Posts Tagged ‘value creation’

T1-5 High-Octane Knowledge Products by a Development Organization

January 29, 2010

Imagine: the top managers and executives of a development-oriented organization are ready to listen to you about KM. They are open to KM but they want to be sure that KM will benefit their organization. They are all busy and although it is difficult to bring them together, you succeeded in scheduling a one-hour slot for a KM activity you will design and execute. What will you do?

I was actually faced with this situation in two instances: a regional inter-governmental organization and a United Nations regional office. What I did then I now call “Zeroing in on High-Octane Knowledge Products”.

Development-oriented organizations are after results and outcomes that are far more complex than those of private corporations. Their stakeholders (the equivalent of “customers” for private corporations) pursue varied interests and agendas, operate at different levels (some are at the community and local level, some are at the national level, and others may be at the bilateral, regional or international level) and wield different types and magnitudes of power (financial clout of donors, regulatory clout of governments, military power of rebels and militias, local monopoly power of dominant businessmen, etc.).

The process I designed and found quite effective proceeded as follows:

  1. Brief lecture (5 minutes): using prepared PowerPoint presentation on what is “knowledge” (assets that enable effective action) and “knowledge management.”
  2. Small-group workshop (20 minutes) on the first question: “List three of your most important stakeholders, and for each one, what important action does your organization want them to do more effectively?” The group outputs are written in large kraft or Manila paper and posted where everyone can read. If there are 5 groups, there will be 15 important stakeholder-actions (duplication can occur across small group outputs).
  3. Voting (5 minutes): Each participant is given a red ball pen and he/she is asked to read all the important stakeholder-action pairs listed by all the groups. He/she selects three which he/she regards as the most important, and writes a red asterisk on each of the three.
  4. Plenary discussion (15 minutes) on the following questions: “Which stakeholder-action pairs garnered the highest votes? Do you agree or disagree? Comments? Did we miss any important stakeholder-action pair?”
  5. Last question followed by plenary discussion (15 minutes): “What knowledge product/service (existing or still to be innovated) of your organization can best support each of the top three stakeholder-action pair?” Those are “high-octane knowledge products” or services the organization is producing or can produce.

The logic follows from the same KM framework discussed in the F Series of my blogs (and the same color-coding also applies).


Identifying high-octane knowledge products

My observations:

  • The workshop illustrates the principle that knowledge enables more effective action, and makes this concrete via the concept of “knowledge product” or “knowledge service.”
  • Best ideas tend to come from the topmost executives, most likely because they are the ones more familiar and concerned with stakeholders in relation to the organization’s strategic objectives.
  • Development organizations often do not directly produce the desired social outcomes they aim for. What they do is to provide products/services to various development actors or stakeholders who produce or contribute to those outcomes. The workshop is a good way to prioritize and identify the greatest social value-adding outputs (or “high-octane knowledge products“) that the organization can produce.
  • The exercise can lead to identifying a high-octane knowledge product/service that the organization is not yet doing, i.e. it can help them set specific targets for R&D or innovation/design of new knowledge products/services.

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T2-1: A Quick Way of Mining Customer Knowledge for Service Improvement

October 7, 2009

The purpose of KM is to support creation of market value or/and social value. Who is the judge whether in fact value was created?

The answer: your internal and external customers. In the non-government and development sectors, the answer is the same, but the language is different: stakeholders. The user of the output of an action is the best judge of the effectiveness of the action, and the effectiveness of the knowledge assets utilized for that action.

When an action results in satisfaction of customers or stakeholders, value is created. Wherever the results of action is traded, then a measure of the value created is the price customers are willing to pay for a good or service less the production and distribution costs
of that good or service.

In the development sector, where the results of actions are often not traded, what is the measure of value creation? It is the stakeholders’ degree of satisfaction. Within a corporation, results of actions are also not traded and there is no price for an internal good or service. Similarly, the measure of value creation here is the internal customers’ degree of satisfaction.

