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Creating a Value Proposition With Creating a Value Proposition With Knowledge ManagementKnowledge Management
Points for discussionPoints for discussion
Patrick Callioni
Canberra 2 April 2002
Purpose of presentation
To discuss the significance of knowledge management to the future of Australia
To discuss measurement issues with knowledge management
To discuss how to create a value proposition for knowledge management
The context
“The Newtonian God - ‘the God who made a clockwork universe, wound it, and withdrew’ - is dead.” Richard Hames Burying the 20th Century (1997).
““When a human society reaches the limits of its stability, it When a human society reaches the limits of its stability, it becomes supersensitive and is highly responsive to the becomes supersensitive and is highly responsive to the smallest fluctuation. Then the system responds even to smallest fluctuation. Then the system responds even to subtle changes in values, beliefs, worldviews and subtle changes in values, beliefs, worldviews and aspirations.”aspirations.” Ervin Laszlo Ervin Laszlo MacroshiftMacroshift (2001) (2001)
The National Office for the Information Economy We must position the Australian economy as a
knowledge and service economy of the twenty-first century
Our international competitiveness is high and we rank highly in international benchmarking studies that measure countries against criteria related to information economy capacity
Our focus in tools that can help us do this, which are largely information management tools
Measurement: Why it is important
““Each day, their organisations’ operations consume Each day, their organisations’ operations consume public resources. Each day these operations produce public resources. Each day these operations produce real consequences for society – intended or not. If the real consequences for society – intended or not. If the managers cannot account for the value of these efforts managers cannot account for the value of these efforts with both a story and demonstrated accomplishments, with both a story and demonstrated accomplishments, then the legitimacy of their enterprise is undermined then the legitimacy of their enterprise is undermined and, with that, their capacity to lead.” and, with that, their capacity to lead.”
MH Moore, Creating public value, Harvard University Press 1995, p. 57.
Measuring knowledge and information
Information is an inert substance, with no inherent power of action, motion, or resistance; one must add something to make it useful and that something is belief (in the form of expectations), derived from experience (or knowledge = information + beliefknowledge = information + belief)
To create value in the information economy…we need knowledge and the capacity to manage that knowledge…to manage information and belief systems
Google shows over 3.2 million references for knowledge Google shows over 3.2 million references for knowledge management, more than for “risk management” (under 3 million)management, more than for “risk management” (under 3 million)
Creating a value proposition with KM There are three sets of issues
First, measuring the cost of KM (and the cost of adding or subtracting to KM)
Second, measuring the value of KM to tangibles such as profit and loss statements
Third, measuring the value of KM to intangibles, such as service, satisfaction, perceptions, expectations, emotions, response time, quality, cycle-time, innovation and so on
Creation of value
Value is a word that requires context to be understood
In most cases, the point of reference will be that of a shareholder or of a stakeholder
….but most of us occupy more that one vantage point and value to a shareholder may be ruination to an environmentalist…who may be the same person
Understanding beliefs and belief states is crucial
A value creation modelOrganisation isaccountable for...
Measured how? By whom? Why? (Primaryreason)
Customer/client ... quality service Personalsatisfaction; returncustom
The customer Self interest
Shareholder/owner ... return oninvestment
Size of return oninvestment
The shareholder Self-interest
Regulator(s) ... meeting policyobjectives,delivering servicesaccording toprescribedminimum standards
Complaints, legalaction
The regulator(s), theMinister, theGovernment,Parliament,
To satisfy ownaccountabilities
Surrogates (lobbygroups et al)
... satisfying policyinterests
Satisfaction ofownclients/customers
Its clients/customers To satisfy ownaccountabilities
Community ... being a goodcorporate citizen
Amount of taxpaid, managementof the environment,how employees aretreated
The community,opinion leaders
Self interest
Partner (supplier) ... meeting agreed(mutual) obligations
Personalsatisfaction
The supplier Self interest
Value creation model is fractal…..
The model can be used at the organisational level or…
...at any level below or above…
such as, for example, a division, team or individual…
...or a community, industry, region or state…
...and beyond.
Creating a value proposition with KM (cont.)
The value proposition is the business case for action (and investment)
It is the logical link between action and return: If we do A, then B will happen, and the return on B will be higher than either the cost of A or the potential risk of not making B happen
We need to know who is measuring value to know what to measure and how
Using the model
Whose point of view is important here? When you can answer that question, you can
use the model to understand what that “actor” values and.....why…
...and then... …how it might best be measured...
Where to from here?
The major issues are issues of measurement
and, in particular, the management of intangibles
The importance of intangibles
Tangibles explain less than 20% of the value of most publicly listed firms. Time Warner has only 6.49% of its value attributable to tangibles…for every $1 of true value, only $0.065 cents is being measured and managed by conventional management practices. For Oracle Corporation, tangibles account for only 4% of its value. For General Electric (worth over US$450 billion), tangibles account for less than 11% of its value (Standards Institute)
