Evolving To A Knowledge-Centric Organization

Evolving To A Knowledge-Centric Organization
Copyright 2004 Northrop Grumman Corporation Evolving To A Knowledge-Centric Organization Panel Presentation ASMC Washington Chapter Mini-PDI March 29, 2005

Copyright 2004 Northrop Grumman Corporation
Agenda Introductions Dr. Michael Stankowski, D.Sc., Associate Professor, George Washington University Mr. James E. Short, Deputy Assistant Secretary, Financial Operations, SAF-FM Dr. Bill Lese, V.P. SATS, DES, NGIT Questions & Answers

Connecting Knowledge Assets
Copyright 2004 Northrop Grumman Corporation Dr. Michael Stankowski D.Sc., Associate Professor, George Washington University Connecting Knowledge Assets

Knowledge sharing: Are you an asset or a liability?
IKM Copyright 2004 Northrop Grumman Corporation Institute of Knowledge Management Knowledge sharing: Are you an asset or a liability? Connecting Knowledge Assets By: Michael Stankosky, D.Sc. and Andreas N. Andreou, Research Director

Introduction: A KNOWLEDGE-BASED ECONOMY
Copyright 2004 Northrop Grumman Corporation Introduction: A KNOWLEDGE-BASED ECONOMY Overview KM Pays off KM Perspectives Intellectual Capital (IC) Knowledge Assets (KA) KM Economic Model Why intangibles? Value drivers IC Schema Back to basics A suggested template Q & A

KM Pays Off Dow Chemical: $100m Silicon Graphics: $2.8m
Copyright 2004 Northrop Grumman Corporation KM Pays Off Dow Chemical: $100m Silicon Graphics: $2.8m Texas Instruments: $500m (cost avoidance) Computer Sciences Corp: $5.8b Chevron: $150m Cemex: (average delivery time 20 minutes) Ford: 3 month reduction in cycle time Cisco: One hour virtual financial close

KM Perspectives “SHARING RELEVANT KNOWLEDGE IS POWER”
Copyright 2004 Northrop Grumman Corporation KM Perspectives “SHARING RELEVANT KNOWLEDGE IS POWER” “IF IT ISN’T BROKE, BREAK IT” “IF WE ONLY KNEW WHAT WE KNOW”

Intellectual Capital “Intellectual capital is what it’s all about. Releasing the ideas of your people is what we’re trying to do, what we’ve got to do if we’re going to win.” Jack Welch

Knowledge Assets INTELLECTUAL ASSET/CAPITAL HUMAN CAPITAL
Copyright 2004 Northrop Grumman Corporation Knowledge Assets INTELLECTUAL ASSET/CAPITAL HUMAN CAPITAL MARKET CAPITAL STRUCTURAL CAPITAL PROCESS CAPITAL RENEWAL CAPITAL INTANGIBLE ASSETS

What is an Economic KM Model?
Copyright 2004 Northrop Grumman Corporation What is an Economic KM Model? A model that allows for the accounting of of non-financial (intangible assets) measures and indicators in the market valuation of today’s business enterprise. Definition of Intangible Asset “An intangible asset is a claim to future benefits that does not have a physical or financial (a stock or a bond) embodiment. A patent, a brand, and a unique organizational structure (for example, an Internet-based supply chain) that generate cost savings are intangible assets.” (Baruch Lev, Intangibles Management, Measurement and Reporting, 2001, page 5) 7 7

What is the driver for the need to account for intangible assets?
Copyright 2004 Northrop Grumman Corporation Why Intangibles? Why is there a need to account for intangible assets? Intangible assets account for 70% of the value of a business enterprise and they are not adequately represented in current accounting methodologies (GAAP). There is increasing discrepancy between the market values of many corporations and the values of their shareholder equity when measuring their book value in accordance with GAAP. Market-to-book ratio for companies has gradually risen to about in the late 1990s (Lev, ). For every one dollar on companies books, there are five dollars unaccounted for. What is the driver for the need to account for intangible assets? We are in the information age, which is dominated by service organizations (Hope and Hope, 1997) is remembered as the year companies serving industry outnumbered those in industry in the US (Sveiby ) Services have increased steadily as a share of measured total output in the economy and the delivery of high-end skilled services and professional services involves substantial input of intangibles. (Blair and Wallman, 2000 p 12) Capital accumulation has more than doubled in the last 10 years and the bulk of this growth is attributed to information technology (Bosworth and Triplett 2000) 5 5

