Why?

Hearing about tragic deaths is not uncommon nowadays—unless the victim is known to you. I had the unfortunate experience of knowing one such victim. There isn’t much I can say or write about since investigations are still on-going. All I can do is share the impact it had on me as a person.

Joe (not his real name) agreed to meet with me in front of City Hall at 10 in the morning. I arrived a few minutes early but Joe was already there waiting for me. He and I then made the thirty minute trip to their house located in the rural area of the city where I was scheduled to hold a home bible study for their family.

It was a couple of months ago that I shared the gospel with Joe’s grandfather (let’s just call him Peter). It was Peter who organized this home bible study hoping that opening the awareness of God’s simple plan of salvation to his family would change their lives and outlook. Peter’s 40+ year old son, Tomas (not his real name) was married with a wife and four children and is an alcoholic and drug addict. Joe, 20+ is the oldest among Tomas’ children.

On our way to their home, Joe showed a level of excitement characteristic of one who recently came to know the Savior intimately. He could not stop asking me about the Scriptures, and was making plans to conduct a bible study in the home of his girlfriend and her family. Our conversation was “intense” as the half hour journey went by quickly.

When we got to their home, Tomas’ household and extended household were waiting for me. Tomas’ asked if we could hold the study after lunch as he had invited a few others to join in. I obliged.

A few minutes after we arrived, as I was drinking served refreshments, I noticed Joe busily preparing to leave. I asked him if he would be able to join the study, but he said that he had work that day and that he had only requested one of his co-workers to cover for him for half a day so he can get to meet me. Joe worked for a known delivery/remittance company in the country. He had a quick bite, and then quickly rushed out the door.

The atmosphere is Tomas’ home was charged with anticipation. Joe’s mother, on the other hand remained reserved and skeptical. That was quite alright with me, as it was not my role to convince. I was simply there to serve as a mouthpiece to share what the bible had to say. Spiritual regeneration is completely and entirely the work of the Holy Spirit. Despite the many years of studying the Scriptures, I never considered the work of conviction and conversion as my work. That was entirely God’s work.

The excitement and positive anticipation of the family turned to mourning when, as I began to open our study with a word of prayer, a young man (who I later found out was a family member) rushed to the door and announced that Joe had been shot at point blank range at what seemed to be a robbery-homicide while making his afternoon deliveries at a nearby city.

I was stunned and speechless. It had only been a little over a couple of hours when I last spoke with Joe, and now, he was gone; tragically taken from this world because of someone else’s greed!

At that moment, my mind was racing, accounting for every single word and gesture I exchanged with him. A felt a thick layer of sweat forming on my forehead and my back; my palms began to sweat, and I didn’t know exactly how to respond.

There was a sense of loss that engulfed me especially when I learned that Joe, at a young age, was the breadwinner of his family who gave up going to college because his father was an alcoholic and drug addict. I caught myself surveying the entire room, particularly the reaction of Peter. I could not quite make out Peter’s reaction as he already had blood-shot eyes probably from pulling an all-nighter of drinking and drug use. Peter was motionless and without emotion.

A few moments later, hysteria broke loose, and Joe’s mother started to beat at Peter with her fists blaming him for the fate of her son. What was discomfiting for me was that the first thing out of her mouth was, “Sino na ang bubuhay sa pamilya natin?” It was as if the value of Joe was limited to being the breadwinner of the family. Through the succeeding moments, I caught myself waiting for cues that would tell me that they valued Joe for more than just the money he brought in every 15^th and last of the month.

As I sat there silent, still not knowing how to react, I closed my bible. As soon as I had done so, Joe’s mother turned her attention at me. With eyes glaring, she had blamed me and Tomas for bringing this curse to her family, for bringing in a new religion, and that this was the lynchpin that took Joe (and his income) away from the family. I remained silent and calmly took the blows from Joe’s mother. When she clamed down a bit, drenched from the pitcher of soda Joe’s mother threw at me (thank goodness it was made of plastic and not glass), I excused myself and made my way to the bathroom to rinse-off the traces of soda on my skin, shirt, and trousers.

I spent the entire Sunday with the family, offering what little cash I had to help pay for the meals (as I found out that Joe was supposed to bring home his pay that evening when he returned and that they had no money) as the refreshments that was served came from Tomas and was purchased on credit from the nearby store.

I have gone through a constant stream of struggles and challenges over the past three years, and again, here I am faced with yet another. I tried to muster the strength to ask “what?” I had to learn through all this, but despondency took the reins as I soon found myself asking “why?”

I left the family on Saturday afternoon, and as I made my leave, I will never forget the reaction Joe’s mother toward me. Tomas remained cordial, but somehow distant and ashamed at how Joe’s mother had reacted toward me.

I haven’t recovered from the trauma. I am still asking the question “why?”.

Enterprise Resource Planning Software for the SME

Over the past few months, I have written several articles on the issue of enabling local SME with the right tools to allow each to effectively compete and extend their products and offerings to a global audience. The Department of Trade and Industry (DTI), in a disseminated report, attributes the lack of management skills, tools, and techniques as one of the problems hounding the Philippine SME sector to-date, particularly for micro and small businesses.

In interviews I conducted with various chambers of commerce and regional DTI offices, as well as foreign NGO’s focused on establishing market relationships with local businesses, one of the strongest reasons that prevented local businesses from tapping the European market is the lack of readiness of 99% of local SME’s in terms of quality management, capital access, and process automation.

