Knowledge Driven Organizations Significantly Outperform their Rivals

By Ernie A. Cevallos

While conversing with an experienced sales manager, I wanted to learn if the resources being invested on a particular customer to develop an opportunity was justified. Was it more efficient to work on other projects that competed for resources, or was it better to continue investing in this project? This manager's response was "Let's stay the course for sure". In this example, the manager had figured out a labyrinth of issues including people, compelling event, solution fit, procurement processes, cultural compatibility, how the customer perceived value, and most importantly a convincing value proposition that was co-authored under the sponsorship of the customer. Did it work? Yes, the efforts of this knowledge worker produced a $15M sale.

This real life situation offers a window into one of the modern workplace's most vexing problems, the issue of knowledge management. The manager and his team had deciphered how to win this major contract and accumulated a series of advantages over the competition. But what will happen when he moves to a different job or goes to a competitor? Will productivity decline until his replacement becomes skilled?



We are all "knowledge workers" now. However, few organizations have become adept at disseminating knowledge among employees. Business gurus have offered many potential solutions. Most involve technology, such as asking employees to submit written comments of expertise to a database that other employees can tap. But few of these efforts have produced big payoffs. Last year, when consulting firm Bain & Co. asked 960 executives about the effectiveness of 25 management tools, knowledge management ranked near the bottom.

Managers keep trying because the concept of sharing knowledge remains as captivating as it is elusive. Despite their discontent with the results, the executives surveyed by Bain actually increased their use of knowledge-management systems last year. According to Most Admired Knowledge Enterprises (MAKE) Read Knowledge Library, knowledge driven organizations significantly outperform their rivals. The list of companies commanding the vanguard in this category include Raytheon, Toyota, Dell, General Electric, and Google. The following metrics illustrate this point well:

- One of the clearest metrics to demonstrate this fact is Total Return to Shareholders (TRS). For the ten-year period 1994-2004, the TRS for the publicly-traded 2005 Global MAKE Winners was 22.3% - nearly double that of the Fortune 500 company median.

- Profits as a percentage of revenues (Return on Revenues) for the publicly traded 2005 Global MAKE Winners was 10.8% - compared to the Global Fortune 500 company median of 4.3%.

- The 2005 Global MAKE Winners also rank high in brand value with 13 out of the top 100 global brands. These 13 brands are valued at US $293.6 billion.