Improvement or innovation of a product or service that will result in even greater customer or stakeholder satisfaction is another objective of KM. How do we do this? Where do we start? One answer: ask the customer!

In most cases, customers know what they want and they know what will satisfy them better (in the case of breakthrough or exceptionally novel technologies, customers will realize what they want only when the new technology is in front of them). They also definitely know what they don’t want; for this reason, customer complaints are good sources of ideas for product or service innovation.

Making improvements or innovations is faster and easier when the output is a service and not a product. The service delivery process is also subject to greater variability than a product manufacturing process. Improving a service output requires a broadening of perspective: from focus only on the internal business process to focus also on the customer experience process. The two processes overlap in delivering a service. Keep in mind that value creation takes place in the latter process, and not in the former, which is only preparatory.

Based on the above, a low-cost way of mining customer knowledge for service improvement is to ask just two questions. It will take the customer only a couple of minutes to answer, but it can lead to solid creation of greater value for customers. “XX” is where you indicate the name or description of the service.

Question 1: On a scale of 0-100, what is your degree of satisfaction with our XX service or output?
(If the answer is 100, stop and do not proceed to Question 2)

Question 2: What improvements on XX can you suggest to increase your degree of satisfaction?

From asking these two questions numerous times in over a hundred organizational contexts, I observed that:

  • Most of the ideas on product or process improvement from employees who perform a process do not match with those from internal or external customers who use the output of such process.
  • Employees who perform a business process are better judges of process efficiency than of process effectiveness.
  • In many organizations including in the private sector, asking feedback from internal customers is often not a systematic procedure nor a personal habit.
  • The answer to Question 2 is high-value knowledge; acting on that knowledge will surely increase customer value.
  • The entire customer experience process constitute what some calls the “Moment of Truth” or the moment when the value of an output is finally validated. Actually, it is not just one moment or one minute, but it can extend over hours or days.

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L22- 200% Listening

July 26, 2009

During the past four weeks, I have visited five Asian countries. When I travel from the Philippines, my home country, to a less-developed country, one of the striking cultural differences I notice is less ability or willingness of sales people to listen to customers. The opposite is true; when I travel to a more developed country, I am always pleasantly surprised at how much better waiters, stewardesses and sales people try to sense what I, the customer, want and serve me better.

Two weeks ago, I asked a university professor from an Asian country his evaluation of a consultant sent to their campus from another Asian country. His answer was one terse word: “useless”. The online evaluation submitted by the counterpart faculty member was a more shocking negative description of the quality of the service they received. Later, I found out that there were several gaps in the process of matching what the client needs and what technical services will be provided.

Last Friday, I was in Singapore having afternoon tea with a management consultant on business excellence. He told me how unclear was his terms of reference in a consultancy service engagement he was entering with an SME (small/medium enterprise) in another Asian country last year. What did he do? Before starting the project, he called up the owner-manager of the SME and clarified precisely what the SME needs and what services he can provide.

There is no doubt that the ability to listen to customers leads to the ability to create more value, both for the customers or buyers (consumer’s surplus = the positive difference between the consumer’s satisfaction, measured as the price she is willing to pay, and the price she actually paid for a good or service) and for the producers or sellers (producer’s surplus = the positive difference between the price of a good or service and its unit production and distribution costs). There is a direct causal link between enterprises’ ability and willingness to listen to customers and the GNP of the national economy. See a previous blog post: “Q3- The Customer is King; But the King is Blind!?”

At the enterprise level, companies stay competitive by listening better to their customers, and by using the knowledge they gain as inputs to their process or product improvement, redesign or innovation. Customer knowledge is the most valuable input to internal organizational learning processes such as business process improvement, R&D or organizational streamlining.

