Knowledge Value Chain (KVC)

In my last post “Our radar has failed”, I offered the view that the current financial crisis is actually more than that - it’s a crisis in the ways we use information to make business decisions.  We’ve obviously come to another “Where do we go from here?” moment.

So, where DO we go from here?

I’ve identified four guiding principles that I believe frame a way to move ahead in the ways we use information to manage our economy and society going forward.  These principles are Vigilance, Integrity, Transparency, and Accountability.  (Each is first defined below using Merriam-Webster’s Collegiate Dictionary.)

Vigilance.  “The quality or state of being alertly watchful.”  Keeping our “eyes on the prize” has to be a top priority so we can avoid making the same mistakes time after time.  Note that this definition implies that it’s possible to be non-alertly watchful-that is, to look without seeing.

There are books and articles being written about what some feel is the shortening of our collective attention spans, and the collective “dumbing down” of our culture.  We must be aware of this trend and take active steps to counter, or at least adapt to, it.  We have more information potentially available to each of us than ever before in history - yet sometimes it all becomes a blur when actually determining what is happening.

I’ve spent my career advising and teaching businesses to monitor  trends in their environment for clues as to how they can become more successful.  But it’s equally true of families and even individuals - since each of us is, in one sense, a small business.  Continual awareness of, and responsiveness to, our environs is a key part of the adaptability of human life. The ability to see and react quickly to our environment is essentially what defines “intelligence”, at both the individual and organizational levels.

Integrity.  “Firm adherence to a code of especially moral or artistic values.”  This basically means that if you say you believe one thing to one person, you don’t say the opposite to another.  If you say you believe something yesterday, you don’t contradict yourself today.

The pressures against integrity are enormous.  There is a kind of “social expediency” that has crept into our social interactions, in which people superficially agree, while withholding their true sentiments for fear of sticking out.  Social scientists have labeled this “groupthink”.

In general, there is an avoidance of discussion and dialogue in our culture, especially where it would result in honest differences of opinion.  This has most recently been glorified as “the wisdom of the crowd.”  Anyone who disagrees with the mainstream opinion is seen as not only wrongheaded, but chronically pessimistic, and even disloyal to the group and its goals.

Integrity is the soil in which grows trust.  There are commercial cultures, the Chinese for example, who largely due business largely based on trust and informal “handshake” agreements.  Americans tend to prefer detailed written contracts.  Is this good business practice-or is it done to compensate for, or even mask, a fundamental lack of trust among the parties?   Trust is the lubricant that makes the whole economic engine run smoothly.   Without trust, contracts are worth little more than the paper on which they’re printed.

Transparency.  “The quality or state of being readily understood.”  When people are unable to see clearly what is happening, they cannot make rational decisions.  Keeping things in the open, available for all to see, is a fundamental principle of both our participative democracy and our capitalist economy.  To the extent things are un-transparent, as they too often are in the financial world, there need to be clear, comprehensible explanations.  To the extent they are deliberately made to be un-transparent, people should be punished.  This is why we have laws against fraud.

People who argue against regulation and in favor of free markets typically ignore this distinction.  Free markets work effectively only to the extent there is informed choice available equally to all players.  To the extent that information is not available, that it is distorted (mis- or dis-information), or that it is available to some parties and not others (asymmetrical information), free markets cannot truly be “free”.

Accountability.  “The quality of being held responsible.”  The linkage between performance and reward has long been a building block of our commercial culture.  This fundamental mechanism incentivizes people to do better, and helps us develop and improve.

And yet we seem to have dropped this fundamental element from our “social contract”.  There are many recent examples of CEOs who destroy billions of dollars of shareholder wealth, yet are handsomely rewarded with generous exit compensation packages.  The Wall Street implosion is only the most recent example of this.  This is a perversion of common sense, and sends the wrong message to investors and to younger working people.  It gradually erodes the causal relationship between performance and reward.

This lack of accountability has crept like a cancer throughout our culture, in many different ways.   Another example is pervasive grade inflation - if everyone’s performance is judged to be good, how is the outstanding performance defined and measured?

When we lose the meaning of accountability, we lose interest in rewarding excellent performance.  Then gradually we lose our ability to determine what good performance is, and to discriminate between the excellent and the mediocre.  Everybody gets a prize, so no one’s feeling are hurt.  This “we all feel good” mentality makes us all feel good - until one day we wake up and realize we are no longer able to compete effectively in world markets against cultures who still hold people accountable for their own actions.

Vigilance, Integrity, Transparency, Accountability - VITA.  Four simple principles that I believe we must uphold and vigorously defend in order to find our way back to a rational, stable economic system that works for all of us.

What do you think?

Once again, our radar has failed.

The current financial meltdown is much more than a serious financial crisis. It’s even more than a crisis of confidence. It’s no less than a fundamental abuse of information and its pivotal role in our economy.

When our economy started in pre-historic times, we bartered for goods and services. Then money was invented—first stones, then metal coins, then paper—and finally, ledger entries. No less an expert than Walter Wriston (then president of Citibank) said over twenty years ago that the fundamental financial resource is now information.