A majority of SME businesses are family-owned and operated. While there are obvious strengths that result from this model, it also introduces complexity, especially when it comes to managing resources and finances. Almost all SME’s still use manual methods to manage their businesses – their finances are recorded in physical ledger books and their version of document management (receipts, invoices, contracts) is “throw-in-the-box or drawer”. Most SME’s tend to mix personal with business expenditures, and because they own the business, most managers do not take the time to read and analyze performance only because it takes so much time for them to encode every detail of spending and income into a physical ledger book or electronic spreadsheet (MS Excel, OpenOffice Calc, Lotus 1-2-3).

The SME version of automation is an electronic spreadsheet, or the use of a pirated copy of QuickBooks, PeachTree, M.Y.O.B, or Microsoft Money. The only reports small business managers typically read are the occasional reports that come from their bookkeepers or accountants (especially during tax time), or from the monthly statement of accounts from their credit card or banks. A majority of critical transactions are often left as a memory item, that is quickly forgotten. For most, margins and discounts are granted using a “fly-by-the-seat-of-your-pants” method only to find that they simply gave too much. The small business is typically plagued with a high volume of incidental costs that are almost never tracked or scrutinized.

Although managers are familiar with existing software products that could truly help them manage the profitability of their business, the prohibitive costs of these products prevents them from justifying any type of purchase. While the need is there, purchasing a product that exceeds business capitalization does not make financial sense.

The management issues that confront small businesses are quite similar to those issues that big business confronts on a daily basis. The only difference is the volume or number of the same issues that need to be managed. Small businesses still have to manage customers, sales, inventory, distribution and support; they have payables and receivables, loans, taxes, and financial reporting requirements that they need to meet—same as big business.

In a global marketplace, those that have the requisite tools to enhance efficiencies are the only ones that can expect to survive. It is a combination of awareness, agility in the production of goods, compliance to quality management standards, compliance with data exchange standards, as well as efficient customer relationship management capabilities. If a business manager was to attend to all these requirements manually, 24 hours would simply be insufficient. The key is implementing tools that permit even those business managers that do not possess formal management training could easily enter data and provide them with immediate access to up-to-date information on the health of their businesses without having to increase the number of employees to track every detail of their operations. What the small business manager needs is enterprise resource planning or ERP tools and software.

Enterprise Resource Planning or ERP software is a suite of integrated tools that allow businesses to manage everything from customer relationships, sales, billing and collection, accounting, taxes, inventory, purchasing, vendor and supplier relationships, as well as logistics and distribution in a single and secured manner. ERP software has been used in medium to big businesses for the past 35 years. Over the years, it has evolved into a level of robustness that make the lives of big business managers more manageable. The only problem with popular ERP software packages today (from vendors such as Microsoft – Axapta and Navision, IBM, Lawson, and Oracle) is that it comes with a price tag of not less than 3M PHP or 60K USD to implement—way beyond the buying range of most SME’s.

In an effort to provide big business tools to small business, I will be offering every local SME with access to an ERP product via a very low monthly subscription fee (lower than the cost of a post-paid mobile phone platinum plan!). All a business needs to have is a PC with access to the internet. The application is accessible to the manager regardless of location, and with the emergence of 3G phones with broadband capability, managers can access their information via internet enabled mobile devices.

Why is ERP an important tool for SME? And, why should SME’s use ERP? Simple: Profitability and global Market posture. The more business processes are managed by automation, the higher its efficiency levels. The less physical resources employed to manage repetitive manual processes, the higher the realization of profit per unit sold, and the higher the productivity output per employee. Rather than add to the labor base, managers can now provide a better quality of life for high performance employees.
By providing a low cost means for more the SME’s in the Philippines to automate we altogether enhance market posture, and increase individual levels of profitability. I am intent on giving small businesses access to the tools that were in the past only accessible to big business. By doing this, I level the playing field and enhance the competitive capabilities of fellow small business owners.

If you are in the manufacturing, assembly, trading, retailing, logistics, growing, or services industry and have a total asset base of not more than 10M PHP, my solution is for you. If you have questions or you want a real solution to the problems described in this article and don’t have much to spend, contact me via email or mobile phone at dennisbreyes@aol.com or +639184158789. Please reference “SMERP4SME” on the subject line.

Together we can increase the market posture of the Philippines to the global marketplace by creating a community of entrepreneurs that are enabled with the best tools information technology can provide for businesses today. Send me and email or call me today! (dennisbreyes@aol.com / +639184158789).

A Primer on The Role of Automation Technology in Managing Transactional Complexity

One of the primary reasons behind the difficulty of automation is
complexity. From a technical perspective, this relates to the
attributes of data that pertain to structure, type, and form. From a
behavioral perspective, it has to do with varying needs and
requirements, and preferences unique to organizational entities or
people as individuals.

Largely driven by the private sector, most process automation
initiatives continue to face challenges due to the dynamics inherent and
characteristic of the market. There is simply no way for private
companies to accurately predict the fluctuations in market demands and
preferences. Since their sustainability is based on making their
products viable across a wide spectrum, competition naturally dictates
that a differentiator must be established in order to out perform the
competition. It is in this area where variability increases. Unlike a
a broad/generic approach, companies that wish to differentiate
themselves would have to cater to a specific segment of their target
market without alienating their larger base of customers. This area of
differentiation offers higher returns due to its uniqueness and value
proposition, but it also offers the highest levels of variability since
customer A will not have the same requirements as customer B--they will
always be differentiated.