Value Drivers CUSTOMER COMPETITOR EMPLOYEES INFORMATION PARTNER
Copyright 2004 Northrop Grumman Corporation Value Drivers CUSTOMER COMPETITOR EMPLOYEES INFORMATION PARTNER PROCESS PRODUCT/SERVICE TECHNOLOGY

IC Schema

Back To Basics Ray Lane, Former COO of Oracle
Copyright 2004 Northrop Grumman Corporation Back To Basics “We don’t have a way to classify the intellectual capital or knowledge.” Ray Lane, Former COO of Oracle “Our problem is we don’t know what we know.” Lew Platt, Former CEO of Hewlett Packard Problem statement: Lack of fundamental and coherent understanding of the knowledge assets that we try to manage at the lowest level of operational granularity. What is needed: A list of knowledge assets that can be attributed to performance outcomes. An architectural blueprint that shows what is relevant to be shared. A template that includes both tacit and explicit knowledge, that goes beyond the traditional information found in a CV.

A Suggested Template

ENTERPRISE MANAGEMENT, ENGINEERING, AND INTEGRATION:
Copyright 2004 Northrop Grumman Corporation INPUTS PROCESS OUTPUTS FEEDBACK ENTERPRISE MANAGEMENT, ENGINEERING, AND INTEGRATION: A Systems Approach to Leverage Enterprise-wide Intellectual Assets Michael Stankosky, D.Sc, George Washington University © 2001—All Rights Reserved u Assure Generate Codify Transfer Use Codification Personalization KM Technologies • Collaborative Distributive Codified Organization Formal Informal Functions Processes Intellectual Assets (Operational)

Performance Metrics MEASURE WHAT IS OF VALUE/MEANINGFUL
Copyright 2004 Northrop Grumman Corporation Performance Metrics MEASURE WHAT IS OF VALUE/MEANINGFUL BALANCED-SCORECARD EMPLOYEE GROWTH/LEARNING ORGANIZATIONAL GROWTH/LEARNING CUSTOMER SATISFACTION KNOWLEDGE CONTRIBUTION (PATENTS, NEW INITIATIVES, REDUCED TIME-TO-MARKET, ETC) IMPROVED CORE PROCESSES

Any Questions?

Mr. James E. Short Deputy Assistant Secretary Financial Operations
Copyright 2004 Northrop Grumman Corporation Mr. James E. Short Deputy Assistant Secretary Financial Operations Transforming The Way We Work Together

What is Knowledge Management (KM)?
Copyright 2004 Northrop Grumman Corporation “Knowledge Management is a systemic process of identifying, capturing, and transferring information that can be used to enhance performance or improve related tasks or processes.” (Information Resources Flight Plan Aug 04) Before we talk about a knowledge-centric organization, I want to make sure we’re all on the same page. Here is the way the Air Force defines KM. I like to view KM in the simple way: it connects people to people and people to knowledge. BACKUP: Other KM Definitions “Knowledge management is an emerging discipline that stresses a formalized, integrated approach to managing an enterprise’s intangible information assets…Knowledge management is a coordinated attempt to tap the unrealized potential for sharing and reuse that lies in an enterprise’s collective consciousness.” Gartner Group “..providing the right information to the right decision-maker at the right time, thus creating the right conditions for new knowledge to be created.” Dow Chemical “Knowledge management is a business strategy, best practice transfer, personal learning, customer intelligence, intellectual asset management, and innovation.” American Productivity & Quality Center Simply put, KM connects people to people and people to knowledge

