Expert: Warren D. Miller - 9/12/2007

Question
QUESTION: Hi there,

I have a question and I'm not too sure if it's related to database but i'm just wondering what is knowledge and what is knowledge management and why are these important to today’s knowledge economy and to IT professionals.  

Do you know of an example of where an organization has achieved value from a Knowledge management initiative

I would just like to get an opinion from you to learn more about knowledge.

Thanks again =)


ANSWER: Hi, Sue--

That's a great question. Let me start by mentioning a couple of things that make knowledge different from most other firm-specific assets:

1. It seldom appears on a balance sheet (it's nowhere to be seen, for instance, on Microsoft's, Merck's, or Boeing's).

2. Knowledge is the ultimate non-depleting asset. In fact, it's just the opposite: it's an accretive asset. The more we use it, the more of it that we and others have.

We are now in the early stages of the third economic revolution in world history. First, there was the agricultural revolution. The industrial revolution followed. We are now in the information revolution. Unlike the previous two, which depended largely on tangible capital (land, equipment, and labor), the information revolution relies significantly, if not wholly, on intangible capital in the form of knowledge.

Unlike tangible capital, knowledge is far harder for competitors to duplicate. Knowledge is not just know-how. It's know-what.

It's not just brainpower. It's also the intuition that arises from teamwork among a group of people who have worked together for years. We see that in professional team sports all the time, of course, and the same thing is true in business organizations. Show me an enterprise with high turnover among people in key positions, and I'll show you an organization that is in trouble. It's hard to develop teamwork if 30 or 40 or 50 percent of the team is changing every year.

Professional services firms (law, CPA, engineering, architecture) spent major bucks keeping track of what the firms know and who knows it. For one thing, that helps them know their own capabilities, what projects they can take on, and which they'd better pass on. For another, it encourages them to spread specific knowledge around to more than one or two people. That way, if some quit and go elsewhere, the firm still has the knowledge.

As for value enhancement arising from a knowledge-management initiative, I think it's fair to say that Jack Welch's six-sigma initiative at GE is a good example. Six-sigma is a statistical measure that equates to 3.4 defects out of every 1,000,000 units of output. The higher the sigma, the closer to perfection the process to which it is being applied is.

Launched at GE in 1995, 6S had a dramatic impact on GE's quality and the efficiency with which it used resources and deployed capital. That, in turn, meant that GE could do produce more and better output with less input (capital in the form of labor and physical assets).

That efficiency was duly reflected in a rising stock price. For every dollar one invested in GE in 1981 when Welch's tenure at the top began, until 2001, when he retired, one would have enjoyed a capital gain of $23.33. . .NOT including dividends! That's a pretty walloping rate of return where I come from.

I hope this is helpful, Sue. If not, please elaborate on your question, and I'll take another run at a response. Thanks for asking!

Warren

---------- FOLLOW-UP ----------

QUESTION: thank you for your reply.
I was just wondering if you can elaborate on why knowledge would  be important to an IT professional? and why would knowledge be important in today's society or in an organization.

much appreciated!

ANSWER: IT changes rapidly, Sue. The problems are wide-ranging and pretty unstructured. Therefore, capable IT professionals must not only know a lot to start with, but also must stay abreast of what's going on. The recent release of Microshaft's Vista version of the Windows OS is but one example. Add to that the Help Desk migraines that come with Office 2007, which is not backwards-compatible (without a file download from the MS website), and you have a real corporate headache, not to mention a looming internal trainwreck where the need for new training is concerned.

In an information economy, knowledge trumps hard assets because of the nature of the "new" economy. Brawn and factors of production aren't nearly so important as what people know. The U.S. has an advanced industrial economy, and brains trump brawn every time in such an economy.

That's why the deteriorating quality of U.S. schools at the primary and secondary levels is such a serious concern for our nation's future security and economic well-being. People who can't think well won't be able to do the jobs that the economy will require. That will result in more outsourcing to countries that do have decent public education, and the resulting domestic political clamor here in the U.S. will become even more deafening than all the yowling about "outsourcing" has been so far.

Hope this helps!

---------- FOLLOW-UP ----------

QUESTION: thanks so much. Last but not least, you've given me a description of Jack Welch's six-sigma initiative at GE
Are you able to elaborate on that for me.

Thanks again for your help so much.

Answer
Glad to help, Sue. Rather than elaborate myself, let me provide some links for you. They will answer your question faster and better than I can:

http://blogs.isixsigma.com/archive/when_jack_talks_people_listen.html

http://www.qualitydigest.com/nov01/html/sixsigmaarticle.html

http://www.benneumann.com/archives/2006/12/six_sigma_or_th.html

And then, of course, there's a book:

http://www.amazon.com/General-Electrics-Six-Sigma-Revolution/dp/047138822X

Hope this is helpful, Sue.

All the best--

Warren