At the lower level of teams and groups, a similar cause-and-effect link operates. Listening is an ingredient in productive group communication. In a previous blog post, “L12- Listening”, I listed several actions that block 100% listening. Let me reproduce them here:

  • Mentally prepare what he will say next while the other person is still talking
  • Mentally comment or judge what a person is saying
  • Recall past experiences, good or bad, about the person talking
  • Automatically defend himself when criticized instead of trying to better understand the reasons and background behind the criticism
  • Retrieve his past emotions, good or bad, he had on the person talking now
  • Fail to listen completely because of an expectation about what the speaker will say
  • Lecture on what he knows about a topic even if the other person is not interested or is not asking about it
  • Notice or get irritated at the bad grammar, bad logic or bad attitude of the person talking
  • Interrupt by saying something when the other person is not yet finished talking
  • Enter a conversation with the belief that there is little he can learn from the other person
  • Talk very long or give long lectures or monopolize the conversation and as a result the other person has less time to talk
  • Think about something else related, or unrelated, to what the person is saying now
  • Mentally dismiss whatever the person is saying because of his belief about the low credibility or trustworthiness of the person talking
  • Focus more on the emotion of the person talking than on what he is saying
  • Answer a question but say so many other extra things unrelated to the question
  • Do something else such as read something while the person is still talking
  • Get distracted by noise or any other external stimulus
  • Etc. etc.

What do you notice? 99% of blocks to listening are internal to the listener!

To fully listen, we must pay 100% attention to the speaker, but at the same time, we must also pay 100% attention to any internal blocks within us. In other words, we must practice simultaneous external attention and internal attention. You may review two bog posts on indigo skill of internal attention: “The Reflective Knowledge Worker” and “L13- Learning How to Learn”.

“200% listening” is the skill of paying full attention to the person speaking while AT THE SAME TIME paying full attention to — and managing — any internal block to listening that may present itself while the speaker is talking. Like the two-faced Roman god, Janus, 200% listening is the practice of simultaneously looking at two worlds, which in this case, are the external world and the internal world.

Janus

The second part requires constant practice and constant self-improvement. The second part is parallel to the internal organizational learning processes that a truly customer-oriented company brings itself to do in response to what it senses externally from its customers. There are technologies and tools in customer relationship management, customer surveys, quality management, etc. at the organizational level, but unfortunately there are far fewer parallel tools at the individual and group level.

200% listening is one such tool.

We will touch on a few others in the L Series. In the next blog post, I will describe how internal attention can be used in anger management.

Cheers!

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Q28- Recap of KM Virtues and Gaps, or Will KM Disappear?

May 30, 2009

This Q Series had been a successful one; 16,267 hits came in since it started. We end this blog series with this summarizing post. To better appreciate an item that strikes you, I suggest reading the blog which explains that point. The blogs are accessible from this post through embedded links (which appear as colored text). While pressing “Ctrl”, you can click on the colored text to create a new tab to read the previous blog post referred to.

Virtues of KM and OL (organizational learning):

Gaps in KM and OL practice:

What we need next, a new KM or the next discipline after KM:

Q28 cartoon

We will start the new L Series on “Indigo Learning Practices” in the next blog. Stay tuned in!

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Appreciating Nonaka’s SECI Model (#23)

May 13, 2009

Let us review the four critical tasks of a learning organization (numbers 1-4 refer to the figure below):

  1. Build those tacit knowledge in workers that contribute most to value creation;
  2. Convert useful tacit knowledge into explicit forms that are easier to reproduce, replicate and reuse; this explicit knowledge is collected in an organized fashion into a knowledge repository or Organizational Brain;
  3. Provide the right explicit knowledge to be reused or practiced by the right knowledge workers; if substantial volumes of explicit knowledge have been collected, it becomes possible to recombine, digest, analyze, correlate and otherwise “mine” the collection to generate new insights and conclusions that are actionable;
  4. Procure needed expertise or knowledge from outside.

4 critical tasks in a learning organization

The tasks revolve around the green quadrant because (a) it is the quadrant where most value creation takes place, and (b) most of the knowledge in an organization is located in the green quadrant.

