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MANAGING: IDEAS & SOLUTIONS/THE LEADING EDGE; GETTING REAL ABOUT BRAINPOWER
US WEST, HEWLETT-PACKARD, MONSANTO, AND OTHERS HAVE PROVED THAT MAPPING CORPORATE KNOWLEDGE ADDS LOTS OF VALUE--TO THE BOTTOM LINE.
It's your first day as general manager of the thingamajig division of Universal Widget. How do you begin? Call a staff meeting, of course. And what do you ask for first? No, mon ami, not the Sweet 'n Low and the Cremora. First you ask for the major-customer files and the competitor files.
Recalling his days as a division general manager, James Nisbet, now chief information officer of Monsanto, describes what happens next. The meeting over, you follow the sales director, or whoever it is in your shop, to get the files from the locked drawer in his desk. As your hands close around them, he hesitates, then says, "I can't promise that these are all 100% complete or up to date." Every time.
Last month I described how consulting firms are using Lotus Notes, internal web software like that used on the Internet, and other systems to create electronic libraries and forums. Their aim: to turn employees' knowledge (human capital) into a shared, firm-wide asset (structural intellectual capital). This time, I said, we'd look at "real" companies doing similar work.
Similar it is, but a first thing to notice is a difference in vocabulary. Forget for a moment the highfalutin language about intellectual capital. To make the case for managing knowledge, says Richard Baumbusch, executive director of US West Communications, the core telephone business of that Baby Bell, "the pivotal insight was finding a language that engages operations managers." That means a rhetoric--and a reality--of results. Says Harry M. Lasker, co-chairman of Renaissance Solutions, a Lincoln, Massachusetts, consulting company: "You should not map the knowledge of your organization if you cannot link it to strategy or the performance that pushes the strategy." The nice thing is, structural intellectual capital can be a powerful way to improve performance.
First, it can help you watch the competition. Last year one of Monsanto's chemical businesses lost a big, fat order to a competitor. Postmortem, folks at St. Louis headquarters learned that a sales rep halfway around the globe and in a different business unit had heard scuttlebutt about the impending sale, but time zones and the ordinary exigencies of organizational boundaries kept the knowledge hidden till it was too late to act on it.
Now a pilot program links hundreds of Monsanto's salespeople who share news and gossip on a Lotus Notes database that is also used by major-account managers and competitor-intelligence analysts. The program is part of an initiative to build a "knowledge management architecture"--KMA. It is modeled on work done by Ceregen, the biotechnology unit of Monsanto's $2.2 billion (1994 sales) agricultural group. Ceregen's online competitor-and-customer database, to which all 600 employees have access, contains continuously updated company profiles and news from public sources like Hoover and wire services; reports from salespeople and attendees' notes from conferences and conventions; an in-house directory of experts; regulatory news; etc., cross-indexed by company, technology, and so on. All this, note, is dope most companies have, but it's scattered and hard to find.
IN a fast-moving business like biotech, merely having current information in one place is a big advantage; the relatively minor costs of groupware and staff time to maintain the system must be set against the money and time it saves. Says Bipin Junnarkar, project director for KMA: "The focus shifts from 'How do I get the information I need?' to 'How do I exploit the information?' " KMA won't stop with competitor and customer intelligence. Says Junnarkar: "Typically people make buckets of information--finance, operations, competitive intelligence--with no flow between them. The question is how to link them to create a learning and sharing organization. Then the fun starts."
Second, a conscious effort to transmute individual talent into corporate knowledge can improve operations by unearthing best practices. "Let such teach others who themselves excel," wrote the poet Alexander Pope, an early proponent of sharing best practices. Dick Baumbusch is taking that approach at US West. "Are some of your people better performers than others?" he asks managers, who of course agree. Then: "Would you like others to become as good?" Baumbusch is working with repairmen in one territory to learn from the best by following them around or bringing them together to swap notes. Knowledge thus identified can be replicated and shared. How to do that, Baumbusch emphasizes, should vary: It might be training for one group, kaffeeklatsches for another, high-tech databases for a third. What's important is to find useful knowledge, bottle it, and pass it around.