You can imagine the amount of work that has to be done for private
companies to build automated systems that could adequately handle such
high levels of variation. But most of the time, they are left without a
choice. They either do it, or die. This inherent complexity gave rise
to the formation of industry consortias that were dedicated to creating
acceptable standards that could be shared within industries to allow
more efficient communication flows without having to sacrifice
differentiated service methods. These firms realized that they spent
hundreds of millions of dollars in sorting through the noise of data and
very little in terms of acting on data. Since then, several prominent
standards groups began to rise to the occasion and begun publishing
structures and methods that would allow firms to focus on differentiated
services rather than on making sure they understood each other.

Standards like the Internet, HTTP, EDI, XML, ebXML, and UDDI came as a
result of this collaboration. Over the past decade these standards have
been slowly adapted by major software developers into their products
giving their customer the ability to manage the technical aspects of
complexity. Today, unless a software comes as compliant out-of-the-box,
companies would not even visit the idea of making use of it. UDDI
<http://www.uddi.org/specification.html> which stands for Universal
Description, Discovery and Integration, for example is a standards
repository of structures and rules to allow companies to electronically
share and exchange data seamlessly regardless of geography.

Admittedly these standards cannot readily address the more prominent
issues of behavioral variability especially in the general market.
Companies often have to alter their directions at the blink of an eye in
order to capitalize on an opportunity that may never present itself
again while minimizing the risks that typically come with such rapid
movement. When this happens, they expect systems to generate the
information they need, when they need it--and usually, that was yesterday.

To control behavioral variability, software systems employ a rule-based
approach to parameterizing activity. These rules are a set of defined
algorithms that control where, when, how and who can use the system or
access the data. This is the layer that enforces policy and unique
process flows that is specific to each organization or company. This
layer encapsulates the uniqueness or differentiated activities of every
organization and units within that organization. Accounting, for
example, maintains a set of constraints and processes that are unique
from the processes of Sales or Manufacturing, or Inventory Management, etc.

We begin to encounter problems when each of these units superimpose
their uniqueness as a de facto that should govern the processes of
another department, or another organization. In reality, there is no
need to integrate processes at the functional level. The only thing
that concerns Accounting when it comes to Inventory Management, Sales,
or Manufacturing is data--and the specifics of data can be clearly
defined and more easily shared and exchanged. While the 1+1 clearly
equals 2 in this equation, how organizations chose to approach this has
presented more problems than was necessary. Even good governance, the
Sabranes-Oxley, or whatever standard you choose to employ, does not
warrant a tight-coupling between different functional processes.
History shows us that this untenable. And if we are to apply Reeds law
to map out future trends, the likelihood that we can gain mastery over
this is close to nil. It introduces more problems than its worth.

Your thoughts?

--
Dennis Reyes, Ph.D.
dennis@dbreyes.com

"Learners prepare for the world for tomorrow."

Learn More About:

Applied Knowledge Management
[http://appliedkm.blogspot.com]

Supply Chain Management
[http://blogs.ittoolbox.com/supplychain/emerging]

Mental Models and Contemporary Issues
[http://trendsofthought.blogspot.com]

-----------------------------------
IMPORTANT NOTICE
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How Small Businesses Can Use World Class Technology and Management Practices

How Small Businesses Can Use World Class Technology and Management Practices

The single biggest inhibitor that keeps micro, small, and even medium
sized businesses or companies from implementing world class technology
and management practices is the cost involved in adopting these. Before
detailing how small businesses can adopt world class systems, let us
first look into the factors that increase the cost in implementing
technology or world class management practices.

First, you have to deal with the issue of entrepreneurial control. Most
small businesses are managed by its founder or founders who may have
inherited the business or began by using their nest egg or savings to
start what they believe is a way to sustain themselves and even promise
a better future for their families without having to hold down a 9 to 5
job working for someone else. Entrepreneurs want to directly control
what happens in their businesses and never really think about the
exchange of their time for money. Since they look at their businesses as
the center of their universes, they are led to believe that doing it
themselves the traditional way can help them save and therefore realize
more profits.

Second, you also have to consider the geography or location of the
business. In Asia where labor is cheap, most entrepreneurs would rather
hire more people that invest in technology. The same goes for most
African, European, and Latin American based small businesses. The only
exception to this are those located in advanced economies where the
cumulative and aggregate cost of labor is much higher than the cost of
investing in world class technology over a five year period. In emerging
economies, labor is disposable, technology is not. Most even operate
without a working business plan. The general approach and direction of
the business is dictated not by an understanding of market forces, but
on the gut-feel of its founder.

Third, entrepreneurs are characteristically averse to risk. Some
entrepreneurs are specialists in their area of business and were at one
time senior employees themselves who feel that their company or the
promise of world class businesses simply failed to deliver on its
promises. They instead believe that they could offer a better
alternative without having to place any stock into the promise of
technology. Most even end up completely discounting what they have
learned throughout their careers thinking that those do not apply to his
or her situation or circumstance.

While there are several other reasons that I could include, let us
instead stop and think about the three reasons that were given. If you
will notice, every reason stated has a counter-argument that could be
offered as a response, and proven ways of doing things that could even
render the reasons stated without merit. But in every instance, what we
encounter is that entrepreneurs have to first deal with the issue of
mindset and of course, relevant knowledge. Hence, this advice is
applicable only to those who wish to grow and sustain their businesses.
Those that are content with the ever decreasing markets and thinning
margins need not employ technology to their advantage.

