Business Week e.biz -- Management
Spread the Knowhow
The Web has changed knowledge management from a New Age fad to an e-business edge
Leif Christensen was in knots about his dingy newsprint--until he turned to his company's chemical supplier, Buckman Labs, for help solving the mystery of why it wasn't getting a whiter shade of white. Christensen, president of Manistique Papers Inc. in Michigan's Upper Peninsula, realized shortly after the company opened its recycling mill that the peroxide it was using to remove ink from old magazines wasn't doing the job. Christensen told Buckman sales reps, and they immediately posted a message describing the problem on Buckman's Internet discussion group. Within hours, other Buckman reps in Finland and Belgium helped find the culprit--rare bacteria that breaks down peroxide--and notified Christensen immediately with an antidote. Total time elapsed? Roughly 48 hours. In the past, this kind of problem-solving might have taken weeks--if it happened at all.
Not anymore. Harnessing the brainpower of an entire global specialty chemicals company to untangle one customer's problem, fast, is proof positive of the power of sharing ideas. For more than a decade, Buckman's far-flung technical experts and sales staff have been conducting dozens of these virtual conversations each day over the company's in-house information network--which was upgraded in 1994 to run on the Net. The system shows how information technology can shift the competitive edge in business to intellectual rather than physical assets. Now, Buckman doesn't just sell chemicals, it sells human chemistry. "I don't think Buckman's competitors can pool the whole brainpower of the organization like Buckman can," says Christensen.Comeback Concept. In fact, Memphis-based Buckman was one of the first companies to adopt a so-called knowledge-management system, which, after a decade in the corporate doghouse, is finally gaining respect. For years, many CEOs and management experts saw it as little more than a touchy-feely New Age management fad, able to do little for a company's bottom line. Now, thanks to the imperative to turn their companies into e-businesses, many CEOs are taking a second look. The attraction: By using the Net, companies can quickly and easily share, store, and retrieve the collective expertise of their people--which was previously hoarded by executives or locked away in employees' heads and file cabinets. "It's finally sinking in that it's not just about selling widgets anymore, but also the rich, experience-won information about the widgets, that will give a company its only real long-term prayer against rivals in the Information Economy," says Rashi Glaser, a professor at the University of California at Berkeley's Haas School of Business.
Companies large and small are jumping on the bandwagon. Industry leaders such as Chevron (CHV), Xerox (XRX), Johnson & Johnson (JNJ), Royal Dutch/Shell (RD), Ford (F), and Whirlpool (WHR) also have major knowledge-sharing initiatives underway. In a recent Conference Board survey of 200 execs at 158 large multinationals, 80% said they had knowledge-management projects in the works, and many already have anointed chief knowledge officers or enlisted KM consultants. All told, says market researcher International Data Corp., consultants pulled in $1.8 billion in KM services last year. By 2003, the number should top $8 billion.
At Buckman, the payoff already is here. Revenues, which hit $400 million last year, have been growing about 5% annually in recent years, a slightly faster rate than its rivals can claim. Robert Buckman points to a 52% increase last year in the share of sales from products less than five years on the market, which he considers a measure of innovation. And he cites as proof statistics on employee productivity: Since 1992, sales per salesperson have gone up by 51%, and sales per employee have increased by 34%. Operating profit per employee jumped 93% in the same period. All this has helped it to compete successfully with much larger and better-funded companies. "I don't think we'd be a player today if we hadn't done those things," says Robert H. Buckman, former Buckman CEO and currently the chairman of the executive committee of Bulab Holdings Inc., Buckman's parent company.
Despite its success, Buckman's experience offers important lessons in how tough it is to build a successful knowledge-sharing network. It takes time and often painful changes in corporate culture. On top of that, Buckman has found, the payoff may not always show up on the bottom line. Says Robert Buckman: "This is messy stuff. Think it's a technology problem? It's not. It's a cultural problem."
