Measuring the impact of KM #value
One of our members, Linda Hummel, is featured in this Inside Knowledge article.
Measuring the impact of KM - by Jerry Ash
The idea that data, information and knowledge represent a sequence is one that tends to make KM theorists go ballistic. However, it might be time to duck your head and read on.
The project, it was envisaged, would benefit Teradata associates, customers, partners and shareholders, by enabling them to:
A KM team was formed, which included a programme manager/director, process lead and an entirely new position – a Knowledge Practice Owner (KPO). The Teradata programme is now referred to as Knowledge Enablement (KE) and the team is the KE team.
Knowledge practice owners
Initially, six KPOs were to be appointed to cover key domains (that is, key industries served) and the positions was posted as virtual (that is, any location), since the KPOs would be traveling the globe to support internal and external consultants worldwide.
However, it became clear there were different needs and issues in different regions and therefore KPOs were assigned strategically to regions instead.
The KPOs support regional and industry-focused teams by providing expertise on the knowledge management processes and how they work. Knowledge management also provides content management support to assigned knowledge domains.
For example, support for a retail industry knowledge domain includes such things as:
Knowledge practice owners, meanwhile, have a number of key duties to fulfill. They must:
In terms of suitability for the post, the ideal KPO should be able to demonstrate the following abilities:
During the first year, the programme team collected requirements from the field and worked closely with information technology services to build the core foundation of a knowledge system – asset repository, asset submission, and search tool.
The content from existing legacy systems had to be migrated into the new system.
Then, these core functions were extended with capabilities that included collaboration sites, rating, ranking and feedback, and a reporting database.
By the end of the year, the tools were delivered to the KPOs – who meanwhile had started to establish themselves as trustworthy service providers – and to Teradata consultants around the globe.
The following year, the scope of KM was enlarged to include collecting assets for the Teradata engagement methodology, deploying a business impact modeling tool and other consulting tools and renaming them Knowledge Enablement tools.
"The vision became to increase the ability for more Teradata users to find higher quality knowledge more quickly via easy-to-use and integrated processes and tool sets," says Linda Hummel, programme manager/director. "The fact that 30 per cent of employee work time is spent seeking information was a driver for this vision," she adds.
From a business impact perspective, the goal was to closely link to Teradata's business objectives to improve margins, reduce risk and increase revenue. And as a result of linking to these objectives, the need to show the impact of the KM programme on ROI was obvious.
A unique approach, in addition to the creation of the KPO role, involved the establishment of Value Engagements (VEs) and creating algorithms based on data to quantify business improvements (ROI).
VEs are conducted across all regions, industries and all phases of an engagement cycle. The goals of VEs are to:
"The Value Engagements give us very specific feedback on typical business impacts," Hummel says.
In one specific case, a VE used KM processes and infrastructure to lessen the workload of a team project manager which allowed the manager to focus on higher
priority customer requirements. The team stored engagement documents in a collaboration site and saved over 40 hours of project management time on the project.
"I realised there were multiple ways of measuring results, in order to measure impact on business results and justify continued expenditure on the programme," Hummel recalls.
Two types of metrics have been identified:
Type 1: Business improvements
Increase revenue (by leveraging and reusing IP and identified best practices)
Type 2: KM process/usage
In addition, a third (but less measurable) category is tracked – user and customer satisfaction.
As a result of gathering input from the VE, the Knowledge Engagement team studied the data as well as best practices in measuring impact of KM, and derived an algorithm for each business goal (improve margins, reduce risk and increase revenue) to determine direct impact.
"For example," says Hummel, "one risk we have is losing knowledge, either from people retiring, or by using contractors who take their knowledge with them when they leave at the end of a project. By capturing project assets, customer deliverables, and the team's knowledge/expertise (lessons learned, CoP sharing, and so on), we measure the time saved in future engagements by having assets captured from previous engagements – leading to reduced searching and reduced need to recreate intellectual assets," she says.
Then, Hummel created an algorithm to measure this: (A*B) = C then C*D, where:
That enabled Hummel to calculate the business impacts, in the case of this example, $1.5 million. This was done for each business goal, added up and presented to management.
"What I call indirect KM metrics," Hummel explains, "are those data items that indicate where associates are using our system, sharing knowledge and looking for assets to reuse, but which cannot directly quantify a dollar savings. For example, improved margin due to knowledge reuse can be indirectly measured by the number of people downloading assets."
During the early years, Hummel's results have been impressive and projections are even more so. Investments in 2005 in KM programmes and technology reached $2.2 million; $1.9 million in 2006 and $2.3 million in 2007.
Using Hummel's algorithm method, returns to date (that is, improvements to professional services margins) showed zero in 2005, $1.2 million in 2006 and $4.4 million in 2007.
These numbers reflect returns due to time savings and knowledge asset reuse, and increased use of Teradata Knowledge Office (TKO), the knowledge repository.
Usage rates have risen from 20 per cent for the previous system to 87 per cent for the new one, but the numbers don't yet show an overall return on investment for the KM programmes. However, projections for the next two years forecast increased returns on lower investments – $5.0 million in 2008 and $5.8 million in 2009.
KM: Not just another IT project
Linda Hummel has never been particularly interested in navel-gazing debates over defining data, information and knowledge.
"I have always been intrigued by the intellectual challenge of capturing and disseminating something as ethereal as knowledge," she says. "How many `What is the definition of knowledge?' debates have you lived through? In fact – and even though my background is in earth sciences/engineering and computer science – it is the variety provided by the holistic approach (people, process, content and technology) that makes KM not just another IT project."
It is, in fact, the holistic approach of service delivery practiced internally by Teradata that makes its products and services "not just another data management solution". Coupled with its historic emphasis on active warehouses, not data marts, Teradata is very much a savvy KM partner. KM would be well served if it abandoned its fight to differentiate itself from data and information and instead distinguished itself among data and information as a strategic piece of the broader, holistic approach of knowledge management.
For further information on the Teradata KM programme, contact Linda Hummel at lindamhummel@...