Why is it important to understand the business value of Knowledge Management? The answer is a simple one - if you understand the value, you understand how much you can justify investing.
Our advice to clients is to form a reliable and justified estimate, as early as you can in your Knowledge Management activity, of the scale of the prize. If you understand the scale of that prize, you know how much you can invest to deliver it, and you are better placed to meet challenges to that investment. We will help you work through a valuation calculation based on your historical and current performance data to develop a business case, and (if possible) an order-of-magnitude ROI.
In order make some sort of estimate of the return knowledge management will deliver, we will need to decide which business metrics knowledge management will impact, and by how much. Value will come through increasing the volume of your business by increasing market share, or by entering new markets, or through increasing margin by reducing costs (and costs can be reduced in a number of ways) or by increasing price. An understanding of how knowledge management will impact these variables, plus reliable historic performance data, allows you to value your knowledge management program.
Historical benchmark statistics are used to identify potential areas of improvement, which are offset against the predicted costs of Knowledge Management implementation.
A good understanding of the value of knowledge management, expressed as a business case or ROI, allows you to make a realistic case for investment.