document management | data warehousing | knowledge management| financial technology| e-government

FINANCIAL
TECHNOLOGY
WEEKLY
DATA
WAREHOUSE
REVIEW
DOCUMENT MANAGEMENT UPDATE REPORTS & RESEARCH TO BUY   DIRECTORY OF SUPPLIERS

 

UNLOCKING THE VALUE OF KNOWLEDGE

Knowledge management as a concept has received much attention of late, but that does not alter the fact that many businesses are not realising the benefits of exploiting the knowledge available to them. However, in the current turbulent business climate, few companies can afford to let this valuable resources remain untapped. In the financial sector, for example, as David Parlby from KPMG Consulting explains, knowledge management can be a source of considerable competitive advantage, particularly in the face of fierce competition from new market entrants.

The financial sector is currently undergoing a period of significant change. New market entrants, new distribution channels and consolidation are challenging the way traditional financial institutions do business. However, despite the fact that these traditional organisations have many years of collective expertise, it is currently the new entrants that are more likely to leverage the value of the knowledge within their company. In this sense, many organisations are missing a trick. Within their structure – whether in the skills and experience of the employees or locked in the databases and operating systems of the company itself – lies a wealth of information that can be used to enormous competitive advantage.


In the face of increasing competition, financial corporations are beginning to focus their efforts on the long-term competitive advantages available through knowledge management applications. Technologies such as intranets and data warehouses are enabling companies to automate various information gathering and retrieval processes. For example, official regulations and telephone directories can be created electronically, which can reduce the consumption of stationery materials and printing costs. As a result, employees will have more time to spend on 'value-adding' activities - such as pitching for new clients or concentrating on customer queries - and less time on gathering information - such as searching for an internal telephone number. The organisation can then benefit from a more motivated and enthusiastic workforce that works more efficiently and with higher productivity.


However, while it is certainly the case that knowledge management can be used to cut costs by improving operational performance, there are other, more far-reaching benefits to be attained from the implementation of a knowledge management programme. For example, financial sector organisations are currently under threat from a whole host of new entrants that are penetrating the sector. Despite the short time they have been established these new entrants have built up a large reservoir of information on their customers, which is being used to support and inform all areas of the business. One of the advantages traditional players in this market have is the sheer wealth and volume of experience and information they possess, yet they are currently failing to maximise the potential of this asset. In order to regain some of the ground lost to new rivals, established financial institutions must look to apply all their knowledge to all manner of business processes – from designing new products and services to implementing sales and marketing strategies.


In fact, knowledge management is likely to become vital in helping financial institutions attract and retain their customers. For example, banks are able to use transaction analysis to carry out tasks as diverse as tackling fraud and designing new products. Without knowledge management techniques, changing patterns in the use of a credit card are simply recorded as transactions. Only when this information is matched with individual records of customers and the experience of fraud experts can patterns be identified that enable the bank to spot potential theft or fraudulent use.


In addition, the wealth of information customers provide about themselves, their interests and their needs from their purchasing choices is far richer and more reliable than any information that would be given in a market-research survey. When united with other information from different sources, such as macro-economic data, banks can use these purchasing patterns to inform processes such as product development, sales and marketing. For example, a bank may decide to offer a new loan specifically for home improvements if it saw that there was an increasing interest in DIY, combined with an economic downturn that might encourage people not to move house, but to carry out home improvements. Knowledge management can also enable the bank to ensure no competitors were offering a similar product (and indeed, to better a rival's offering), as well as to target precisely those customers most likely to take out a new loan and to repay it reliably. Traditional financial institutions have the breadth of knowledge to enable them to beat newer entrants at their own game, if this information is applied in an innovative manner.


The same is true in the insurance industry. The information companies possess about their customer base can enable them to target the most profitable groups. In particular, concentrating on key areas of differential knowledge, such as preferred leisure activities, can also help open up lucrative niche markets, which may not be defined by the traditional demographic measures such as size of family or age. For example, detailed knowledge about its customer base might enable a company to target drivers of sports cars, or even windsurfers! In addition, by identifying the areas in which its personnel are particularly knowledgeable a company may be able to tap into a profitable, niche vein that competitors without the same knowledge would not be able to enter as convincingly. Superior, or different knowledge can be a powerful basis of competition, allowing companies to move away from underwriting any business - and a tendency to attempt to be 'all things to all men' - to only quoting in those areas in which they have superior expertise and can realistically hope to achieve and maintain considerable market share. There are real examples today of leading insurers who have undertaken such knowledge-led business process re-engineering to considerable advantage to both their corporate value and customer base.


Many financial organisations work in a project or deal-focused environment, whereby a certain piece of work may require the collaboration of individuals from a number of different departments and countries, and possessing a wide variety of very specific experience and expertise. Knowledge management tools can facilitate the rapid mobilisation of the best team for the job, which incorporates all those employees whose expertise will add value, regardless of location. For example, directories outlining the experience of each member of staff, including skills, employment history, and past projects undertaken, which are searchable by subject, can be invaluable in making up a project team. In addition, databases can be set up that outline past projects, including the personnel involved, the strategy, any problems encountered and their solution, and the overall outcome of the project.


