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April 5, 1999

What's The Investment Worth?

By Beth Davis and Brian Riggs

Illustration by Jose Ortega

apturing knowledge is hard enough--so how do companies account for the investments they're making in knowledge-management projects?

According to InformationWeek Research, about a quarter of the 200 IT executives surveyed say they have no expectation of being able to measure the return on their company's investment. On the other hand, 16% of respondents claim they have already achieved payback, while another 49% of them expect to do so over the next two years.

Shell Oil Co. is among the companies attempting to project the potential returns from its knowledge-management initiatives. Shell is running two tests that involve electronic communities of reliability and safety engineers. The engineers work in 11 refineries across the United States and have access to an internally developed intranet that lets engineers enter and access information on best practices that might help them do their jobs faster, better, and cheaper. The system "allows us to identify a best practice in Deer Park, Texas, and immediately share it with someone in Martinez, Calif.," says Scott Beaty, knowledge-management officer in the learning and transformation services division of Shell, in Houston.

Shell estimates that identifying a best practice at one refinery already reaped $3 million in savings and "cost avoidance." By adopting this approach more broadly, Shell could save $15 million to $30 million this year alone, Beaty estimates.

But others warn against placing too much emphasis on financial returns. "Putting pencil to paper to do an ROI on knowledge management is the wrong thing to do," says Tom Brailsford, manager of knowledge leadership at Hallmark Cards in Kansas City, Mo. "If you are insistent upon ROI, knowledge management will die a quick death."

Why the dim view of ROI? Brailsford says the focus should be on "creativity, innovation, and moving the business forward."

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Illustration by Jose Ortega