23 September 2015

Why KM is needed for today's division of cognitive labour

"The world is changing."

We hear it all the time. Articles pointing out the move from the manufacturing economy to the service economy. Reports showing the gradual effects of offshoring. Papers researching the benefits and pains the knowledge economy has heralded in over the last thirty years.

But some of these underlying changes are not linear at all. They work in an altogether new direction and skew the way we measure the effectiveness of our workers.  One example is the division of cognitive labour.

In his fantastic book "King Arthur's Round Table: How Collaborative Conversations Create Smart Organisations", David Perkins talks about the difference between mowing a castle lawn and designing a new lawnmower.  With a small amount of loss for each person added, you can fairly easily divide the lawn up and mow it quickly with more people.  However to divide up the task of designing a new lawnmower is a much trickier issue and the more difficult the task is, the lower the efficiency of each worker.  This creates a declining return on investment as shown below.

When you think about this, it makes sense to go for the low hanging fruit first. Many companies have done this successfully; Think of the budget airline business, or low frills online shopping.

In this model, customers are placed horizontally. There are simple customers and difficult customers that take more mental effort to service.  The choice to apply the Pareto principle is logical. Service the 80% of customers with a high ROI and ignore the 20% of customers that require your team to have more knowledge, information or decision making ability to satisfy.


It is an attractive idea. Simple, focused and something that would win you votes at a boardroom table.
But seductive might be a better term, because as most people who have worked in customer service operations would know, it is based on a faulty premise...that the customers are stacked horizontally.

In the real world, customers are actually stacked vertically (see below). That is, most customers have a large number of needs that are easily met, and many (sometimes the majority) also have special or unique requirements.  These dont happen all the time, but they expect you to meet these needs too.  When looked at it this way, you are not rejecting 20% of pesky customers, you are letting down 80% of your customers some of the time.

Those companies that persist in this way discover that customers start complaining and silently disappearing. Churn rates increase and finally, sales people start discounting to retain business; tacitly recognising that the company cannot actually meet all their customers needs. Thus starts a slippery slope of lost advantage and declining reputation.  Of course this won't immediately show on the books as the increased turnover at the lower price will balance out the lower profit margins, but that can only continue for so long.

So what can be done?  Well, that is where Knowledge Management comes in.  By focusing on the needs of your key accounts, good KM programs discover the types and frequencies that these difficulties arise. Next, they provide ways to enable your staff to deal with them in an ad-hoc manner while still retaining control and integration with the rest of the company.

In his recent article, Scott Hayes talks about the lure of the question "what is happening right now", when in fact we should be asking questions about trends and real impact before we start formulating change in our organisations.  KM tools like After-action reviews, Knowledge Assessments and Lessons Learned programs seek out these trends and keep the important being over-ridden by the urgent.

Understanding the real impact of complex and medium/long term problems in our business is part of what leadership is about. Good knowledge management isn't just part of the solution to better division of mental labour, it is also a key tool to understanding where the real problems lay in the first place. In fact, I would argue it is a critical tool if you want to keep the harder 60% of your customer base long term.

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