Building a Customer-focused and Learning Culture with KM Philip Fung Vice Chairman of KMDC July 2005

Agenda Challenges to managers in the new economy Building a new work culture KM practices in retail shops

Challenges to managers in the new economy

Knowledge Based Economy An economy in which the production, distribution and use of knowledge is the main driver of growth, wealth creation and employment across all industries

Knowledge Workers Knowledge workers will own the tools of production because they own their knowledge and will take it with them where ever they go. Peter Drucker, Post Capitalist Society

Challenges Globalization and competition ICT has changed the way we work Knowledge becomes obsolete quickly Increased demand from customers Low staff loyalty

Impact on Work Life Work more with less Stress High staff turnover Low morale

Building a New Work Culture with KM

New Work Culture Customer focus Team work Continuous learning

Value of Customer Knowledge An important asset that companies own Origin of most improvements in products and customer service Vital for companies to create and sustain their competitive advantage

Sources of Customer Knowledge Directly from customers Indirectly through knowledgeable employees, suppliers and partners Systems that capture and analyze sales transaction, customer profile, usage pattern and etc.

Acquisition of Customer Knowledge Market research Loyalty program CRM program Focus group Involving frontline staff Customer user-group Company hotline & web site

Problems with Customer Knowledge Gather by different business units for their specific objectives Not properly managed throughout the life cycle Lack of a “ central clearing house ” and senior executives to take quick and appropriate actions Low participation from frontline staff Focus on explicit knowledge and data

Customer Knowledge in Fashion Retailing

Nature of Fashion Market Short selling period- in months or weeks Demand unstable- influenced by weather, mass media or film stars Low predictability- difficult to do accurate forecast High impulse buying- most buying decisions are made in the store

What Retailers Do? POS data Loyaltycardprogram Marketresearch

What Retailers May Not Know? The store traffic Conversion rate- how many shoppers are “ converted ” into buyer The amount of time a shopper spends in a shop The interception rate- the percentage of customers who have some contact with sales staff The waiting time Why customers don ’ t buy

Customer Knowledge Strategy Identify customer knowledge as the most important knowledge to the business Apply KM principles and practices to maximize the value of customer knowledge Build up a customer-focused and learning culture

Two Examples using KM Use frontline staff to build a customer-focus culture Use AAR meeting to build a learning culture

Shop Customer knowledge Management (CKM)

Why CKM? superior customerknowledge applyour product and service delivered We know that in order to gain competitive advantages in this constant changing environment, we will need superior customer knowledge, and the ability to apply that knowledge to improve our product and service delivered.

What is Shop CKM? Our front-line staffs generate many insightful knowledge through their day-by-day interaction with the customers … how do we manage all these collective tacit knowledge? The question is : how do we manage all these collective tacit knowledge?

Support for the Front-line Staff: Training on observation skills Emphasis on their benefits when head office better understand their difficulties whilst selling products to the customers. Implementation Shop CKM

Discoveries Learning Action Through front-line staffs observations and sharing own tacit knowledge with team member. Codify collective knowledge standard from. Fax to office for storage and analysis. Relevant parties to develop action plan according to the learning discovered. The Knowledge-transfer Process: Benefits of Shop CKM

Shop After Action Review (AAR)

U.S. Army ’ s After Action Review A review meeting held after an action, with the purpose to capture lessons and re-use in next battle or mission.

Ground Rules of AAR Meeting Discover the “ ground truth ” Focus on issues, not people No personal attack Don ’ t blame for mistake or failure Be Open, positive, constructive

4 Questions in AAR Q1.What did we set out to do ? Q2.What actually happened ? Q3.Why did it happen ? Q4.What are we going to do next time ?

AAR as a KM tool Capture Lessons Learned Experience Knowledge

AAR as a KM tool Knowledge Transfer Individual Team

How to start KM initiatives?

Three approaches to change Top down Bottom up Middle-up-down

Middle managers are often attacked as the obstacles to changes In the knowledge-based economy, middle managers are the key to innovation Knowledge is created by middle managers who are leaders of task forces

Stages of Implementation Stage 1 Getting Started Stage 2 Explore and Experiment Stage 3 Pilots and KM Initiatives Stage 4 Expand and support Stage 5 Institutionalize KM Source: APQC