238 Part II • Information Technology
are four explanations. First, organizations invest in KMSs
because they believe that the value derived by the individ-
uals using the system will exceed its cost (Santhanam and
Hartoro, 2003).
Second, one trigger leading to the development of
KM projects is related to firm valuation. For example,
Microsoft’s net value was estimated by examining its
market value based on stock prices minus net assets. The
enormous difference was attributed to the knowledge held
by individuals and the organization (e.g., routines, best
practices). In a similar time frame, “knowledge assets”
began to appear on a few firms’ balance sheets in their
annual reports. Hence, there is a growing awareness and
consensus that “knowledge,” or intellectual capital, will
enable firms to differentiate themselves from others and to
compete effectively in the marketplace, and this has led to
a proliferation of KMSs for managing knowledge assets.
Third, the resource-based view of the firm theory
suggests that “knowledge assets,” when thought of as an
organizational resource, can be a source of competitive
advantage. In other words, organizational knowledge assets
that are valuable, rare, inimitable, and nonsubstitutable could
allow firms to differentiate themselves from competitors.
Fourth, tangible benefits accrue from implementing
KM and KMS initiatives. Although the benefits are specific
to a given firm, there are both operational improvements
andmarket improvements.Operational improvements
focus on internal activities and include cost savings (e.g.,
faster and better dissemination of knowledge), efficient
processes (e.g., best practices), change management
processes (e.g., behavior changes), and knowledge reuse
(e.g., high quality standards). In contrast, market improve-
ments focus on external activities such as performance
(e.g., increased sales), cost savings (e.g., lower costs of
products and services), and customer satisfaction (e.g.,
faster resolution of customer problems).
The goal of a KMS is to tap into the knowledge of
the individual and the organization and disseminate it
throughout the firm to derive operational and market
improvements. Furthermore, a KMS is fundamentally
different from other systems because (1) it considers the
content contained within the system—that is, the system is
only as good as what is in it!—and (2) the system is not
used to work on the task, but rather to acquire knowledge
needed to perform the task—therefore, the use of a KMS is
one step removed from the task itself. Based on a study ofBusiness Intelligence Moves to Marketing
Business intelligence (BI) has become an important tool in sales and marketing. For example, restaurant
chains have become big users of BI for marketing. Wendy’s decided to accept credit cards in its
restaurants based on results from its BI system. In analyzing the data from the company’s trial
acceptance of credit cards in select stores, Wendy’s found that customers who use credit cards spend an
average of 35 percent more per order than those who use cash. CKE Restaurants, the parent company
of Hardee’s, made the decision to go national with its over-the-top Monster Thickburger (two one-third
pound beef patties, three slices of processed cheese, and four strips of bacon) based on BI analysis of
Thickburger test marketing. CKE devoted $7 million in advertising to promote the national Thickburger
rollout, and sales in Hardee’s stores that had been open for at least a year were up 5.8 percent in the
month following the rollout. “The Monster Thickburger was directly responsible for a good deal of that
increase,” says Brad Haley, Hardee’s Executive Vice President of Marketing.
BI has been successfully used to help companies target their mailings in direct marketing
campaigns. Direct marketing uses brochures, fliers, catalogs, and other promotional material to convince
potential customers to buy whatever is being marketed, which might be a cruise, a credit card, clothes,
and so on. If BI is used to identify the most likely customers for the product (say a cruise), and then the
marketing materials are mailed to only the top 10 percent of a large model base, the return on the
mailing will average 2.34 times more than if the mailing was sent to a random 10 percent of the model
base, according to Peter Harvey, Chief Executive Officer of Intellidyn, a consulting firm that helps clients
design and implement direct marketing campaigns. In another example of the use of BI in marketing,
about 50 marketing people at StubHub, the online marketplace for event tickets (now owned by eBay),
create their own BusinessObjects reports to make decisions about where to target promotions and online
advertising. For example, they analyze customer buying patterns and demographic data to determine
when purchases for a particular event are likely to peak so they know the right time to advertise.
[Based on Kelly, 2008; Levinson, 2007; and Weier, 2007]