Modern information technology long ago dwarfed earlier record-keeping methods. A typical teenager now carries with her several times the amount of data contained in the Encyclopedia Britannica. And these technologies gave us assurance that, to paraphrase the Who, “We could see for miles and miles.” With modern technology and record keeping methods, the story went, we could undertake transactions of far greater scale, scope, and complexity than ever before. And the “systems” would warn us if anything was wrong.

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I recently conducted a KVC Workshop for intelligence producers at SCIPo8’s international convention in San Diego.  During the workshop I surveyed them about their biggest obstacles and problems in corporate intelligence.  We’ve been collecting and analyzing this kind of data now for several years—I call it the “Intelligence Points of Pain” database.

NEWS FLASH:  Intelligence problems and challenges are remarkably similar across different organizations, in different industries, in different countries.  Even as I compare Workshop results from different years, I find the results amazing consistent.

The Points of Pain clustered into major themes, to paraphrase:

• “I’m stuck at the bottom of the value chain.”  People feel pigeon-holed into doing tactical research when they should be doing strategy, not in touch with senior management, being stuck as a data retrieval service, etc.

• “My value is unclear.” Several people report having trouble getting feedback from internal clients on their work.

• “I’m invisible.” People report that colleagues don’t know what they do, how to use them, being “out of the loop”, etc.

• “I’m drinking from a firehose.” The sheer volume of data we’re required to pore over is getting to some of you. It’s gotten much greater since I started doing CI, and I’d predict it will continue to.

• “I’m overworked and under-resourced.” This gets to the value proposition as well, since as your value becomes clear, you will generally gain access to greater resources.

I feel your pain!  In my own work, I’ve heard myself say each of these things at various times.  Some of these problems I’ve solved, some I’ve found “work-arounds” for, and some still challenge me on a regular basis.

Do any of these sound familiar to you?  Please send us your comments below.

It was a weekday afternoon in the fall of 2007.  Though sitting at my desk, I was speaking “virtually” with about a hundred other people around the world who share my interest in corporate intelligence.  Specifically, I was midway through giving a live webinar (hosted by Aurora) on the Knowledge Value Chain®.

A chat message came through on the screen sidebar from the head of intelligence at a large US company.  She said her company was planning an all-day intelligence event, and they wanted to order one hundred copies of my KVC Workbook as a discussion guide for attendees.  This was the largest single order for the book to that point, on that basis I counted the webinar as a huge success.  We left it that she’d call back the following week to firm up the order details.

She did call back the following week as planned…but the content of the conversation was much different than I’m sure either of us had anticipated.  She was calling to say that the event had been cancelled and she would not need the KVC books.  My disappointment gave way to sympathy when she continued that her small CI department was being disbanded, and it was possible several of them would even have to leave the company in search of new jobs.

I realize that things can change quickly in business, and you have to learn to “roll with the punches.”  But I had a feeling of regret in that, if this person had had a working knowledge of intelligence ROI even six months prior to that, I’m confident that she could have addressed the “value” challenge, or even prevented its becoming an issue in the first place.

LESSON:  No intelligence professional wants to be on the wrong end of a discussion about return on investment.  That’s what prompted me to develop the KVC approach in the first place.

Adapted from an article Value Driven Intelligence, to be published in Competitive Intelligence Magazine, fall 2008.

Here’s an excerpt from my chapter in the new book Starting a CI Function (SCIP 2008.)

In each organization, the specific mission for intelligence, and the intelligence plan that supports that mission, will vary.  However, a set of “information deficiencies” that is strikingly similar across many organizations, across all industries, remains.  These include: 

• There is too much information “out there”, and often it’s hard to find. According to the search engine Technorati, the number of blogs is now over 93 million-with 175,000 being added each day. Not all of these have business value—but a surprising number do, and should be on your intelligence “radar screen”. And it’s only going to get worse. A recent study (”How Much Information?  2003“, School of Information, University of California, Berkeley) found that worldwide information production increased by 30 percent each year between 1999 and 2002.
• We can’t even quickly mobilize the information we already have “in here.” A recent study (conducted by Accenture and reported in “Managers Have Too Much Information, Do Too Little Sharing, Says Study“, Marianne Kolbasuk McGee, InformationWeek, January 3, 2007) found that large company managers spend an average of two hours a day looking for data they need-then when they get it, they typically find that about half has little value.  This is due to organizational silos and lack of governance systems that define how and where information is to be shared.
• We’re not sure what it all means, and where it’s going. The science fiction writer William Gibson said, “The future is here. It’s just not evenly distributed yet.” The seeds of the future are in the present—right here, right now.  It’s just that figuring out which events are “trends” that you should study closely, and which are “blips” that you can safely ignore, is not so easy.
• We’re not sure what to do about it.  Even if you had perfect information—which none of us does, or ever will—it is still often not clear what to do about it.  Stanford professors Pfeffer and Sutton (in The Knowing-Doing Gap, Harvard Business School Press, 2000) have described a “knowing-doing gap” that afflicts most companies, and prevents them from effectively using much of the knowledge they already possess.

