=Paper=
{{Paper
|id=Vol-34/paper-21
|storemode=property
|title=Shareholder Value through Knowledge Management - How IT-based Knowlegde Management Generates the Conditions for Creating and Retaining Value
|pdfUrl=https://ceur-ws.org/Vol-34/stadelmann.pdf
|volume=Vol-34
|dblpUrl=https://dblp.org/rec/conf/pakm/Stadelmann00
}}
==Shareholder Value through Knowledge Management - How IT-based Knowlegde Management Generates the Conditions for Creating and Retaining Value==
https://ceur-ws.org/Vol-34/stadelmann.pdf
Shareholder Value through Knowledge Management –
How IT-based knowledge management generates the conditions for
creating and retaining value
Dr. Martin Stadelmann
Senior Manager, Head of Management Consulting
Mummert + Partner Unternehmensberatung AG (Switzerland)
World Trade Center
Leutschenbachstrasse 95
CH-8050 Zürich
Martin.Stadelmann@mummert.ch
the impact of the action taken, and which can also
Abstract be used as a standard of comparison in the
context of benchmarking for a certain number of
Recent literature on the subject contains companies.
numerous definitions of the term knowledge
management (KM). The justifications which are
adduced to legitimise KM business solutions on 1 KM: Creating value instead of reducing
offer are equally numerous. Central to the costs
argument in favour of the implementation and use
of solutions involving KM for the majority of
writers are the expected improvements in Based on the concept of shareholder value, the ability of a
operational processes, and the optimisation of company to generate financial profit in the long-term
organisational circumstances. The emphasis is on (thereby creating value for its owners), is regarded as a
aspects of cost and the potential for saving precondition for the success of any entrepreneurial
money, and on the opportunities for improving activity. The attainment of a level of value-creation which
efficiency and rationalisation. By way of contrast, can be compared with that of competitors is dependent on
the article presented here describes an integrated the financial deployment of the available material assets,
approach to knowledge management which i.e. the means of production of fixed assets and assets in
expands on this reductionist way of looking at circulation which can be assessed in monetary terms.
things, and includes a strategic perspective of However, only the logical, targeted and innovative
value creation and retention into its considera-
deployment of the intangible business asset ”knowledge”
tions. Taking as a starting point the main
(referring to tried and tested procedures, customers,
direction of thrust of the value-creation strategy –
its emphasis on products and innovation, products and their qualities, information flow, values,
customers and their loyalty towards the company behaviour, co-operation with internal and external
or cost and operational efficiency - those areas of agencies etc.) can enable a company to surpass its
internal business activities are identified, that competitors, and by means of a permanent increase in its
hold out the prospect of considerable potential stock market capitalisation – and thereby its market value
for the creation of value if accompanied by - to create shareholder value and secure it in the long
coherent management systems, processes and term. From this point of view the following definition is
structures, as well as supported properly by IT- offered:
based systems for knowledge management. At the
same time, a sample of measurable variables will Knowledge
be presented from which it is possible to gauge is the basis which a company needs to
establish specific capabilities which will
The copyright of this paper belongs to the paper’s author. Permission to copy
without fee all or part of this material is granted provided that the copies are not
enable it to compete successfully in the
made or distributed for direct commercial advantage. long term and thereby create, retain, and
Proc. of the Third Int. Conf. on Practical Aspects of secure value for its owners.
Knowledge Management (PAKM2000)
Basel, Switzerland, 30-31 Oct. 2000, (U. Reimer, ed.) For companies which are resolutely orientated towards
http://sunsite.informatik.rwth-aachen.de/Publications/CEUR-WS/Vol-34/ value-creation, it will therefore no longer be possible to
gear the design and introduction of solutions involving
M. Stadelmann 20-1
KM towards criteria of efficiency and rationalisation in. 2 Focus: Emphasis on product, customer
Rather will they have to take continuous account – i.e. in and cost
parallel with the working, problem-solving and decision-
making processes in which employees are involved - of The establishment of a KM initiative which is specifically
the necessity to identify their employees‘ need for geared to a certain company as a tool for creating and
knowledge. It is important that this should be satisfied at maintaining shareholder value requires the involvement of
the earliest opportunity, to enable companies to develop all of the agencies (board, top management, department
and establish the core competences which are essential to heads, etc.) which are responsible for the company’s
successful action and thus to the active creation of strategic orientation, and the consistent support of
entrepreneurial value. management. These must define the dominant value-
creation strategy for their company – emphasis on
Additionally, it is vital for any knowledge management product, customer or cost - and communicate this
program, to create the conditions for establishing a unambiguously within the company. The three generic
company culture in which knowledge is communicated, value-creation strategies below are central to this:
circulated and published. This may involve symbolic acts
such as the periodic award of ”Knowledge Share • product-orientation – the continuous development of
Awards”, though it can also be directly incorporated into innovative products and services, which can satisfy
the material incentive system (e.g. as an integral part of the very latest demands of the market and customers,
personal or even team MBOs). It is a central objective to • cost-orientation – the logical rationalisation and
create a working atmosphere in which isolationism and
financial optimisation of existing production and
”hoarding” knowledge do not constitute a source of
power, influence or indispensability for specific individu- logistics procedures to secure leadership on cost, and
als or groups within a company. Contrary to this, it should • customer-orientation – the creation of long-term and
be the objective to attain a situation in which the cir- intensive relationships with customers to secure and
culation of useful knowledge is rewarded, and employees build on the existing potential for a return (i. e.
