Knowledge Management and Knowledge Value Assessment

I received a comment from Adam Peters in response to a recent note (see: Knowledge as a Key Driver of the Economy). In this latter note, I ruminated about knowledge as both an important input and output in our economy. I decided to elevate his comment to a note and I copy it below in a slightly edited form:

Two concepts that have been covered during my IT Management Master's education are Knowledge Management and Knowledge Value Assessment (also referred to as the KV Added method). Knowledge Management is a growing field of study concerned with how knowledge, as opposed to data or information, is transferred between individuals, groups and organizations. Wikipedia has a good page on the subject. If you search further on the subject, you may want to focus on scholarly articles as there are a lot of consultants advertising their services whose views may be slanted to fit their profit margin.

I doubt that the Lab Info Tech Summit has a great volume of new information to offer. However, as you mention, these meetings allow for a focused, efficient means for the information and knowledge to be transferred from those creating the knowledge to those that are most in need of it. Journals and the internet are great at transferring and holding information, but interactions and experiences do a much better job at transferring knowledge.

The latter concept, KVA, is an alternative financial management scheme that measures inputs and outputs based on knowledge. An investment or a process can be measured by Return on Knowledge rather than ROI. To illustrate, a automated hematology analyzer requires less knowledge to operate than manual methods (decreased input), but delivers [the] same results, or knowledge, as a manual method (same output or greater if the process is faster). This is a positive ROK. There are obviously many more factors in the equation but they are all accounted for. For more info see work done by Thomas Housel and Arthur Bell.

Here is the Wikipedia link to knowledge management, where it is defined in the following way:

Knowledge Management (KM) refers to a range of practices used by organisations to identify, create, represent, and distribute knowledge for reuse, awareness and learning across the organisation.

What interested me the most about Adam's comment was his mention of Return on Knowledge (ROK) and how it is calculated. For those of you who want to delve into this somewhat arcane subject, I discovered an article on the web (see: Measuring the Return on Information Technology: A Knowledge-Based Approach for Revenue Allocation at the Process and Firm Level) that provides more details. Below is an abstract of the article:

This paper proposes an approach for measuring the return on Information Technology (IT) investments. A review of existing methods suggests the difficulty in adequately measuring the returns of IT at various levels of analysis....To address this issue, this study aims to develop a method for allocating the revenue and cost of IT initiatives at any level of analysis using a common unit of measurement.

Following the knowledge-based view (KBV), this paper proposes an analytic method for measuring the historical revenue and cost of IT investments by estimating the amount of knowledge necessary to generate a common unit of output from any business process....The proposed KBV approach is extended specifically for IT resources, allowing us to assess the Return on IT (ROIT) using a typical productivity ratio...that accurately captures the true business value of IT... at virtually any level of analysis.

Comments

[The PACS Designer]

ROIT as a value purchase is frequently overlook by most institutions or at least not well understood enough for them to obtain a true value for the IT purchase. Having worked directly with customers as an IT software developer has given me the opportunity to relate to customers that their entire work process will change upon installation of the new software. Also because software is a method of gaining new efficiencies that can effect many departments it is important to evolve all departments that may be affected. Using a global view the the new IT working environment will uncover numerous ways in which value is being brought to the daily work routines and can be monetized using the right measurement tools.