The question I am asking here is "How can lessons from Trident Missiles improve future patient healthcare treatment?" or more prosaically "What is the business case for knowledge management in healthcare product and service development and delivery?"
A number of times in recent weeks the topic of the business case for knowledge management (KM) has arisen in my interactions, conversations and activities, and from which some initial reflections are convincing me of the need and importance for new work, approaches and applications in this area. Personally I would like to develop the case approaches in the life science/pharmaceutical/healthcare area but new approaches may apply across sectors and cross-industry comparisons may be insightful.
Before getting into the challenges let me mention one story I came across recently that really brings home the future benefits of KM applied to technology development over the long term. It is the one of how the knowledge required to refurbish Trident missiles has been literally lost: http://kerrieannesfridgemagnets.posterous.com/did-we-throw-out-that-fogbank-stuff-no-probs Ignoring the question of why the missiles are being refurbished and whether that should be done, you can simply focus on the issue of huge cost gain and loss of investment through inadequate KM. This case involves not only inadequate explicit knowledge management of data, procedures and processes, but also the loss of human and social capital knowledge associated with the technology due to worker loss and retirement unaccompanied by tacit knowledge sharing, transfer and alumni retainment measures. So there simply has been an almost complete organizational memory loss of a key competency; lack of KM is now costing tens if not hundreds of millions of dollars of squandered taxpayers’ money to reinvent the wheel.
In this time of cost-cutting responses to the finance industry triggered economic recession and mass follow-me psychological depression, it would be pertinent for long-term investment stakeholders to consider the above lesson in lack of KM. As executives are cutting costs and jobs to survive and human and social capital in the organization is being lost or destroyed, one should ask what is the impact of knowledge loss on the long term value and growth of the organization. What KM measures are being taken so that the organization is simply not forgetting what it can do?
Let’s return to focus on the challenges with formulating the business case for KM in the life science/pharmaceutical industry case. If the case is for a small tactical project and we concentrate on short term benefits and localised returns, then one can probably do a reasonable job with existing best practices. However this is of very limited value in assessing the impact on factors that are really strategically important – e.g., longer term overall financial performance, sustainable development, stakeholder value, innovation success etc.
If we accept the statement that no major organisation in the life science/pharmaceutical industry has yet implemented a successful quantified global organisation-wide KM strategy, then we are immediately and obviously in the situation of having no previous data or case study as reference. (I welcome exceptions even if partial cases added as comments and links to this initial post.)
Moreover the situation is even worse in terms of complexity. The current industry business models are in their old age years; the current approaches of pharma mergers and biotech acquisitions are intermediate strategies, and the models of the future e.g., service oriented approaches combining knowledge, diagnostics and interventions for population segmented personalised medicine are currently plans and pilots. Such factors will certainly distort many of our calculations for mid and long term returns.
According to the Economist’s 2020 study Pharma industry executives considered KM as the greatest potential source of productivity gains between 2005 and 2020. (Reference:
“Foresight 2020: Economic, Industry and Corporate Trends”, The Economist, (2005).
http://www.eiu.com/site_info.asp?info_name=eiu_Cisco_Foresight_2020&rf=0) Although looking promising at first sight, my concern is what definition of KM was understood by respondents to this survey. If the understanding was similar to what I have often encountered, there will be a great spectrum of definitions included in the survey sample and unseparated in the results analysis. So we need to consider the question (and our business case ones) in the light of considering all KM impacts on value including structural, human and social capital values, and hence needing consideration of intellectual capital approaches. Of course the current impact of mergers and acquisitions and associated job cutting complicates significantly an intellectual capital analysis applied over time.
A further significant complication in pharma is the long development cycle and time gap between initial R&D and market returns. There will in general be a lag between gains in an intellectual capital index and a stock market financial metric, but the long lag time in drug development with complexities such as mentioned above make a clear return analysis very difficult. We know at least anecdotally that many pharmaceutical companies often face knowledge loss issues similar to that depicted above for the Trident with their drug products. The loss of personnel associated with mergers, acquisitions or recessions exasperates the already challenging issue of knowledge integration, sharing and translation across the life cycle.
The Dow Jones Sustainability Index has now been applied to pharmaceutical, biotech and healthcare companies for a few years and provides some initial insight on the KM business case problem for this sector as it includes some KM-oriented components such as human capital and talent management valuations. However it appears that several extensions and elaborations to such indexes are necessary. The ideal would be a KM index component that predicted future stock market index gains for organization or sector which could guide both current strategy and investment decisions.
However as KM increasingly becomes integrated with operations and work processes, it will become more challenging to separate out components as suggested above and inter-dependency may favor smartly aggregated multidimensional metrics.
Finally, there is the issue of the prospect of the increasingly collaborative approach to work in life science R&D, translational medicine and healthcare service provision. If infrastructures increasingly involve virtual organization approaches sharing risk, practices and value creation across organizations, the KM evaluation and measurement situation has a further series of differences in these contexts. At this stage one might just think one should give up on a detailed approach to intangibles and a quantitative KM business case for the industry.
However, let’s finish on an optimistic note. What we may be happy to settle for here are metrics which can successfully guide decision making rather than scientifically rigorous ones. We should therefore remind ourselves of the bounded rationality theory of Herbert Simon, which would point to our only needing to guide the non-optimal decision making of managers, based on metrics which are good or useful enough. There should only be so many pairs of shoes for me to choose from in the shop before I decide; for me 2 or 3 good pairs are enough! We can also remind ourselves that although Herbert Simon was awarded his Nobel in economics, he spent much of his life working in AI. (If you are an economist expert reading this post and encountering imponderable conjunctures, please reach out to correct, extend, enlighten and collaborate…!)
So for now I will conclude it looks like an interesting problem to work on. Please a) add relevant comments and links to this post and/or b) contact me at Barry.Hardy -(at)- douglasconnect.com if interested in joining a (probably initially small) practice group interested in discussing and developing approaches in this area.
Barry Hardy
InnovationWell Community of Practice & Research Manager
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