why km programs fail

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THE REINVENTION OF MANAGEMENT

WHY DO GREAT KM PROGRAMS FAIL?

Steve Denningwww.stevedenning.com

http://blogs.forbes.com/stevedenning steve@stevedenning.com

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Knowledge management

1996-2000

By all indicators, an apparent success

“A world leader in KM”

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Knowledge management

2000-2008

By all indicators, an apparent success

Put on a back burner

Within a few years, it had been put on a back-burner

Not just the World Bank • BP• Ernst & Young• IBM• HP

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Why do managers act this way?

(These are highly intelligent, educated people!)

In 2008, I began exploring:

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2008

Why did management systematically kill all the creative

things in organizations?

• knowledge management?• lean manufacturing?• innovation?• marketing?• leadership storytelling?

It’s not just KM

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President, Ford Motor Company, 1960Secretary of Defence, 1961-1968President, World Bank, 1968-1981

Robert McNamara

“the smartest man I ever met”John F. Kennedy

1978 A second clue …

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Traditional management

rests on seven shaky principles

Most management textbooks…Most business schools …

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1. “The purpose of a firm is outputs”

7 planks of traditional management

Today, customers have choices.Rapid change firm makes wrong “things”People want: outcomes, not outputs.

The firm produces “things”, i.e. goods or services

World Bank = loans

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2. “Management’s main job: improve efficiency”

7 planks of traditional management

Result is declining returns

Today: we need organic growth

Efficiency focus kills innovation

Focus on squeezing costs:Getting bigger cost reductions

Economies of scale

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3. “The customer can be manipulated”

Michael Porter: “Parse and manufacture demand”

7 planks of traditional management

Today, the buyer is the bossInstant information available to all.

Customers have choices.Customers communicate with each other

The World Bank will make more loans,

whether countries want them or not.

E.g. we prepare the loans for the countries

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4. “Staff are human resources that can also be manipulated”

External incentives: carrot and sticks.

Today, most work is knowledge work:

Disengaged workers don’t produce their best.

7 planks of traditional management

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5. Communicate by directives

Tell people what to do

7 planks of traditional management

Knowledge workers don’t perform well

when they are ordered around

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7 planks of traditional management

6. “Traditional management practices are self-evident”

Management reflects

timeless truths of the universe.

Evidence of management dysfunction is inadmissible. Bad managers? Yes!

Management itself is bad? Impossible!

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7. “Managers don’t ask questions”7 planks of traditional management

The source of the Dilbert manager

1. Managers focus attention on procedure, and not on substance.

2. Managers communicate to subordinates indirectly by signals, rather than clearly stating a position.

3. Managers play for time.

A. Zaleznik: Managers & Leaders: Are They Different? 1977 HBR

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The assumptions are interlocking

Management function is to squeeze out costs

Purpose of a firm is to produce outputs

Communicate through commands

Demand can be manufactured

“Human resources” can be manipulated

Management principles are self-evident

Managers don’task questions

The mental model is impervious to challenge!

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2008 Q. Why were all the creative things in organizations systematically killed?

• knowledge management?• lean manufacturing?• innovation?• marketing?• leadership storytelling?

A. Management did it!

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2009: Conclusive proof of the failure of traditional management

• The rate of return on assets has fallen by 75% since 1965• The life expectancy of Fortune 500 firms down to 15 years, and is heading towards 5 years.• Only 1 in 5 workers fully engaged • In 1980-2005, established firms created zero net new jobs.

Sources: Deloitte’s Center for the Edge: The Shift Index; Kauffman Foundation

1965

Today

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Management has failed!

2010 Many writers are concluding:

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Management kills KM• systematically• relentlessly• through business schools• through cost-cutting drives • despite claims to the contrary

Although KM often makes temporary gains, eventually …

KM isa low hanging

fruit!

CFOCOO

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Knowledge Management:

horizontal, collaborative knowledge-based culture

Traditional management culture:

Top-down, authority based

Our hope in 1996

The reality of 15 years in KM

Knowledge Management:

horizontal, collaborative knowledge-based culture

Traditional managementculture:

Top-down, authority based

What we have learned

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Do you recognize the world of management I have just described?