So how can small business use world class technology and management
practices to improve their businesses? Here’s how.

1. Develop a detailed assessment of your cost from the following
perspectives: savings and opportunity loss, tax planning,
long-term sustainability, internal processes, customer preferences
and shifts, buying power for supplies, maintenance, customer
relationships, the cost of money, culture and competitive environment.

2. Calculate your process cycle efficiencies as well as your market
performance. Calculating for PCE is done by dividing the number of
processes over time. Calculating for market performance depends on
which aspect of performance is being measured. Generally, you need
to focus on critical to quality as defined by your customers.

3. Develop a working snapshot of your competitive environment.
Understand the what, how, who, and when variables that your
competition employs. It is important for entrepreneurs not to
disintermediate. Disintermediation never helps the long-term
sustainability of the economy—at any level. The purpose of your
snapshot is to help you define new areas of opportunity that
complements and supplements but does not destroy the competition.
You have to distinguish between good competitors and bad
competitors. Never attempt to destroy good competition.

Wait a minute! Nothing of the three items mentioned anything about
technology. That is true, but all of these require technology enablers.
Without technology, it would take the entrepreneur an inordinate amount
of effort to develop the essential information to help them make
decisions that will benefit their businesses.

The tight coupling between technology and management practices enables
speed of execution. Small businesses need to leverage their size to
maximize agility. But without the necessary data that could help them
develop relevant information that leads to knowledge which is
foundational to progressive activity, the size of the small business
will never serve the best interests of its founders.

In each of these cases, the entrepreneur will quickly find out, for
example, that labor costs are more expensive than technology over a
three year period. Labor will always be factorial in nature—its
incidental costs is compounding over time. Another is that of loss of
opportunity, the cost of buying and cost of goods. Without employing
technology to the entrepreneurs advantage, they would not be able to tap
the critical information they would need to minimize costs and losses
while maximizing returns and profits.

By employing technology the right way, small businesses can reduce the
losses associated with employees leaving (with the complete list and
relationships of your customers and suppliers), costs associated with
suppliers and their performance, etc.

Here are the areas where small businesses can employ technology:

1. Business Planning
2. Invoicing and Order Tracking
3. Customer Relationship Management and Marketing
4. Enterprise Resource Planning
* Bookkeeping / Accounting and Financial Management
* Inventory Management Control, Transportation and Demand Planning
* Service Management and Point of Sale Systems

I suppose the litmus test of the applicability of technology for small
business is whether this is applicable at the family-run micro retail
store level. It is applicable. All of the areas listed above apply to
all forms and sizes of businesses. The only difference is the amount of
“spend” that courses through each area.

It must be noted, the profit is a function of managing the cost of
investment against what customers are willing and able to pay for those
products and services in exchange for their time and effort. It is not
about eliminating costs but reducing costs to increase realized profit.
As such it will involve a proportionate investment. Bottom line, it all
depends on the willingness of the entrepreneur to employ technology to
benefit their business.

Of course, the basic requirement to employ technology is a personal
computer. These are so inexpensive nowadays. Even expensive software
systems can run on 10 year old computers running on a Pentium I
processor with less than 100 MB of memory and 2GB of hard drive storage
capacity. These personal computers can be acquired for as little as $100
USD or even less, depending on where you opt to buy used equipment.

What world class technologies are available for the small business?
Entrepreneurs need to realize that world class does not necessarily mean
paying the highest price for the technology or service. World class is
found in the substance of the technology or service provided.

Open source technologies have the substance without the excessiveness of
postured costs and provide you with solutions to help you enhance the
efficiency of every areas of your business operation.

All the entrepreneur has to invest in to employ world class systems are
the following:

1. Personal Time (for learning)
2. Personal Computer
3. Internet Connectivity (if available in your area)
4. Professional Services
5. Communications

Depending on the size of your business, you can avail of inexpensive but
professional services. In fact, it is recommended that you do. Make sure
to employ small business owners who can provide you with those services
as the price of their services will not be inflated. Employing
professional services will reduce errors in implementing technology and
the learning curve required to use technology. To complement the value
extracted from professional services, entrepreneurs must read relevant
books to help them improve on understanding, knowledge, and skill. Books
are an inexpensive but are an effective means of learning better ways of
doing businesses or learning about what the market, or your competition
is doing right.

In most cases, the expense involved in employing technology are tax
deductible since they are part of your immediate capital and operating
expenses. Rather than pay a larger tax amount, it would be better if you
invested in technology to help you build a stronger business.

If you are a business owner or executive that runs a small to medium
sized operation who would like to know more about how to leverage
technology effectively and inexpensively, send me an email at
dennis@dbreyes.com <mailto:dennis@dbreyes.com>. I will be more than
happy to engage you in conversation and extend my services.

--
Dennis Reyes, Ph.D.
dennis@dbreyes.com

"Learners prepare for the world for tomorrow."

Learn More About:

Applied Knowledge Management
[http://appliedkm.blogspot.com]

Supply Chain Management
[http://blogs.ittoolbox.com/supplychain/emerging]

Mental Models and Contemporary Issues
[http://trendsofthought.blogspot.com]

-----------------------------------
IMPORTANT NOTICE
The information contained in this electronic mail is intended for the use of the individual or entity to which it is addressed and may contain information that is privileged and/or confidential. If the reader of this message is not the intended recipient, or the employee or agent responsible to deliver the message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by telephone and return the original message to us at the above address via the Postal Service. Thank you.

