August/September 2006 
How do you identify and analyze ROI from Knowledge Management?
(Congratulations to the reader from CA who submitted this month's topic!)

In This Issue:
New Research Reveals a Funding Paradox for KM
Practitioners Share Lessons Learned from their KM Initiatives
Resources on the Web

Contributed by Ladd Bodem, Principal, ServiceXRG

Intuitively Knowledge Management appears to make good business sense.  This intuition has led to the creation of many Knowledge Management initiatives through grass roots efforts.   The origin of bottom-up Knowledge Management initiatives has largely been possible because of the minimal investment required to make progress.  A few hours of time by a few dedicated experts, the ability to leverage existing technology for the exchange of information, and informal style guidelines can be the basis for an effective yet informal Knowledge Management initiative.

Source: ServiceXRG

Expectations of Knowledge management are high and cut across all aspects of the service business from customer satisfaction to quality of response.  On a 5 point scale of importance, increased customer satisfaction is the most important (4.5 out of 5.0) impact of Knowledge Management followed by reduction of service delivery costs (4.3 out of 5.0).  To meet these expectations, an investment in Knowledge management must follow. 

In a perfect world the level of investment for Knowledge Management would be at the point of diminishing returns – the point where additional investment will not result in any additional meaningful return.  It is difficult to adhere to strict principles of economics when there are many competing needs vying for finite budget.  The good news is that more than two-thirds (70.1%) of companies now have some dedicated Knowledge Management resources, yet just 3.1% of total support staff is dedicated to this effort. 

The Funding Paradox
The success of Knowledge Management relies on funding and support yet support and funding is often contingent upon the ability to quantify the impact of the investment. For Knowledge Management to yield maximum benefit it must be properly funded and supported by the organization. A lack of support, however, is the primary reason for Knowledge Management failure.   The primary reason for under funded Knowledge Management initiatives is the inability to quantify its impact.

Lack of funding can severely hinder the success of knowledge management. Equally debilitating is the lack of organizational support.  Knowledge Management is not a back office application used by just a few, nor is it infrastructure stored in the data center.  Knowledge Management is as much a cultural transformation as it is a technology enabled business process.  Knowledge Management requires sponsorship and support across the entire organization from staff to executive management.

The Road to Continued Success
As knowledge initiatives take hold and mature, the funding paradox gives way to true cost - benefit analysis to determine how much investment will be made to Knowledge Management.  Continued success will come from efforts to enhance content creation process, employ enhanced technologies and deliver tangible business value by leveraging knowledge assets. 

This article is excerpted from ServiceXRG's recently published report Knowledge Management Strategies, Benchmarks and Best Practices.For more information please visit www.servicexrg.com.

Excerpted from recent InQuira webinars featuring Jodi McBride of Pitney Bowes and Jeff Vargas of Nokia.  Each webinar is archived and available from the link in the sidebar.

Most organizations must calculate the expected return on investment (ROI) before an investment can be made in any knowledge management initiative.  Many factors can affect the success of an initiative, its impact on the organization, and how ROI is measured.  Practitioners sound out on what they learned from their experiences:

Lesson Learned:  Actively monitor and manage the cultural and behavioral changes your knowledge sharing initiative will instigate.  “You can never underestimate the change management requirements that go along with projects like these.”  You need a shared vision sponsored, supported and driven through the company from the highest levels of the organization.  Communicate regularly and consistently throughout all phases of the project with key business stake-holders and end-users.  Follow a communication plan that keeps all parties included and responding.  “The more that you can communicate, the better off you are.  You can never over-communicate in a situation like this.”

Lesson Learned:  Know the needs of your end users.  Understand how language components impact search accuracy.  Identify user search behaviors and consider search rules.  “There were certain search rules and things we should have watched and monitored and evaluated as our associates did searches and we could have pulled that information out and created more search rules to make searches more effective for our associates.”

Lesson Learned:  Encourage user adoption with incentives.  McBride warns, “User adoption is not guaranteed.”  Help employees understand the desired results and how they will be measured.  Then, develop ways to recognize and reward consumers and providers who adapt to the changes in the system to encourage its use.

Lesson Learned:  Define ROI measurement and reporting requirements early in the process.  McBride emphasizes, “Make sure you understand exactly what you are going to look for to get to your ROI and define those reporting requirements as early as you possibly can.”  Once live with the new system and process, expect business stake holders to ask for reports comparing performance to expected ROI from the project.

Lesson Learned:  Don't underestimate the impact of tangential benefits.  For example, "we didn’t anticipate how [having information available from a single source] was going to change the experience in the classroom and how this was going to change how we trained.  So this year, our focus has been to really redesign the classroom experience and...incorporate the use of KIP [Pitney Bowes' knowledgebase] and create better training materials that really focus on the user experience and the classroom experience to help them pull out information from KIP and help them use these tools as part of the classroom, rather than giving them a big book of everything they’re ever going to need to know and then have somebody lecturing them and showing them how to use the different pieces.  We actually bring it all together in more of an engaging experience in the classroom.  It has changed a lot how we train, and that is something we did not anticipate when we went live."

Lesson Learned: Keep the end goal clearly in mind.  Avoid rolling development or project creep.  Periodically evaluate how well you are adhering to your original specifications.  As Jeff Vargas points out, “It’s very important to make sure that your decisions on whether to expand the effort or to maintain the effort are based on your business needs and the timing that you are trying to achieve.” 

Lesson Learned:  Recruit the right people for the project.  Identify and bring in the right people with the right skill sets from the start, making sure their skill sets align with the assigned tasks and responsibilities.  Involve end users in content identification, design, and testing.  Vargas asks, “Are the people who began the definition of what you need … been involved all the way through the implementation of it?” He points out, “Sometimes as people change in a project, it’s easy to lose sight of what you thought originally versus what the new folks thought as they were introduced into the project. So, it’s important to make sure that vision goes throughout the entire lifecycle of the project.”

Lesson Learned:  Consider the impact on existing business processes.  Identify and understand all the existing processes that will no longer work with the new system so that these can be addressed. Vargas recommends that “you understand the processes that will change and what is going to break or be different as you go into the implementation phase of your investigation.”

Practitioners interested in learning more on how to plan, justify, and measure a knowledge management initiative may want to consider the following online resources:

• KnowledgeBoard is a "self-moderating global community thinking and collaborating on subjects around (but not limited to) Knowledge Management and Innovation in the worlds of business and academia" that features articles, papers, discussion forums, event transcripts and other presentations. 
• KmWiki is a "collaborative persistent 'conversation' on all matters related to knowledge management."  It's where we found an interesting article, 17 Myths of Knowledge Management, by Steve Denning
• Any one of the 194 blogs Technorati lists tagged to the Knowledge Management category.  A few we like include Knowledge-at-work and ELSUA ~ A KM Blog
• How to Justify Knowledge Management and Collaboration Projects, a new research report from Jeffrey Mann at Gartner, published August 2006