can distinguish themselves by making their knowledge, additional business, more intimate business relation,
expertise and experience widely available on a broad front reap the benefits of cross- and up-selling).
to be used and re-used in connection with entrepreneurial
value-creation processes. In this context , emphasising the Within these three generic strategic orientations, it will be
fact that ”knowledge is the only company asset which is possible for most companies to adopt an unambiguous
not exhausted with use, but actually increases both position on the basis of the overarching company policy.
quantitatively and qualitatively” will support arguments in
favour of knowledge access, sharing and distribution. Customer-
orientation
Company Strategy
Strategy of Value Creation
Culture Need for Objectives
knowledge
Incentives to pass Core competences Structures/
on knowledge processes
Knowledge Management Strategy Cost-orientation Product-orientation
KM Initiative #1 KM Initiative #2 KM Initiative #n Figure 2: Positioning a company’s specifi of value-
creation strategy which is specific to a company (e.g.
”Product-orientation)
Value creation, benefits for the enterprise
Taking that position as a starting point, KM initiatives
Figure 1: Determinants and process of deriving a strategy must be directed at providing specific support activities
for Knowledge Management (KM) for the establishment of the required core competences in
the area of the strategic focus which has been specifically
selected by a certain company or division within a com-
pany (see table, Appendix page 20-5). Different studies
M. Stadelmann 20-2
have in fact demonstrated that scarcely a single company conferencing and decision support systems, distance
has succeeded in reaching the top in more than one of learning tools and discussion forums.
these three areas, in comparison with its competitors, and
that it is essential to strategic consistency to identify one’s
of information
own strengths and exploit them in a competitive
Availability
environment. Even so, it may be quite opportune, Company success due to value-
creation oriented management
wherever KM initiatives which are specific to an area or and work behaviour
division are launched, either to adopt various of these
Co s s
• task-/problem oriented
po
m ibl
• at the right time, in the right place
bi e b
directions of main thrust in parallel KM initiatives, or to
ne y
• in the right format
d us
• management
an e
pursue a combination of various of these value-creation
d of
m I
Data warehouses, RDBMS,
ad T
strategies as part of a single initiative. In this case, all the repositories, MIS, Internet/
e
Intranet technology/portals,
document management, data
activities and initiatives must be closely monitored and mining, push technology, • exchange of ideas
search and retrieval tools, • joint activities and problem-solving
coordinated, so that it is ensured, that the selected KPI/benchmarking systems • synchronous/asynchronous communications
• documentation • training
measures will not be contradictory with each other. • discussion Process
E-mail, discussion forums, video support
conferencing, chatting, groupware,
workflow, decision support, computer-
based training, distance learning
3 Approach: Example ”Product orientation”
Figure 3: Combination of process support and the
availability of information
For the purposes of a ”knowledge value assessment”,
those areas of knowledge will be identified in the The fields of knowledge which are specific to a company
initialisation phase of a company-wide KM program or situation, and which are essential to the establishment
(consisting of different KM initiatives) which are essential and exercise of the core competences which are relevant
to the establishment and exercise of the core competences in the case of product-orientation, and thus require
which enable the company to perform specific activities in intensive management (i.e. acquisition/collection, storage,
respect of the selected strategy for value-creation (see maintenance, circulation/provision) come under the
table, Appendix page 20-5). In the context of this example following areas:
- the case of companies where strategy is focused on
product-orientation (which is typical for pharmaceutical or • fundamentals and related research,
hi-tech companies) - the particular competences are:
• design, development, and construction,
• project management,
• the use of interdisciplinary working practices and
• familiarity with the customer’s requirements,
methods of problem-solving,
• information about patents
• the promotion of creative work styles and conceptual
• competitors‘ development projects and the results
thinking,
• market intelligence
• the rapid development and commercial exploitation
of new products and generations of products in swift
Obviously, management of these areas of knowledge is
succession,
conditional upon access to data and information from a
• the development of solutions which are based on the
variety of sources – both in-house and external. Access to
transfer of knowledge between different functional
external sources may involve the use of search and
areas and divisions,
retrieval tools which are based on internet technology and
• the circulation and exploitation of technical
access mechanisms. Data bases, data warehouses and
knowledge, functional expertise, and experience
intranet portals will be used to establish in-house
inside and outside an individual team,
information and knowledge stores – known as ”content
• the identification of new areas of application for repositories” - , while tools for the provision of access
existing technologies and solutions, and rights, document and content management and data
• the early recognition of promising technological mining as well as analytical tools are available to
developments and market trends. complement internet technology for the purposes of
retrieval and searching.
