In 2004, I embarked on building an internet-based platform with a vision for creating a ‘knowledge driven, geography independent’ network of consultants, and have enjoyed great benefits of increased business efficiency and service levels with each new iteration.
Knowledge management (KM) is predicated on a brilliant piece of work undertaken in 1970 by a Harvard post graduate, Robert Metcalf. This became eponymously known as Metcalf’s law; the value of a telecommunications network is proportional to the square of the number of users of the system. You only need to sit alone and try to think of a good idea to realise how much easier it is to do in a brainstorm with other minds. Knowledge management is the technology equivalent of the oral history kept by Geronimo’s tribes or intel shared between operatives of terrorist networks. It is how we share our common purpose and the information with which we achieve it. KM has become a billion dollar industry because of the macro trends including the ubiquity of the net, reductions in the cost of processing, and the growing strength of search technologies to tackle the volume of content.
I was struggling for direction in building our KM platform when renown Indian author Madan Mohan Rao passed me his tome on the subject which illustrated the concept of 3C’s: Content, Computation and Collaboration. Three intersecting circles with step sequence numbers gave me the visual clue for attempting to transform EASTWEST PR from a group of people sharing information by voice and requiring proximity in expensive offices, to an enabled team of knowledge workers who may have short engagements with our company, but who need to have insight into the history of our relationships with our stakeholders, and whose knowledge we need to retain for the next generation of consultants. Identifying the user requirements, core content and business processes became a priority, along with calculating the value of embarking on this initiative.
I categorised our Key Performance Indicators and identified 13 of the benefits of the system that we would build based on: Efficiency, Quality, and Revenue. I took a leaf from Jim Collins’ theory on the economic denominator, and identified ‘time’ as the key metric to be able to buy more cheaply and sell more expensively to eek extra margin from the mature Singapore PR market in which we compete. Improving the quality of our induction process, engagement with journalists and clients became the goal for building a great company. Enhancing existing margins that were falling to the low ‘teens back to 20 per cent, and selling new services to replace traditional media relations, became the rationale for the top line. I allocated percentages and actual figures to each of the 13 indicators that I wanted. In hindsight, fewer would have sufficed and would have been easier to track.
The key calculation was to look at the economic denominator of the PR business which is time. Agencies hire people and aim to achieve a 15-20 per cent net profit by the following equation:
Salary x 3.0 billings = gross revenue.
Gross revenue – direct costs = 40 per cent gross profit
Gross profit – (fixed indirect costs + variable costs) = 25% EBITDA
EBITDA – (depreciation + tax+Interest) = Net profits
In any professional services firm, in order to increase revenue or net margin requires increasing the number of hours or charge per hour, both of which reach the limits of human endurance and client credulity. My view is that one other way to enhance the margin of the business is to remove all repeatable low level tasks for which people take time but clients will not pay. So we started a process of watching what we did.
We had 10 people spending an hour per day at an average cost of $50 per hour building media contact lists from scratch in excel; a task that clients deem not added value consultancy and therefore non-chargeable.
10 hours x $50 =$500
Annual opportunity cost = $120,000
I figured that this was a task that could be centralised and given to one person using a simple concurrent web-based database and decided that this would be the first KM task to tackle. To reclaim this time and charge clients for it would justify my KM expense alone.
Offering to reduce people’s workload would seem a popular thing to do, but in fact KM represents many cultural challenges and it is the implementation of anything new that requires as much consideration as the application itself. “Information is Power” often translates to “what I know means you can’t fire me”, so why should people share what in a knowledge economy can be their meal ticket? At EASTWEST we believe, as Sir Francis Bacon wrote, ‘Ipsa Scientia Potestas Est’ (‘knowledge is power,’) and that knowledge comes from sharing information and participating in an ideation process that creates a greater result than the individual alone can achieve.
In the first week of launching our centralised media contacts application called Connect, I sat with people as they tried it. I reassured them that information sharing would enable them to move into higher value consulting work, and therefore positioned KM engagement as an essential component of their career success. I doubt my arguments were persuasive but the benefits of ‘one media list for all’ accessible from the office, home or a coffee shop, became so powerful that excel sheets disappeared within a week.
