The International Data Corporation (IDC) estimates that Fortune 500 companies lose around $31 billion a year by failing to share knowledge within their organisation. A high cost for what can be efficiently mitigated with ‘fit-for-purpose’ knowledge management strategy and implementation. Studies suggest that simply improving accessibility to information and tools can save organisations roughly $2 million a month per every 4000 employees.
Sairam Natarajan, Partner at Nexelens, believes the issue often starts with business leaders not understanding the practical value of knowledge management and how it plays a critical role within the larger business strategy.
Why is knowledge management important?
Business leaders must understand different forms of organisational knowledge as a good starting point to leading effective change. Knowledge can be separated into two: implicit and explicit knowledge, with both requiring different approaches and tactics from individuals. Explicit knowledge is codified and readily accessible. Tacit knowledge is experiential knowledge that is yet to be transferred from an individual to a documented – it can include know-how, situational awareness and contextual insights.
It is implicit knowledge that is often difficult to codify, document, and put to organisational use. However, doing so enhances business efficiency and greater results.
In the knowledge economy, organisations create value and make money based on the knowledge they and their employees possess. Knowledge is a monetisable asset, so it is key to manage it carefully and effectively.
For most clients working with Nexelens, a significant blocker to their growth strategy is insufficient or inefficient knowledge management – wasting time finding information, non-standard ways of doing things (from business development to execution), inefficient way of handling or storing documents, employee turnover causing business disruption, etc. This all builds up and affects areas such as employee morale, quality of work, delivery schedules, and sales figures.
With the shift to remote or hybrid working, knowledge management has become crucial to success and hard to ignore. Knowledge management strategies are now an important factor for businesses to consider if their people are to do their jobs well and meet the organisational objectives. Technology and processes to create, host and share such knowledge with the right people in time for it be useful will make this easy and it’s important to cultivate a culture that would support this mission.
What are the benefits of an effective knowledge management strategy?
Having an effective knowledge management strategy can provide multiple benefits for organisations including cost savings, revenue and margin upside and employee and client retention.
First and foremost, it helps align knowledge flows and workflows within an organisation to the larger business objectives. It introduces clarity at each job level, arming employees with what they need to know to do their jobs well, where they can find the relevant knowledge and how they can put it to use to achieve desired results. This has a direct, positive impact to employee morale and, if managed effectively, can integrate into workplace cultures on a permanent basis.
Secondly, it kills reinvention of the proverbial wheel and all the inefficiencies that come with it. Businesses have the ability to go to market faster, cross-sell and up-sell more, reduce speed to talent and staff quickly and deliver efficiently by reusing existing organisational knowledge. All of this helps staying competitive in the market and offer greater value to clients.
There is also a cost benefit to organisations. Through its work with clients, Nexelens identifies an average annual cost saving potential of c. £400,000 for an organisation with about 100 employees by strengthening their KM practices. For larger organisations, the cost saving potential increases steeply (about 3-4 times the average amount), as complexity and impact due to poor adoption of knowledge management practices increase exponentially with scale.
Nexelens have developed an easy-to-use free online KM Benefits Calculator that helps organisations articulate the potential financial impact of knowledge loss and the cost saving and benefits of having a fit-for-purpose KM program. The calculator allows you to plug in your organisational data into our model to get realistic insights about the benefits your organisation can derive from investing in KM programs.
Knowledge management can also increase revenue through sales. Sharing and making information available and accessible can provide functions with the information they need to do their role better, increasing efficiency across teams. For sales, this can mean employees are better equipped to communicate with clients, leading to more revenue, increased deals and time saved.
Finally, knowledge management is also pressed into action to support planning for succession in senior leadership roles. Much of the ‘high value’ knowledge at such levels is too tricky or sensitive to be documented but through tactical knowledge sharing techniques like mentorship, peer-assist, and joint problem-solving, organisations can successfully get their next talent layer ready to perform at the highest level.
What are the challenges of knowledge management?
Broadly there are three challenges that show-up in most organisations that fail to harness the value out of their knowledge management program.
- Lack of leadership participation. If the senior leaders do not participate in the KM program, the rest of the organisation will not participate and any initial momentum will be lost in the long run. KM is a business imperative; the messaging and signalling has to be consistent and clear from the top.
- Positioning the KM program as optional. Most organisations make the mistake of positioning their KM program as an optional and ‘good to have’ initiative. For knowledge management to work effectively within the workplace, everyone must be ‘on board’ and should actively participate. KM is not an optional administrative task. It is a smart investment.
- Misunderstanding around what it takes to launch and sustain an effective KM program. There are a lot of myths around what is required to implement an effective KM program and the biggest myth is that it requires huge upfront and sustained investments. Often organisations can utilise their existing technology stack to implement a meaningful KM program. For example, small and medium sized organisations on the Microsoft 365 platform can enable collaboration, communication, and knowledge sharing by leveraging tools that they have already paid for as part of their Microsoft licensing arrangements. This is because it’s often seen as an administrative task rather than a smart investment. This lack of understanding can cause organisations to lose more money than they save, or can save, each year.
How can you create and utilise knowledge management to support growth?
For organisations on a growth trajectory, an effective knowledge management program is an ally and force multiplier. A fit-for-purpose KM program designed to enable faster speed to market, ability to bring in the right in-house experts to client interactions, harness the past work done by the business to win more clients, and the ability to connect and grow with the alliance ecosystem is a great model.
Here are some components of a growth-focussed KM program:
- Integrated business development resource centres. An online one-stop shop that brings together best in class business development material.
- Proposals and case study repositories. A searchable repository of gold standard client proposals and case studies that can improve your response time to a client query by over 80%.
- Knowledge harvesting from CRM systems. A contextual system that integrates insights from your CRM systems to identify opportunity for upsell and cross-sell within your existing client base.
- Alliances and Partners knowledge sharing. A shared collaboration space for teams to collaborate with partners. In today’s world, the real opportunity is in tapping into information and insights at all possible handshake points – internal and external.
If you are thinking of exploring this further, a good place to start would the free online Nexelens’ Rapid KM Proficiency Diagnostics (RKMPD) tool. You can follow that up with a chat with a friendly KM consultant to sketch out the next steps.