As a consequence, one of the main demands on an IT-
based KM system consists in the provision of
It is only this combination of tools and functionalities,
infrastructure mechanisms (whether in the form of
which support processes with sophisticated information
functionalities or autonomous tools) which support the
stores and access mechanisms, which permits a ”leverage
establishment and exploitation of these competences from
effect” that allows employees to re-orientate and
the point of view of collaborative processes within and
restructure their management and work behaviour with a
between teams or groups of people. The following are
view to the creation focussed on value.
particularly suited to this : e-mail, groupware, workflow,
M. Stadelmann 20-3
1. Problem, idea,
objective, cause References
6. decisions,
experiences,
2. Search, trigger actions Treacy, Michael, Wiersema, Frederik D. - The Discipline
5. Setting up teams & of Market Leaders: Choose Your Customers, Narrow
7. “New knowledge” joint activities
Your Focus, Dominate Your Market, Addison Wesley
Dashboard Navigator
Personalized
Page
Publishing Company, 1997.
Warehouse Header
Repository
N
a Image/Units
RDBMS v Object Store
i
g
a
t
i
o
n
Text/Units
Java/Analysis
Klasson, Kirk - Managing Knowledge for Advantage:
Content & Collaboration Technologies, Knowledge
3. Search results,
data, content
4. Sources, specialists, Leadership Series, Cambridge/USA, 1999.
experts
CIN (ed.) - Think Tank Studies ”The Knowledge
Figure 4: The Knowledge Management cycle Paradox: How to Manage Your Most Strategic Asset”,
Cambridge Technology Partners, Cambridge/USA, 1999.
A system which is designed in this way will thus support
employees in their customary problem-solving and
decision-making processes, while at the same time
ensuring that the results of these co-operative processes
do not go astray, but continually flow back into the
knowledge stores provided as ”new knowledge”. There
they will broaden the knowledge base which is available
for the next cycle of activities to include the latest
experience and results. At present this still largely
happens either in a structured or an unstructured form.
However, future KM solutions and KM products will
contain a methodical fusion of the two forms.
4 Conclusion
The overarching objective behind the conception and
design of knowledge management solutions must
therefore be to provide their users with the information
they require to fulfil their tasks successfully from those
areas of knowledge which are relevant in the context of
those tasks – at the right time, in the right place and in the
right format. Regarding the collaborative processes
involved in task fulfilment and problem solving, they must
contain infrastructure mechanisms which can support
cooperative work structures and procedures.
In this combination, a KM solution will be able to
improve considerably the competences which a product-
orientated company needs to consequently pursue its
emphasis on the value-creation, and to ensure both the
creation of value (turnover, yield etc.) and its retention
(which can be seen from stock market capitalisation) in
the long run.
M. Stadelmann 20-4
Appendix (Table)
Establishment and Essential core Potential for the creation
maintenance of areas of competences of value/measurable
knowledge variables
Product-orientation • fundamentals and related • rapid development and • quality of selection and
research commercial exploitation of prioritisation of R&D
• design and development new products and projects !
• project work and project generations of products • time-to-market "
management • the early identification of • life cycle of company’s
• lessons learned new areas of application own products !
• market trends and for existing technologies • number of company’s own
customer requirements and promising patents and copyrights !
• information about patents technological • re-use of results of
• competitors‘ development developments and market development !
projects and the results trends • yield/new development !
• market intelligence • interdisciplinary activity • acquisition of new custo-
and problem-solving mers/proportion of return
• creativity on new customers !
• conceptual thinking
• transfer of knowledge
between Divisions
• transfer of knowledge
within and between teams
Customer-orientation • customers‘ habits, needs, • relationship management • customer loyalty !
preferences • creation of references, • length of relationship with
• customer data (historical generation of customer !
data and personal details) recommendations • fluctuation in customers "
• rival suppliers, market • identify and exhaust • turnover, return per
knowledge and experience opportunities for cross- customer !
• good knowledge of own selling • share of wallet !
products and services • create exchange barriers • number of customers/
• tendering procedures • database/system-based employees !
• best practices for marketing, e-commerce • new-customer
consultations and • retention marketing business/total business !
customer-support • establishment and • image !
meetings maintenance of a positive
brand image
• reliability of products and
services
• transfer of experience
Cost-orientation • production schedules • efficient output of • turnover of stock !
• production processes, goods/services and • utilisation of means of
processing orders processing of orders production at capacity !
• procurement/ sales • competence in procedures • productivity of factors of
processes and channels and methods production !
• materials management and • analysis and problem- • scrap, rate of defects "
logistics solving • delays in delivery "
• best practices for • definition and maintenance • capital tie-up "
operational processes of standard processes
• internal and external
benchmarking
Knowledge Capability Benefit
Table: Selected aspects of KM support for value-creation strategies
M. Stadelmann 20-5