Others agree that convincing people to do things differently is the biggest hurdle. According to the Gartner Group, a full 50% to 70% of the work it takes to make a knowledge-management initiative a success will revolve around coaxing cultural changes. "Getting people to really share what they know is required now if you're going to start letting the Net modernize the organization," says Lawrence Prusak, IBM's top knowledge guru.Forum for Ideas. At the heart of Buckman's knowledge-sharing system is an online discussion forum called K'Netix. It has 54 discussion groups that focus on Buckman's main products--chemicals for papermaking, leather-tanning, and water treatment. A salesperson might survey colleagues around the world for the inside skinny on a particular client, say, or get ideas on how to solve a customer problem. Typically, employees post 50 to 100 messages a day. That has helped the company amass an easily searchable database of in-house expertise and past lessons learned that now contains more than 15,000 documents--all accessible by employees or customers via a Web browser. Before the online system was in place, "you would always be reinventing the wheel," says Cheryl Lamb, manager of Buckman's Knowledge Center.
Buckman began experimenting with what he dubbed "knowledge sharing" in the mid-1980s, when he took charge of the company his father, Stanley, founded in 1945 and led until his death in 1978. Buckman's old way of distributing technical information--hiring PhDs and putting them on airplanes, Robert Buckman says--was getting too expensive as the company expanded globally. So Buckman began stationing people overseas. Today, 86% of its 1,300 employees work outside the home office.
With its staff scattered so far and wide, the company needed a way to keep people in touch. But getting the right information to the right people--fast--is easier said than done. For starters, in 1985, Robert Buckman told senior managers in Memphis to swap examples of innovative ideas through the company's e-mail system. But soon, the system became a network for chit-chat and gossip, and little else. "I realized the managers weren't going to share," he says. "They had information, but feared giving it up," because they felt they wouldn't get credit for their ideas.Real Gold. So the CEO decided to adopt a more revolutionary strategy: empower the field staff to communicate with each other, rather than routing all information through managers in Memphis. He wanted his employees to share not just written reports but also the knowledge inside their heads gleaned from years of working in paper mills, tanneries, and treatment plants. "That's the real gold inside companies," he says. To pull that off, he set up a new computer system that linked the senior managers in Memphis plus Buckman's 1,300 employees around the world.
Once again, Buckman's efforts met resistance. Many managers resented having to yield their control over the flow of information--and refused to participate. "They didn't want to open their cabinets to people," says Dean Didato, vice-president for leather chemicals. So the CEO decided to get tough. First, he ordered Marketing Manager Alison Tucker to start compiling weekly statistics detailing each employee's use of the knowledge-sharing network. "You wouldn't believe the activities in those databases on Thursday night"--the night before she ran the report, Tucker recalls. "They knew if their name was not on there, they'd get an e-mail from Bob." Finally, Robert Buckman set up a system to promote those who shared information--and to punish those who did not. The clincher: In 1994, he took the system's 150 most frequent users to a Scottsdale, Ariz., resort for a week. Only then, he recalls, did the holdouts start getting the message.
Other companies that launch knowledge projects face similar hurdles. Part of the problem is that the results are often difficult to quantify. To Mark Tucker, an analyst at Boston-based Delphi Group, knowledge management has been, for some companies, just another overhyped consulting service being peddled by sales-hungry consultants and software makers. Tucker praises companies such as Buckman Labs: Delphi gave Buckman an award for its efforts in 1998. But Tucker believes some companies aren't willing to do what it takes culturally to make their projects really pay off. "For some companies, KM is still just a New Economy buzzword," he says.
Even though he helped popularize knowledge management, Robert Buckman doesn't mind hearing it get slapped around a little. He thinks it has been oversold by some consulting firms. "We spent 15 years putting this thing together and getting to where we are, and we're still not done yet. This isn't a project. It's a journey," he says. Word to those just embarking: Get ready for a long haul.e.biz online
For a Q & A with knowledge-sharing guru Robert Buckman, visit ebiz.businessweek.com.By Marcia Stepanek; Contributing: Jeanette BrownReturn to top