KNOWLEDGE MANAGEMENT IN AN ADVERTISING AGENCY
This white paper was originally written in 1998. All of what was written still holds true; therefore it is being published here. In 2002, The Marketing Store, a global promotions agency, invited PentaTwo to help them lay the foundations for an agency-wide Knowledge Management initiative and today the company is in Phase III of the undertaking.
However, most advertising agencies have yet to undertake an organized effort to establish Knowledge Management as an integral part of their day-to-day operations. This is a grave error.
Introduction.
“Knowledge by its very definition is unstructured and unpredictable. One never knows when the ‘aha’ experience - which combines knowledge, experience and action – will take place. So does that mean that you don’t have to worry about it? Another simple answer: You’d better!”
-Jon Powell, MMA/Gartner Group Newsletter, Summer 1998
In 1998, The Economist noted, “Knowledge Management remains an infuriatingly vague subject.” (And, today, it still does!) This is in part because it has an infuriatingly vague vocabulary surrounding it. Terms such as data, information, tacit and explicit knowledge, intelligence, learning and wisdom are often used interchangeably and without clear definition.
Add to this the challenge of navigating through all the technology suppliers that claim to have “Knowledge Management” products, and one can become easily overwhelmed by either philosophical debate or arguments over the question, “How do we manage knowledge?”
The confusion is understandable. Even experts and practitioners disagree on something as fundamental as exactly what to call concerted efforts to capture, organize and share what employees know. With some semantic quibbling, we are as likely to hear such efforts referred to as managing “intellectual capital,” intellectual assets” or “knowledge resources.”
Whatever it’s called, proponents generally agree with why it’s important. According to Anne Stuart, (thenSenior Editor at CIO,) “Because of downsizing, frequent job jumping, constant change, globalization and the transition from an industrial to a knowledge-based economy, companies feel more pressure than ever to maintain a well-informed workforce, boost productivity and gain competitive advantage.” By creating an inclusive, comprehensive, easily accessible organizational memory, knowledge management helps meet all these goals.
However, questions continue to evolve:
-Is it possible to manage something as intangible as knowledge?
-How do you determine its value?
-How do the benefits fit into the balance sheet?
Definitions & Distinctions.
It is now generally agreed that the starting point for knowledge is data.
Data is defined as raw forms of transactional representations, or basic units of observation and measurement. Data is mostly explicit, it can be written down, stored, retrieved, passed around and discussed easily.
Information is a collection of data that has been translated into a form, which conveys a message. It is the raw material from which knowledge is formed.
Knowledge is much more than organized and patterned data. Knowledge also pulls together assumptions, theories, understanding and conclusions from study, experiment and experience.
It is important to realize that there are two main types of knowledge: explicit and tacit. They can be further divided into ‘public’ and ‘private.’
Explicit knowledge is knowledge that can be easily passed on to others; whilst, tacit knowledge is difficult to codify and express to others without actively engaging them in an experience similar to that in which the tacit knowledge was created. Tacit knowledge is also said to be very context-specific. A final characteristic is that tacit knowledge can be created and stored unconsciously. As people become familiar with a task, they learn unconsciously how to improve their performance. They find this difficult to pass on to those new to the task because they do not realize they know it.
Tacit knowledge is often what makes an organization unique and differentiated in the marketplace. It is the keystone of sustainable competitive advantage.
Knowledge can be integrated and applied to achieve objectives and solve problems in the form of intelligence and is acquired and updated through a process of learning. How good any piece of knowledge is, and how appropriately it is applied in any given situation has a lot to do with wisdom, which adds another layer of discernment and judgement to knowledge through depth of experience. Wisdom, it has been observed, is knowing when one’s knowledge is useful or adequate.
Data and information, being mostly explicit, can be stored in machines, while knowledge, intelligence, learning and wisdom reside in the heads of people. Managing data and information is therefore a fundamentally different task from managing knowledge.
Information can be updated, transferred, processed and downloaded with ease and at a lower and lower cost. Updating, transferring and downloading knowledge from “knowers,” by contrast, is anything but straightforward. Transferring knowledge between people in particular is a major challenge, not least because knowledge is often equated with power that is enhanced by scarcity.
Also, unlike the information stored on a company’s computers, knowledge leaves the office every evening and may be lost for good when a “knower” leaves the business.
This is perhaps the most critical distinction to grasp from this hierarchy of definitions.
Joe Helfer, Founder of Knowledge Management Readiness Systems, provides what he calls a “common-sense” approach for a Knowledge Management framework.