For anyone contemplating a KM initiative, my experience is to find a quick, easy win that will have universal appeal, engage in that application as the leader of the company to give it legitimacy, and let that idea settle in over time before implementing more. This gives the KM team time to consider some of the other key success factors:
KM Framework Audit
Connectivity Devices, bandwidth, interfaces, technology, tools
Content Knowledge assets, context and workflow, strategy for:
codification, archive, retrieval, usage, tracking
Community Core Communities of Practice aligned with business
Culture Of learning and sharing. How to encourage best practice
Capacity Strategies for building knowledge capacity in employees e.g.
mentoring, workshops
Cooperation Spirit of cooperation within, and external partners
Commerce Commercial incentives to participate
Capital What percentage of revenues and quantum will be invested in
KM, what are the measurements being used to gauge
efficiency and ROI.
Source: Knowledge management tools and techniques. Madan Rao. ISB 07506 7818-6 pg 34
This brings me onto the perennial question of technology; to buy or build. In my experience it is imperative to map the entire processes and identify all the content formats (docs, video, images etc) prior to making this decision. What I found was that for my business specific needs, such as putting a PR agency online, there was no application. For the generic business applications there are a plethora.
I decided that I would undertake a hybrid approach; I would build my business specific applications and integrate off-the-shelf applications. We built Connect, one feature set at a time, starting with media contacts, press releases, press coverage, then linking each of these three into JRM (journalist relationship management) application which mimics CRM features; then we added an events engine, then sales, then a blog for collaboration and a wiki for document storage and latterly groups on flickr, slideshare and youtube. We bought MS Exchange as it integrates nicely with Blackberries and use the Mapi spooler from Exchange to power the e-mail component of the JRM. We continue to host domestically with an 80 GB hard drive /1GB RAM IBM blade server and 1 MB ISDN line to the office. This has taken a lot of time to design, and we have two vendors; one for email and system administration and one for developing Connect.
My goal was to build the KM platform before expanding EASTWEST regionally, and this has, in my view, been a core component in our success in China. China-based consultants have access to the 10 years of history that I have assiduously stored on our servers and can search and review documents, create quotations, show pictures and video of events, and discuss client activities as if in the same office; well nearly. I get an alert whenever a prospect posts an enquiry on our site, and can view the entire sales pipeline and financials via Connect:Sales and the Wayki. Account directors can review the releases, approve them, and follow the media progress via the call sheets display. Clients receive auto alerts when articles about their company have been published by other (known as coverage) and we are moving to create a self-service functionality for them—this saves time for all parties and enhances service levels.
All this sounds very well you may be saying, but what did this all cost and has it been worth it? EASTWEST is a privately held firm and we have funded development ourselves from cash flow. Net margins have improved back to the 20 per cent level, though this is largely due to the tremendous efforts of the consultants who can engage with clients from a position of knowledge power. We are able now to subcontract consultants and give them access to Connect for temporary work; they access our knowledge and we their time for as long as it is beneficial for both to do so. New recruits, most of whom join via our intern programme, are able to work on fee paying work within a month. And, yes, we have started charging clients for the real time news service that is the Connect:Alerts media monitoring service. This exercise has taken me four years, but it could be quicker if there was a decided KM person or external consultants involved. I have little change from S$100,000 and have not billed for my time; but the first application of media contacts only cost S$5,000 and is still worth its weight in wheat.
‘We are smarter than me’ writes Joe Wikert—www.wearesmarter.org—about the power of social networks, and I would push that to say that with KM ‘we are more powerful than me.’ This is not false humility on the part of a British public relations person, but rather a recognition that social networks have always been, and always will be, more powerful than the individual. They can also be more fun, more productive and more profitable. From a leadership perspective, KM demands a thorough and honest review of your business and also your own attitude towards being in command and control. If we assume that the future belongs to the next generation anyway, in my view it is better that I create the platform for them to build that future, than be left behind while they build it themselves. Besides, I know that they are smarter than me so why get in their way.
Jim James is a director of EASTWEST Public Relations, an independent PR firm with offices in Singapore & Beijing.