According to Laura Birou, only 10-20 percent of an organization’s knowledge is explicit. Robert H. Buckman of Buckman Laboratories estimates this fraction at only 10 percent. William H. Baker Jr. estimates it at 20 percent. Furthermore, not all of this explicit knowledge is captured in the organizations’ IT-based information systems. What IT does well is facilitate the replication and transmission of explicit knowledge so that more knowledge workers can use/practice them, convert them to their tacit knowledge, and create value for the organization.

Notice that the well-known SECI model of Nonaka addresses all four critical tasks of a learning organization:

  1. Socialization: tacit-to-tacit knowledge transfer from expert to learner
  2. Externalization: conversion to explicit group knowledge
  3. Combination: combining new explicit knowledge with other existing explict knowledge
  4. Internalization: conversion back to individual tacit knowledge

Nonaka SECI model

The SECI model is not the only mix of knowledge pathways that performs the four critical tasks. In the previous blog post, notice that the Case Study 3 organization also addresses all four critical tasks of a learning organization. The mixes of knowledge pathways do vary from organization to organization.

In Case Study 3, the explicit group knowledge is in the form of a Learning-Oriented Systems Manual (=organizational brain), which at this point in time is not yet web-based. This illustrates the fact that although information technology can be an excellent enabler, it is not an absolute necessity for a learning organization.

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Q25- Robin Hood versus the Sheriff of Nottingham

April 26, 2009

The concept of glocality and counter-glocality (see my previous blog about “More Power to Glocals!”) can be applied to situations where the scope or reach of power of an actor does not overlap with the scope or reach of his beneficiaries. Two different and separate groups or publics are involved. The net effect of this behavior pattern is what economists call “transfer” of resources.

A popular example is transfer of resources from the many to the few (=Sheriff of Nottingham model) and transfer of resources from the few to the many (=Robin Hood model), where — unlike glocals and counter-glocals — the few is not a subset of the many. I discussed these two models in a paper on “Information Technology and Security in the 21st Century” at the Asia-Pacific Security Forum Conference in Taipei, Taiwan in December 1999.

transfer-to-few-versus-transfer-to-many1

Actually, the two models are not opposites. Robin Hood and the Sheriff of Nottingham share something in common: both did not create value; they merely transferred resources from one economic entity to another. Other examples of transfers are: robbery, burglary, pyramidal financial scams, taxes, government subsidies, B lost something and finder A keeps it, casinos, gambling, dole-outs, charitable philanthropy, gifts, donations, grants, etc.

A way to visualize the small difference between “Robin Hood” behaviors and “Sheriff of Nottingham” behaviors is to create a Value Creation Scale where mere transfers of resources are in the middle between value destruction and value creation behaviors:

scale-value-destruction-to-value-creation

Using this scale, we can now better appreciate where the two models lie:

application-of-scale-1

I will provide more illustrative examples of using the Value Creation Scale in my next blog post. See you soon!

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Q2- KM is for Creating Value; Whose Value?

January 8, 2009

We saw in the F Series of blogs that KM supports value creation. A question is: whose value?

The answer is neat and unequivocal in the private sector: corporate KM is driven primarily by customer value. That is why use of KM and growth of the KM discipline have grown fastest in the private sector.

How about KM applied in the government sector? Who should define what is valuable for a government agency? The public served by the government agency? The head of the agency? The people’s elected representatives in Congress who appropriate taxpayers’ money to the agency? The electorate? Or who?

KM for development is more complex. Many actors and stakeholders are involved in development projects and each of them has its own and usually different idea of what valuable result they want from a development project:

  • Beneficiary community and each member of the beneficiary community
  • Project funder, lender or donor
  • Development NGO or institution which may be the lead implementor the project, and the development workers or professionals employed by the NGO
  • Local government which may be the recipient, conduit or guarantor of the development funds, and the elected or appointed officials therein
  • National government and the officials therein
  • Technology providers, construction companies, infrastructure and utilities providers, service providers
  • Academe, development research institutions and other support systems.

Applying the private sector perspective in the development sector, the end consumer which is the beneficiary community or social group should define what is valuable. Therefore KM for development should be driven by what the community truly wants or needs, right?

