Why do so many organizations have trouble keeping up with the continuous change they face? Why do organizations make such little use of the innovative ideas that are hidden in several places in the organization? Why is it so hard to motivate people within the organization to contribute to change? These questions bother many CEO's and HR professionals within organizations.
In this article we address these questions as they relate to innovation and managing change. We will demonstrate how knowledge management and E-learning specifically can be of great support. We will argue to break down these issues into a series of manageable, practical projects that an organization can undertake in order to induce a culture change. Moreover we will show how E-learning can bring about the necessary cultural change.
There is one certainty for big global companies, life is complex and it tends to become even more so. Technology developments take place ever faster and cause major changes in almost every industry. The fact that change is the only certainty is no new message but we find that guidelines on how to manage this change most effectively, still remain ad-hoc and vague at best or non-existent at worst for most companies we meet.
As new developments in the organizational environment create new opportunities, many companies have started various projects in the field of Customer Relationship Management (CRM), e-Procurement, Supply Chain Management, etc. This is changing the commercial management system: improvement and innovation of the commercial value chain of a company. Most of these initiatives are enabled, if not driven by new technology.
Nevertheless most projects in CRM have been a failure in global companies last years. The reason is that most managers don't understand the real stage of technology. Often they take too simple solutions for complex problems.
The impact of new technology is in many cases of strategic level importance. CRM technology for example has evolved from supporting existing sales processes (e.g. sales force automation) to ingenious analytical tools that enable insight in customer behavior, profiles and preferences. Based on these customer analyses, a company should constantly rethink its value proposition, create new products and services, improve flexibility of the supply chain and maybe search for new partnerships. With the rapid changes of today, in the competitive environment, in the supply chain and even within the enterprise itself, the core business process results in a constantly changing set of operations.
In this CRM example, the very implementation of a software tool will change business drivers and create the need for further innovation and change. This will lead to opportunities to integrate other IT solutions, creation of new services etc. In this way, strategy development and IT implementation become intertwined. Knowledge gained in IT implementation projects should be used for strategy development and vice versa and deployed on a continuous basis.
At this point, traditional project- and change management methodologies begin to fall short. In traditional project- and change management, the final goal is set up front, a work breakdown structure is made and the organization and the project team have a clear idea of the end result of the effort. Most of the knowledge gained during this effort often dies with the end of the project. This may seem a very efficient and effective way for the execution of a given software implementation project, but when changes take place rapid and constantly, this will create a knowledge gap, as shown in figure 1. Usually a project team will start to develop new ideas and gain new insights and knowledge. The project team might be able to bridge the gap between the changing environment and the existing organization, but as the project team starts to implement their ideas and plans, they will find that it takes a long time and a great effort to involve the rest of the organization and realize change within the organization. Meanwhile, the changes in the environment take place ever faster and thus the knowledge gap is created (see figure 1).
Figure 1: The progressively widening gap between knowledge required to respond to a changing environment and the knowledge generated when the organization follows a traditional strategy and project management approach
Implementing a knowledge management system
The challenge is to align the organization as a whole to a constantly changing environment in terms of learning and innovation. In the innovative organization, the creative process is not conducted by a few people working for a relatively short period in separate projects, but it is a part of the culture of the company. We consider a knowledge management (KM) system to be essential for creating such an innovative culture to bridge the gap shown in figure 1.
A knowledge management system supports value creation from an organization's intangible assets. The content of the KM system should be derived from strategic issues in the commercial value chain. If knowledge generated in for example CRM, E-procurement and internet projects, can be captured and exploited, KM can contribute to bottom line value creation.
However, many organizations struggle with the challenge of the operationalization of KM. Knowledge is volatile, everywhere, mainly stored in people's heads. KM is a mixture of business data and information and means to put this information in the right context (e.g. a specific task) to enable concrete action. In this way information is transformed to competencies, skills, expertise, etc. which we call knowledge.
In our philosophy, institutionalization of knowledge starts with providing tools to employees in which information and knowledge can be
gathered and captured,
analyzed and stored,
organized and structured,
published and made accessible,
Fortunately, technology is now available that can perform these functions. Although KM remains very complex with a lot of influence of the human factor, we see IT as main enabler to realize operationalization of KM. So this raises the question: who owns KM within an organization. Traditionally, KM has been the HR department, with limited accountability. Now however, upper management and IT department become involved. The approach we suggest here can bring some harder targets for a KM budget and return on investments made in KM. In this paragraph we will have a strong focus on KM technology. This does not mean that community building, creating enthusiasm and motivation to share knowledge and collaborate are of no importance; it is also a prerequisite for a successful KM system. We will address this aspect in the next paragraph.