The 85-15 Principle of KM

The 85-15 principle of knowledge management is that 85% of the success of any KM initiative is psycho-sociological and 15% bits and bytes.

Current levels of progress among KM practitioners and the practice area of KM in general has increased its orientation towards automation technologies. While automation is a key enabler of any KM initiative, the main purpose of automation is to increase the levels of collaboration and analytical efficiencies which involve information availability, storage, cataloguing, organizing, sorting, and analyzing. But there is more to KM that cannot be automated or made efficient through automated tools.

Knowledge is tightly coupled to the “eye of the beholder”, hence, bound to space and time. The fastest computers in the world can only make availability and access efficient, but these cannot create the needed relevance (although it can help establish relationships and dimensions) that is a core component of knowledge creation activities. The most essential aspects of KM (as a practice and discipline) are often bereft of attention and wanting in emphasis—the psycho-sociological, or the human factor.

Due to our desire to “deliver” project commitments that are driven by the constraints of budgets and the trappings and metrics of business success, this emphasis on automation in the field of KM adds a layer of complexity that only increases over time, keeping us further away from realizing the objectives of KM, in general. As far as knowledge is concerned, faster does not necessarily equate to better. KM is about substance, automation is all about efficiency.

At its core, KM is about helping organizations leverage their core asset—the intelligence that resides in the heads of the people that comprises the organization—in an effort to establish a level of competitive edge that is renewable, not so easily duplicated but transferable, does not depreciate quickly, and possesses requisite variety. These characteristics, however, are bound to higher levels of variability and complexity since they are bound to human beings. All of these combined, the inhibitors of agnosticism or the inability to come to a state of true knowledge, along with the pressure to deliver a solution within a given timeframe, is slowly changing the KM landscape to nothing more that another extended branch of technology automation.

This shift in emphasis has resulted in more failed KM implementations. Technology automation accounts for only 15% of what could be defined as a successful KM implementation. We need to create distinctions between the actual work of KM and the enabling tools that make access to the resulting work product of KM and the process of data collection and organization more efficient.

The reason why 85% of the success of any KM initiative is the psycho-sociological is quite obvious from several perspectives. First, knowledge is always a human product and by-product—machines simply store the data that represents this knowledge. Second, the speed at which knowledge can be applied to create new market opportunities are dependent on the human factor. Third, if you discount the human factor from KM, all you have left is a software system and a black box—nothing more—a mere business vanity. And finally, you can implement a world class software system but unless the “users” are convinced of its value and relevance, it will remain an unused world-class software system.

It is important to note that KM is not about storage, speed, communication, or the sexiest computer system money can buy. Having the capability to store terabytes of data and the ability to deliver the same in nanoseconds is a technology achievement, not a KM achievement. In fact, having the ability to store or increase the speed of delivery and access does not make an organization a knowledge-rich organization, it simply makes it a data-rich organization. This is an important distinction that we must never confuse.

Having stated thus, it is equally important to realize that the core objectives of KM, and the drivers of modern day life appear to have stark contrasts, even conflicting interests. To not clearly establish demarcations and areas of synthesis could spell disaster for any initiative. To avoid potential pitfalls, project objectives must always factor in the reality and potential impacts of knowledge progression. This fact must be factored in with extreme prejudice, if you may, for knowledge progression WILL happen. While the common response to mitigation is “good management,” the reality is that good management plays such a minute role in the larger scheme of things. For good management to become the solution, good managers need to be omniscient—and no one is.

Because KM is all about knowledge, we need to re-calibrate the emphasis of KM from hard systems or soft and applied systems towards defining a working synthesis; we need to shift our attention from the tools and revert back to understanding the dynamics that drive the owners and holders of knowledge to create, execute, and transfer knowledge. KM must therefore immerse itself in understanding the human factor if it is to play a strategic role in the game of business. While knowledge of tools is essential, the focus must not be clouded by a desire to create a “one-click” knowledge management solution.

KM as practice and discipline involves a deep understanding of the inner working of systems. It is not just about documentation and transfer, but also involves generation, cultivation, motivation, and stimuli. KM is a domain archetype and not an architectural by-product.

We must never forget that the question KM needs to solve is and occupy itself with is: “How can an organization leverage human and knowledge capital as a strategic asset towards developing sustainable competitive advantage?” Everything stored on computers are data bits and bytes. Real knowledge will always reside in the being of the human factor—the human being.

Thus, KM must focus on defining, designing, and managing systems that stimulate and enhance the organization’s ability to leverage existing knowledge and the environment that is conducive to the creation of new knowledge.

Remember 85% is psycho-sociological, 15% are bits and bytes. 85% is the human factor and the systems that human beings are bound to, and 15% are the tools and implements (technology) that enable human beings to do their work.

Knowledge Variables

Have you ever been in a situation where you had to exchange ideas with people that are from a different layer of society, level of education, or culture while communicating using the same language? And, have you ever had to explain your ideas repeatedly in different ways just to get your point across? Those of you that have can appreciate how difficult it could be to communicate even the simplest of ideas to people who don't quite get your point (even if the ideas are crystal in your mind). I know I had.