Challenges from FM Strategic Plan
Copyright 2004 Northrop Grumman Corporation Challenges from FM Strategic Plan “Deliver global financial services, manage Air Force resources, and help Air Force leaders be effective and efficient resource stewards and make informed resource decisions.” “Develop a sustained passion for continuous improvement and innovation that will propel the Air Force into a long-term, upward spiral of accomplishment and performance.” “Make processes efficient and effective to produce accurate and relevant financial information complemented by sophisticated decision support.” “Knowledge management systems are just one part of an effective strategy that will help generate, capture, and disseminate knowledge that is relevant to the organization’s mission.” Our mission is laid out for us in the Financial Management Strategic Plan. I’ve laid out some of the key challenges from the plan that face us, with an eye on how Knowledge Management can overcome the challenges. These quotes are all challenges FM Knowledge Management can help solve. “Informed resource decisions (bullet 1), “continuous improvement and innovation” (bullet 2), and “sophisticated decision support” (bullet 3) are the essence of Knowledge Management. The last quote is from the President’s Management Agenda, FY 02, p 13 and is #1 of 5 Government-wide initiatives: “Strategic Management of Human Capital”.

Actions Established FM Knowledge Management (FM KM) Core Team
Copyright 2004 Northrop Grumman Corporation Actions Established FM Knowledge Management (FM KM) Core Team to assist FM Community; SAF/FM Chief Knowledge Officer position established October 04 Using Air Force Knowledge Now as the on-line vehicle to facilitate learning and collaboration Aiding the FM Transformation effort Using Communities of Practice (CoP) as the primary collaboration tool in the FM Community - 55 new FM CoPs published in FY 04, bringing total to 132 CoPs (71% growth) and 3,065 unique Users in FM CoPs (158% growth) These are some of the Actions FM KM has taken to respond to the challenges laid out in the FM Strategic Plan. Bullet 1: The FM community is leading the way for the Air Force in its KM efforts. We have a FM KM core team established at Wright Patterson AFB and in Washington, DC, and Mr. Montelongo formally established a Chief Knowledge Officer position to advise me and lead FM’s KM efforts. Bullet 2: We use Air Force Knowledge Now as our on-line vehicle to facilitate learning and collaboration. Bullet 3: The Air Force’s financial management community is transforming from a transaction-focused organization to one of decision support. FM KM is aiding the transformation effort by setting up communities of practice and discussing available tools that will allow our transformers to work smarter. Bullet 4: Speaking of Communities of Practice, I’m very proud of the progress we’re making. We are truly on the road to becoming a knowledge-centric organization. The next slide shows our results from the actions we’ve taken. BACKUP INFO: A Community of Practice (CoP) workspace provides a web-based collaborative environment where members of a group use shared information and administrative and communications tools to conduct business, manage a project, keep abreast of important group issues and solve group problems.

Results Improved communications within and across organizations (24/7/365 global access) Cost/Time Savings “Automated Tools Forum” one primary example Higher Productivity/Improved Mission Accomplishment “Wisdom Exchange” links FM subject matter experts with questions from the field Weaving KM into the fabric of FM everyday work Bullet 1: KM innovations like 24/7/365 access any place via the AF Portal (AFP) promote a broader KM perspective AF-wide and fosters a culture embracing decision support and analysis - financial managers contribute their expertise, which reinforces their role as strategic partners with decision makers. Bullet 2: The Automated Tools Forum is a concrete example of how FM KM can deliver a solution in less time and for less money. In this forum, we’ve placed the best work tools that the FM community has to offer, and made them accessible for all to use. This is a prime example of collaboration at its best. Bullet 3: The FM KM team has fundamentally transformed the way we work together! Documents are exchanged via uploading instead of sending s with huge attachments that bog down servers. Instant notification of changes allows users to stay in touch. We’ve achieved cost effectiveness by integrating FM with existing Air Force Tools (Air Force Knowledge Now and the Air Force Portal).

