February 20, 2001, 4:02 PM — FACE IT. Most knowledge management efforts are doomed to failure. They are internally focused, and they have fluffy measures of success. Often, the KM team counts inputs ("We have 20 people working on KM") and activity ("We have 1,500 best practices codified"). You end up keeping very smart people busy producing lots of paperwork, and increasing overhead costs, for fuzzy benefits.
To succeed, CIOs must redefine knowledge management in terms that focus on what would make it most valuable to a business. That means having a deep knowledge of your company's supply chain, from what your customers want to when they want it and which suppliers can quickly deliver high-quality parts to meet those wants. You can use this knowledge to focus on the critical goal of improving the return on capital for your company, your customers, suppliers and business partners. And by mastering KM -- one of the squishiest IT concepts out there -- you can help your company seize an enormous digital age opportunity.
Here's why. While the 30-day payment cycle has been a convention for as long as anyone can remember, it's obsolete in the digital economy. The traditional principle governing the physical supply chain made a lot of sense when it took me three to five days to book an order, 15 days to ship it, and six days for the bank to clear the transaction. But the rules are no longer valid as business becomes more digitized. When I click "buy" on a webpage, everybody should get paid.
Understanding this shift and the importance of managing knowledge about your company is what will make capital flow in your favor. Business conditions have not yet caught up to this potential. Companies that have good knowledge of their supply chains can take advantage of this "float" to get cash from customers at new economy speed, while paying suppliers at old economy speed. This means you can keep inventory out of your own supply chain until the last second, moving all that inventory and capital volatility onto your buyers and suppliers' balance sheets. In a volatile market, you have more strategic flexibility because it's their capital that's bouncing up and down, not yours.