The assumption we implicitly make is that people of differing cultures and backgrounds will naturally understand and interpret ideas in ways that fit their own context. The fact is, even people coming from similar backgrounds have unique ways of absorbing, communicating, understanding, retaining information and different ways of “knowing”. This uniqueness can lead to either a rich exchange ideas that builds an entirely new body of knowledge or result in an all out conflict.

Human beings are complex creatures. We each look, learn, retain and communicate in different ways, using different styles and methods which are uniquely our own. For us to get along with others, it is necessary for us to communicate what we think in ways that could be appreciated and in a language that could be understood by others. How we communicate our ideas is revealing of the depth of knowledge we each possess concerning a given subject. And how we act consistently with what we know determines the depth of wisdom we each have as individuals. Knowledge and wisdom, however related, are mutually exclusive.

Knowledge is complex. But what is knowledge? The origin of the English word “knowledge” comes from the Greek word “gnosis” (pronounced as “nowsis”) which means “to know.” In the present-indicative-active, it communicates the idea of a never ending drive to know. Practically defined, it is the collective sum of an individual’s understanding of the world around him in general, and of specific domains in particular. By “collective sum” I mean, the sum of experience, data, information, customs, learning styles, language, interpretation, world view, culture that is tightly coupled to what makes the individual uniquely individual.

Knowledge is made up of multiple variables. It is mathematically impossible to define an algorithm that can precisely tell us how each of these variables interact or contribute to how an individual forms and organizes knowledge. In this regard, the term “knowledge management” sounds more like an oxymoron than an accurate description of the study. If we cannot define an algorithm to precisely determine how knowledge is formed and organized in human beings, then how can it be truly managed?

From an applied standpoint, it is not my intent to discuss the ontological roots of this area of study, but to provide practical information that will allow all of us to get to the first base of knowledge, which is, understanding.

Some of the variables that make up the formation “knowledge” are as follows:

1. Language
2. World view
3. Presuppositions, Fears, Culture, and Superstition
4. Personal Beliefs, Values and Norms
5. Collective Experience (direct and indirect)

Some of the variables that affect the formation of knowledge are as follows:

1. Psycho-sociological variables
2. Personal Behavior
3. Personal Need
4. Environmental Conditions (circumstance, opportunity or risk)
5. Societal Parameters for Interaction
   

These variables that make up and affect the formation of knowledge are all mutually complex variables by themselves. How each is used to form knowledge in an individual is not quite known. What is a generally accepted principle is that these variables affects the individual’s formation of knowledge.

Any one of these variables can weigh more heavily than the others given specific contexts. What knowledge is formed as a result of context depends on the orientation of the individual in that specific context. Behavioral scientists have been trying to determine, in mathematical terms, how each of these variables relate to each other and in what situations new relationships are established. So far, only “fuzzy math” exists.

How can this help you? By helping you understand the parts from the perspective of wholes.

This study will not go into the technical details behavioral scientists have to deal with. Rather, I will focus on providing information (in as layman terms as possible) that will allow each of my readers to draw their own conclusion, to help each frame their own applied patterns as it pertains to the subject of managing knowledge.

In future posts, I will discuss each of these variables I mentioned, in detail. I will also attempt to provide specific situational contexts to help my readers apply the information in very practical terms.

The situational contexts will revolve around both the personal (relationships, family, friends, etc.) as well as the professional (practice domains, industry, etc.). I am preparing studies that will help marketing professionals, medical practitioners, HR practitioners, entrepreneurs, and company executives apply core KM principles to help enrich their own experience and in the process, through feedback, attempt to create new knowledge.

Meanwhile, tell others about this post. Spread the word! If you wish for me to cover specific topics that affect you, just send me an email. I would be delighted to hear from you.

Until next time…

Corporate Universities: Developing Innovative Corporate Training Programs

I have often wondered if the incumbent practices employed in corporate training programs really provide the desired benefits for organizations for both the short and long term. Have you ever participated or enrolled in any of these programs?

Over the past few years I have casually observed how corporate training programs have been conducted, and have, on occasion, been a customer myself (sending employees for training). The program pretty much follows a template: printed courseware materials, case studies, and Power Point slides. The length of the training program depends on the scope of the subject at hand. But most of the time, it takes up about three days of productivity from each participant on the average.

The session begins by the instructor’s posture—certifications, years of experience as a trainer, subject matter (courseware) knowledge, and so forth. The objective of course, is to establish subject matter authority by dumbfounding their students with “academic credentials” to deflect from the reality that most of these young instructors have little to no real world experience.

If you look at the age group of participants, the range will vary. For technical courses, the majority will be under 30, but with management courses the age range spans between 33 to 50 years old. The irony in this setup is that the very people who should be teaching are usually the very people enrolled in the program. Most of them possess first hand, real world experience on the subject matter but had to endure the grueling few days just to receive a sheet of paper saying they have completed the course. Most of the attendees have to go through this process if they ever expect to advance in the workplace. Besides this reason, especially for those with real world experience, the course was really a waste of their time and their employer’s money.

Three days are over and participants return to work. Managers expect them to produce results that demonstrate enhanced subject matter and domain knowledge. A month goes by, and then two—nothing. So, what happened? The company paid an average of $500 USD for every attendee they sent, but they have yet to realize benefit? If you’ve ever sent people on training, you know what it feels to spend on a financial “black-hole”.