Call To Action Air Force-wide Knowledge Management Conference in May
Copyright 2004 Northrop Grumman Corporation Call To Action Air Force-wide Knowledge Management Conference in May FM KM Strategy Development after the Air Force Conference FM KM booth & theatre time at ASMC/PDI May/Jun Marketing and training will continue to be immediate challenges for FM KM What’s our call to action from here? We’ve listed several of the next steps that are planned. Bullet 1: We will be participating in the first Air Force-wide Knowledge Management Conference in late April, and I’m pleased to tell you that there will be two FM KM presentations as part of the break-out sessions. My Chief Knowledge Officer will be making a presentation on an FM KM Performance Analysis that he worked on last fall for me, and there will be another presentation on FM KM by the FM KM Core Team. I’m excited that the Air Force has decided to hold this conference. This signals to me the Air Force’s commitment to Knowledge Management. Bullet 2: One of the major outcomes from the Air-Force wide conference will be the discussion and development of an Air Force KM strategy. We as an FM community will take the Air Force’s strategy and develop our own FM KM strategy. Bullet 3: We will use two successful FM Communities of Practice for our theatre time at the ASMC PDI. This will be their story of how collaboration is working in the field to better accomplish their mission. Bullet 4: I find in my travels that one of our key challenges is marketing and training on the system. Once people learn about FM KM and actually use our site, they get extremely excited by its potential. Right now we are starting to work well at the grass roots level, but it will take time to change the culture of how we work together.

AF FM KM go to https://www.my.af.mil/afknprod/fmkm
Copyright 2004 Northrop Grumman Corporation I’ll close my presentation with a slide that depicts the FM KM Home Page on Air Force Knowledge Now. You can see that three of the key areas I discussed– FM Transformation, the Automated Tools Forum, and Wisdom Exchange—are prominently featured. Thank you for the opportunity to participate in today’s panel discussion. I look forward to your questions. AF FM KM go to

Back-up Slides

KM Benefits Fosters innovation Improves customer service
Copyright 2004 Northrop Grumman Corporation KM Benefits Fosters innovation Improves customer service Enhances employee retention Streamlines Operations and Reduces Costs Better, Faster Decision-Making

Communities of Practice (CoPs)
Copyright 2004 Northrop Grumman Corporation Communities of Practice (CoPs) Facilitates information sharing and organizational learning conduct business manage projects keep abreast of important group issues solve group problems

FM Air Force Knowledge Now Performance Analysis
Copyright 2004 Northrop Grumman Corporation FM Air Force Knowledge Now Performance Analysis 2-Month Study conducted Fall 04 Detailed briefing given to Mr. Vonglis on 3/17/05 Presentation will be given to Air Force KM Conference in April Study provides several recommendations: Establish KM Governance Structure Use findings from the analysis as input to written FM KM Strategic Plan Meet with FM Transformation Owners

Chief Knowledge Officer (CKO) Memorandum
Copyright 2004 Northrop Grumman Corporation Chief Knowledge Officer (CKO) Memorandum Memo signed 4 Oct 04 by Mr. Montelongo Legitimizes/establishes the CKO position CKO charged with coordinating knowledge-related efforts, coaching senior leadership, and connecting people One goal is to establish KM Advisory Council Memo distributed to all ALL MAJCOM/FM

FM KM Strategy Development
Copyright 2004 Northrop Grumman Corporation FM KM Strategy Development Reviewed FM KM FY03 Workshop output Will incorporate recommendations from FM AFKN Performance Analysis CKO Interface with CIO CIO developing Air Force Information Management Strategy, which will address Knowledge Management Planning Session scheduled May 11th with Hubert Saint-Onge

KM Working Group Meetings
Copyright 2004 Northrop Grumman Corporation Bi-weekly meetings started in August to work active issues and share knowledge Expanded membership to include FM KM Core Team, FMT, AFKN offices Issues addressed include: Broken Links issue as a result of moving to AF Portal Service Delivery Model Budget Formulation System Budget CoP Air National Guard Knowledge Capture Air Force Knowledge Services Forum to work transition of FM KM initiative to Air Staff

FM KM Transition to SAF/FM
Copyright 2004 Northrop Grumman Corporation FM KM Transition to SAF/FM Estimate 1 Oct 05 for handoff KM Working Group serving as forum for identifying details of Transition Plan Overview strategy briefing given to Maj Gen Faykes and Mr. Short