We will start with breaking KM down into several pieces, each representing a KM technology that supports a different aspect of capturing information and putting it in the right context to turn it into knowledge. A practical way to start building a KM system is by creating a corporate knowledge portal that fosters a knowledge community to learn, share knowledge and collaborate. This knowledge portal should include practical tools that will help the members of the knowledge community to turn knowledge into action.
Hallmark for example implemented an on-line knowledge community. On their enterprise information portal, people in their retail channel can share best practices, opinions and ideas for innovation. Based on theory provided in e-Learning courses, employees are challenged to create new concepts for e.g. customer loyalty. Other employees act like customers and give feedback on new developments, all on the same platform. Implementation of this community has been identified by Hallmark as a critical component for improved quality of product development, enhanced customer loyalty and increased sales.
There are many tools and applications that focus on different aspects of the management of knowledge. We therefore see a KM system as an ecosystem of integrated KM technologies. Each of these KM technologies is often incorporated in different software tools and applications. The creation of a KM system can be regarded as implementation and integration of different KM software tools. Note that there are technologies that we have never before regarded in terms of knowledge management (e.g. Workflow management, Management information systems), but when integrated in a KM system, they become a valuable source of knowledge.
Figure 2 shows an ecosystem of different KM technologies, integrated in a corporate knowledge portal.
Figure 2. Our approach to knowledge management involves integration of different KM technologies, to which the stakeholders have access through the corporate information exchange portal. Implementation of each discrete technology can be executed in a pilot project and integrated on the back end.
To clarify the various KM technologies, we address all topics of figure 2 in the next bullets. In brackets we give the names of current providers for each specific subset of knowledge technologies:
E-learning: knowledge gained and shared in the training process; opens up new information sources and knowledge for innovation. ( Docent , Saba , Intellinex , SmartForce )
Collaboration: knowledge created by people working in projects sharing expertise. It supports the interaction of employees in processes and projects. For example the sharing of documents and files around certain tasks and improved communications increase efficiency of processes and projects. It also fosters knowledge sharing and collaboration on specific issues beyond the limitation of a process or job, to enable creative processes within the organization. ( Niku , Evolve , Sensatex & Lifelink , Descartes )
Information retrieval supports the ad hoc need of additional knowledge that can be linked for example with learning topics. Documents, files and intranet / internet information sources are regarded as knowledge to be derived from stored internal and external information to support process and project execution. ( EoExchange , Verity , Autonomy , MediaLab )
Management Information Systems: knowledge of organizational performance. When processes are measured, performance indicators and management information is often a valuable input for defining areas of improvement and strategic issues and also learning (e.g. skills training). ( SeeCommerce , Lotus , Descartes )
Workflow management (WFM) supports the execution of a process within the organization. By modeling processes, tacit knowledge, interwoven in daily work and interaction can be made explicit. Process modeling enables performance measurement, which will provide management information (see previous bullet). ( Staffware , Cosa , Bwise )
These different types of knowledge platforms can be integrated into a corporate knowledge portal and personalized for employees to enhance utilization (and reduce exposure to information overload). ( Tibco , Broadvision , ATG , Interwoven , Autonomy and Verity )
When taking the example of the CRM implementation in the previous paragraph, one can imagine that an E-learning tool will help employees not only to learn functionality of the new CRM technology. Also courses on E-business in general, changes in the industry and the strategic role of CRM will trigger a creative thinking pattern. Collaboration tools like discussed in the Hallmark case will stimulate people to share knowledge and make the project team more effective while capturing the knowledge that otherwise would vanish. If the project team has insight in performance indicators like customer satisfaction and loyalty, they can measure their progress and find the right direction for improvement. An adequate information retrieval and document management system will support people in finding the right input for further innovations and improvement.