Most of these generic training programs produce little by way of results that will directly benefit the paying company. It simply adds a little knowledge to make the attendees a little more dangerous. Worse, a piece of paper could mean increased cost for the company the moment the certified employee jumps ship.

Of course, a distinction has to be made for training programs that are tailor fit to specific organizational contexts. These programs provide more realizable benefits for the corporation and its people since the context of training is specific to their unique requirements. Generic programs offered commercially do not.

The obvious reason behind the choice of programs is that of cost—generic programs cost less. But what companies fail to realize is that they lose out on the intangible benefits of hosting a context specific training program. They lose out on capturing the dynamics that surface when you bring employees together (that share a common and context specific objective) to absorb new information. They lose out on the benefits of serendipity. Due to the fact that the materials are generic, client companies will have difficulty mapping the benefits of new knowledge directly with performance and quality output since they have no way of determining whether the increase or decrease in quality or performance is directly related with the training or with some unrelated event that occurred in the life of their employee. It would be equivocal to try to map benefits directly to program over which they had no control.

In the long run, it costs more for the company to avail of generic commercial programs than if they had made the initial investment to pay for context specific training programs. They either pay for it upfront, or they will end up paying a higher price in the future. Either way, it will cost them.

As a result of the KM movement, there have been several training models that have surfaced. But among these models, I like the model of a Corporate University. From an applied standpoint, most corporations feel that employing such a model would be a waste of their money—nothing could be further from the truth. This is a classic example of the dilemma of mindsets I discussed in previous posts. Corporate officers tend to look at immediate savings and would rather make investments into physical assets than into a creating a culture of learning.

The cost of transforming one’s company into a corporate university involves KM specialists, process specialists, and automation technologies. It usually involves allocating an investment that represents between one to two percent of a company’s operating expenses on the average, to begin its transformation. This share could increase to about 6% if automation technologies are implemented. When we keep matters into perspective, this amount (relative percentage) is miniscule compared to the more expensive and bold investment initiatives that companies make nowadays. The best thing about making this investment is that knowledge will continue to appreciate without having implementation costs increase. The fact is, the more companies invest in knowledge, the less it will cost them in the long run.

In simple terms a corporate university is a system designed to enhance learning within a company. Every activity becomes a learning opportunity that can be captured, stored, shared, and reused throughout the organization, and enhanced by every encounter or application of knowledge. Because it is tailor fit to the specifications and context of a company, it is designed to benefit the company and its employees.

Corporate universities also provide the framework that promotes the propagation of constructive mental models through holistic thinking which company’s that adopt a purely corporate (tangible results only) model completely miss out on. Obviously corporate universities also provide tangible benefits, but this is considered to be “fruits" of a tree planted on fertile ground, in a manner of speaking, and not the "root" itself. Corporate universities considers tangible results only as a consequence but not its primary focus (the primary focus is enhancing their most valuable asset—people). For corporate universities, placing priority on enhancing knowledge in people produces far more sustainable results and higher quality products. Companies that employ a culture of learning and an environment conducive to the creation of new knowledge enjoy much low rates of attrition and turnover and introduce more innovative solutions to market faster than their closest competitor.

If you want to know more about corporate universities or want to know how to become one, send me an email at dennis@dbreyes.com. I can help you develop context specific strategies that will give you an edge over your competition.

Until next time…

How to Maximize Intellectual Capital Investments

The thrust to maximize returns on intellectual capital investments has been a mainstay of business and performance management consultants since the early 80’s. Every corporation in America, was inundated with promises of benefits by an increased investment into understanding and creating value using the intellectual capital route. The 1990’s, or the rise of the dotcom generation largely benefited from this fad. Unfortunately, when the bubble burst, and investors were wanting to understand what had happened to their investments, no one was able to provide an answer good enough to assuage investor loss.

What was largely discovered is that the valuation method used to increase intellectual capital worth employed a huge amount of creative accounting tricks. Valuation was as varied as the number of ice cream flavors available. You all know what happened next.

Intellectual capital investment and human capital investments are considered to be distinct in today’s business environment. But in reality, they are part of the same whole and are tightly coupled to each other. Without the human factor to contribute to the intellectual capital pool, intellectual capital would exist. The dilemma of measuring or quantifying intellectual capital net-worth is that the methods used to quantify material or physical assets (GAAP) cannot capture the value of non-physical assets. (This would require an entire study and discussion). How can a company quantify the value of their intellectual net worth when the systems used to quantify value are limited to that of capturing material or physical value? Most often the value assigned to non-physical assets is arbitrary—it simply depends on the relevance of such an asset in each given context.

As the intellectual capital trend spread throughout the world, businesses began to deal with the same issues and were confronted with more problems than it was suppose to solve. The support infrastructure that existed in advanced economies such as the US, was non-existent in other parts of the world. Legislation that protected intellectual capital simply did not exist, and where it did exist, the enforceability was insufficient. Confronted with this reality, Asian businesses, in particular, are slowly moving to strengthen local legislation to allow for stricter and more enforceable guidelines to protect intellectual property rights. But much work still remains.

Integral to increasing the intellectual capital pool of organizations is the proportionate increase in human capital investments. The awareness of human capital investments began to catch on in Asia toward the mid-1990’s and has continued to grow since. Consequently, companies began to restructure their specific environments to allow them to maximize their benefit from their human capital pool. But despite the renewed emphasis on the importance of human capital, organizations are still confronted with the challenge of reducing attrition and brain drain.

