• March 29, 2004
  • By Ashutosh Roy, chairman & CEO, eGain Communications

The Strategic Value of Knowledge Management

Knowledge Management (KM) is a poor name for a powerful concept. Names aside, what it stands for is the ability to easily and continuously capture, organize, and make available actionable know-how within an organization. When implemented with the right objectives, process clarification, and people incentives, it unleashes process efficiencies, business model flexibility, market insights, and customer loyalty.

Contact centers and customer service organizations provide some of the best examples of successful KM application. However, KM also has irrefutable value beyond the contact center.

To measure the value of KM beyond the contact center, let's first understand the value that KM brings in the contact center. The first-order benefits of KM in contact centers are measurable: improved agent productivity and reduced agent training time. The second-order benefits of KM are far more significant and strategic and are mostly reaped by teams beyond the contact center. Here are some examples:

Customer loyalty: KM sharply reduces the need for escalation within contact centers. A large software company saw its technical support escalations drop by 13 percent after it implemented KM. While there is a direct cost benefit of reduced escalation, there is a more strategic impact on customer satisfaction, too. Not surprisingly, the same company saw an 8 percent increase in the "agent informed" score in customer surveys. As consumers we all remember positive service experiences, rare as they are, and reward providers of consistent, accurate service. This translates to repeat business and enduring customer loyalty for companies.

Service model flexibility: KM allows the company to capture the knowledge essential for best practice-based business operation and make it available to all employees and customers, as well as outsourced contact center agents. A large wireless provider implemented KM with the express purpose of reducing the cost of outsourced customer care. Having implemented KM, the provider was able to put out its customer care business to open bid, driving down the cost of its service operation by 20 percent. By eliminating the switching cost of domain knowledge from the equation, the client  achieved higher operating efficiencies. In another case, a financial services company deployed KM to accelerate the post-merger resource rationalization across two large customer care teams covering multiple products by empowering agents with service domain knowledge across products of the merged entities.

Market insight: Customer feedback is notoriously difficult to gather and authenticate. Focus groups tend to suffer from the "Hawthorne effect," and market research can be dangerously tilted by its very design and origin. Customers really say what they think of your products and what they want from you when they ask you for help. Customer service interactions, then, are the mother lode of market insight. Unfortunately, most customer interactions are captured in contact centers as "resolution codes." It is hard to derive trends from a dozen or so resolution codes. Knowledge-powered web sites and contact centers enable the business to capture the customer's dialogue with your organization, which can be easily mined for churn and upsell points using the analytics capability of KM solutions, resulting in lower customer turnover and higher wallet share of individual customers.

Continuous improvement with learning KM solutions: Without KM, most companies suffer from the "Yoda" effect. Given a situation, there is always some "Yoda" in the company who can best address it. Unfortunately, the "Yoda" is not as easy to spot as in Star Wars. A well-defined and enforced process to suggest, review, and capture knowledge is an invaluable strategic benefit of a KM system. This closed-loop process fuels continuous learning within the organization that is hard to replicate by competitors.

While some of these strategic, enterprise-wide benefits of KM might not be easy to measure at an operational level, they translate to unique competitive advantage in an environment of increasing product commoditization. Company leaders and senior managers need to keep this in mind as they look for ways to increase the value of contact center interactions with customers.

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