BenefitsEngaged Workforce

Knowledge Management Drives Corporate Sustainability

Paul Pederson’s break-through thinking created the international business language that facilitated knowledge sharing across the globe.

by Joseph Vales, Kerry Ann Vales

When you think of the great management consultants over the past two decades, one name always pops up: Paul Pederson, the visionary who built the Change Integration and Knowledge Management Practice at PricewaterhouseCoopers. In this column, legendary consultant Paul Pederson discusses how knowledge management led to the creation of the International Business Language and the movement toward corporate sustainability. I was very fortunate to work for him and see first-hand what made Paul and his team so special.

JV: You led the consulting industry in building the change management/change integration practice at PW and PwC. What led you to focus on change integration as the key enabler for supporting large-scale re-engineering programs?

PP: Back in 1990, all the major consulting firms had developed large information technology consulting practices supporting the Global 2000. Then Michael Hammer wrote an article in the July/August issue of the Harvard Business Review that served as a catalyst to change everyone’s thinking. In his seminal article, “Reengineering Work: Don’t Automate, Obliterate,” Hammer concluded that large-scale transformation could not be solely delivered by information technology solutions. This started the reengineering boom as companies needed to radically reengineer their business processes. At PW, we formed a global think tank/team to extend Hammer’s thinking and reengineer to best serve our clients. Over a period of several months, we created a new methodology to drive our consulting practice. We branded the methodology, “Change Integration” and built a $500 million change integration practice in just a few years. It soon became the standard for how we worked with clients around the globe.

JV: In your methodology, how important was it to connect people, process, and technology?

PP: From the beginning, we strongly believed that you had to link/integrate people, process, and technology. As we worked with clients, we developed case studies to validate our approach and methodology. We recognized that you really couldn’t look at one area, i.e. change, organizational structure, or technology. We believed in our approach so much that we told our consultants that if a client said, “Look, you can’t change the organizational structure, we’ve just finished that.” Our response was to say, “We are not sure we can help you.” This was tough to do, but it was right, so we walked away from business.

JV: From your change integration work, when did you first see the importance of knowledge management?

PP: It really happened when we were doing a project for Sony Music to help reengineer several of their business processes. An experienced consultant on the project reported a conversation with the client, who said, “If you are telling me that your team of consultants can tell us how to reorganize the organization we have created over the past decade, you are crazy. But, if you can tell us what other people are doing, what the best practices are in our industry and across other industries, we will listen to you.” That was the moment we realized we had to compile a global knowledge base of best practices being used by
companies. We found that as we started to launch and develop the concept of knowledge management, we needed to build a global knowledge base and infrastructure to harvest the knowledge of the world’s most successful companies. We branded this best practice database, KnowledgeView, and built knowledge management as a core foundation for our consulting practice.

JV: Can you describe what made KnowledgeView so special?

PP: The core of KnowledgeView was abstracts of global best practices. We started by reviewing published sources, journal articles, and industry publications, as well as information from electronic publications, which we licensed. We provided our consultants with a highly structured way of capturing and reporting knowledge and used it to populate the database with new findings and lessons learned from the hundreds of consulting engagements that we led around the globe. It
consisted of a description of what the problem was, what they did to solve it, whether it was still in operation, and what they would do differently if they were to go through the process again. It was a transformational step in the knowledge management process. When I retired, I believe we had between 4,000 and 5,000 best practices, kept current by replacing at least 20 percent of the best practices each year.

JV: KnowledgeView set the foundation for knowledge management, but you took it to the next level by creating the International Business Language (IBL), also referred to as the Dewey Decimal System for business processes and knowledge sharing. What led you to create the International Business Language?

PP: We needed a way to organize the hundreds of best practices our consultants were identifying monthly and be practical about how we organized our database. This led us to the idea of creating a taxonomy, another word for the International Business Language. This was just at the time that the Internet was taking off, and some advisors said that you
didn’t need a structure for the database. They felt you should just put in the words for a best practice and hit the search button. Well, if you ever used an Internet search engine to research a general topic and generated over 2.5 million responses, you might ask yourself if you needed to be more specific in your request.

Our consultants needed best practices to be organized and placed in structured categories by process, sub-process, geography, and industry. We found that the concept developed in professor Michael Porter’s value chain analysis was ideal for our needs. We structured the International Business Language around the value chain of a business and attributed Porter’s work in our taxonomy. We soon delivered a unique value chain definition for several key industries: petroleum, utilities, banking, investments, consumer products, pharmaceuticals, technology, and so forth. We included a generic value chain as well to serve as an umbrella for all industries and supplemented this structure with 15 or 20 categories used to classify best practices.

JV: As a result of the International Business Language, an executive looking to reengineer his processes in Europe would be able to identify the processes in the same way that someone in North America would.

PP: Yes, and that was the power of the International Business Language. Translated into several languages and used worldwide in our consulting engagements, it was the best way to bring teams of professionals and client people together to analyze a problem from a common framework and understanding.

JV: How do you manage knowledge when a firm outsources key functions like human resources?

PP: Shortly before I retired, I prepared a paper called “Fighting for Knowledge.” Within it, I stated that as the supply chain of a company became more and more outsourced, or if a central function like human resources was outsourced, it was even more important for companies to capture and record knowledge. You had to take steps to make sure that everything that your outsourcing partner learned was captured and populated back into your company’s knowledge base. You had to make knowledge explicit and make it available throughout your company so that when your engagement was over, your information didn’t disappear with the absence of your outsourcing partner.

JV: Now that you fathered knowledge management and created the International Business Language, what’s next for Paul Pederson?

PP: When I retired from PricewaterhouseCoopers, I went back to school and received a master’s in liberal arts. I was very interested in ethics and corporate responsibility and wrote several white papers on it. Since then I have been closely involved with developing a Center for Corporate Sustainability for the Graduate School of Management at the University of Dallas.

JV: Can you define corporate sustainability?

PP:
There are many terms with similar meaning: corporate citizenship, corporate governance, and corporate responsibility. Depending on which industry group you are talking to and which side of the ocean you are on, certain names become the mantra. Corporate sustainability to me is more consistent with western capitalism; it refers to what a company will do to sustain shareholder value for the grandchildren of the current shareholders. It can involve environmental practices, human rights, relations with labor and other stakeholders, community good works and education, corporate governance, and ethics—anything you can do to really improve the reputation and sustain the long-term viability of the corporation.

JV: Looking ahead five years, what is your vision for the corporate sustainability project at the University of Dallas?

PP: We will have extended what we created at PricewaterhouseCoopers and leveraged a KnowledgeView-like database with the International Business Language as its foundation. We will have identified, recorded, and are on a path to become the central source for global best practices in corporate sustainability. Our knowledge base will cover key parts of the value chain and be referenced by the best practices on the issues most affecting corporate sustainability.

JV: Is corporate sustainability a boardroom issue?

PP: Yes, it is. People will want to work for companies that support the principles of corporate sustainability. Boardrooms understand the strategic implications of building a company that will attract and, more importantly, retain the best and brightest. Customers are looking for evidence of the sustainability record of who they buy products and services from. More and more, investors are expressing their interest in the sustainability reputation of companies they consider investing in. It will be a key strategy for winning the war for talent and core to how HR departments will promote what makes their companies so special.

Paul Pederson is an adjunct professor at the University of Dallas in Texas. For more information, he can be reached at paulopederson@hotmail.com.

This article was co-authored by Kerry Ann Vales. For more information, she can be reached at KAVales@aol.com.

Tags: Benefits, Engaged Workforce

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