Dr. William G. Lese, Vice President Simulation, Analysis, & Training Systems, Northrop Grumman IT Achieving Corporate Excellence through Enabling Knowledge Centric Operations

Knowledge Management Perspective
Copyright 2004 Northrop Grumman Corporation Knowledge Management Perspective Information Systems Platforms & Storage Software Infrastructures Networking & Communications Electronic Workplace Enterprise Application Packages Structure Management Hierarchy Lines of Communication Culture Values Behaviors Attitudes Rewards Technology Organizations and People Processes Practices Communities of Practice In implementing the KM roadmap, we have chosen the Community of Practice (CoP) as the organizational unit for defining the KM infrastructure. In a formal organization the population is too diverse to permit meaningful evaluation. However, the CoP, by definition, is united by a common purpose, values, and vocabulary. Its knowledge needs can be easily identified. This roadmap method can be used repetitively for all CoPs regardless of their specific knowledge content. Every organizational system has three basic components: its physical structure, its processes and practices, and its enabling technology. For the organization to effectively accomplish its mission, these three components must be balances and mutually supporting of each other. For a CoP, the organizational structure is virtual and cutting across formal organizational boundaries. Its communications are often informal and knowledge exchange networks form more serendipitously than by mandate. CoPs may reside within the part of the organization’s value chain that directly produces its products and services or they may be part of the supporting infrastructure. The enabling technology can be isolated to that required to facilitate the capture and exchange of knowledge. Supporting Infrastructure Planning HR Contracting Purchasing Etc. Value Chain Research Design Develop Acquire Deliver Support

The New Northrop Grumman
Copyright 2004 Northrop Grumman Corporation The New Northrop Grumman Northrop Grumman 5/94 Vought Aircraft 8/94 Westinghouse Defense Electronics 3/96 Logicon 5/97 4/01 Aerojet 10/01 Sterling Software 10/00 Newport News 11/01 12/02 Northrop Grumman TASC, PRC BDM TRW Sperry Marine Ingalls, Avondale Shipbuilding Litton This slide has two purposes: (a) it shows what companies make up Northrop Grumman, so that a customer can see how diverse our offerings have become, but more importantly (b) it gives us a place to talk to the customer our our experience with organizational integration – an activity that the Department of Homeland Security is heavily involved in now. This slide also presents an opportunity to explain why Northrop Grumman wants to help: we believe we are the “Cadillac” of government contractors, but that means we need for customer procurements to be discerning in order for our “best value” strategy to work. When we can help any customer become more efficient and streamlined, that helps Northrop Grumman, because “smart customers buy smart solutions”. Decade-long transformation to complete National Security portfolio Process for post-merger integration recognized by: Forbes, 2002 Company of the Year U. Va. Darden School Best Practice Case Study Deloitte Consulting white paper on merger-integration Integration Best Practices Integrate quickly; manage integration like a program, with milestones, schedules, and work statements Assign direct integration duties to senior executives Focus initially on financial, legal/regulatory, and human resources systems Maintain focus on customers Communicate integration plans continuously, to all employees and customers, paying particular attention to lower-level management Address cultural issues Identify existing best-practices from within individual organizations, extend those to the enterprise (don’t develop new approaches) Later, use synergies to develop new capabilities

KM Benefits to Northrop Grumman
Copyright 2004 Northrop Grumman Corporation KM Benefits to Northrop Grumman Creates Synergy across the Entire Corporation Increases Operational Efficiencies Manages a Changing Environment Ability to Capture the Knowledge of an Aging Workforce Stimulates Innovation which Provides a Competitive Advantage Ability to Rapidly Sense & Respond Ready Knowledge Access Across Enterprise Ability to Identify and Resolve Emergent Issues Ability for a Geographically Dispersed Workforce to Collaborate Ability to Integrate Technologies Seamlessly into Customer Solutions Ability to Leverage Business Development Opportunities Tie to RAND study

