MORTEN T. HANSEN, NITHIN NOHRIA,

AND THOMAS TIERNEY

1990’s foundation of industrialized economy shifted from natural

resources to intellectual assets

Rise of networked computers

Codify, store and share certain kinds of knowledge

Executives lacked successful models that they could use as

models

Study knowledge management in different industries

Management Consulting

Health Care Industry

Knowledge is the core asset of consultancies

First to pay attention to and invest in KM

Aggressively explore use of IT to capture and disseminate knowledge

Their experience is relevant to companies that depend on smart people and flow of ideas

However, consultants do not take uniform approaches to managing knowledge. They employ two different KM strategies

Codification The strategy centers on the computer

Knowledge carefully codified and stored in databases

Accessed and used easily by anyone in the company

Personalization Knowledge closely tied to person who developed it

Shared mainly through person-to-person contacts

Purpose of computers: help communicate knowledge

Choice of strategy The way the company serves its clients

Economies of the business

The people it hires

Anderson Consulting and Ernst & Young

Codification strategy

“People-to-Documents” approach

Extracted from the person who developed it

Made independent of that person, reused

Bain, Boston Consulting Group and McKinsey

Personalization strategy

Dialogue between individuals

Brainstorming sessions and one-on-one conversations

Deeper insights by going back and forth on problems

to be solved

Access Health “Clinical decision architecture”

Reuse structure leads to low prices

Captured 50% of call-center market. Growing at 40% a

year

Memorial Sloan-Kettering Cancer Center Highly developed personalized model

Higher prices

Consistently ranked as top cancer research and

treatment institution in the country

Knowledge management strategy reflect

competitive strategy

Creating customer value for customers

Ernst & Young and Anderson

Consulting

McKinsey, BCG and Bain

Always dealing with similar problems Problems don’t have clear solutions

Service offering is very clear Highly customized solutions

“Economics of reuse” “Expert economics”

Hires undergrads from top

universities and train them

Hire top-tier MBA grads

• Companies that use knowledge effectively: 80-20 split

Downfall of CSC Index in the early 1990s

Problem: mixing inventors with implementers

Result: CSC Index unable to keep up with

competition like Anderson Consulting and Ernst &

Young

Lesson: important to avoid straddling, but unwise

to focus on one exclusive strategy

Executives must be able answer the following questions ,

1. Why customers buy a company’s products/services

rather than those of its competitors

2. What value do customers expect from the company?

3. How does knowledge that resides in the company

add value for customers?

After giving answers to these questions clearly, managers

consider the following questions:

1. Standardized or customized products?

2. Mature or innovative products?

3. People rely on explicit or tacit knowledge to solve

problems?

Companies that isolate KM risk losing its

benefits Do not isolate in departments like HR or IT

Benefits higher if coordinated with HR, IT and competitive

strategy

Responsibility of top management Actively choose a knowledge management approach that

supports a clear competitive strategy

Strong leadership = benefit of customers and company