MANAGEMENT

Managing knowledge as a company asset

The old adage "knowledge is power" has new meaning when brainpower can be so readily acquired, retained and applied

Dutch Holland, Holland & Davis; and Brian Toelle, Schlumberger GeoQuest

nowledge is power. Or is it? Technology has put a new spin on this truism by creating a significant opportunity. This opportunity centers on a major asset that is as real as a new field discovery, an offshore platform or an office building.

The asset is knowledge. Its use – not simply recognizing that companies have it – can have a dynamic effect on financial bottom lines and a substantial impact on the daily business of oil exploration. Using knowledge is power. And knowledge, unlike physical assets, is not depleted by use; it tends to increase with refinement and testing.

Today, tools ranging from collaborative software to e-mail, from Web-enabled applications to object-relational databases, are figuratively shrinking the world. Now organizations have unparalleled global communications and computing power at their collective fingertips and enhanced opportunities to develop and use knowledge, a source of competitive advantage, to improve corporate performance.

To get full power from knowledge they already have, companies are finding three actions critical: 1) Developing a work environment where the company’s knowledge is considered a valuable asset and adding to it is recognized and rewarded; 2) Managing the company’s work processes to effectively use its best knowledge; and 3) Investing in technological tools that make the exchange, capture and application of knowledge effective and efficient.

Knowledge Management Problem Example

How does knowledge management (KM) relate to the real world and what effect could KM have on normal E&P projects? Here’s a short story that illustrates a typical situation in today’s oil business.

Company X is given the opportunity to farm-in to a prospect developed by another company in a basin that Company X does not work out of its Houston office. The exploration manager, recently transferred from Company X’s office in the Middle East, assigns the evaluation of the prospect to one of his geologists. Because the farm-in is available for only a limited time, the geologist’s evaluation is not as in-depth as would be preferred, and he is unable to locate anyone in the Houston office that has experience in that particular basin.

Based on log curve characteristics, the geologist concludes that the target formation’s environment of deposit (EOD) has been misidentified and recommends that Company X pass on the farm-in, which they do. A competitor joins the farm-in and drills a discovery well. Further investigation by Company X reveals that one of their own geologists working in the London office had worked the basin while employed by another company.

This geologist recalls that the log curve characteristics were odd, but correct, for that area in that particular basin and confirmed the proposed EOD was valid. Unfortunately, nobody in the Houston office knew about this geologist or his past experience. Too late did the exploration manager in Houston obtain the knowledge that a resource existed elsewhere in Company X who was better suited to this problem.

Developing and Applying Knowledge Assets

Even in today’s technological workplace, formalizing knowledge as an asset is not common, and active KM is not widely practiced. For example, mention KM and reactions will vary widely from "It’s technology" to "It’s just software; install it and you’ll be up and running" to "It’s strictly people and what’s in their heads."

In reality, KM is twofold: "What did we corporately learn while performing this task, and how do we put that learning into play the next time we perform a similar task?" The desired process and result is that KM makes disciplined use of good ideas and proven know-how to increase the company’s productivity and revenue.

In the past, managers were encouraged to start thinking in process terms. Today, however, that is still largely not the case, but the opportunity is compelling. If managers understood and mapped the best way to accomplish tasks, then kept this knowledge in play for every project, the change would be dramatic. They would be well on their way to realizing significant KM benefits. Some E&P companies have realized that capturing and disseminating the methods used by their most productive geoscientists is vital, and they are building systems for this.

The best way to widely disperse knowledge within the company does not come from the new economy. Using KM practices, determine how to convert valuable knowledge into work instructions, procedures and standards, then spread them within the company. From that point, state that employees must consistently use these formalized insights unless there is a specific time and place to make an intelligent exception.

In other words, a company’s best knowledge is an asset that must be recognized, preserved, managed and profitably used. Therefore, process mapping is an essential component of KM. Why? Because a company’s knowledge about how it conducts its business is an asset, and the company must productively manage that asset for its investor community.

Technology is integral to KM because it has changed how knowledge is shared, by allowing companies to effectively make it more widely available. For example, once a good knowledge-sharing system is in place, Web-enabled technology lets people access relevant information virtually instantly. Just as important is the immediacy of putting new knowledge to work.

Essentially, KM is resurfacing because new tools make tasks practical that were not practical before. But, and this is critical, these tools must be put into place for the explicit purpose of knowledge sharing and management for the process to work.

Benefits in E&P

Zeroing in on the oil business, how does KM impact the worldwide exploration and production of oil and gas? Once a company’s work environment includes "knowledge assets," with the expectation that all organizational levels must contribute, and the correct tools and methods are in place and understood, the impact can be significant.

Benefits affect various levels within a company. For example, an asset team investigating a new geologic province or field would use KM tools to become familiar with the new area quicker than ever. Likewise, project planning and problem resolution would also be expedited due to access to a knowledge base with proven solutions. Collaboration tools would also allow rapid identification and communication with experts needed for specific challenges to the project.

In the "short story" example mentioned earlier, the exploration manager or geologist assigned to evaluate the farm-in would have been able to search Company X’s knowledge management system to rapidly locate and communicate with the expert in the basin being investigated.

Other benefits spread to supervisory and management personnel. They benefit from improved project tracking facilities enabling them to monitor knowledge obtained. Cumulatively, all these benefits combine to increase knowledge capture and retention, and decrease project cycle time.

Capitalizing on KM

One of the best ways to make KM work is by steering its use with the company’s performance-management system. That helps ensure that those making extra efforts to generate and share knowledge get recognition, and those who withhold information at critical times are explicitly discouraged from this behavior. Over time, the net result is the creation of a culture that shares and values knowledge.

Too obvious? Not really, because, typically, knowledge-sharing behavior is not graded. However, that could change by using knowledge-sharing scorecards to track contributors to the knowledge base. Therefore, if knowledge is not put into play in daily decisions, the CEO’s scorecard suffers because performance is not optimized. Similarly, the scorecard can apply to senior managers down to lower levels. Knowledge must be treated as a tangible asset and the company should only reward those who contribute and share.

Today, many companies are measured more on brainpower than on physical assets. As a result, maximizing market evaluations means valuing knowledge within the company. This mandates that tools and methods for mapping and disseminating superior work processes, as well as aiding and fostering collaboration, are critical to effective knowledge search and sharing. The bottom line is very clear: Companies with the most and best "brain value" will win in the long run.

The authors
	Winford (Dutch) Holland, PhD, is founder and CEO of Houston-based Holland & Davis LLC (dutch@hdinc.com) a nationally recognized management consulting firm serving the energy industry. A widely published author and speaker, Dr. Holland’s newest book is Change is the Rule: Practical Actions for On Target, On Time, On Budget Change.
	Brian Toelle (btoelle@houston.geoquest.slb.com) is senior geoscientist with Schlumberger GeoQuest’s Technology Solutions Department and has nearly 20 years’ experience as a geologist / geophysicist. He performed exploration and development projects for Texaco and Saudi Aramco for 14 of those years and is currently developing E&P Workflow and Knowledge Management solutions for oil industry companies.