“Knowledge shared is Knowledge doubled.”
Karl-Erik Sveiby, 1995

The painful journey to discover the Art of KM

Twenty years ago Karl-Erik Sveiby was Executive Chairman and co-owner of Ekonomi and Teknik Förlag, a trade magazine publishing company in Sweden. In Sweden he and his company were eyeing a prosperous future. However Sveiby had one problem. The sort of problem that can ruin a man and destroy a business. He had discovered that his earlier experience as a Unilever manager had not equipped him to manage “knowledge workers” (an unknown concept at the time).

“I was trying to understand a company that had no traditional assets, but was growing and growing quickly,” says Sveiby. “And although I owned the company, I had no idea how to manage a company with “knowledge” as both the primary resource and output, which as you can imagine was a serious problem.” It is a problem Sveiby believes is more widespread in corporate Australia than many leaders would like to admit.

For his own part, Sveiby began what he calls his “painful journey” of research, trial and error into managing his “knowledge company”. It became his motivation for most of the 1980s during which time he began developing systems which would later become known as ‘knowledge management’. Far from being a fly-by-night term, knowledge management had a rapid and day-to-day impact on Sveiby’s business. By the time he sold the company in 1994 he had increased his staff from five to 200 and built Scandinavia’s largest trade press with seven titles, among them Sweden’s most prestigious business weekly and Sweden’s first management magazine. Dr. Karl-Erik Sveiby is now the world’s most respected voice on knowledge management.

“Knowledge management is the art of creating value from intangible assets,” he says. “It I refer to it as an art because although I have spent 15 years on it, knowledge management is still in its early days and remains more of an art than a properly researched discipline.” Sveiby says that knowledge resides in many different places, from databases and filing cabinets to people’s minds. And that lawyers are firmly entrenched in knowledge industry. Indeed, knowledge is their currency. “There’s nothing that can be more important to a lawyer than knowledge,” says Sveiby. “It’s their work. Using knowledge to create knowledge is what they do.”

Although Sveiby is largely credited with being the Father of knowledge management, it wasn’t really until 1994 when he sold his business and decided to “do something different” that international interest in his systems took off. Until then he had channelled the results of his research on knowledge management almost entirely into his own business. ‘Something different’ meant calling Australia home. In 1995 he moved here with his wife, Kati Laine-Sveiby (a Doctor in Ethnology) their daughter, Karolina, and beginning a consulting career as an adviser to companies. His clients reads like a Who’s Who of Who Matters: Arthur Andersen, USA; BHP Australia; China Light and Power HongKong; CSIRO Research, Australia; Ericsson, Sweden; Ernst & Young, Sweden; Fuji Xerox, Japan; Gadens Lawyers, Australia; Hewlett Packard USA; IBM Europe; LendLease Australia; Minter Ellison Lawyers, Australia; Morgan & Banks Australia; National Australia Bank and NASA, USA.

The string of international clients make up the bulk of Sveiby’s work “advising ‘Fortune 500’-type of companies worldwide”, but Sveiby believes all firms, irrespective of size, should engage in knowledge management. Sitting in his office in his home in Caloundra, 100 kilometres outside of Brisbane, Sveiby looks over the Pumicestone passage, the body of alluring aqua where the sea meets the mainland. On the day we speak he is working from his desktop computer and his laptop; gentle tunes play from a CD he bought on a recent trip to South Africa. However despite the appeal of his work space, Sveiby spends most of his time on the road working face-to-face with people.

According to Sveiby most traditional companies and firms focus on their tangible assets, leaving their most important and abundant asset unmanaged. Sveiby’s “intangible assets” are divided into three families, all of which are interrelated. The first, where everything begins, is the competence of people. With that competence, in a corporate environment, people produce products or services. This is then delivered to the outer world, or the second family, known as the External Structure. If the corporation is large it also needs a support structure such as accounting and IT – everything that remains when the people have left the office, which he calls the Internal Structure. “The most important inter-relation,” says Sveiby, “is the way we inter-react with each others. That is, knowledge is created between the relationships of our people and the customers, between the customers and our administration, and between the customers themselves.

“So, if I know something and I share it with you, then we both know it. So from the business point of view of the organisation, the value of the resource has been doubled.”

For Sveiby, it is organisations such as law firms, with economies where most of the assets are intangible, that have most to gain from this knowledge economy. Within this new world, economies based on knowledge obey different laws to the economies based on resources. “Indeed, almost the opposite,” says Sveiby, who is currently visiting Professor at Macquarie Graduate School of Management in Sydney. “For instance in sharing knowledge, doubling it, means that we have potentially unlimited resources at our disposal. Those are resources that people have an infinite capacity to create. Given the right circumstances, the right environment and the right motivation people can always create knowledge. In principle there is really no limit to what people can create. So knowledge is actually a resource which is potentially in abundance.” Contrast this to traditional viewpoints of value in businesses, for instance computers or any machine that aids us: they deteriorate and depreciate when used. Intangibles do not. On the other hand, says Sveiby, knowledge grows when used. “So this is an opposite result to the traditional resource of an economy. This is what makes knowledge management so fascinating and potentially so incredibly rewarding for companies that are willing to learn to use it properly.”