Data: 6. Blue, Australia, (818) 340-7895
Information: Adam is six feet tall, has blue eyes, lives in Australia and has a telephone number.
Knowledge: Adam is easier to reach by telephone than by e-mail.
Wisdom: It’s best not to communicate with Adam by e-mail.
Now that we have an understanding of what we mean by knowledge, let us develop an understanding of the phrase ‘Knowledge Management.’
Knowledge that has been formalized, captured and leveraged within an organization to produce a higher customer valued asset is called Intellectual Capital. Or, in other words, intellectual capital is intellectual material - - knowledge, information, intellectual property, experience - - that can be put to use to create wealth.
Knowledge Management, or the management of intellectual capital, projects vary as widely as the industries undertaking them. But generally, efforts are intended to retain, analyze and organize employee expertise, making it available anywhere, anytime - - ideally and ultimately to improve the bottom line.
Effective Knowledge Management pays off in fewer mistakes, less redundancy, quicker problem solving, better decision making, reduced research and development costs, increased worker independence, enhanced customer relations, and improved products and services - - all adding up to keep the company at least a few steps ahead of its competitors.
“If we apply knowledge to tasks we already know how to do, we call it productivity. If we apply knowledge to tasks that are new and different, we call it innovation.”
-Peter F. Drucker, Post-Capitalist Society
Symptoms of a Knowledge Problem.
David H. Smith, head of Knowledge Development for global giant Unilever has developed a list of nine symptoms of a “knowledge problem” – something wrong with how your company manages its brainpower. In 1997, Smith was given the task of “helping Unilever act more intelligently” – that is, learn faster and leverage what it knows. “The solution to our problem isn’t to work harder. We’ve got to learn to work smarter…” That, as Smith says, “is obviously true but extremely trite.”
Knowledge problems have symptoms that mimic other problems, and as Smith says, “Each of the following is a symptom that you don’t manage knowledge well: People aren’t finding it, moving it around, keeping it refreshed and up to date, sharing it, or using it.”
-You repeat mistakes. Obviously, there is nothing wrong in making a mistake. But, when you keep repeating them, well…
-You duplicate work; or, you keep re-inventing the wheel.
-You have poor customer relations.
-Good ideas don’t transfer between departments, units, or countries. Thomas A. Stewart calls this “the most common knowledge problem of all.” How do we get people to share ideas rather than hoard them, to accept ideas, rather than reject them?
-You’re competing on price. Everything you learn about a customer is an opportunity to make it harder for competitors to horn in. The result: margin.
-You can’t compete with market leaders. Trying to answer the question, “What do they know, that we don’t know?” may enable you to outwit the bigger competitors.
-You are dependent on key individuals. This means there is too little teamwork or you do not know how to encourage star workers to reveal secrets of their success.
-You are slow to launch new products or enter new markets.
-You don’t know how to price for service.
Smith’s list is diagnostic, not prescriptive. And, each item on it is a knowledge problem, with real business consequences – for both your clients and you.
“Few people quarrel with the notion that companies must learn to invest in and manage knowledge if they hope to compete in an economy where, more than ever, knowledge is what we buy and sell.”
-Thomas A. Stewart, “Why Dumb Things Happen to Smart Companies.” Fortune
Knowledge in an Advertising Agency.
Let us take a look at a typical advertising agency, and the Data, Information, Knowledge, Wisdom (DIKW) hierarchy, as it relates to the Account Service Group. The following will hold true, for most account groups:
Assistant Account Executive: Data
Account Executive: Information
Account Supervisor: Knowledge
Account Director: Wisdom
More often than not, it is the Assistant Account Executive who is expected to be the reservoir of all data. All that the AAE is aware of is the fundamental data about the client (who? what? where?), the marketplace, the consumer and the competition. By the time this data has been mastered, it is time to be promoted to the position of Account Executive.
The Account Executive now has a very good idea of how the agency works, what is expected of him/her, and is capable of ordering and structuring data into information.
The process of “digging” for data (that already exists in most cases; however, it is inside somebody’s head) and the process of converting the data into information take up most of their time - - no wonder the AAEs and AEs spend 60-80 hours a week!
As the AE matures and is capable of pulling together assumptions, theories, understanding and conclusions from study, experience, and experiment (if there is ever time for that) and becomes knowledgeable, he/she is made an Account Supervisor.
Now the Account Supervisor is actively recruited by headhunters for a similar position (at a higher pay, of course) in another agency, or by the client, or worse yet by the client’s competitor.
