ROI for Knowledge Management, Continued…..

March 27, 2007

This article has been moved here…..

Since i launched this blog a little over a month ago i have recieved a considerable number of responses. While a few of my readers do take the time to leave a comment against a post. There are a large number that send their comments via mail.

I have chosen to put a few of these in my blog as i would hate for my other readers to miss out on this information ( the post was way too large to have it sitting idle in my comments section ) .

Joseph M. Firestone who is the CEO of KMCI sent me one such mail which contains some information regarding the topic of ROI for knowledge management.

The ROI issue in KM is one that surfaces fairly frequently. I think the issue is part of the larger problem of developing good metrics for knowledge processing and KM activities and direct outcomes, But it’s also closely related to the problem of modeling KM impact on other activities and outcomes in the enterprise that it effects indirectly.

If I recall correctly, there was a recent discussion of KM and ROI in the actkm list serv group which you may have seen earlier. It was a pretty good interchange and covered many of the main issues surrounding the subject. I’ve written a few things either on KM and ROI or closely related to it. One piece is here:

http://kmci. org/media/ KMBenefitEstimat ionrev1.PDF

A second is downloadable from the Cutter Consortium site. Go here first:

http://www.adaptive metricscenter. com/media/ BSCdevelopmentsa ndchallenges. pdf

Then here:

http://www.cutter. com/offers/ adaptivescore. html

and download the adaptive scorecard report using their promotion code.

In addition, I’ve also developed a Software Template using Expert Choice providing a very detailed hierarchical ontology identifying descriptors and metrics relating to knowledge and KM processes and knowledge outcomes. The measurement models themselves can be developed using this ontology, along with the measurement methodology (The Analytic Hierarchy Process) associated with Expert Choice. The template is called the Open Enterprise Template because it provides a framework for measuring progress towards the Open Enterprise (See http://www.dkms. com/papers/ openenterpriseex cerptnumb1final. pdf) for more on the Open Enterprise.

Finally, I’ll point out that the issue of ROI is also not a straightforward one because of the issue of monetary ROI versus ROI in terms of values. We know that the relationship between money and value is a non-linear one so that, in general, a person’s first $1,000 units of currency are worth far more than the same person’s last $1,000 units when that person has become a billionaire (at least relative to the person). The fact that the relationship is non-linear raises the issue of value interpretation of improvements in monetary assests resulting from business activities including KM. The paper I’ve mentioned above discusses the value interpretation question and the Open Enterprise Template combined with the AHP methodology provides a way of handling it. The paper also contends that measurement techniques are needed that will allow comparison of monetary and non-monetary values on the same measurement scale.The adaptive scorecard paper puts the possibility of value interpretation
into both KM and Balanced Scorecard contexts

Please feel to comment on any of the other posts as well to enable further discussions on the subject.