The Value of Efficiency

It's sometimes difficult to justify a significant investment in a knowledge management system... it seems that getting a reasonable amount of funds to properly invest in and deploy a tool who's basic promise is to help people work together better (the most basic description of what KM is intended to do) can be a difficult sell... and causes immediate questions. What exactly are you going to do? What is the outcome going to look like? How much is it going to cost? How much time is it going to take? What products do you need? How should it be architected? Ultimately, how much are we going to save by doing what you want? KM is a fuzzy field with frequently ambiguous costs... and the simple act of trying to get answers to these questions... product investigations... Requests for Proposal, knowledge gap analysis, social network and interaction analysis, business process design... all of these things take time for you to do, and time from others that you have to work with to do it. So why would anyone bother?

In my work as a Knowledge Manager in a prior life I figured out a simple calculation to put a number on the potential value of a KM strategy. It's simple, very generic, applies to every company in the world, and uses 2nd grade math at best. No, it's not exact, and there are huge factors that aren't accounted for... but I strongly feel it is the fundamental calculation for understanding what a KM initiative can do at it's most minimal level.... and it's stated as simply as this: How much money can I save the company by saving time... and how much money are you (Mr. CEO) willing to invest to save that money?

Lets pretend for a moment that you're even a relatively small corporation of say, 1,000 people (not just employees... non-employee workers also contribute to company costs). Lets also pretend that the "fully loaded" cost of each employee is $100,000 per year. This isn't just your pay... that's pay, insurance, benefits, taxes, 401K matching, etc... everything that adds up to your total compensation plus the simple overhead to your employer of employing you. Lets also pretend that there's a lot of things that you do every day that aren't ACTUAL work. Things like looking for answers to questions, answering questions of other people, filling out forms, starting and engaging in disconnected or even manual business processes. Now lets do some math...

First, lets break down the actual number of minutes you work in a year (assuming 10 days of paid holiday and 2 weeks paid vacation): 52 weeks - 4 weeks x 5 days a week x 8 hours a day x 60 minutes an hour = 115,200 minutes a year.

Now lets find out how much you cost per minute: $100,000 / 115,200 minutes = $0.868 dollars a minute. (just reading this far has probably cost someone about $3 of time... think about it.)

Okay... now lets pretend we think we can save you maybe 5 minutes an hour... or $4.34 an hour... or $34.72 a day... or $173.60 a week... or $8,332.80 a year.

Already, this is nothing to laugh at... but remember... there are 1,000 of you... so if we saved everyone in the company 5 minutes an hour, we would save the company $8,332,800.00 a year.

8 MILLION DOLLARS.... for 5 minutes an hour.

EVERY YEAR.    (or, lets say $40 Million over 5 years?)

How much are you willing to pay to get $8 Million into your pocket, or $8 Million into your budget?

This is what I was trying to do as a Knowledge Manager... and now, this is what I try to do with Microsoft Office SharePoint Server 2007... a product that is effectively a KM strategy-in-a-box. Getting to spend my time with my customers enabling them to be more effecient, faster, more resilient, more stable, more able to change quickly to evolving business climate. Yeah... maybe I drank the Kool Aid a long time ago... but at that price, it's effectively Cristal. :P

So, other than not doing it, what is the biggest mistake I see my customers make? UNDER INVESTING. The try to do all of this with the lowest possible investment in software, servers, people, training, planning, and strategy, and then find themselves having invested in failure. Please, please, PLEASE let yourself be successful, and your people happy (because they're successful), and your business successful (because it saved $8 million dollars).

We're here if you need any help at all. :)