Break for discussion

Yes?No?

Not sure?

KM isa low hanging

fruit!

CFOCOO 21

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We have to generate

a culture of continuous innovation

Implication for KM & organizational survival:

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1. New goal for the organization2. New role for managers3. New coordination mechanisms4. Shift from value to values5. New way to communicate

Five big shifts… and 70+ practices

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Customer Capitalism Delighting customersThe customer becomes the bossMaking money is result, not goal

Shareholder Capitalism Tweak the supply chain Make money for shareholders

1. NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders1

Deliver more value to customers sooner

The Age of

Customer Capitalism

We are entering

Roger Martin, HBR Jan 2010

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Outside-in perspectiveUnderstand the customer Solve the customer’s problems

Inside-out perspective Tweak the supply chain

1. NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders1

Deliver more value to customers sooner

We are entering

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1. NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders1

Not just satisfy them: Delight them!

We are entering

Everyone in the organization is focused on generating

a continuous stream of added value sooner

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Public sector equivalents

of “delighting

clients”

Education: “students first”Health: “patients first”

The convenience of “the system”

1 NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders

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1 NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders

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This changes the game completely

Outputs Outcomes

Things People28

Simple Complex

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2. NEW MANAGER ROLE: from controller to enabler

• Work is done in networks of self-organizing teams

• Teams are empowered to decide.

• Teams report to clients, not managers

• Managers: set goals, remove impediments

• Control can’t delight customers

• You can’t control knowledge work

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3. COORDINATION OF WORK: Dynamic linking

• Work in short cycles: reduce risk & increase agility.

• Deliver value to clients each cycle (not reports).

• Specify the goal, not how the work is done

Hierarchical bureaucracyBig plan

Start Finish

Boss driven

Client driven

Shortcycles

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Radical transparencyFacing the brutal realityGet to root causes

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Alan Mullaly CEO, Ford

4. FROM VALUE TO VALUES: radical transparency

BureaucracyMake the numbers,

come what may!

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Bureaucracy = get the product out

• Systematically identify impediments

• Fix problems immediately

• Identify and remove root causes

4. FROM VALUE TO VALUES: continuous improvement

Enable continuous improvement

The status quo is never good enough

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5. INTERACTIVE COMMUNICATON: conversation

Command and control

• Adult to adult conversations • Storytelling • Open-ended questions• Springboard stories• User stories

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Managers are thinking how to… Everyone is thinking how to … Produce more outputs more cheaply Delight customers & stakeholdersSqueeze more from “human resources” Inspire others as peopleParse & manufacture demand Have relationships with customersSurprise them with unexpected charges Surprise them with unexpected

valueMake people feel queasy Make things feel easy and fun

Two different mental models of management

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The shifts are self-reinforcing & interdependent

Focus all work on delighting

customers

From controller to enabler

From bureaucracy to dynamic linking

From command to conversations

Radical transparency

WHAT’S NEW: doing all at once

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Where did these shifts begin?

In 1980s, the approach began spreading among auto manufacturers (“Lean”)

In mid-1990s, the approach began spreading to software development (“Agile”)

You can see current exemplars in firms like Apple, Amazon and Zappos

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The transition is inevitable

Two- to four-times gains in

productivityEconomics will drive the change!

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The transition is inevitable

Traditional management0% to -50%

Radical management

+1,000%

Ten year share price

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Educate yourselves

Spread the word

Become leaders of the new movement: inspire!

• Disseminate the Shift Index• Disseminate the books that show how

• Master the 5 principles and 70+ practices of radical management

The opportunity for KM

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Lead the revolution!

• Embody the change yourself • Make your KM world a model • Learn to tell authentically true stories • Capture people’s imagination • Join with those who share the vision • Encourage and support them in their work

The opportunity for KM

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“Revolutionizing the world of work”

Hang out with fellow revolutionaries:

2 day workshop May 12-13, 2011Washington DC

“Join us to help reinvent the Fortune 500, government, & the health and education sectors”