Cigna Corp. is two years into an impressive effort to improve operations. Key to that: using structural intellectual capital to augment the talent of its people. The Philadelphia insurer's property and casualty division was a miserable performer--in 1993 its active portfolio of U.S. P&C business lost $251 million. But that loss became an $87 million profit in the 12 months that ended September 30. Restructuring and reengineering led by Gemini Consulting played big parts in the turnaround but weren't the whole story. Reengineering improves efficiency--like cleaning up your desk or, if you're really ambitious, my desk; but getting more efficient doesn't help if you're underwriting bad risks, as Cigna was, any more than gaining speed helps a pilot if he is in a nosedive. Excellence comes from making more knowledgeable choices. Says Harry Lasker of Renaissance Solutions, which Cigna hired to make that happen: "We found significant latent know-how in the organization. There were experts, but not a good means of extracting and publishing that know-how."
In underwriting, Cigna gave home-office managers the additional job of building and maintaining a knowledge base, housed in the same software that every underwriter uses to process applications. A nursing home in California wants insurance? The custom-built software tells you the nearest earthquake fault and how dangerous it is; it gives guidelines for assessing risk factors like staff training or sprinkler systems; and so on. When new information comes inexpert analysis, feedback from the claims department, or insights from the underwriters themselves-- the manager/knowledge-editor evaluates it and, if necessary, changes the database. Claims processors and agents have similar setups. The cost? "Very little," Lasker avers. "They were collecting all the information anyway, but it just went in the files."
Third, structural intellectual capital can help companies stay lean. You had good reasons for draining away corporate staff and several acre-feet of middle management, but there were babies in that bath water: graybeards who'd seen it all, meddling staffers who occasionally--admit it--saved your hide. Knowledge networks can help provide the value that staff added with fewer of the costs. Take, for instance, Buckman Laboratories (1994 sales: $246 million), a Memphis-based speciality chemical maker that does business in some 90 nations. In Buckman's business, like so many others, success comes these days from providing fast, customized solutions to specific customer needs rather than from just shipping carloads of product. That means putting brainpower on the frontline. Says CEO Robert Buckman: "You can't go up to a guru and then back down, the way we used to. It's too slow; you lose relevant detail." Besides, better to have your smartest people in the field than tethered to their desks. By connecting people through a network, you can replace the depth of knowledge that a multitiered hierarchy offers with the breadth of knowledge that is the sum of employees' collective experience.
TODAY over 40% of Buckman's employees are out selling, and 72% are college graduates; the corresponding numbers in 1979 were 16% and 39%. The diaspora depends on efficient knowledge transfer from one far-flung smarty to another. "This is the greatest revolution in the way of doing business we have seen in our lifetime," Buckman says. He foments it in the simplest possible way: a private forum on Compuserve, open only to employees, where anyone can pose a question and anyone can offer an answer. A handful of sysops and technical experts monitor subforums (mostly organized around industries Buckman serves, such as paper, plastics, and water treatment), making sure that the best contributions are saved and publicized. Buckman offers no special incentives for participation. Says he: "If you promote the people who do the best job of sharing, you don't need any other incentives."
LEVERAGING the value of corporate staff is the motive for Hewlett-Packard's innovative Knowledge Links program. H-P's "product processes organization" (PPO) is an internal consulting group whose services are "hired" by the company's highly decentralized business units. Eighteen months ago Judy Lewis began looking for ways to get more value from PPO's uniquely broad knowledge of the company. For example, PPO had helped H-P's Deskjet printer business learn about market segmentation--a subject not as well understood by the company's testing and measurement division. PPO offered to be a go-between, collecting case histories, rules of thumb, and the like from the printer people and translating them so the test-and-measurement folks could see how to apply them. An extra benefit of the translation process: PPO itself has become smarter. Says Lewis: "We used to operate a set of programs--quality, information systems, procurement--but we couldn't link them seamlessly."
H-P is now setting up web servers to put this information online. Every internal consulting engagement is a potential source of war stories, best practices, or other knowledge. Says PPO's Garry Gray: "We can't possibly maintain all information about all things at all levels of depth, so we try to create stories that capture the essence of a program." A manager thinking about outsourcing manufacturing can learn how others have done it and, more important, who has done it.
The technology network thus supports the real knowledge network--the informal one of people talking to people, which is difficult to maintain in a sprawling organization. The virtuous cycle begins: People do things that become stories that become documents on a network that people use to learn how to do things. Human capital begets structural intellectual capital, which begets human capital.
Reporter Associate David C. Kaufman
Join Tom Stewart in the FORTUNE FORUM ON COMPUSERVE (GO FFORUM) or by E-mail: 74774.3555@compuserve.com
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