There goes a “knower” out of the door.
Those Account Supervisors that do not leave (after six-eight years in the agency) become Account Directors. But Account Directors obviously have neither time nor the inclination to being a mentor and share their knowledge and wisdom with the young AAEs and AEs.
The cycle starts all over again.
This very scenario applies to all the departments in the Agency, from Creative to Production, Media to Administration. All that changes are the titles.
All this leads to inefficiencies, lost revenues and finally the next agency review.
While it is not possible to reduce or eliminate turnover, one possible solution is to develop a culture within the agency to constantly gathering all the knowledge, recording it, and making it available on demand to others.
Now let us assume that an Agency has three other offices in the country. Let us assume that the Midwest office has been invited to “pitch” Account ABC in a particular category? Before rushing to get all the information (starting out with calling Find/SVP) will anyone even consider calling the agency’s other offices to find out if either one of them had been involved in a pitch in the recent past to a client in the same category?
Let us assume someone did make the calls, and the Agency’s West coast office had indeed recently pitched another client in the same category. Did anyone keep records of the pitch? More importantly, did those involved in the pitch conduct a post-mortem on the complete process and determine any causes for not having won the account? In all probabilities, no attempt was made to have such a meeting to gather information and document all the knowledge gained from the experience. Capturing tacit knowledge, recording it, and making it available can indeed save time effort and money. It may even have helped in the presentation the Midwest office is to make.
How about that time when your agency was invited to pitch Account XYZ because your agency had handled a competing client, Account PQR till about a year ago? Now, Suzi who was the Account Director on PQR is no longer with the Agency, and the whiz kid Jim who knew everything about this category is working on another account and is on an overseas assignment. All the years your agency spent on Account PQR, and none of the knowledge and wisdom on the category is readily available. The team that will be making the pitch has to start from ground zero!
These are just a few examples of how a Knowledge Management initiative in your agency may help in the future. There are many, many instances that one can talk about where information is not available, not shared, or at times there being too much information stockpiled.
So where does one start? One way is to initiate and stimulate the agency’s thinking about Knowledge Management by asking the following questions, as suggested by Jon Powell:
-What critical knowledge exists in the agency and how is it accessible?
-How is knowledge systematically transferred?
-Does you agency acquire knowledge from the outside and how is this knowledge used within the agency?
-How do you generate, capture and disseminate new knowledge?
-How does your agency evaluate or value knowledge assets?
-Which technologies are used to capture, structure and disseminate knowledge?
-Are there any quality control checks built into any existing knowledge management processes?
-Does top management perceive and manage knowledge as a critical resource for future value creation and as an integral part of the corporate/business strategy?
In a very real sense, what is knowledge and what is not lies in the eye of the beholder: one person’s knowledge is merely data to another. A key determinant of these differing perspectives is strategy. Hence the first rule of effective Knowledge Management is that the definitions of management of and knowledge cannot be separated from the context of strategy. Therefore, your agency should first develop clear business strategies and then manage knowledge to support and leverage them.
You cannot manage knowledge unless you are very clear about what you want to do with it.
-Robert Davies “Reflections on Knowledge,” Management Center Europe
Some Principles of Knowledge Management.
Many companies are beginning to feel that knowledge of their employees is their most valuable asset. But, only a few firms have actually begun to actively manage their knowledge assets on a ‘broad’ scale.
Professor Thomas H. Davenport, University of Texas, an expert in the area of knowledge management, lists ten principles of Knowledge Management:
1. Knowledge Management is expensive (but so is stupidity!).
Knowledge is an asset, but its effective management requires investment of other assets. Many Knowledge Management activities require the investment of money or labor, including the following:
-Knowledge capture, i.e., creation of documents and moving documents onto computer systems. -Adding value to knowledge through editing, packaging, and pruning.
-Developing knowledge categorization approaches and categorizing new contributions to knowledge.
-Developing informational technology informational structures and applications for the distribution of knowledge.
-Educating employees on the creation, sharing, and use of knowledge.
2. Effective Management of knowledge requires hybrid solutions of people and technology.
Human beings may be expensive and cantankerous, but they are quite accomplished at certain knowledge skills. When we seek to understand knowledge, to interpret it within a broader context, to combine it with other types of information, or to synthesize various unstructured forms of knowledge, humans are the recommended tool. These are the types of knowledge tasks at which we excel, and we should be employed for these purposes.
