and financial matters) that are fairly well-defined. Siemens Business Services provides technological solutions (e.g., SAP R/3 consultancy) which have well-organized support knowledge. Competitive advantage of these organizations lies in the cost-effectiveness of service provision. The wealth of knowledge cumulated by these organizations and the ability to use this knowledge to serve their clients stand as a key value proposition.

Here, the codification approach to KM is often employed to facilitate economic reuse of knowledge. Knowledge is codified, stored electronically, and made available to employees via common technological platforms throughout the entire organization. For instance, Ernst and Young has developed the Center for Business Knowledge as a central repository holding its 40 areas of operational knowledge (Sarvary 1999). Similarly, KWorld of KMPG and SAP R/3 Knowledge Library of Siemens Business Services (Davenport and Probst 2000) are valuable knowledge resource repositories for their employees. These organizations deliver their knowledge resources to employees through common technological platforms such as Microsoft Office, Lotus Notes, and web browsers.

Service-Based Organizations in High Volatility Context McKinsey and Skandia typify such organizations. Their competitive advantage lies in the ability to provide strategic services that are tailored to the unique requirements of clients, in a timely fashion. Skandia, a financial services and insurance organization, leverages knowledge about its clients and their needs to develop strategic financial services. McKinsey, a strategic consultancy organization, utilizes its cumulative knowledge to deliver highly customized solutions to solve unique client problems. Due to the highly dynamic nature of their businesses, new and unstructured knowledge must be effectively exchanged so that custom-made solutions can be tailored for their clients. Such tacit knowledge can be effectively shared via face-to-face interactions.

The personalization approach to KM is usually used by these organizations. Compared to organizations under the preceding three categories, these organizations rely less on IT for knowledge sharing. Knowledge management initiatives focus more on people than on IT. For example, knowledge sharing in McKinsey is done mainly through brainstorming sessions and personal conversations. Physical transfer of people between offices is crucial to knowledge sharing (Sarvary 1999). In Skandia, the exchange of knowledge among international subsidiaries is conducted mainly through physical transfer of people. International meetings among managers are held several times a year to exchange experiences and promote new concepts (Mertins et al. 2001). Moreover, Skandia built a

waterside villa (Future Center) where employees can exchange ideas and experiences, thereby facilitating accidental learning and building networks (Earl 2001). These events are designed to promote intensive knowledge exchange and for employees to learn where to find experts on certain topics within the organization. Table 2 summarizes the KM systems in the organizations discussed above.

Low volatility context Productbased Expert Directories Connect (British Petroleum) Expertise Directory (Shell) COP KNetix (Buckman Laboratories) Global Networks (Shell)

High volatility context Expert Directories Expert Directory (Microsoft) Knowledge Map (Siemens Infineon Technologies) Connex (Hewlett Packard) Direct Exchange Phone and video conferencing (Siemens Infineon Technologies) People-transfer (Hewlett Packard) Repositories Electronic Sales Partners (Hewlett Packard) Eureka (Xerox) Internal Technical Education (Microsoft) Direct Exchange Phone and video conferencing (McKinsey) People transfer (McKinsey and Skandia)

Servicebased

Repositories Center for Business Knowledge (Ernst and Young) Kworld (KPMG) SAP R/3 (Siemens Business Services) Table 2. Summary of KM Systems

Implications for Practice Product-based organizations in low volatility context tend to compete on bases other then the physical products themselves. Many such organizations adopt the personalization approach to KM. A combination of expert directories with collaborative tools (e.g., discussion forums and video-conferencing) allows employees to connect and pool their knowledge. Executives operating in such a context can identify and foster COP that have direct impact on their organizational strategic objectives (e.g., the COP on Pulp and Paper

in Buckman Laboratories). These communities can be supported with tools that allow efficient posting of queries and solutions, and searching of discussion threads. Participation in COP may also be made a part of employee performance appraisal. For example, Buckman Laboratories promotes and rewards employees who are actively contributing in discussion forums.