From knowledge management to change management
Putting technology in place does not complete the knowledge management solution, nor is it the solution for creating an innovative culture. If an organization really wants to use the knowledge management system for strategic innovation, employees have to be encouraged, coached and made enthusiastic to contribute and work with the system. The irony is that many leaders at the top who have succeeded in making changes in the past may not have the insight into how a company has to change again in the future. Many times, younger people see that need earlier and more clearly but lack the experience and the power to realize it. A knowledge management system empowers this talent in the company. It should become a tool that is integrated in the daily job of people, since they are the agents of change. Here we get into change management, which we define as the institutionalization of (constant) organizational improvement and innovation in the governance and human resource management of the organization.
Based upon the KM system and the changes in the commercial management system, a company should evaluate existing and required competencies. At the same time people should receive incentives for contribution of their knowledge to the organization, for example in terms of money or promotions. One of the main requirements is a top management sponsor and other dedicated people who will drive the knowledge community. Bottom line is that the KM system should be in many ways attractive for employees to use and contribute. There are several principles to achieve a successful online community. These principles vary from community leadership, places, roles, profiles, etiquette, events, rituals and other (Community building on the web: secret strategies for successful online communities; Amy Jo Kim, Peatpit press, 2000). It is important to address these issues and build a community naturally within the existing organizational culture.
In this way, we can build a learning system where we can mix strategic actions with knowledge management, governance and HR. With one of our clients, a large company in the chemical industry, we found that building an e-learning and knowledge management platform is needed to help employees with starting up CRM and eProcurement projects. The knowledge gained in these projects will be used in other future projects. At the same time the KM system will be incorporated in the governance and HR function. The company leaders will actively participate in the KM community to become visible change agents and use the KM system to steer in the desired strategic direction. This creates a closed loop in both content deployment and structuring the change process, as shown in figure 3.
Figure 3: Change in the commercial system (e.g. CRM, E-procurement) gives direction to knowledge management and will be institutionalized in the change management system. The change management system provides a closed loop for the innovative, learning organization.
Conclusion: KM is fundamental for cultural change
Implementing knowledge management, as we argued, can be the fist step towards a new innovative culture and a new approach to change management and strategy development. The next steps of this process are shown in figure 4.
Figure 4: Possible steps in a Change management scenario. Building an innovative culture can be achieved through a series of discrete projects aimed at development and acceptance of the business strategy.
In several cases, a useful first step of a KM system implementation, is to begin with E-learning to stimulate new thinking patterns. The KM system will eventually be used by employees working in projects, aimed at improving and innovating the commercial management system. When the impact of these projects become clear, current and required competencies will be analyzed. While developing the right competencies, the projects will be implemented in the line organization. At this point, the whole approach will be institutionalized in a change management system, ultimately resulting in a new organizational design, with a focus on innovation and learning.
With the implementation of a KM system, a large global software vendor has increased productivity of their consulting department by 50%. In each small department, a knowledge manager is responsible for capturing reusable components. A part of the salary of all consultants depends on the contribution to the KM system. At the same time the system is used for further improvement of products and services. This can be seen as the first step to a new organizational culture.
In this process, top management and HR professionals act as change agents on a steering committee and they recruit the best talents for taskforces to execute innovative projects. Outsiders can act as coaches or project leaders to stimulate new patterns of thinking. A steering group ensures that projects become aligned with the desired strategic direction.
Successful organizational change does not happen in a linear pace, as we can see in Figure 4. Instead it keeps pace with the ever-increasing environment change. The sequence of projects in Figure 4 gives a rough idea of the change process, but is not a fixed pattern. In reality it allows ample space for improvisation. The challenge is to create a snowball effect that starts with a small pilot group that will work parallel on different projects. Over time, this group will evolve naturally in size and in scope and ultimately involve and motivate the whole organization. The new technology and Internet provide revolutionary opportunities. A knowledge and learning infrastructure based on new technology enables new organizational communication and collaboration models that increase the effectiveness of the management of cultural change.
As we have shown with several cases, new technology and e-business are driving forces behind the changes that force organizations to constant innovation, but at the same time these same drivers help us keeping up with continuous change. Therefore, we consider project-based KM a key asset in achieving cultural change, and E-learning a first practical step towards a desired cultural change.
The contributionsin managementsite of our correspondence clerk in SiliconValley harvest much appreciation. Burt Rost van Tonningen has processed its contributions and has joined in an integrated vision on e commerce, e organization and e strategy with as title:
PREPARING FOR THE E-TORNADO: Observations from a European in Silicon Valley