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In this occasional column, Montague Institute Founder Jean Graef comments on one of the Digest articles. See also other POV articles.

Do we need internal knowledge markets?

McKinsey director Lowell Bryan argues that organizations would get a lot more value from their proprietary knowledge if they applied market principles to it. By this he means high value products, standards, incentives, facilitators, and the notion of independent buyers and sellers. Montague Institute founder Jean Graef thinks the market metaphor is useful because it shifts the emphasis from knowledge management to knowledge exchange. As early as 1999, she began to flesh out how such a system might work (see "Upstream knowledge managment"). In the Institute's events, courses, and articles, members learn about practical tools and techniques that make it easier to implement Bryan's vision.

Article in focus:

Making a market in knowledge Originally published in the McKinsey Quarterly. (Lowell Bryan, CFO, August 17, 2004)

About the author. Lowell Bryan is a director in McKinsey's New York office.

About the publishers. CFO magazine is Economist Group trade publication aimed at Chief Financial Officers. The McKinsey Quarterly is the business journal of McKinsey & Company, a leading management consulting firm.

Article summary. According to Bryan, most companies have tried one of three approaches to managing knowledge with "mixed success." (1) Technology alone doesn't work because most corporate documents are out of date, poorly written, and can't be easily "parsed" (read) by computer software. (2) Content "pushed" to employees by a centralized staff of communicators doesn't work because "it's not very valuable to most frontline employees." (3) Allowing each business unit the freedom to manage its own knowledge works "because it facilitates exchange among small groups of workers with common interests," but it "provides just a fraction of the potential benefits of exchanging knowledge on a company-wide scale."

Bryan's solution is an internal knowledge market, which he defines as "the exchange of items of value among parties who don't know each other." Markets, he says, need valuable objects for trading (common knowledge by definition doesn't qualify). They also need standards, protocols and regulations, and market facilitators. From the "buyer's" perspective, the knowledge to be acquired must be more insightful and relevant — as well as easier to find, gain access to, and assimilate — than alternative sources (such as asking the guy in the next cubicle). The trick, says Bryan, is motivating authors to produce content that meets this standard. It's the company's responsibility to create a market mechanism that gives authors the right incentives.

But establishing an efficient knowledge market, says Bryan, won't be easy. He estimates that "it may take $20 million to $30 million in annual incremental spending to launch a prototype knowledge market in a large company" (italics mine). Most of the money would go for hiring and/or training market facilitators — the people who develop and enforce standards, add value in the form of navigation tools and information packaging, and stimulate the creation of new knowledge objects. This level of spending could be justified, he says, by only a 1% increase in productivity.

Commentary
Bryan's market metaphor is useful because it shifts the emphasis from knowledge management to knowledge exchange — a more complex concept. Instead of focusing on documents, it requires us to look at a collection of factors including content, people, and the tasks they perform. Instead of targeting our efforts to all available information artifacts, we focus only on those that front line employees find valuable. Instead of hoping that software will create an effective exchange of knowledge, we recognize that technology must be accompanied by the kinds of organizational changes Bryan suggests, including the training and support of a cadre of "market facilitators."

What do you call it?
While Bryan calls his system a "knowledge market," we call it knowledge base publishing. We chose the "knowledge base publishing" terminology to emphasize the necessary integration of the print, Web, and database publishing models for both efficiency and usability. Integration of the information disciplines is also a key factor in creating an effective knowledge exchange. Organizations made some progress on this score, such as tapping the knowledge of librarians to help create efficient ways to store enterprise metadata. But there's still a curious reluctance to employ the user-friendly tools of print publishing — e.g. A - Z indexes, glossaries, references, and tables of contents — in the Web and database environments. Even where A - Z indexes are used, they are often simple alphabetical lists with no subject hierarchy, no cross references and no definitions.

How to motivate authors and create facilitators
Bryan readily admits that creating an effective company-wide knowledge market (i.e. a knowledge base publishing infrastructure) is a "daunting" task. Most of the investment required, he says, would go to creating the knowledge-services staff whose members would act as market facilitators. He thinks about two dozen are needed in a large organization. In our experience, though, potential facilitators already exist. They are librarians, technical writers, editors, database administrators, systems analysts, subject matter experts, "power" users, gatekeepers and boundary spanners that help to keep information flowing in both formal and informal channels. Increasingly, even the knowledge workers themselves are playing this role (see "Get ready for end user development").

The trick is to unlock their skills through an interdisciplinary, learn-by-doing training program, support them with a robust information infrastructure, and free their time for facilitation tasks. And yes, as Bryan suggests, give authors incentives to create higher quality documents. We not only need recognition programs, but we also need to help authors see that a little more time invested in content creation will ultimately pay dividends in their ability to make more effective use of their own intellectual assets.

Knowledge markets and productivity
According to Bryan, a $20 million to $30 million annual incremental investment in an internal knowledge market is a good deal if it produces as little as a 1% increase in productivity. Interestingly, 1% of McKinsey's 2002 estimated revenues was $35 million (see "Marvin's shoes: a tale of two firms").

But how do you calculate productivity? A simple productivity formula that compares inputs (i.e. time spent) with outputs (e.g. tasks completed) isn't very meaningful. For example, it doesn't account for the difficulty of performing a task, the skill required to perform it, the risk associated with it, or its impact on the bottom line. These factors, of course, vary by industry and company circumstances. Some progress on this score is being made by the financial services and health care industries (more on this in a future article or roundtable).

Still, even with more effective utilization of information professionals and more accurate productivity formulas, it's still important to recognize that some benefits of knowledge markets or knowledge base publishing can't be reduced to hard numbers. As Bryan says, "a competitive advantage from knowledge is gained through the productive internal exchange of insights that help employees think differently as they make decisions and take actions" — a worthwhile goal that is often hard to quantify.

For original articles by Jean Graef, see the Montague Institute Review.