“We make doors and windows for a room. But it is the spaces that make the room livable. While the tangible has advantages it is the intangible that makes it useful.”
Lao Tzu 600 BC

Gadens law firm implements a knowledge-based strategy

Two and a half years ago Gadens law firm in Australia appointed Margaret Williams as their national knowledge manager to implement and foster knowledge management within the firm. This came after the firm’s national partners went on retreat in Port Douglas in 1999 and their CEO, Don McKenzie, arranged for Karl Sveiby to workshop knowledge management with them. “That was a fantastic opportunity to raise the issues of knowledge management in this organisation,” says Williams. “And because this support came from the top, half the battle was won. There are so many organisations where people are battling to implement these knowledge-type projects, but aren’t able to sell it to their senior managers or their partners.

“We don’t sell screws and nails or fish fingers, what we do sell is the lawyers’ expertise and what’s in their heads. And if you can’t reuse that and really maximise it to its full potential then you’re not really extending that service to the client ... and obviously there’s a dollar value to it at the end of the day.”

Campbell Hudson is partner at Gadens who promotes a culture of knowledge sharing within the firm. “In our industry we are all knowledge workers,” he says. “We’re only as good as the knowledge that we can impart to our clients. Knowledge management is critical to the success of my business and I think knowledge management benefits all fields of law because of the fact that lawyers are in a knowledge industry. To be a successful lawyer, to be a successful knowledge worker, you need to have knowledge sharing.”

Margaret Williams aims to encourage lawyers and partners to share their expertise so that they’re not constantly re-inventing the wheel. “That then promotes team work and trust,” she says, “that in turn produces higher morale in the firm and means then that the junior lawyers have got access to the expertise and will be able to make decisions faster. That in turn then frees up the partners and the more experienced people to do the high level work; they’re not so bogged down in the day to day stuff because they’re not constantly repeating themselves.”

Williams has set up a system at Gadens known as knowledge mapping. Team meetings are held and lawyers discuss ways in which they can identify what a particular team knows. Once knowledge is identified that would be of use to their colleagues, Williams facilitates them to pool this information expertise. It can be in the written form, in the form of an index or in the form of identifying new precedent documents.

In this way Williams has set up a knowledge data base of Gadens’ precedent documents and policies which was not nationally available two years ago. This is run through an Intranet and each lawyer has his or her own work spaces on the Intranet that allows them to share information. “We also have numerous chat lines up and running,” says Williams. “That really assists people with a similar interest to converse and ask questions and receive answers and share information over the chat line.” Williams points to the implementation of the GST as a recent example of when it became most beneficial: “A lot of problems were solved over that chat line,” she says.

However, Williams says none of this has been easy to implement. “It’s hard work and you have to be very pro-active and very energetic. You have to make it fun. There has to be an incentive at the end of the day. Gadens has a formal rewards and recognition system. So when people go for their review and their appraisal system, knowledge management is actually part of their core competence and the expectation is that they will have demonstrated ways in which they have shared their expertise.” And if that’s not enough motivation, Williams has implemented a trophy for the Knowledge Sharer of the Week award. “It’s a gold cup – like an Under 5s soccer type of trophy.” At the time of going to print the trophy was on the desk on corporate partner Michael Hodgson who made his precedent documents available. On another occasion it went to a partner in Gadens’ Brisbane office. “This person has an enormous research collection on construction law,” says Williams, “He’s a very, very experienced person and we have just implemented a system of indexing his collection and making that index available on our Intranet. So it’s become a resource.”

While most of the work Williams has thus far done at Gadens has involved knowledge in a written form, she has recently set up a new project designed to access “the knowledge in people’s heads.” It is, she says, the hardest to access. “The system is similar to a corporate yellow pages, or a skills register. Each lawyer is responsible to advertise their own area of expertise and via the network they will then be put in touch with one another. So if somebody wants to know who is the expert on receivership, then simply by querying the data base you can find out who that person is.”

It sounds good, however could it be misused to the frustration of senior lawyers and partners who find themselves being constantly interrupted by people wanting to pick their brains? While Williams says it hasn’t been a problem up until now, she does admit that the chat line could be misused in this way. “People can use it as a short cut to get a quick answer to a question when occasionally it could be seen that this person really hasn’t done their homework first. But I think there is an unwritten protocol that people will respect. And I think that lawyers being lawyers do prefer to be contacted about something that they are expert in, rather than feel that that other person is going to go off and having stab at something that they’re not expert in.”

A second potential problem with this and other systems of knowledge management is that for as long as professionals can remember knowledge equals power. Within this there was, and quite possibly still is, a culture where one partner knew everything and he kept his business to himself and everything went through him. While acknowledging such a culture, Campbell Hudson says that the approach of Gadens and other firms today is quite the opposite. “The old days of one person knowing all and keeping it all in his office and he was ‘the man’ were probably appropriate for their time but we’ve moved beyond that time. You must now have a team who’s aware of what’s going on and can produce product far superior to that produced by one person. For something like knowledge sharing to really work you’ve got to have a culture that really drives a commitment to knowledge sharing. So when a file comes in I’ll get a number of people around the file and I’ll talk some issues about the file and I’ll get those people from the paralegal level to the senior associate level to be tested about the issues. So I’m sharing my knowledge, and then when they go back to their desks and come across another article, they’ll come back and share it with me. So we bounce off each other and you end up scaling a greater height. It’s imperative to drive this culture of knowledge sharing to improve our product.”