Well, perhaps not all the time. Let us look at two examples.

1
An upstream community wants to withdraw or use water from a river. Doing so satisfies its need and therefore creates value for them but at the same time subtracts opportunities for a downstream community which also wants to satisfy its own similar needs for water.

2
In many places in our planet, development can hardly proceed because of conflict — a sign of eroded or damaged social capital. In fact social capital can be double-edged: some social groups achieve unity among insiders (improving “bonding” social capital = exclusive social capital) at the expense of greater hostility to outsiders (worsening “bridging” social capital = inclusive social capital). When armed hostility obtains between two social groups, results valued by one group are harmful to the other group. Each group will use knowledge for destroying the other group. Remember that in KM, knowledge is defined as capacity for effective action and in the case of war, effective action is that which can destroy the capabilities and will of the enemy.

Then, what is the problem here? Is KM part of the solution, or is it part of the problem? Is there something else besides KM we need to consider? What is missing here?

What do you think?

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Q1- What is KM for?

January 4, 2009

In mid-2004, I facilitated a Knowledge Management workshop for Malaysian educators at the SEAMEO INNOTECH. During coffee break in the hallway, I met a Bangladeshi gentleman attending another workshop. As our conversation veered towards September 11, I can sense that he is a fan of Osama bin Laden. He asked me, “What do you think of President George W. Bush?” I paused for a while and said:


    “The two sides share many things in common:
    1. Each believes that he is right and the other is wrong.
    2. Both Al Qaeda and the US Pentagon use knowledge management or KM (Al Qaeda uses networking, websites, technology, manuals and how-to’s, hands-on training, mentoring; its leaders may not call what they are doing KM, but nevertheless these are all KM tools).
    3. Both use violence.

    I think the two are perfect for each other.”

He thought for a long while before we could resume our conversation.

What then is KM for? In my KM Framework or F Series of blogposts, I proposed a simple framework that shows the fundamental connection between knowledge and action, and between action and results desired by the actor. I provided examples of how to apply the framework in various situations.

It is the actor (who is the conscious or unconscious user of knowledge and KM) who defines what intended result is valuable to him or her. KM is for value creation, and what is valuable is defined by the user. Now, what is valuable to one may be harmful to another — the current conflict in the Gaza Strip is a dramatic reminder. There are mild versions of this gap: in community development, what are valuable to the community do not exactly coincide with what are valuable to the donor institution.

Can KM be used to address these issues? If so, how? Is KM only for value creation, or can KM be used also for value destruction? Is this a problem of KM, or is this a problem beyond KM?

Are we missing anything in the above story and analysis? Are there other ways of viewing this issue? Are we asking the right questions?

What do you think?

questions-questions

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D11- Tangible versus Intangible Assets

December 14, 2008

I described in an earlier post (see: “KM is Not Enough!”) the factors that contribute to good performance or value creation:

what-creates-value

We must note the following to better grasp the intricacies of tangible and intangible assets:

