ROI for Knowledge Management

This article has been moved here…..

As with every business venture , unless there is a solid case built on the ROI chances are the initiative wouldn’t get the backing of the executive team. It’s a numbers game, and without a clear indication of some benefit, in terms of a dollar figure, it get more and more difficult to justify the costs.

Now the reason i started up this post is to get an idea of how companies , if at all, calculate the ROI on a knowledge management initiative. Based on my experience, figuring out where the knowledge is and getting it to flow is tough enough, adding a number value to it seems next to impossible . Sure , there have been methods where people have attempted to calculate it. But the question of a methodology robust enough to calculate the ROI of a KM intiative doesn’t seem to be here as yet, then again i could be wrong.

So, if any of you have managed to implement an accurate ROI calculation in a KM environment i’d love to hear about it. Do leave a comment , against this post so other people can get involved in this discussion.

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4 Responses to ROI for Knowledge Management

  1. Axel says:

    Dear Ajun
    I appreciate your inquiry into the possibility to calculate an ROI for KM. As a consultant I am facing the question of benefit to the organization for every intervention I am suggesting. In some cases it is relatively easy, in others it is very hard. As far as KM is concerned, I believe it is somewhere in the middle. I am not sure to what extent you subscribe to the notion of first and second generation KM. Most of my understanding in that area is based on Mark McElroy’s writing about TNKM and the CKIM program. In a short summary, first generation KM would be the one where the focus lies on having the right information at the right place at the right time. Second or The New KM adds the issues of knowledge generations and the deciphering of knowledge claims to the work of first generation KM. For the first generation KM I believe it has gotten easier to make ROI calculation as there is a cost to not having the right information in the right place at the right time. I don’t only mean that in a hardware or software related way, but also along the lines of time wasted for searches, time lost to complete work against deadlines, time spend and paid for redoing work that has already been done in the past but isn’t available due to lack of searchable storage, good record keeping or other measures. For TNKM it is a little more complicated since the cost becomes more of a speculation. This is not only due to the lack of assurance that an effort to develop the missing but needed knowledge will actually be found when needed, but also because it is sometimes almost impossible to know what it is that is being missing or what needs to be found. I have a number of slides that were developed for the CKIM program that show some of the processes involved. I believe you might benefit (and everybody in this KMCI forum for that matter) if you ask Mark directly what he would suggest for the quantification of ROI for regular and TNKM efforts.

  2. Arjun Thomas says:

    This is a very interesting suggestion Alex, would really like to hear more on how these were implemented in actual scenarios, whether they worked, what the pro’s and cons were. I feel that a large part of what’s discussed in KM is very theoretical, even if they were implemented in corporations there is very little feedback in terms of detailed case studies…..

    Appreciate the response though….. This would be a great way to kick start a discussion on practical implementation strategies….

  3. Hi Arjun, I just discovered your KM blog and added you to my RSS, I enjoy the reading.
    One comment on the ROI issue, which is a common and a recurring issue in knowledge management spheres. I think that management will often talk about metrics, but we should not forget the power of stories to demonstrate the value.
    One of my most powerfull successes was when after a short presentation of myself, to a group of seniors, one of them stood up (unplanned) and summed up the benefits his team was having, and insisted the others to use the systems as much as possible.

  4. Arjun Thomas says:

    Marnix,

    I agree with you, story telling is a huge part of knowledge management. Using it as a platform to demonstrate the value of the system is a way to broach the subject of ROI. Appreciate the comment, do check out my other posts if they interest you…

    Cheers,
    Arjun.

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