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It’s here—the shiny (really!) new version 3.2 Knowledge Value Chain Workbook.  Our thanks to the TKA team and partners who made this happen.  Workbook designer John (”The Great”) Fantini and printer Craig (”On-Time”) Pace of Spectragraphic Inc. did yeoman service in getting this edition ready.  Mike (”Pool Boy”) Powell made extensive editorial comments, as did KVC “users” Kathy Walsh of Purdue Pharma and Stephen Lippman of Merrill Lynch.

For those of you with version 3.1, most of the changes are editorial, there is little new content this time (hence its “dot” number).

We have now shipped the book worldwide—most recently to Estonia and Korea—and welcome any feedback from those of you who have it or are using it.

 To order, click here.

Financial Intelligence Requires a Deeper Look
 

New York, NY - Arising Group, Inc. recently completed intensive exercises in financial analysis with Tim Powell of The Knowledge Agency® (TKA).

George Karshner, Executive Vice President at Arising Group, said that understanding the financial fitness of a company is essential to proper due diligence.  “Companies targeted for M&A or involved in litigation may not want to reveal their true financial condition,” Karshner said.  “A company’s public relations team may put on a happy face, but to know the true health of a company you need to look at their public filings and financial statements and understand the implications of the different business ratios,” he added.

“The TKA Financial Intelligence Clinic opened a new world for our engineers who regularly design and implement tools for financial data, but who had little knowledge of how to find and interpret financial intelligence. Our entire team was inspired.”

Arising Group has provided software and services to the financial industry for more than a decade.  Their clients include banks, brokerage firms, CPAs, and independent fair valuators for hedge funds.  They understand that business success calls for the ability to survey the competitive landscape, forecast probable events, and set up early warning systems—and that these competitive intelligence tools are built upon an understanding of the numbers.

# # #

Contact:  George Karshner, ARISING Group

Phone:    (718) 888-2800

Email:     george.look84091@zoemail.net

January 11, 2008, NEW YORK—The Knowledge Agency announced today that the new clinic Financial Intelligence:  A Value-Based Approach^TM is completed, and has now successfully completed field-testing at a major corporation.  “I’ve tried to put into a bottle those must-know things about using financial analysis to discover your rivals’ strategies,” says clinic developer and leader Tim Powell.  “These are skills I’ve developed and used every day in my work as a financial analyst, including ten years as a consultant in the Big Four firms.”

The one-day clinic is typically given at a client location, and includes practical modules that use real-world case examples.  Also included is a live exercise in which participants analyze their own company, then a major rival, for clues to the competitive dynamics in your industry.

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Sharp readers of the KVC Workbook (Version 3.1) have spotted several typos:

• Page 3, right column, 1st paragraph - change “necessary” to “necessarily”
• Page 5, 1st line - change “rather” to “father”
• Page 5, right column, 2nd paragraph - after “more”, insert “than”
• Page 6, right column, 3^rd paragraph, 6^th line - change “the” to “to”
• Page 7, 1^st paragraph - change first “who” to “which”, and “their” to “its”
• Page 10, 4^th paragraph - after “of” insert “us”
• Page 12, 2nd paragraph - change the second “do” to “conduct”
• Page 23, 2^nd paragraph - after “routinely” drop “and”
• Page 28, 2nd paragraph, 2^nd line - drop “we”
• Page 30, 2^nd line - change “know” to “known”
• Page 32, 2^nd paragraph, last line - after “$50,000″ insert “car”
• Page 40, 4^th paragraph - after “company” insert “has taken”
• Page 42, last paragraph - change “some” to “an”
• Page 44, 3rd paragraph - drop the second “that”
• Page 46, 1st paragraph - change “diagnosis” to “diagnose”
• Page 62, 3rd paragraph - change “an” to “and”
• Page 66, 2nd paragraph - drop second “you”
• Page 74, 1st paragraph - after “way” insert “as”
• Page 74, 3rd paragraph - change the second “your” to “you”
• Page 79, slide fourth bullet - after “possible” insert “to”

Thanks, you know who you are!

 All of these (and more) changes are made in the new Version 3.2.

 The Knowledge Agency has moved!  After a successful five-year run on Fifth Avenue, we’ve moved west to the Hudson River waterfront.

Effective November 1, 2007, TKA’s  address is:

The Knowledge Agency

548 West 28^th Street

New York, NY 10001, USA

That’s in the Hudson Yards area the New York Times recently profiled as one of the fastest-developing business centers in New York.  Several major art galleries, publishing, and technology firms have already relocated from midtown to here.  Soon Ogilvy and Mather, Morgan Stanley, News Corporation, and Condé Nast are said to be moving their headquarters here.  We have some interesting neighbors!

We’re also in the process of modernizing  and upgrading our phone and Internet systems based on fiber optic T1 technology.  Phone numbers stay the same.