Talk to anyone in the business world about measuring results, and chances are that most answers will start with the word “return”. Depending on whom you ask, the answers can range from Return on Investment (ROI), Return on Equity (ROE), Return on Capital, or for some in more leisure-driven industries, it could be Return on Life (ROL). But businesses are realizing that they’ve perhaps missed an important piece of the puzzle while trying to calculate their return on various efforts. This “piece” is actually the common thread that connects every single task, project, and department, just as the central nervous system coordinates and influences the activity of all parts of the human body. Businesses are scrambling for effective ways to measure and optimize this common thread – their grey matter. This is exactly where consultants, both internal and external, can help.
As a consultant, you need to give your clients the competitive advantage that comes from measuring their Return on Knowledge.
Essentially, Return on Knowledge (ROK) would be a way of looking at the knowledge already embedded in an organization and determining what value a company is capturing from that knowledge. So capitalizing on ROK would mean figuring out a way to determine how effectively an organization gathers, uses, and transfers its institutional knowledge (or employees’ collective wisdom).
Here are three of the most important reasons for consultants to focus on return on knowledge for their clients:
1. We are in a Knowledge Economy
The face of business has evolved in many ways, but today the pace of business evolution is faster than ever. While most global enterprises were built on the backs of industrial and process-driven industries, now many jobs – even those formerly industrial jobs – are driven more by technology and knowledge. For a simple illustration, look at the location shift of America’s economic center; one could argue that for a long time it was located in Detroit, for another long swath of time it was in New York City, and now a good deal of real wealth is concentrated in San Francisco/Silicon Valley, where almost no jobs are 100% industrial.
There are more knowledge and technology hubs emerging in Chicago, Boston, D.C., and more recently, Miami. The startup culture is further fueling the emergence and growth of knowledge-based businesses and careers. Though the economy has become more knowledge-based, few companies have shifted strategy and used their knowledge to gain a competitive advantage.
2. Return on Knowledge is Cost Effective
Do you think businesses really like hiring expert consultants to help them identify and navigate problems, only to find out that the cost of fixing the problems is even greater? Businesses are getting leaner by the day, and they expect the consultants they work with to respect their lean business models.
Instead of recommending a whole host of new (and sometimes expensive) fixes, what if consultants could just leverage the existing wealth of internal knowledge by collecting, organizing, analyzing, and translating it into actionable insights for their clients? This not only reduces the costs of putting new systems and processes in place, but also ensures that only new fixes that are absolutely necessary are rolled out. By measuring the ROK, consultants can also help their clients identify communication gaps, organizational misalignment, and even any projects that are deterring overall growth.
3. Better Client Retention
There is copious evidence to prove that by focusing on ROK, you not only reduce client spending, but you help your client stay relevant in today’s business world. It is about helping your clients to understand that their greatest competitive advantages can come from optimizing the already existing knowledge. Needless to say, a happy client is going to want to work with you again, leading to better client retention.
If you ever find yourself having to convince your clients about measuring their ROK, tell them that it really is the first and probably the most important step toward eventually increasing their ROI.
The next post in this series about Return on Knowledge will throw light on how ROK can actually be measured. In the meanwhile, go through our ebook Is Return on Knowledge The Business Metric of The Future?