The Case Against Knowledge ManagementCompanies waste billions on knowledge management because they fail to figure out what knowledge they need, or how to manage it. In his latest book, Thomas A. Stewart explains how to answer both questions.By Thomas A. Stewart, February 2002 IssueOur primary purpose in this book is to teach you how to cook, so that you will understand fundamental techniques and gradually be able to divorce yourself from a dependence on recipes. -- Simone Beck, Louisette Bertholle, and Julia Child At a company where I worked many years ago, circulating correspondence was an everyday practice. It was also one of the simplest and best knowledge management techniques I've ever seen. Whenever you wrote a letter -- and we wrote a lot of letters -- you made two copies: one to file, one to circulate. Every week (or every so often) you took the circulating set, culled any that included confidentialdope or made you look more stupid than usual, stuck on a buck slip, and put them into your outbox. By the time the folder returned, it was generally time to refill it and send it out again. Everybody participated, including the chairman and the president. Has knowledgemanagement beenoversold? What's it goodfor? Discuss. "A whale ship was my Yale College and my Harvard," said Herman Melville's Ishmael; when it came to learning my job, circulating correspondence was mine. Reading my superiors' letters opened a window into how they conducted business with the world outside; I aped things more experienced colleagues did, and saw how they handled tricky situations; I copied useful addresses into my Rolodex (another antique). I learned who knew what, and that made me better at asking for advice. Circulating correspondence was obligatory, easy, and genuinely useful.As such, it stands in stark contrast to much of what today passes for knowledge management -- an activity that has assumed immense importance in the corporate world. Knowledge management undergirdsa growing edifice of ideas, techniques, and technologies. International Data Corp., a research group that focuses on technology, estimates that poorly managed knowledge costs the Fortune 500 about $12 billion a year. Reasons for the lost money, by IDC's reckoning: "substandard performance, intellectual rework, and a lack of available knowledge management resources." You don't need numbers like IDC'sto know that the need is there: Just consider how much time you wastesearching for information that ought to be at your fingertips. The response to the need for knowledge management has been astounding. In Intellectual Capital in 1997, I wrote, "If the subject of intellectual capital ever spawns a business fad, it will be under the guise of 'knowledge management,' because there's money to be made selling software, systems, and consulting services with the touted goal of allowing every person in an organization to be able to lay his hands on the collected know-how, experience, and wisdom of all his colleagues." I was more right than I dreamed. Knowledge managementhas become "KM," and there are national and international KM conferences, local KM forums, the Journal of Knowledge Management, and Knowledge Management magazine. By IDC's estimate, knowledge management software and services will be a $6 billion industry in 2002. As time marches on, and Moore's Law with it, this technology gets swifter, stronger, and subtler. Why, then, is there a nagging sense that all of it misses the point? Or that much of the time it yields no more insight than a file of circulated letters? A couple of stories will get us toward the answers. Software vs. Wetware Jack Whalen, a sociologist, works at Xerox's Palo Alto Research Center. A few years ago, he was assigned to the Institute for Research on Learning, a nonprofit group Xerox supported. He spent a couple of years there studying how people, computers, and expert-system software interacted in a customer service call center in Lewisville, Texas, north of Dallas. The software (in this case, Inference Corp.'s CasePoint) was supposed to help employees tell customers how to fix problems with copiers -- paper jams, faded copies, and the like. When the call-center operator typed words spoken by a customer -- "jam," for example -- the softwaresearched its memory bank of diagnoses and solutions. Trouble was, employees weren't using the new software. Management decided that employees needed an incentive to change. The company held a monthlong contest in which employees earned points (which translated into cash) each time they solved a customer problem, by whatever means. The winner was an eight-year veteran named Carlos, with more than 900 points. Carlos wasn't a big favorite among managers -- "He's a cowboy," one of them said -- but his victory was nosurprise. He almost never used the software.Has knowledgemanagement beenoversold? What's it goodfor? Discuss. The runner-up was a shock. Trish had been with the company just four months and had no previous experience with copying equipment. Her 600 points more than doubled the score of the third-place finisher. She didn't even have the new software, only an older, less sophisticated system. But she had a secret weapon: She sat across from Carlos. She overheard him when he talked. She apprenticed herself to him and persuaded him to show her the innards of copiers during lunch breaks. She built up a personal collection of manuals and handwritten notes about how to fix problems. The case of Carlos and Trish says a lot about knowledge management. The point isn't to criticize the software; CasePoint has many fans and documented triumphs. Sure, Trish learned better from Carlos than anyone did from CasePoint. But how many people can sit next to Carlos? Managing knowledge is not a matter of choosing software vs. wetware,classroom vs. hands-on, formal vs. informal, technical vs. social. Effective knowledge management uses them all -- and motivated employees will find unexpected new ways to put knowledge to work. Success depends on recognizing that all of these need each other. To see how the interdependencies work, consider the case of PricewaterhouseCoopers. If I hear one more consultant say, "Knowledge is the only thing we have to sell," I will take up narcolepsy in self-defense. But it's true: A big firm like PricewaterhouseCoopers (with 160,000 partners and employees in 150 countries) has no reason to exist if it can't bring its collective brainpower to bear on clients'