While companies, focus groups, industry and trade associations have begun to educate the general public on the importance and strategic nature of human capital, there are environmental conditions that prevent organizations to implement and fully realize, much less maximize, on the human capital.

The value of human capital is not measured by the size of an organization’s employee base, but by the quality represented within that employee base. Here again we encounter the dilemma of quantifying value. It is about companies enhancing core competencies, such that their competencies are disproportionately higher than existing market demand. Admittedly, such an ideal outcome is tough to create especially in Asian companies and specifically within Philippine organizations.

The environmental conditions that prevent Philippine companies from maximizing benefits from their human capital investments are systemic in nature. Meaning, these conditions are deeply embedded in individual and collective psyche.

Let’s look into this a little more in detail…

The Philippines in general (private and public) continue to make significant investments into adopting Western management styles, policies, and forms of governance. Such investments are considered necessary for the country to remain globally competitive. Western schooled executives have an established edge over their locally schooled counterparts not because they are less competent or intelligent, but because most progressive corporations hold western schools in higher esteem than local universities and colleges. Board members seem to be more comfortable retaining foreign educated professionals rather than extend the same opportunity to executives with local experience and education. The fact is, expatriates form a larger population of top executives within Philippine companies over naturally born Filipinos. What happens when the economic focus shifts from North America to Asia and Europe (which is imminent)? Will this mean a need for radical change of paradigms on the part of the Philippines?

This reality creates a double standard that inhibits corporations from maximizing benefits from their investments into human capital. While corporations promote western practices, they retain local styles and prejudices.

The cost of labor, for example, within typical Philippine companies are significantly less that any foreign counterpart (with the exception of China). While the workload is relatively similar, the compensation remains inconsistent with the organizations declarations of valuing human assets. Local corporations will spend more on technology, and less on people. Should there be opportunities for training, corporations will typically bind employees to performance contracts or employment bonds while depressing salary levels. It seems that corporations are intent on squeezing every ounce of creative juice from their employees without proportionately increasing the purchasing power of the same. The rationale behind this is usually maintaining competitive advantage by keeping overhead costs to a minimum. The problem is that most corporations lose a lot more by making investment decisions on other areas of their business. It would have been far more cost effective to invest in the lives of their people.

Our actions speak so loudly that our employees fail to hear what we are saying!

When we do find corporations who value their employees and demonstrate this by improving the lifestyles of their employees, we find them taken advantaged of by the very people who benefit from the company. Talk about a vicious cycle!

Labor laws play a significant role in the systemic problem. Labor codes are clearly biased towards laborers. It offers a level of false security that disproportionately disadvantages their employers and the very community it seeks to protect. Current labor laws revolve around the idea of tenure rather than sustainable value. Given this scenario, corporations end up reducing their exposure by depressing the wages of their people just to limit the exposure to financial risk. Just imagine a company that is in financial difficulty. Should the company decide to lay-off people to survive, it will end up killing itself completely. Instead of protecting and providing a means to rehabilitate itself, labor laws place priority on settling salaries over creditors without regarding the condition of its founders or incorporators.

I can go on and on and on discussing systemic dysfunctions but the objective here is to give the reader insight into the complexity that surrounds the issue of realizing benefits from human capital investments, and what considerations organizations need to be address when it comes to the challenge of realizing those desired benefits.

Given these conditions, how can corporations maximize their investments into human capital?

First, we must qualify what an investment into human capital really means. In simple terms, it is the investment of the company into the intellectual and functional growth of every employee within its domain. This involves creating intelligent policies, a culture conducive to personal and professional growth, functional and theoretical training, mentoring and leadership development, performance incentives, and competitive salaries. The focus of the investment is to create an environment where growth and experimentation are encouraged, an environment that showcases achievement, and environment that molds restrictive mental models into new progressive ones, and an investment in capturing the same for reuse throughout the entire organization.

The following are areas you may want to explore if you intend to maximize benefit from your human capital investments:

1. Modeling Leadership – people will duplicate the attitudes of their designated leaders. Make sure leaders are made accountable and responsible for their own actions, and are willing to do the very things they expect of their people.
2. Intelligent Policy –integrate a reward system into the framework of corporate policy rather than maintaining a purely punitive model. Make sure to integrate the same into performance management activities.
3. Safe Communication – establish “safe communication” systems that will allow people to be heard without fear of reprisals
4. Cross Fertilize Skills – promote a well rounded understanding of operations and functions for every employee by getting people to experience different roles within a department or business unit. This will prevent intellectual or functional atrophy from setting in.
5. Serialized or Organic Promotions – promote from within. Limit the number of outsiders who end up filling leadership positions within the company and make sure that promotions are based on the merit of performance. Don’t promote people to higher levels of incompetence simply because they know, or are associated with, the people at the higher echelons of the organization.
6. Create systems that showcase innovation and knowledge champions – make sure that people are recognized only for performance that goes above and beyond expectations. Remember to be sparing—to much recognition will minimize its impact on the organization.
7. Build systems that promote the reuse and enhancement of knowledge – make sure to build systems and mechanisms that allow knowledge holders to transform tacit knowledge into explicit form. Attrition is a reality that will never leave us as long as choice remains a part of free will. To protect the interests of the company and to prevent the company from being held hostage to the demands of key knowledge holders, it is important that such mechanisms be implemented.

If you wish to know more on this subject please feel free to send me an email at dennis@dbreyes.com. I will be more than happy to be of service.

Until next time...