Saturday, July 08, 2006

Why knowledge management projects get abandoned and why shouldn’t they?

Today, creation and utilization of knowledge drive business performance. No other asset is perceived to be as valuable, imperfectly imitable, rare among competitors, with no strategically equivalent substitutes as organizational knowledge (Kogut & Zander, 1992; Nonaka & Takeuchi, 1995; von Krogh & Roos, 1995). Studies have shown that successful creation and utilization of new knowledge improve decision making, accelerate learning, improve innovation assimilation, increase productivity and minimize reinvention and duplication (see e.g. Wing & Chua, 2005). However, organizations differ in their innovation absorptive capacity: improved skills and abilities of acquiring facts, learning, imbibing knowledge, understanding, exploiting existing knowledge and creating new knowledge. The greater the innovation absorptive capacity the faster and more successful can be the innovation assimilation in a firm.

With increased global competition, companies need to innovate continuously by introducing new products, processes, or new ways of working. Their agility in doing that depend a lot on how successfully they implement knowledge management (KM) practices. According to the 2005 and 2006 Global Most Admired Knowledge Enterprises (MAKE) reports (Teleos, 2005; Teleos, 2006), benefits of KM have been substantial. Companies dedicated to growth through innovation and managing enterprise knowledge created intellectual capital and shareholder value twice as fast as their competitors - for the ten-year period 1995-2005, the total return to shareholders for the NYSE/NASDAQ-traded 2006 Global MAKE Winners was 24.2% - over twice the average of the Fortune 500 company median. Profits as a percentage of revenues (Return on Revenues) for the publicly traded 2005 Global MAKE Winners was 10.8%, compared to the Global Fortune 500 company median of 4.3%. Being valued at US $293.6 billion, the 2005 Global MAKE winners also rank high in brand value with 13 out of the top 100.

Consequently, organizations (firms and governments) invest heavily in KM initiatives with hope to improve existing knowledge utilization and new knowledge creation (INPUT, 2006; Wing & Chua, 2005). However all too often, many KM projects get abandoned as companies do not know how to go about them or do not deliver what had been promised (Chua & Lam, 2005; Davenport & Glaser, 2002; Desouza & Awazu, 2005; Stewart, 2002; Wing & Chua, 2005). It is important, therefore, to understand the causes of KM projects abandonment to improve management of risks associated with KM projects.

Wing & Chua (2005) explored root causes for KM projects abandonment and came up with three main categories of causes: poor project implementation, organizational mismatch and content deficiencies. The “poor project implementation” category comprised underestimated complexity of KM projects, shortfall of expertise, and lack of project support. These factors led to excessive technology costs and project delays. The “Organizational mismatch” occurred when KM project were not well-aligned to existing organizational structures and roles. This category comprised techno bias (relying on IT only), weak business case (without significant benefits), lack of clear KM requirements, lack of KM measurement, technology mismatch, conflict with stakeholders and lack of user involvement. Finally, issues related with the third category, content deficiency, pertains to the core of KM projects: creation, transfer, and access of knowledge. Here, lack of technological scalability, poor tools usability or reliability, knowledge camouflage (when knowledge is difficult to get to or is non-digestible), knowledge hoarding, and out-of date knowledge, lead to content deficiencies. These issues span across areas of technology (e.g. poor knowledge access), process (e.g. out of date knowledge) and culture (e.g. hoarding) and are “unique” when comparing KM projects to generic projects.

Organizations need to be aware of the above issues and manage the risks accordingly. Common practices include: having a formal KM requirements document “ticked” by the users, iteratively designing a process, and/or build prototypes of KMSs, document and get to know knowledge needs in the firm in the given context. As actual implementation of the knowledge management can be seen as diffusion and implementation of process innovation, the above findings can be complemented with the findings from (Sherif & Menon, 2004). First, senior managers may develop administrative guidelines, allocate resources, define the scope of change, appoint the change agent who fosters the adoption of the innovation throughout the organization, and develop education and training programmes. Second, middle and project managers may need to develop the methods for implementing new processes, creating scales for progress measurement. Third, the operational staffs may need to be able to create new knowledge and exploit existing knowledge. Future research may attempt to build a comprehensive model of KM implementation failures linking other areas of concern, e.g. innovation absorptive capacity (Sherif & Menon, 2004).

Chua, A., & Lam, W. (2005). Why KM projects fail: A multi-case analysis. Journal of Knowledge Management, 9(3), 6-17.

Davenport, T., & Glaser, J. (2002). Just-in-Time Delivery Comes to Knowledge Management. Harvard Business Review, 80(7), 5-9.

Desouza, K. C., & Awazu, Y. (2005). Engaged knowledge management : engagement with new realities. Basingstoke: Palgrave Macmillan.

INPUT. (2006). INPUT Predicts Federal Knowledge Management Spending Will Reach $1.3 Billion by FY10. Retrieved 07.07.2006, from LINK. Last updated 27.06.2006.

Kogut, B., & Zander, U. (1992). Knowledge of the firm, combinative capabilities, and the replication of technology. Organization Science: A Journal of the Institute of Management Sciences, 3(3), 383-397.

Nonaka, I., & Takeuchi, H. (1995). The knowledge-creating company : how Japanese companies create the dynamics of innovation. New York ; Oxford: Oxford University Press.

Sherif, K., & Menon, N. M. (2004). Managing Technology and Administration Innovations: Four Case Studies on Software Reuse. Journal of the Association for Information Systems, 5(7), 247-281.

Stewart, T. A. (2002). The Case Against Knowledge Management. Business 2.0, 3(1), 80.

Teleos. (2005). 2005 Global Most Admired Knowledge Enterprises (MAKE) Report. Executive Summary. Retrieved 09.11.2005, from LINK. Last updated 08.11.2005.

Teleos. (2006). 2006 Global Most Admired Knowledge Enterprises (MAKE) Report. Executive Summary. Retrieved 07.07.2006, from LINK. Last updated 27.06.2006.

von Krogh, G., & Roos, J. (1995). A perspective on knowledge, competence and strategy. Personnel Review, 24(3), 56.

Wing, L., & Chua, A. (2005). Knowledge Management Project Abandonment: An Exploratory Examination of Root Causes. Communications of AIS, 2005(16), 723-743.

[Summary Prepared by: Pete and Sanjeev]

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