top of page

Making Cents out of Knowledge Management - Book Review

1 May 2012

Dr. Moria Levy

"Making Cents out of Knowledge Management" is another compelling addition to Jay Liebowitz's extensive series of books (28). Liebowitz, who initially served as a knowledge manager at NASA and is currently a professor specializing in the study and teaching of knowledge management, delves into the critical topic of ROI and the value of knowledge management within organizations. The book is divided into two parts: Part One, authored by Liebowitz, explores the issue and its methodological aspects, while Part Two, primary in size, presents case studies from organizations detailing their knowledge management activities and addressing the question of ROI—whether, how, and to what extent.


The book covers the following topics:

  1. Introduction: A brief overview of knowledge management

  2. The concept of measurement and its principles

  3. Measurement methods

  4. Case Studies


This book is recommended even for those not directly engaged with measurement and ROI. It features a collection of case studies that narrate various knowledge management projects of diverse types, spanning different natures and locations worldwide. The richness of these case studies alone justifies exploring the book's contents.

Happy reading!


Introduction: A brief overview of knowledge management

To delve into the realm of ROI in knowledge management, Liebowitz sets the stage by providing insights into his philosophy concerning knowledge management.


Liebowitz defines knowledge as a skill to act—information that can be employed for action. Within organizations, he identifies four main types of knowledge:

  1. Knowledge that creates competitive value (for the future): Knowledge that bestows added value to the organization for future benefits.

  2. Performance facilitator knowledge (today): Knowledge that aids in recognizing and rewarding employees for their performance and managing others effectively.

  3. Knowledge related to change management in the organization.

  4. Knowledge about knowledge management.


The three components of knowledge management are culture/people, processes, and technology.


Knowledge management projects should begin with a situation assessment (knowledge test) that scrutinizes knowledge sources, sharing and utilization levels, tools, needs, and knowledge flow processes. This assessment unfolds in two stages: first, as a lateral survey, and second, through in-depth interviews with representative employees.


A dedicated sub-survey can be conducted to evaluate the intergenerational flow of knowledge in organizations with members of Generation X and Generation Y. This sub-survey sheds light on the nature of information flow and associated intergenerational challenges.


[For those interested, the book incorporates detailed questionnaires serving as the foundation for general and intergenerational organizational surveys.]


The concept of measurement and its principles

ROI, an abbreviation for Return On Investment, entails a usually quantified examination of the feasibility of investing in projects. Liebowitz, drawing on Tobin's insights, provides several reasons for scrutinizing the ROI of knowledge management activities within an organization:

  1. Quantitative data measured in ROI calculations serve as a baseline for further comparison, enabling progress assessment.

  2. ROI sets expectations.

  3. ROI facilitates management's consent and support.

  4. ROI establishes a model for measuring success that can be learned from and replicated later.

  5. ROI represents a genuine examination of feasibility.


Preliminary principles for each measurement include:

  • There are no magical answers to what is suitable to measure.

  • Seek business metrics.

  • Measure at various levels.

  • Monitor the status of metrics.

  • Define the desired value before outlining actual measurement goals.


It is widely acknowledged that measurement is not always straightforward, and distinguishing the aspect of knowledge management from broader aspects of performance and contribution poses challenges. Consequently, some choose to avoid the issue altogether, while others attempt measurement, often adopting a softer approach by discussing "return on vision" instead of directly addressing the return on investment.


In the context of measurement, there are additional metrics that, while not directly indicative of ROI, complement it:

  1. Employee evaluations may include assessing knowledge sharing and contributions to the subject.

  2. Recognition of awards as markers of success and worthiness.

Note: For those seeking to persuade management to engage in knowledge management but find it challenging, initiating the discussion with organizational knowledge preservation (retirement knowledge preservation) can provide a more accessible entry point for management to understand ROI even without practical measurements.


Measurement methods

To define accurate metrics for the effectiveness of knowledge and its management, it is crucial to pose deliberate questions:

  • To what extent are we currently leveraging knowledge effectively?

  • Are existing knowledge resources being utilized appropriately?

  • Are we positioned to harness knowledge for the future competitively?


Methods for measuring the value of knowledge management activities include:

  • Measuring time and cost savings in knowledge work processes (before and after change).

  • Assessing the quality of knowledge employees receive before and after sharing.

  • Gauging the utilization of knowledge management solutions (e.g., participation in meetings, portal logins, file downloads, etc.).

  • Demand for knowledge management services, development of knowledge management solutions, and support for knowledge communities.

  • Leadership development through the application of knowledge management.

  • Benchmarking against competitors or known standards.


Another measurement direction proposed by APQC (quoted in the book) involves the integrated measurement of all activities without separating various components. This approach examines long-term progress toward the organization's strategic goals—for instance, whether the level of risk in business activities decreased due to knowledge management activities.