Product-based organizations in high volatility context tend to adopt both personalization and codification approaches to KM. During product development (and for research and development purposes in general), expert directories and collaborative tools can support the personalization approach to KM. To support sales teams and technical field teams, a common knowledge base with anytime, anywhere access will go a long way towards facilitating the codification approach to KM. In many instances, organizations control the quality of knowledge content being codified through a careful review process by domain experts (as in Xerox). Given that rate of innovation and fast product dissemination are keys to success, and that both factors hinge on intensive knowledge sharing, executives may consider providing team rewards to foster collaborative norms, which encourage knowledge sharing.

Service-based organizations in low volatility context often take the codification approach to KM. Management can focus on the creation and maintenance of knowledge repositories in core domains, with a careful review process by domain experts or knowledge owners. To be most effective, these repositories must provide employees with seamless access, and have powerful indexing and search capability. Beyond the technical qualities of knowledge repositories, executives can also provide incentives to build an organizational culture that encourages knowledge sharing. For example, employees in Ernst and Young are rewarded for their contribution to knowledge repositories. In addition, organizations can enforce policies to alleviate misuse of organizational knowledge so as to further encourage knowledge contribution.

Service-based organizations in high volatility context often rely on the personalization approach to KM. They require IT tools that support multiple media (e.g., audio, video,

text, and graphics) for richer interaction. Since knowledge sharing is mainly conducted through one-to-one interaction, executives should build a culture of mutual support. For example, consultants in McKinsey are expected to return phone calls from colleagues promptly. Organizations may consider mechanisms to reward employees for sharing knowledge directly with colleagues. For example, the amount of consulting time that an expert has provided to colleagues may form a part of performance appraisal. The implications for practice are summarized in Table 3.

Low volatility context Productbased Identify and promote strategic communities of practice Provide expert directories and collaborative tools Reward participation in strategic communities of practice

High volatility context Provide expert directories and collaborative tools for product development teams Provide knowledge repositories for product sales teams Review of contents in knowledge repositories by experts Reward team sharing of knowledge Build a culture of mutual support and interaction Provide communication support for one-to-one interaction via multiple media

Servicebased

Create and maintain high quality knowledge repositories Provide effective search capabilities for repositories Reward quality contributions to knowledge repositories Reward effective reuse of knowledge from repositories Table 3. Summary of Implications for Practice

Conclusion This article offers some insights on the IT-KM match through a study of 12 organizations with successful KM initiatives. Depending on whether organizations are product-based or service-based, and whether they operate in a high or low volatility context, organizations are found to have distinct patterns in their approaches to KM (see Figure 1). Future work may go beyond the industry classification of this study to investigate KM strategies and IT support at a finer level (e.g., task characteristics or processes supported). It is plausible that organizations could use the personalization and codification approaches to KM, to varying extents, depending on task characteristics or processes supported. Nevertheless,

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by highlighting the best practices of organizations with successful KM initiatives, this article gives executives some clues about approaches to KM that may suit their situations and appropriate roles of IT in support of these approaches.

high

Service-based organizations in low volatility context

Product-based organizations in high volatility context

Codification approach

Product-based organizations in low volatility context Service-based organizations in high volatility context

low low

Personalization approach

high

Figure 1. KM Approaches across Industry Contexts

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Hansen, M.T, Nohria, N. and Tierney, T. (1999). What's Your Strategy for Managing Knowledge? Harvard Business Review 77(2): 106-116. Hickins, M. (1999). Xerox Shares its Knowledge. Management Review 88(8): 40-45. Huang, J.C. and Pan, S.L. (2000). Learning from an Oil Giant: Case Evidence from British Petroleum Amocos Knowledge Management Program Journal of Information Technology Management 11(1-2): 45-55. Mertins, K., Heisig, P. and Vorbeck, J. (2001). Knowledge Management: Best Practices in Europe. Springer, New York, NY. Sarvary, M. (1999). Knowledge Management and Competition in the Consulting Industry California Management Review 41(2): 95-107. Teigland, R., Fey, C.F. and Birkinshaw, J. (2000). Knowledge Dissemination in Global R&D Operations: An Empirical Study of Multinationals in the High Technology Electronics Industry Management International Review 40(1): 49-77.

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