Conversations, Networks, Measurement

This is a question i have been thinking about for some time. The question of ROI ... and, how this impacts the way we look at KM. The question is simply this ... how does one measure the impact of KM initiatives on the financial health of the organization. This question can be answered depending on how you understand the question. Simply put, anything that has a financial impact, has an impact either on the revenues, or on the cost, whether directly or indirectly. Suresh Nair posted a commend over at the post where he refers to the whole discussion from the perspective of need. Do we need something? If yes, and it would have an impact on the performance of the organization, go for it. But then, another aspect to look for is, whether it is worth it, if you go for it. And that is probably the trickier question to answer. How does the CFO decide that its worth it investing in a Social Networking tool, for example.

This question can be looked at in two parts. One, content, and other, collaboration. Lets look at content first. This is a little simpler to address. To begin with, if you have a document, you could always look at the document, and look at how much effort this document would save. So, for example, if a document reduces rework, or reduces cyclc-time by, say, 10%, thats 10% reduction in cost for that particular process. Its a different matter that this kind of determination is by itself not something which is completely accurate, but if you get the opinion of enough people, you could come up with a number which is reasonably accurate, at least in theory.

This brings us to the second point about conversations. And this is where it gets tricky. How do you measure the impact of conversations? Here, lets look at it in two parts. One, when taking a decision to invest in a tool to enable conversation, how does the organization even know how, and in what form conversations are actually going to happen? There is probably no way to determine this, given one of the key factors is the adoption rate, and even once you move past that, the nature of the conversation, according to the basic paradigm, is something you cannot regulate. The other aspect, if you already have such a platform, is how to actually determine what value conversations are adding. This is where it seems the paradigm of ROI faces some resistance.

There was a recent post by John Husband about assessing productivity, where he describes some of the aspects of networks, and hence, conversations, which make measuring them tricky. To quote:

• They multiply rapidly because the value of a network increases exponentially with each additional connection.

• They become faster and faster because the denser the interconnections, the faster the cycle time.
• They subvert (unnecessary) hierarchy because previously scarce resources such as information are available to all.
• Network interactions yield volatile results because echo effects amplify signals.
• Networks connect with other networks to form complex adaptive systems whose outcomes are inherently unpredictable.

The interesting to see from these is that networks can open up ways of working which are new, which we havent yet seen in organizations. For example, the idea of bypassing hierarchies. This is something which is enabled by the network. Does this lead to quicker decision making? Probably, it does. What is the financial impact of quicker decision making? We dont know. Can this be measured in the context of specific decisions? I think so. An organization i was interacting with a few years ago, had a servicing scenario, where the service engineer, if facing a problem which he could not solve, would travel back to the office, consult his manager, who would tell him the solution to the problem, and then he would go back to the customer site, check if the spares required for solving the problem are there or not, and if not there, would come back to the office, order the spares, and when they are available, repair the product. With handheld devices, the engineer could interact directly with their counterparts across the country, and quickly get a solution, either through a Knowledgde Base, or through interactions with service engineers, and reduce the time taken to repair. At the same time, if the spares werent available, the engineer could broadcast a request for spares to other engineers who could provide them if they had stock which they didnt require. There is value in these conversations.

But, these are specific examples, and on the whole, it is not so simple to determine this kind of value from conversations, or from networks. But can at least define scenarios in which conversations can create value, in a specific context? As i have written before, measurements or possible improvements make sense more in a specific context, rather than being broad-based. And, if you can take this to the context of the business process, you can at least begin to understand the applicability. And, within this context, it is rather easy to identify how conversations could create value. Not that this exercise is feasible, especially if you try to do this across the organization, but it at least illustrates the value of conversations in the context of the organization.

Another thing that John mentions:

Continuous flows of information are the raw material of an organization’s value creation and overall performance.

This is the idea on which the concept of ERP was based, too. Of making the relevant information available to the relevant people, so they could take effective decisions, and processes could be streamlined. Only thing, ERPs focus on transaction processing, where data is made available across organization silos or departments, while we are talking about ideas and experiences being made available in a similar manner. It is a little easier to quantify the impact of data sharing (production planning cycle time reduced by 20%).

To take an example, i am having a conversation with Nirmala about something which we realized we were both thinking about. The whole interaction was sparked by a comment on twitter (and also on facebook), and brought out a conversation which could lead to ideas coming out of it. These ideas could have some form of value. Even so, it would be impossible to quantify this to begin with. And even then, if it is a new idea, then its easier to quantify the value, while if its just sharing of ideas, making people more effective in their work, then it is tricky to measure this, too. Add to this, that if nothing comes out of this idea, i would have at least learnt something, which again is very difficult to quantify.

Any thoughts, please feel free to comment.