On a practical level, the book enumerates numerous metrics for the following aspects:

  1. Examining costs (e.g., establishing and operating communities, handling lessons, and related trips).

  2. Evaluating the effectiveness of activities (e.g., the percentage of implemented lessons learned, the number of early-stage communities, and the percentage of knowledge transfer processes).

  3. Assessing usage levels (e.g., the number of portal licenses across the enterprise, staff room membership numbers, and the usage by salespeople to find opportunities).

  4. Evaluating impact and contribution (e.g., improvements in education and reading levels, motivation and satisfaction levels, and competitiveness).


[For those interested, the complete list can be found in the book, and portions are available on the APQC website, a primary source for this list.]


Case Studies

The following provides a summary of the case studies presented in the book:


Annie E. Casey Foundation - Network of Centers for Treatment of Children at Risk and Their Families (U.S. State)

Key Knowledge Management Activities:

  1. Database and knowledge for staff about programs.

  2. Common database for tools required for children's and family's benefit.

  3. Regular processes for routine and systematic knowledge collection.

  4. Assistance in reaching content and expert officials.

  5. Fostering a learning environment.

  6. Constant support focused on center goals.


Measurement:

  • Value of knowledge assets created.

  • Knowledge management life cycle and overall maturity.

  • ROI against expenses.

  • Balanced Scorecard for directed activity.

  • Examination of organizational culture and employee attitudes toward "knowledge" assets.


U.S. Navy Shipyard - U.S. Air Force Shipyards

Key Knowledge Management Activities:

  1. Visual 3D technology integration.

  2. Introduction of software to manage engineering information throughout its life cycle.


Measurement:

  • Value of actions, information, knowledge, and people for fixed processes.

  • Historical knowledge about costs and profits of processes and tasks.

  • Management of regulatory information.

  • Efficiency in operational processes.

  • Analysis of overall activity and resource investment.


SOQUIJ - A Quebec legal information research organization (State - Quebec)

Key Knowledge Management Activities:

Choosing a platform for knowledge management to create automatic summaries of legal texts.


Measurement:

  • Comparison of programs based on quality of summary, ease of reading, relevance, algorithm type, openness to adding functions, and service provider level.

  • ROI examination regarding legal issues, decisions made, acting judge decisions, and documents facilitating the process.


INET International - A company collecting medical information (Country - Canada)

Key Knowledge Management Activities:

Implementation of software for tracking and monitoring medical indices of patients taking a particular drug.


Measurement:

ROI measured against targets for diabetics (e.g., improving medication balance, reducing administrative staff costs, utilizing the communications network).


Catholic Health Initiatives - National health care nonprofit organization (U.S. State)

Key Knowledge Management Activities:

  1. Knowledge communities for sharing knowledge.

  2. Promoting learning processes and disseminating lessons learned.


Measurement:

ROI was measured within the pharmacist community, examining increased pharmacy activity and preventing inappropriate medication administration.


Export Development Canada - For-profit organization providing financial services (Country - Canada)

Key Knowledge Management Activities:

  1. Information and knowledge portal.

  2. Information centers, data mining, locating experts, document management, and more.


Measurement:

Objectives against which ROI is examined include increased productivity, reduced customer support costs, increased profits, reduced computing costs, and automated processes.


India as a Company (India - State)

Key Knowledge Management Activities:

Addressing challenges in the employee market's constant growth.


Measurement:

No specific activities are mentioned; it is more of a manifesto or set of thoughts and desires.


PBS - General Services Administration Public Building Service - Asset Management Division (U.S. State)

Key Knowledge Management Activities:

  1. AAR's Lessons Learned.

  2. Collaborative workspaces.

  3. Exchange of knowledge.


Measurement:

  • Number of collaborative workspaces.

  • Customer satisfaction.

  • Awareness of knowledge management solutions.

  • Amount of tangible assets in the knowledge exchange platform.


NASA - American Space Organization (State - USA)

Key Knowledge Management Activities:

  • Knowledge platform and interfaces for access.

  • Content development and management.

  • Collaborative

  • Computing infrastructure.

  • Compartmentalization and permissions.

  • Interpersonal interaction, groups, and learning.


Measurement:

  • The author's assertion against quantifying the feasibility of knowledge management.

  • Suggested measures include scope of activity (users), amount of content, outputs, and business advantage.


AARP - American Association for Retired People (State - USA)

Key Knowledge Management Activities:

  1. Knowledge management is built into the organizational structure.

  2. Intranet for staff to share knowledge.


Measurement:

Defined goals for measuring feasibility, such as breaking silos, creating integrated work teams, identifying unknown knowledge, creating a cross-disciplinary work environment, and establishing knowledge centers.


In conclusion, these ten case studies offer insights into various content worlds and different levels of measurement, emphasizing that knowledge management is relevant to a broad spectrum of organizations worldwide, with a more extensive array of solutions than previously thought.

bottom of page