Creating a Value Proposition With Knowledge Management

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Creating a Value Proposition With Knowledge
Management

• Points for discussion

Patrick Callioni Canberra 2 April 2002
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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

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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 becomes supersensitive and is
  highly responsive to the smallest fluctuation.
  Then the system responds even to subtle changes
  in values, beliefs, worldviews and aspirations.
  Ervin Laszlo Macroshift (2001)

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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

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Measurement Why it is important

• Each day, their organisations operations
  consume public resources. Each day these
  operations produce real consequences for society
  intended or not. If the managers cannot
  account for the value of these efforts with both
  a story and demonstrated accomplishments, then
  the legitimacy of their enterprise is undermined
  and, with that, their capacity to lead.
• MH Moore, Creating public value, Harvard
  University Press 1995, p. 57.

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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 belief)
• To create value in the information economywe
  need knowledge and the capacity to manage that
  knowledgeto manage information and belief
  systems
• Google shows over 3.2 million references for
  knowledge management, more than for risk
  management (under 3 million)

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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

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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 environmentalistwho may be the same person
• Understanding beliefs and belief states is crucial

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A value creation model
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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.

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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

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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...

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Where to from here?

• The major issues are issues of measurement
• and, in particular, the management of intangibles

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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 tangiblesfor
  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 US450 billion),
  tangibles account for less than 11 of its value
  (Standards Institute)

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patrick.callioni_at_noie.gov.auwww.noie.gov.au