NGC Knowledge Journey – Key Milestones
Copyright 2004 Northrop Grumman Corporation NGC Knowledge Journey – Key Milestones 1996: First customer KM engagement with USJFCOM 1997: Started Internal Knowledge Management (KM) 1999: Expanded KM Across IS Sector 2000: Formed Corporate-wide KM Community of Practice 2001: Expanded KM Across Integrated Systems Sector 2001: Participated in the Industry Benchmarking Study on Communities of Practice 2001: Corporate Sponsorship - KM Council Formed 2002: KM Teams Established in Other Sectors 2002: Identified as a Best Practice in KM by Industry 2003: Established a Corporate KM Strategy 2004: Corporate level funding committed 2004: Conducted 6th Corporate-wide KM Summit 2004: Created KM Program Manager position 2005: Deploy Collaboration Infrastructure and Tools

KM Relationship to Enterprise Solutions
Copyright 2004 Northrop Grumman Corporation KM Relationship to Enterprise Solutions ENABLING BETTER INFORMED DECISIONS DECISION SOLUTIONS KNOWLEDGE MANAGEMENT DECISION QUALITY KNOWLEDGE UNDERSTANDING Right Knowledge Right Place Right Time Actionable THE ENTERPRISE ENTERPRISE ARCHITECTURE CONNECTIVITY DATA PROCESSING INFORMATION DATA & TRANSACTIONS THE CUSTOMER’S PROCESSES AND DATA

Elements to Our KM Strategy
Copyright 2004 Northrop Grumman Corporation Elements to Our KM Strategy Activities Objectives Outcomes Drivers Provide Common Enterprise-Wide Processes and Systems Knowledge Depots COPs Expert Networks Provide Common Enterprise-Wide Talent and Capabilities Management Solution Establish a Governance Solution Put in Place a KM Technology Infrastructure Knowledge is Easily Identifiable and Accessible NG is a Knowledge Optimized Culture NG Shares a Common Language and Governance NG has Embedded Knowledge Tools and Processes Able to Rapidly Stand Up High Performing Teams Enterprise-Wide Access to Capabilities Highly Coordinated Enterprise for Customer and Supplier Knowledge Ability to Rapidly Sense & Respond Ready Knowledge Access Across Enterprise Ability to Identify and Resolve Emergent Issues Ability to Collaborate Across Enterprise Ability to Integrate Technologies Seamlessly to Customer Solutions Ability to Leverage Business Development Opportunities Build Technology Portfolio Pursue Emerging Opportunities Apply Technology and Talent Improve Performance Developed at a Cross-Sector Workshop facilitated by Hubert Saint-Onge

KM Strategy Implementation Actions
Copyright 2004 Northrop Grumman Corporation KM Strategy Implementation Actions The ability to rapidly tap NG’s talent The ability to maintain tacit knowledge continuity The ability for people to share, learn and collaborate The ability to find and reuse knowledge regardless of sources The ability to manage customer relationships The ability to share enterprise excellence knowledge Focus on culture shift & communications A high leverage cross-sector competitive business pursuit Information architecture Establish governance model

KM Projects Oversight Model
Copyright 2004 Northrop Grumman Corporation KM Projects Oversight Model IIS & KM Teams Implementation Corporate KM COUNCIL Strategic Leadership Sector KM Councils Steering Groups: 3 - Collaboration 4 - Search & Taxonomy 7 - Change Management 9 - Information Architecture 10 - Governance 11 - Portal KM -- ES Sector KM -- MS Sector KM -- ST Sector KM -- IS Sector KM -- IT Sector KM -- SS Sector KM -- NN Sector Tactical (S2 – Integrated Portal Management Team (IPMT)) Leverage Best Practices Share Enterprise Standards Corporate KM PM Program Management KM -- Corporate

Discussion Wrap-Up Knowledge Management is a continuous, never ending journey that becomes the accepted operational model Human interaction and intellect are at the heart of all KM activities Information technology is an enabler for KM Knowledge Management programs can be successfully implemented through different mechanisms Northrop Grumman has integrated internal KM initiatives with our external KM products and services KM provides NGC decision makers with actionable decision quality knowledge at the right time

Washington DC Chapter PDI
D E F I N I N G T H E F U T U R E Q &A

Evolving To A Knowledge-Centric Organization

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