Chapter 5- Finding Your Value Proposition

• Knowledge creates value when it is put into action.
• To translate knowledge into value, companies need focus.
• The first step in a firm’s pursuit of knowledge and best practice transfer is identifying its own value proposition.
  
  
  
VALUE PROPOSITION
— the logical link between action and payoff
— the business case for action (and investment).
— the driver of your competitive advantage.

1. Customer Intimacy
2. Leadership in Product Development
3. Operational Excellence

• Focus ensures valuable resources are applied to high-payoff areas.
• Focus helps guarantee transfer of the “right” knowledge.
• Focus gets management’s attention and funding.
• Focus gets employees’ attention.

• The simplest way to choose an area of focus is to look for the highest pain or the highest gain.
• Perform internal and external benchmarking
• Align the companies’ transfer work with their strategy for competitive advantage.

Flexibility is key to success in KM as in other areas of business.  You certainly need to focus, but that FOCUS may well change with time and events.

The basis for leapfrogging competition is the sharing of customer, operational and product information.

To compete today and into the future, companies must up the ante of their competitive intelligence.

High value know-how is fast becoming the fuel that feeds the search for excellence.

VALUE PROPOSITION #1 (Customer, Customer, Customer):  Increase revenue, reduce cost of selling, and increase customer satisfaction and retention.

This value proposition focuses on capturing knowledge about customers, developing and transferring knowledge and understanding of customer’s needs, preferences, and business to increase sales, as well as bringing the knowledge of the organization to bear on customer problems.

• Enhance revenue, margins and customer satisfaction and retention.
• Present a single face and corporate image to the customer, no matter how many divisions or products you have.
• Provide “one-stop-shopping” for the convenience of- in particular- business customers.
• Give service representatives the information they require to treat customers as  individuals and to answer questions and solve problems more quickly, and on the first call.
• Become so intimate with your clients-and so easy to do business with- that the ‘cost of exit’   becomes too high for your customers to consider.
• Help sales people grow more efficient and effective at selling, cross-selling and repeat selling.

1. Empower front-line service employees with the knowledge they need to effectively handle customer inquiries, complaints and needs.
2. Ensure everyone throughout the organization “knows” the customer, and keeps intimacy as top priority.

CASE EXAMPLES

Arthur Andersen Embeds Knowledge Into Service

— The goal of “One-stop-shop” called Knowledge-Space is to bring the full knowledge of the firm to bear on every engagement.
— AA manages knowledge for the purpose of increasing customer intimacy.

USAA’S ECHO

— A comprehensive customer feedback system called ECHO (Every Contact Has Opportunity)  helps service reps store and quantify feedback and  improve overall knowledge of the customer.
— ECHO lets USAA maintain and increase an already high level  of customer satisfaction, track market factors and organizational considerations on a daily basis, and update each customer-contact employee on any relevant item.
— ECHO’s purpose is to monitor, study, and respond to member comments.  It helps bring the knowledge of USAA to every customer’s call.
— ECHO also captures types of inquiries and looks for trends.

Chapter 7 — Product-to-Market Excellence
 

VALUE PROPOSITION #2: By reducing time-to-market, and designing and commercializing new products more quickly and successfully, we will increase revenue, retain market lead, and grow our profit margin.

Why transfer knowledge and best practices in product development?

• Shorten the time-to-market process (by reusing old practices and designs)
• Embed the right knowledge and functionality in the product or service (by ensuring ideas and comments flow to the right place)
• Cut the costs associated with successful and unsuccessful products, allowing more profitable product launches per year.

Two Knowledge Management and Transfer Strategies:

1. Getting the Right Product Out 
   — Companies must ensure they’re getting the “right” products and services out to their customer base by ensuring ideas and practices flow throughout the organization, from customer service to R & D and so on.
   
   
2. Getting Products Out the Right Way 
   — Companies need to use knowledge to help get products developed the “right way” by reusing what other parts of the company, at other times, have learned about getting their product to market-faster, better, and with better results.

1. Understanding of the characteristics of good and not-so-good products and designs.
2. Best practices on moving through the product development process, including how to launch a new product.
3. Reusable designs and research.
4. Best practices from departed (disbanded) teams.
5. Understanding the use of past experience with regulatory bodies (who can slow you down faster than a flat market can)

Hughes Reuses Old Designs For New Products

— The Hughes “Knowledge Highway” combines an intranet, a database of lessons learned and best practices, and pointers to experts and “human” networks.

— To ensure it gets the best ideas, first, NSA has set aside a multi-million dollar annual IDEA (Innovative Development and Enterprise Advancement) funding pool for high-risk R & D.
— Its goal is to provide a simple, fast, and streamlined process for sponsoring exploration of technical innovations with breakthrough potential, in an environment highly conducive to sharing of ideas and innovation.

— Right the First Time is a program which centers on speeding up the drug approval process by ensuring that the documentation required by regulatory agencies covers all the right areas and leaves no room for doubt and time-consuming follow-up questions.
— In the pharmaceutical industry, the opportunity cost of delaying a drug for one day can be as high as $ 1M.

Chapter 8 — Achieving Operational Excellence
 

VALUE PROPOSITION #3 (Process and Operational Improvements):  Boost revenue by reducing the cost of production and increasing productivity, and raise performance to new highs.
This value proposition focuses on the transfer of operational processes and know-how from top-performing business units and processes to less-well-performing businesses, ultimately improving the organization’s overall performance, reducing expenses and increasing revenues.

When can transfer of best practices bring operations up to a higher level of performance, whether it be cost, quality or cycle time?

1. When an organization has dozens or hundreds of similar operations such as plants, offices and retail outlets.
2. During mergers, when two organizations want to create a true synthesis by combining best practices.
3. During strategic alliances and outsourcing partnerships, when both parties need to share best practices to collectively achieve a desired result.

CASE EXAMPLES

Skandia Gets New Business Off the Ground- FASTER

— Core to Skandia’s approach has been the notion of recycling ideas and experiences on a global scale, in order to create a worldwide base of structural intellectual capital while retaining local human capital.
— As a result of these concerted efforts to share operational best practices across the company’s global business units, the lead time of starting a new business has shrunk to 7 months (vs. an industry standard of 7 years)

Doing Chevron’s Best

— In 1992, Chevron began systematically to track implementation of process improvements and performance metrics, while building a global summary of best practices company wide.
— By transferring what works best in the various decentralized units to other units we can avoid “reinventing the wheel” and duplicating the efforts of others.
— The actual learning process takes place via to “soft” mechanisms: networks and best practice teams.