Apr 9

The Changing Value of Knowledge

It is befitting to finish this series on the new changes in knowledge with the question of whether knowledge is a valuable item for an organization, from my perspective time-to-value is a far better telltale of performance for an enterprise software application than return-on-investment these days.

Traditionally the value of knowledge to the organization has been explained by using the time-value of learning.  That is, a new hire is worth X to an organization, evidenced by the salary they receive.  Over time that salary grows and 10 years after starting, following promotions and raises, the individual increases their value to the organization to 3X, 4X or more (evidenced by their new salary).

This increase in value has been explained as the value of the knowledge acquired by doing the job – which then translates into a more valuable worker for the organization.  This increase in value, experts say, is the increase in value of the accumulated knowledge.  This example has been documented extensively in books that talk about the value of knowledge for organizations.

Well, I say, that is wrong and I can give you three reasons why that is no longer the case (although it might’ve been correct in the past).

Reason 1 – it ignores the value to the customer

As Wim Rampen put is so well a few weeks ago value can only be calculated in use – not as an accumulation.  Just because you do something many times does not mean it brings value; if you learn to do certain tasks very well, the value may result in a reduced-time-to-execute, but not in the ability to do it faster per se.  And this reduced time to execute may be valuable only if both parties to the specific interaction value reduced time over anything else.  If the value is placed over more contextual answers over the time to produce an answer the value changes. The value model above focuses on the individual becoming more able, not necessarily more contextually knowledgeable over time.

Further, and this is the biggest problem, the model above focuses the value of knowledge exclusively in the accumulated ability to do (more or better) things, but it does not put them to use.  The real value of the knowledge, and of the organization for that matter, lies in the exchange of that accumulated knowledge in an interaction with the customer.  Not measuring those exchanges means that we are not measuring the value of the accumulated knowledge when put to use.  And not measuring the value in use of the knowledge is no longer an option – as the model for knowledge management is changing drastically.

Indeed, stored knowledge these days is virtually worthless.  What worked yesterday will be unlikely to work tomorrow.  Processes, culture, technology, people, societies – they all are changing at a rapid pace; keeping pace with the necessary knowledge to subsidy these changes is critical, and accumulated knowledge is not necessarily that answer.  What you knew how to do 10 years ago is unlikely the right answer today.

As we move to SME-based, real-time knowledge usage the accumulated knowledge over the years plays a lesser role each day.

Assigning value to accumulated and stored knowledge for potential use in an exchange with a customer is wrong. It simply ignores the value-exchange that must happen and that it is not based on what we knew ten or even 20 years ago, but in what we learned yesterday (usually).

Reason 2 – it only solves the equation of value for acquisition – not usage

There are four stages to knowledge management (or the value chain of knowledge if you don’t like the word “management”):  acquisition, organization, distribution, and usage.

When we look at the value of knowledge as what was acquired over time, we neglect the most important one: usage.  Knowledge these days is only valuable when it is being used – not stored.  Acquisition (and maybe organization) of knowledge is not very valuable today.  More than one of my clients found themselves with extremely large repositories of knowledge – and still not the right information (tales abound, but needless to say – it is not the size of your repository but what you do with it that counts).

It is not about accumulating more knowledge (acquiring it over time), but about how to distribute it and use it.

In the older days (twenty-through-five years ago?) knowledge accumulation was the rage.  It was not the quality but rather the quantity of the knowledgebase that, in the mind of the practitioners, was the solution.  If the company invented and developed the product all answers must come from the company and be contained in the company’s repositories.

It was not until ten years ago or so, as the situations where knowledge became more complex and ecosystems of functionality began to emerge, that those same organizations understood that they not always had the knowledge or information they needed; sometimes the answer lay somewhere outside of the organization.  In these cases, the value of knowledge acquisition is not quite as extensive as the value of usage (ok, fine – finding it first, but that is not acquisition as much as distribution; we can argue that later).

The shift from acquisition to usage means that the value of knowledge must also shift from acquiring over time the knowledge to do one job well to finding the right information at the right time and being able to use it before it loses the value it has.

Reason 3 – It does not accommodate extended ecosystems of knowledge

This is the most important reason why the value of knowledge cannot be calculated from what a single individual (or even a group of them) accumulated over time: today knowledge is accessible in the most remote locations.  Note that I said accessible, not that it exists – knowledge always existed in remote locations, but until technical implementations of collective knowledge began to be used in the past dozen years or so, we could not access that existent knowledge.

These remote repositories, subject matter experts (SME), and systems are used to build ecosystems of knowledge.  I covered this in my presentation on KM Nirvana last year (Slideshare link, slide 6) when I presented the model of a perfect knowledge implementation solution that relied on collective knowledge, subject matter experts, existing enterprise applications,  and knowledge repositories as a way to generate the right answer each time.  From my perspective the search of the right answer cannot be limited to an index of a knowledge repository – but that index becomes part of a larger ecosystem of knowledge.

If we value knowledge as what one individual can contribute, usually from the organization’s perspective, we miss out on the ability to measure the value of knowledge form all other contributors in this ecosystem.  And, more and more of the answers are coming from these extended networks of knowledge, not from stored knowledge – making the calculation of that value across the entire ecosystems not only more complex but in some cases impossible.

Indeed, if we can measure the amount of value that training and learning on-the-job added to a person’s value over time, how can we do the same for a SME who is outside of the organization?  We have no way of tracking how their knowledge accumulation and acquisition made them more valuable – and even if we did, their participation in several different ecosystems, likely, makes it increasingly hard to calculate their value in all situations.

As you can see, calculating the value of knowledge has shifted dramatically over the past few years – to the point that it is not possible to measure properly with the same models.  To adapt to the changes in knowledge we will have to focus on what is the value that it contributes to each situation, how it is handled while in use and what is the value-add to organizational KPIs.

In other words, knowledge is changing dramatically as the rest of the enterprise is while moving towards a collaborative enterprise model.  We need a new way to look at the value it provides, and that is where you come in.

How are you calculating the value of knowledge today?

image credit: http://www.engineerleader.com/wp-content/uploads/2011/08/Value.jpg
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  • Jeroen Brouwers

    Hi Esteban, nice article. If I may answer my view on your questions and have an question first.

    I may a bit strict in your reasoning, but how are these experts than trained, if knowledge is so fluid that what’s stored yesterday is alread not valid anymore, thus placing the emphasis on SME’s/experts to get real-time knowledge? Or put another way: who do you get enough experts to handle customer inquiries since you won’t have first line support anymore in this model but simply the experts handling the inquiries?

    I do fully agree that the old method of putting value in knowlegde might not be the best way. The emphasis that you put on the usage of that knowledge is imo crucial. So from our point of view at Selfservice Company, knowledge is what’s used and needed. So you have to know what is used, and – more complicated – what’s missing.
    From there, the next question leads directly to yours: what’s the value then, since just usage is not value by itself. Our answer to that is its support in the customer journey. Simply put: if we can create or transform knowledge that helps users fulfill their demand online, e.g. improve self-service ratio’s (both in sales and support), KM claims that value. With decent measurements, you can nail that down to the value for each single answer or KB article.