When it comes to KM best practices, APQC president Carla O’Dell explains how knowledge taxonomies and open standards can improve benchmarking and speed knowledge transfer.

Taxonomy is one of ‘those’ words. There’s just something about it that causes people’s eyes to glaze over. But even if you never throw out the word at a cocktail party or executive meeting, it doesn’t mean KM professionals should avoid the power such a classification system can provide when working to identify, create and distribute knowledge.

A common taxonomy of fundamental business processes can make the job of comparing practices between companies a much simpler and more valuable exercise. The more detailed and widely recognised such a classification system is, the more useful it will be. Because APQC is known for its business process taxonomy, open access to enterprise benchmarks, and knowledge management initiatives, I am often asked how these might be used in synergy to promote knowledge and best practice transfer.

My answer is simple on the surface: Benchmarking identifies the internal and external best practices, and knowledge management creates the systematic processes to share these practices with the people in an organisation who need them.

"The most effective benchmarking projects will accelerate an organisation’s rate of change and help to overcome complacency."

The most effective benchmarking projects will accelerate an organisation’s rate of change and help to overcome complacency. There’s always another company or another division that has figured out a better way of doing some of the things you do. Although the majority of firms tend to focus on keeping up with the competition, most breakthrough improvement opportunities are found outside of a company’s specific industrial sector.

“We constantly try to pick up new ideas,” Mehmood Khan, Unilever’s global leader for innovation process development, confirmed. “We are a fast-moving consumer goods company but we compare ourselves to IT and other high-tech industries. Within our own industry, we have to see how we compare to peers. Benchmarking tells us where we stand with respect to our competitors and other industries across the world.”

That knowledge becomes the basis for action, which is the intent of knowledge management initiatives.

The four phase model

Effective benchmarking requires a systematic process for examining internal processes, finding other organisations that perform such processes better and learning how they do it. Benchmarking projects should start with planning, followed by collecting data, analysing performance gaps and adapting and improving.

The most successful organisations devote half of their benchmarking time and resources to this final stage, using the information gathered to modify their business processes. This includes sharing best practices, creating improvement plans and executing those plans.

The planning phase of a benchmarking initiative lays the groundwork for unearthing performance gaps and best practices. During this phase, the benchmarking team establishes the scope of the study, choosing an area of focus that is aligned with the organisation’s strategic priorities and processes. To enable the goal of knowledge sharing and action using the findings from the benchmarking study, the planning phase must identify who needs the information (the recipient) and how best to engage them with the ‘source’ material to build the likelihood of them using it.

After determining the scope, processes and practices to benchmark, the team will identify and define key performance indicators (KPIs) and begin to measure internal performance. This set of metrics will vary by organisation and blend leading and lagging (financial or outcome) measures. The team must strike a balance between using measures that are meaningful to company managers and those that can be directly compared to metrics tracked by other organisations.

Adopting standard business process definitions and metrics will make it easier to find and reduce the cost of gathering valid and reliable data and practice information. The KPIs help identify the companies with better practices from whom the benchmarking team can learn.

Open source

APQC’s process classification framework (PCF) was originally launched in 1992 as a taxonomy of business processes for member organisations. Since its inception, semi-annual updates have kept the process framework current to reflect new enterprise categories, processes, definitions and KPIs. It organises operating and management processes into 12 enterprise level categories and more than 1500 processes and associated activities.

The enterprise and industry-specific PCFs form the foundation of the Open Standards Benchmarking Collaborative (OSBC), a complimentary benchmarking program managed by APQC that allows organisations to compare their performance data against that reported by thousands of other operations.

Open source software, such as Linux, is a prime example of the open systems and common standards that have changed industries around the world. Rather than anyone “owning” proprietary source code, developers are free to use the code, innovate, and contribute improvements. In a similar fashion, by building upon the publicly available PCF, the OSBC research contributes to more objective and higher quality comparisons of business performance.

Instead of struggling to find comparable data, which can take weeks or months, benchmarking teams can use the OSBC database to immediately start gap analysis and identifying best practices.

Of course, the value of the open standards benchmarks and the underlying process framework extends to the knowledge management process itself. Despite the recognised value the function brings to an organisation, the return on KM activities can be difficult to evaluate. Standard measures and computed performance ratios, as provided by the OSBC benchmarking program, allow users to see how their knowledge management compares to peers and world-class organisations.

APQC is a member-based, non-profit global resource for process and performance improvement.