Computers Today, December 1-15, 1998 Managing IT

December 1-15, 1998 MANAGING IT

KNOWLEDGE MANAGEMENT
Turning Ore into Mineral

Customer information can be power for the company. But only when it is processed into knowledge. But with knowledge itself getting multifarious, only IT solutions can come to the rescue.

By T.A. Balasubramanian

Zeroing in the Latency Factor

Illistration Customer is the King, they say. But what is this creature called customer? Today, maturing information technologies such as large databases, sophisticated statistical techniques, and freely available multiprocessing power have made it easy to probe the customer's real psyche. The best generic example comes from a series of beer and diapers ads that Tandem, a division of Compaq, used to run, featuring an obese young father wearing nothing but a diaper. The ad pointed out how, using data mining, retailers discovered that men who go out to buy diapers in the early evening are also inclined to purchase beer. That led convenience stores to begin stocking the diapers next to the beer, increasing sales of both.

One difficulty in applying IT to process information is that customer knowledge is widely dispersed around a company. Many different business functions-including marketing, sales, service, logistics and even financial functions-have intimate interfaces with customers. While the IT function does not, typically, interact with customers, it has a role to play in devising means by which customer information gets recorded and organised before it can be turned over into the computing treadmill. Each business function usually has its own interests regarding the customer, its own way of recording what it learns, and perhaps even its own customer information system. The disparate interests of departments make it difficult to pull together customer knowledge in one common format and place.

High Octane Power

Illistartion Customer information and knowledge also inspire a high level of politics and passion. If knowledge is power, customer knowledge is high-octane power: it is unlikely to be shared without reluctance. The salesperson with valuable customer information on index cards in his luggage or laptop, the service department with valuable insight into what customers think about new products, the marketing organisation with highly detailed customer attitudes and behaviour from focus groups and surveys-all have some reason to keep control of what they know about customers. Another factor making knowledge management difficult is the fact that there are several different types, each of which must be managed with a different approach.

The first type is data-derived customer knowledge that originates in transaction systems. Typically, this type of knowledge is thought of as involving the final customers. Not many realise that it can also be about business customers or associates. Managing this wealth of knowledge involves several Ps:

Prioritising. Defining what information is really important and what customer behaviour really counts.

Pacing. Ensuring that "customer" and other such terms mean the same thing throughout the firm.

Processing. Allotting sufficient processing power to chew through all the data.

Pruning. Refining and turning data into knowledge through statistical processing (although a word like neural network sounds more sophisticated than statistics, that is what it is).

People. Finding smart people to structure and interpret the analysis of customer data, regardless of data mining theories.

Soft and Tacit Knowledge

Some companies are starting to get quite good at turning customer data into knowledge. MasterCard International Inc. does it on a regular basis for member banks that want to understand the psychographics of their credit card customers. FedEx uses it to increase market share and profitability among small shippers.

Data-derived knowledge is what may be called the first type of knowledge, and this is probably the easiest type to manage.

Most organisations, however, are not always sensitive about the second type, what may be called "human customer knowledge" or sometimes "soft knowledge" as it typically comes from direct interaction among people. It includes experiential observations, comments, lessons learned, conclusions and qualitative facts (such as organisation charts) about the customer. This type of knowledge generally pertains to select business customers or high-value customers, though sometimes it is also useful to capture human knowledge from large numbers of customers.

The third type of customer knowledge is tacit -unstructured, difficult-to-express knowledge that sensitive salespeople observe or sense about their customers. Most people have difficulty in articulating this-tacit knowledge feels squishy, and it often is. But the voice of the market never speaks clearly, and, like trained psychologists, those on the selling edge often have to assimilate and extract intuitive messages from customers at the subrational level. Every good salesperson tries to elicit some tacit knowledge from a customer in the form of body language, facial expressions or other 'vibes'. Some market research experts argue that customer opinions about products and marketing messages can best be understood in tacit forms of expression-say, how far the customer twists a dial-rather than explicitly stated verbal arguments. Tacit customer knowledge can be just as important to sales and marketing functions as the other types of customer knowledge.

The good news about tacit knowledge is that much of it does not have to stay tacit forever; it can be converted to explicit human knowledge and thus made more permanent and transferable. The bad news is that doing so is difficult. It requires continual observation and analysis.

Not an Abstraction this

Customer knowledge is not a rarefied abstraction. When managed well and applied to various customer-facing business processes, it can increase purchase and retention levels, save money by focussing marketing efforts, and yield customised products and services. If an organisation wants to really understand its customers and work at knowledge management, there is a long road ahead, but the excitement of discovery makes the effort well worth it. Not to mention the business benefits.

T.A. Balasburamanian is a technology analysts and consultant based in Mumbai.

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