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Managing the knowledge manager

With more firms emphasizing the value of managing knowledge, is it time for companies to take the next step and appoint a chief knowledge officer to the job?

    Most top managers recognize the value of managing knowledge.

    In a 1998 survey of North American senior executives, 77 percent rated "improving the development, sharing and use of knowledge throughout the business" as very or extremely important. But should companies appoint a chief knowledge officer (CKO) to do the job?

    The answer depends on whether the CEO and senior management are prepared to make the position succeed. Certainly, thanks to the groundwork laid by pioneering knowledge managers, CKOs can now create substantial value. First employed in the early 1990s to foster the flow of knowledge throughout increasingly complex organizations, they functioned rather like plumbers, routing bits of information through different pipes to the right people. They then built better pipes, such as companywide e-mail networks and corporate intranets, and still later, redesigned work and communications processes to promote collaboration.

    Today, in organizations that already have these technical and social networks, CKOs can take a more strategic perspective, scanning the enterprise to discover how they might improve processes and customer relationship management as well as promote employee learning. Other senior managers might be able to see how knowledge can be better used in their particular units or functions, but the CKO can stand back and manage interventions that cross formal business boundaries, thus helping the enterprise as a whole.

    In organizations where cross-business and cross-functional interventions aren't likely to happen unless someone from the top team takes express responsibility for them, appointing a CKO would seem to be a good idea.

    Not always, however. Since knowledge pervades every activity of many organizations, some CKOs have been tempted to launch numbers of interventions, which then failed to show clear results. Others have tried to give their role solidity by building a departmental empire, but the innate amorphousness of the position makes it an obvious budget target as soon as it fails to deliver. And if senior managers disagree on the purpose of managing knowledge, they may urge the CKO to focus on conflicting or low-value activities.

    What can be done to ensure that the CKO unlocks a company's latent potential? To find out, we asked CKOs at various companies for their views about the make-or-break factors. Although the CKOs had different experiences, all concurred that success depends on two things: first, on the ability of senior management to agree about what it hopes to gain from managing knowledge explicitly and from creating a performance culture (which raises the staff's demand for knowledge) and, second, on how well the CKO develops and executes a knowledge-management agenda.

    The value that senior managers hope to create from managing knowledge generally lies at one of three levels. At the lowest level, the managers aim to help their organization become better at what it already does. International Computers Limited (ICL), the U.K. information technology service provider, found that several of its business groups wanted to improve the speed and quality of their services to customers. Elizabeth Lank, ICL's program director for mobilizing knowledge, decided that these groups would benefit if the company shared three kinds of information: about projects already completed, skills already developed, and customer concerns the business groups were working to address.

    She therefore organized databases to capture that knowledge and created networks permitting those who needed it to communicate with those who had it. Lank appointed the sales and marketing director, for example, to "own" the third piece of knowledge and to work out exactly what had to be shared and how, with a focus on enabling conversations rather than compiling documents. The speed and quality of service to customers subsequently improved: there were fewer cases in which three parts of the organization competed for the same business or customer information couldn't be found quickly.

    A premium on knowledge
    At the second level, knowledge can be used to underpin new forms of commercial activity, such as customer-focused teams and cross-unit coordination. Wunderman Cato Johnson, the relationship-management arm of the advertising agency Young & Rubicam, provides an example. In 1996 it was shifting from a service-line business to one organized around key clients throughout the world. Nicholas Rudd, who was then CKO, promoted the transition to "seamless" worldwide service by improving customer relations and pursuing new business. This approach put a premium on knowledge that supported two new forms of behavior: sharing lessons learned from experience and focusing business-development efforts on network success. At this level, knowledge management goes beyond the "basic hygiene" of improving current processes to supporting new ones.

    Knowledge management can go even further by generating an entirely new value proposition for customers. A business might, for instance, decide to offer previously "internal" knowledge as part of its product. The World Bank, to cite one case, used to provide primarily financial resources to developing countries. Now it also offers direct access to huge reserves of knowledge about what forms of economic development do and don't work. This approach not only benefits clients but also strengthens the commitment of the bank's shareholders, which see the effectiveness of their capital enhanced. Steve Denning, the bank's former director of knowledge management, observed that "internal knowledge sharing improves our efficiency, but sharing it externally has a much larger impact, improving our quality of service and reaching a much wider group of clients."

    If a company wishes only to improve its current processes, bringing in the appropriate experts (rather than hiring a CKO) may suffice to achieve the necessary social and technical objectives-creating new teams or new electronic forums, for example. If aspirations run higher, the chief executive officer may need an informed CKO to pinpoint the most valuable links between knowledge and the business and to plan how best to exploit them.

    To create value, a CKO must be realistic about how much anyone in this role can achieve in a particular organization at a particular time. The limits of the CKO's potential contribution are to some extent set by what the CEO and the senior-management team have done before the position was created; for this reason, even the most gifted candidate should hesitate before accepting an offer from an organization whose top managers don't see the point of managing knowledge and whose employees don't have a thirst for acquiring it. But in organizations whose senior managers and employees have the right attitude, CKOs with the persuasiveness to secure general support should find vast scope for their creativity.

    For more insight, go to the McKinsey Quarterly Web site.

    Copyright © 1992-2001 McKinsey & Company, Inc.