  • In the last two decades, market values of most corporations now far exceed their book values (for example, as of December 12, 2008 the market-to-book ratios of 215 industry groups listed in Yahoo! Finance averaged 4.458). This means that intangible assets are contributing more than tangible assets in creating value.
  • There are many evidences across various sectors and disciplines that intangible assets are more important than tangible assets in creating value (see previous post on “Intangibles: More Essential for Value Creation”).
  • International accounting standards recognize “intangible assets” as such if they are: non-physical, owned by the corporation, and can generate future economic benefits. Because of the ownership criterion, many corporations do not consider the human capital they hired and the intangibles that their personnel create (e.g. internally developed software and other structural capital) as assets to be entered in their books of account, although these definitely contribute to value creation by the corporation. In fact, training is often considered as a cost item, instead of a capital investment item. The intangible assets commonly recognized by accountants are: goodwill, brand, intellectual property rights like patents and copyrights, licenses/franchises and similar legal agreements, etc.
  • The intellectual capital accounting school of KM (e.g. Karl Erik Sveiby, Leif Edvinsson, Thomas Stewart, Patrick Sullivan, Baruch Lev, etc.) recognizes three categories of intellectual capital: human capital, structural capital and stakeholder capital (which includes customer capital proposed by Hubert Saint Onge) – which contribute to value creation but are missed by traditional accounting methods. These three categories are also recognized as “knowledge assets”. Note, however, that stakeholder capital is only the externally-facing part of Relationship Capital in the model diagrammed above (see next blogpost “D12- Relationship Capital versus Stakeholder Capital versus Consumer Capital”). Elements of intellectual capital are often not entered in books of accounts – a management gap which paved the way for various methods of “intellectual capital accounting”, Kaplan and Norton’s Balanced Scorecard, US Securities and Exchange Commission’s “colorized reports”, etc.
  • Knowledge assets are mainly intangible and often not entered in books of accounts. A common example of tangible knowledge assets is technology, which is a form of “embedded knowledge”. Examples of knowledge assets not always entered in book of accounts are trade secrets and internally developed patents (those that were not bought or sold by the organization).
  • To encompass the wide range of factors (including natural capital, social capital, indigenous knowledge, traditional or government-sanctioned access rights, cultural capital, etc.) that contribute to value creation, whether tangible or intangible, whether measured or not by accountants, we proposed the term “metacapital” (see the bottom of the previous post on “Valuation of intangible assets”).

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F15- Our Development Concepts may be THE Problem

November 14, 2008

The previous two blog posts point to a key criterion in KM for development: What do community members truly value?

In 2003, CCLFI.Philippines implemented a project on “Leveraging Best Practices” for UNDP. We documented best practices into manuals, and tried to capture the qualities of best practioners through vignettes and video interviews. We invited community leaders who were recipients of UNDP grants in lessons-capture workshops. Near the end of the project, we conducted a “Wisdom and Knowledge Sharing Workshop.”

One of the workshop exercises tried to probe what the community members value by asking the question: “What is a successful community project?” The workshop groups were asked to draw their answers and explain their drawing to the rest of the participants.

One of the workshop groups drew this answer. “Tagumapay” is the Tagalog word for “success”.

what is success to the community

One of the group members, Annabelle, explained their answer (translated from Tagalog, shortened and edited while maintaining the essential ideas):

    For us, the start of development is like making walis tingting.* [*Note: “Walis tingting” is a local broom (“walis”) consisting of about a hundred coconut midriffs (“tingting”) tied together. This coconut broom represents a well-known local metaphor for unity: one coconut midriff cannot do anything; it is powerless. But when many are tied together (unity of the community), they gain strength and efficacy.]

    First, the leafy part from each coconut leaflet is removed by a knife to produce one tingting [midriff]. This is like individual discipline: it is difficult or painful but when done, it is a small success. Then many tingtings are tied together into a broom. This is community discipline and unity – a bigger success. With a broom you can clean the seashore of garbage. If the community is united and a project answers community needs – when families get their own house, land and livelihood and they can help themselves and the community – then the project is successful. However, that is not the end-all of success.

    The last stage [see last arrow pointing to houses inside a heart] is when you no longer need the broom because every community member understands and respects or feel responsible for the environment, and no longer throws garbage. That is far greater success.

Reflecting on their answer, my colleagues at CCLFI.Philippines learned these lessons:

  • My colleagues and I were expecting that community leaders will mention material measures of success. They did (house, land and livelihood) but they placed more attention to intangible outcomes (individual discipline, community unity, and internalized sense of responsibility).
  • Our thinking was based on the sustainable development framework, which looks at economic, social and environmental impacts — all about external impacts. The community leaders’ thinking is wider: they also look at external impacts but they look further: at internal or personal impacts. We were tied to the concept of sustainable development; but they were more into sustainable living.
  • We — “the development agents” — realized that our notion of what is valuable to them is just that: a notion. The shocking clincher is: our development concepts or notions may be THE problem.

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