What’s Your Strategy for Managing Knowledge?

Knowledge management as a conscious practice is so new that there are few successful models for executives to use as guides. In this excerpt from their article in the Harvard Business Review, HBS Professors Morten T. Hansen and Nitin Nohria and colleague Thomas Tierney of Bain & Company reveal two key KM strategies — codification and personalization — and their use among consulting firms.
by Morten T. Hansen, Nitin Nohria & Thomas Tierney

Some large consulting companies, such as Andersen Consuiting and Ernst & Young, have pursued a codification strategy. Over the last five years, they have developed elaborate ways to codify, store, and reuse knowledge. (See the exhibit "How Consulting Firms Manage Their Knowledge") Knowledge is codified using a "people-to-documents" approach: it is extracted from the person who developed it, made independent of that person, and reused for various purposes. Ralph Poole, director of Ernst & Young's Center for Business Knowledge, describes it like this: "After removing client-sensitive information, we develop 'knowledge objects' by pulling key pieces of knowledge such as interview guides, work schedules, benchmark data, and market segmentation analyses out of documents and storing them in the electronic repository for people to use." This approach allows many people to search for and retrieve codified knowledge without having to contact the person who originally developed it. That opens up the possibility of achieving scale in knowledge reuse and thus of growing the business.

Take the example of Randall Love, a partner in the Los Angeles office of Ernst & Young. Love was preparing an important bid for a large industrial manufacturer that needed help installing an enterprise resource planning system. He had already directed projects for implementing information systems for several manufacturers in other industries, but he hadn't yet worked on a manufacturing project in this one. He knew other Ernst & Young teams had, however, so he searched the electronic knowledge management repository for relevant knowledge. For help with the sales process, he found and used several presentations on the industry — documents containing previously developed solutions — as well as value propositions that helped him estimate how much money the client would save by implementing the system.

Because Love reused this material, Ernst & Young won the project and closed the sale in two months instead of the typical four to six. In addition, his team found programming documents, technical specifications, training materials, and change management documentation in the repository. Because these documents were available, Love and his team did not have to spend any time tracking down and talking with the people who had first developed them. The codification of such knowledge saved the team and the client one full year of work.

Ernst & Young executives have invested a lot to make sure that the codification process works efficiently. The 250 people at the Center for Business Knowledge manage the electronic repository and help consultants find and use information. Specialists write reports and analyses that many teams can use. And each of Ernst & Young's more than 40 practice areas has a staff member who helps codify and store documents. The resulting area databases are linked through a network.

Naturally, people-to-documents is not the only way consultants in firms like Ernst & Young and Andersen Consulting share knowledge — they talk with one another, of course. What is striking, however, is the degree of emphasis they place on the codification strategy.

By contrast, strategy consulting firms such as Bain, Boston Consulting Group, and McKinsey emphasize a personalization strategy. They focus on dialogue between individuals, not knowledge objects in a database. Knowledge that has not been codified — and probably couldn't be — is transferred in brainstorming sessions and one-on-one conversations. Consultants collectively arrive at deeper insights by going back and forth on problems they need to solve.

Marcia Blenko, for example, a partner in Bain's London office, had to consider a difficult strategy problem for a large British financial institution. The client wanted Bain to help it expand by offering new products and services. The assignment required geographic and product-line expertise, a broad understanding of the industry, and a large dose of creative thinking. Blenko, who had been with Bain for 12 years, knew several partners with expertise relevant to this particular problem. She left voice mail messages with them and checked Bain's "people finder" database for more contacts. Eventually she connected with nine partners and several managers who had developed growth strategies for financial services institutions. She met with a group of them in Europe, had videoconferences with others from Singapore and Sydney, and made a quick trip to Boston to attend a meeting of the financial services practice. A few of these colleagues became ongoing advisers to the project, and one of the Asian managers was assigned full time to the case team. During the next four months, Blenko and her team consulted with expert partners regularly in meetings and through phone calls and e-mail. In the process of developing a unique growth strategy, the team tapped into a worldwide network of colleagues' experience.

To make their personalization strategies work, firms like Bain invest heavily in building networks of people. Knowledge is shared not only face-to-face but also over the telephone, by e-mail, and via videoconferences. McKinsey fosters networks in many ways: by transferring people between offices; by supporting a culture in which consultants are expected to return phone calls from colleagues promptly; by creating directories of experts; and by using "consulting directors" within the firm to assist project teams.

These firms have also developed electronic document systems, but the purpose of the systems is not to provide knowledge objects. Instead, consultants scan documents to get up to speed in a particular area and to find out who has done work on a topic. They then approach those people directly.

When we initially looked at how consulting companies manage knowledge, we found that they all used both the codification and the personalization approaches. When we dug deeper, however, we found that effective firms excelled by focusing on one of the strategies and using the other in a supporting role. They did not try to use both approaches to an equal degree.

About the Author

William Joyce is a professor of strategy and organizational theory at Dartmouth College's Tuck School of Business.

Bruce Roberson is executive vice president of marketing and sales at Safety-Kleen.