By establishing these databases, a store of knowledge can be formed that is accessible for all employees to use. However, when dealing with knowledge on a commonly shared network, it is important to create a 'knowledge map' which enables employees to understand where different types of information are stored, and includes a comprehensive list of who within the organisation holds what skills and expertise. As a result, an item of information can be located as easily as pinpointing a feature on an Ordnance Survey map.
Take, for example, a financial services company that is based in America, and has strategic partnerships with companies based in the UK and France, and now wants to break into the German market. By having a database of employee skills, contacts and common documents within these partnerships, the company can use these knowledge management tools to facilitate the rapid mobilisation of the most effective team to realise this goal. Using knowledge management techniques to gather information on the experience of each member of staff, their skills - such as the ability to speak German and any previous experience they have of working in Germany - and employment history, the perfect team can be formed in order to break into this market.


In addition, knowledge management can help companies overcome at least some of the problems posed by globalisation and consolidation. Technology such as intranets improves general communication between departments and functions across different regions and time zones. In this way, personnel in a large multinational organisation can gain an understanding of the activities of their colleagues across the globe, especially those in corresponding departments and disciplines, and can draw on this diverse experience. In the event of a merger or acquisition, a concerted effort to capture and store in a coherent form all the knowledge from both parties, can have a significant effect on the overall success of the new venture, and can prevent vital information being lost in the re-structuring process. This is particularly important in the case of a financial institution such as a bank taking over an insurer, as in the case of Lloyds TSB and Scottish Widows. In this situation, each company has different, yet complimentary, clients and processes, making the integration of information very beneficial.


In addition, by making it business policy to systematically make an organisation's intellectual capital readily accessible, it may be that common problems can be assuaged. For example, if one office in one location has laid down best practice to solve what turns out to be a common operational problem, this best practice – when shared – could solve similar problems in offices throughout the world. Without knowledge management, it might never have come to light that this was a common problem, let alone that a solution had been found. For European financial institutions struggling with conversion to EMU, for example, the ability to share best practice in conversion routines of the best and, possibly, the only way to ensure that every EMU-related issue – from pricing to long-term relocation – is effectively addressed.


In an increasingly competitive marketplace, effective knowledge management is crucial in securing the most profitable clients and the lion’s share of the market, so the motivation to use good knowledge management techniques is strong. In addition, many companies already possess much of the necessary infrastructure. Here, the financial sector’s reputation for being an ‘early adopter’ of new techniques should pay dividends; almost every financial institution has the IT networks that enable knowledge to be shared, along with vast amounts of data. In order to maximise the value of these reserves and resources, financial companies must act quickly to put this knowledge to work. As we move through the digital age, the difference between highly successful and mediocre financial organisations is increasingly likely to be decided by how effectively they carry out this vital task.


David Parlby is a Partner at KPMG Consulting, and can be contacted on 020 7311 8649

In this month's edition of Document Management Update:

Lotus unveils Raven Discovery Server. more>>
Deutsche Bank chooses IBM WebSphere Translation Server. more>>
Zurich deploys Autonomy in worldwide risk engineering extranet. more>>
Feature: The need for content management. more>>
eRooms launches eRooms 5.0 - Richard Croasdale finds out how the company plans to differentiate collaboration tool from Microsoft rival. more>>
Documentum launches 4i Portal content edition. more>>

Other knowledge management features:

Content management — helping create order out chaos. Knowledge management maybe an oxymoron — albeit a useful one — but there are certainly parts of our intellectual capital that we can manage much more effectively. more>>

UNLOCKING THE VALUE OF KNOWLEDGE. Knowledge management as a concept has received much attention of late, but that does not alter the fact that many businesses are not realising the benefits of exploiting the knowledge available to them. However, in the current turbulent business climate, few companies can afford to let this valuable resources remain untapped. more>>

Information overreach - With 2.8 million public websites and approximately 800 million web pages (and counting), the challenge of finding the right business information quickly and easily is difficult, at best. more>>
Putting Knowledge to Work. Knowledge management has spawned a lot of theoretical discussion, but how do you put it to work to achieve – and quantify – real benefits for businesses? Peter Turnbull, SER’s UK head of marketing, goes back to Shakespeare to bring to life working solutions for companies today. more>>
Knowledge is power, as the saying goes. Ernst & Young understands this better than most - the firm has one of the largest knowledge infrastructures in the world and is the only professional services firm to have been recognized as one of the world's top five "Most Admired Knowledge Enterprises" in each of the last two years. more>>
In favour of GM insurers. more>>
feature. more>>

 

 

 

 

contact | terms & conditions | privacy policy

© Copyright 2001 Newsletter Interactive Ltd