Computers and communications systems, on the other hand, are good at different kinds of things. For the capture, transformation, and distribution of highly structured knowledge that changes rapidly, computers are more capable than people.
Given this mixture of skills, we need to construct hybrid Knowledge Management environments in which we use both humans and computers in complementary ways.
3. Knowledge Management is highly political.
“Knowledge is power.” Thus it should be no surprise that Knowledge Management will be a highly political undertaking. If knowledge is associated with power, money, and success, then it is associated with lobbying, intrigue, and back-room deal.
4. Knowledge Management requires knowledge managers.
Key business resources like labor and capital have substantial organizational functions devoted to their management. Knowledge won’t be well-managed until some group within the firm has a clear responsibility for the job. Among the tasks that such a group might perform are collecting and categorizing knowledge, establishing a knowledge-oriented technology infrastructure, and monitoring the use of knowledge.
5. Knowledge Management benefits more from maps than models, more from markets than from hierarchies. Knowledge managers can learn from the experience of data managers, whose complex models of how data would be structured in the future were seldom realized. Firms rarely created maps of the data, so never had any guides to where the information was.
Letting the market work means that knowledge managers try to make knowledge as attractive and accessible as possible, and then observe what knowledge gets requested using what specific terms.
6. Sharing and using knowledge are often unnatural acts. Many consider the knowledge they possess to be a valuable resource and accordingly are reluctant to share it with others. The person whose job it is to create knowledge will seldom put his job at risk by using someone else’s knowledge. Our natural tendency is to hoard our knowledge.
To enter our knowledge into a system and seek out knowledge from others is not only threatening, but also just plain effort; so we have to be highly motivated to undertake such work.
Sharing and usage of knowledge will have to be motivated through time-honored techniques such as performance evaluation, and compensation.
7. Knowledge Management means improving knowledge work processes.
Knowledge is generated, used, and shared intensively in a few specific knowledge work processes. Any Knowledge Management process has to start with mapping the work process and making improvements in these key business processes.
8. Knowledge access is only the beginning.
Access is important, but successful Knowledge Management requires attention and engagement. In order for knowledge consumers to pay attention to knowledge, they must be more than passive recipients. This is particularly important when the knowledge to be received is tacit.
9. Knowledge Management never ends.
Like human resource management or financial management, there is never a time when knowledge has been fully managed. The categories of required knowledge are always changing and new categories are always emerging. Changes in strategies, organizational structures, new managers and new professionals warrant a need for continuous knowledge management.
10. Knowledge Management requires a knowledge contract.
Who owns the knowledge or has usage rights to employee knowledge? Is he knowledge of employees owned or rented? Is all the knowledge in employee heads the property of the employer? What about the knowledge of consultants while they are consulting? Few firms have policies to deal with these issues today.
The Chief Knowledge Officer.
Knowledge can take many forms and organizations differ in their definitions. Nonetheless, there is widespread agreement among forward-looking companies that knowledge is the most important asset an organization possesses. Unlike physical assets, it never depreciates or gets used up. In fact, the more knowledge is used, the more value it has.
However, to have a lasting impact on productivity, knowledge must be translated into performance, and applied to business operations.
Knowledge Management is a multi-disciplinary field that draws on aspects of information science, interpersonal communications, organizational learning, cognitive science, motivation, training, publishing, and business process analysis.
Charles Lucier, Chief Knowledge Officer at Booz Allen, believes that it is very difficult to encourage people in a decentralized organization to share their best thinking and collaborate effectively without someone to champion such efforts on a systematic basis.
Realizing this, many Fortune 50 companies have established the role of ‘Chief Knowledge Officer’, and in most cases the three basic responsibilities of the position can be stated as:
-Evangelizing about the importance of sharing knowledge.
-Running and backing projects that find, publish, and distribute knowledge around the firm.
-Managing the knowledge management staff.
In short, the job of the CKO is about two things: collection and connection. Both must be done.
So, what does it take to be a CKO? According to Ron Miskie, Chairman of Knowledge Transfer International, Inc.: “CKOs need basic business acumen, a sense of vision, and an entrepreneurial spirit.”
What we should also remember is that knowledge officers manage people, not technology. Therefore, it is also important that the CKO wholly understands the business they are in.
“For us, knowledge management is critical. It’s one of our four core processes – sell work, do work, manage people, and manage knowledge.”
-John Peetz, CKO, Ernst & Young
Is it not time for your agency to create an environment in which information and knowledge are shared and used more efficiently and effectively? PentaTwo thinks the time is now.
