CEO’s finally got a wake up call about the true value of managing knowledge and the risks of losing intellectual capital. It is becoming painfully obvious that companies need to document and retain the knowledge of their key personnel and subject matter experts. They need to manage this intellectual capital and treat it like Intellectual Property (IP) before it simply walks out the door. Just ask British Petroleum. When BP senior corrosion engineer Richard C. Woollam left, BP lost valuable intellectual capital, namely his knowledge, experience, and expertise. That’s when the brain drain began.
Around February 25, 2006, corrosion in the Prudhoe Bay pipeline caused a “small leak” in a quarter-inch hole in the pipe. BP discovered the leak five days later on March 2, after 250,000 gallons of crude oil spilled across 1.93 acres. The spill, the largest ever on Alaska’s North Slope, forced BP to shut down the pipeline and the Prudhoe Bay oilfield, the largest U.S. oilfield. Overnight, 8% of domestic oil production was shut down due to “extensive corrosion”.
On August 7, oil spilled in the Eastern Operating Area of BP's Prudhoe Bay oil field.
“By the time a massive oil-pipeline spill was discovered in March on Alaska's North Slope, the job of BP's senior corrosion engineer had been left unfilled for more than a year, an internal BP audit found. This vacancy, and others, hindered BP's ability to maintain a ‘strategic view’ of its corrosion prevention activities, the audit found. A BP spokesman said Friday that a replacement for the senior corrosion engineer has yet to be found...”
"Alaska Gov. Frank Murkowski and other officials toured the Prudhoe Bay oil pipelines, which have been crippled by corrosion problems discovered this week. The threat of a stoppage also endangers Alaska's budget: Oil taxes account for more than 90 percent of its revenues...”
“Half of Prudhoe Bay oil field's production operations were shutdown Aug. 7 in its Eastern Operating Area after a leak was detected and about 630 gallons of crude oil leaked. Downgraded operations closed 16 miles of oil transit lines and halted 400,000 barrels of oil production a day in the Alaskan oil field, reducing 8 percent of U.S. domestic production…"On September 6, Congress began hearings on BP’s corrosion problems in Alaska.
“U.S. lawmakers are launching an investigation into the August shutdown of BP's Prudhoe Bay operations after corrosion was detected in the 29-year-old pipeline...”
The House Energy and Commerce Committee holds a hearing ON September 7 on BP's corrosion problems in Alaska. A leak forced the shutdown of half the Prudhoe Bay oil field. Committee Chairman Joe Barton says evidence indicates the problem was caused by BP's poor maintenance of the pipeline..."
It was "truly beyond comprehension" that a profitable company such as BP would fail to maintain the infrastructure that was the basis for its earnings – Rep. Jan Schakowsky, D-Ill.
"BP's top U.S. executives told lawmakers Thursday that the company stumbled by failing to prevent a major Alaskan pipeline from becoming crippled by corrosion..."
"At the hearing, a former BP official responsible for monitoring pipeline corrosion invoked the Fifth Amendment in response to the panel's questions about the problems that led to the partial shutdown of the nation's largest oilfield..."
"BP's operating failures are unacceptable. They have fallen short of what the American people expect of BP and they have fallen short of what we expect of ourselves." – BP America Chairman Bob Malone told members of a House panel.
"I deeply regret this situation occurring on my watch," – Steve Marshall, president of BP exploration in Alaska
Hearings continued on Capital Hill on September 13.
"BP didn't fundamentally understand the conditions of their lines and did not maintain it properly," Thomas Barrett, administrator for the Pipeline and Hazardous Materials Safety Administration, testified Tuesday before the Senate Energy committee.
Clearly, BP did not document nor retain the knowledge of its senior corrosion engineer. Every company should, at a minimum, document and retain the knowledge of key individuals and subject matter experts if it wants to have any hope of not wasting time and money reinventing the wheel every time smart people leave.
But shareholders deserve better. So smart companies not only capture and retain knowledge, they also digitize, automate, and manage that knowledge so it can be shared and leveraged throughout the enterprise. Just ask great companies like ExxonMobil.In the early 1990’s, Mobil Oil
developed a bold strategy to transform the knowledge of their top lubrication experts around the world into digital assets that could be shared throughout the Mobil system. This global expert system strategy and global knowledge management strategy led to development of the Mobil Lube Knowledge Base.
Mobil Marketing executives first started understanding the value of capturing knowledge as a corporate asset in 1989, after the rollout of the ALFRED Rolling Oils Expert System. This expert advisor captured 50 years of Mobil's experience with rolling oils and metal rolling mills. The knowledge was represented in the system as a collection of business rules and expert decisioning rules.
Mobil's Lube Marketing Strategy in the 1980's was to provide value added services to customers. Executives started envisioning a global "Lube Knowledge Base" as a laptop sales tool to support every sales engineer worldwide. LKB goals were to:
- Capture expertise from top marketers & engineers and make it available worldwide
- Train field reps
- Improve customer service & service quality
- Provide consistent solutions
- Minimize paperwork/looking through thick manuals
By 1991, business and IT executives agreed there was a need to develop a worldwide lube expert systems strategy. The IT strategy was aligned with Mobil’s longstanding lube marketing strategy to provide value added services to customers. IT and the US / Intl’l business units planned a strategic Knowledge Management Program with these goals:
- Maintain Mobil’s competitive edge in the worldwide lube market
- Provide current product and customer data to the field sales force
- Capture individual expertise and share that knowledge throughout the Mobil system
- Enable marketers to increase face to face selling time
The Mobil Lube Knowledge Base consisted of a suite of interoperable and integrated expert advisors and knowledgebases that retained and shared Mobil’s best knowledge on everything from Environmental Health & Safety (EH&S), grease marketing, compressor lubrication troubleshooting, to rolling oil program diagnosis. Expert advisors were also envisioned for hydraulics, cutting oils, and marine (cruise ship) diesel engine lubrication. Knowledge engineers interviewed Mobil experts from the U.S., Japan, England, France, Germany, New Zealand, The Netherlands, Austria and other countries to elicit their knowledge and build the global Lube Knowledge Base.
One of the systems in the Knowledge Base was the EH&S audit expert advisor. Jim W. was Mobil’s EH&S audit expert. Jim was also an expert on fighting oil refinery fires and cleaning up oil spills. As Jim neared retirement, Mobil did not want to lose his 30+ years of intellectual capital conducting EH&S audits. One of the nicest and smartest persons you will ever meet, Jim was a super expert who reported on a dotted line to the CEO. Knowledge engineers collaborated with Jim to build the expert advisor. “Cloning” Jim was Mobil’s answer to retaining his knowledge and expert advice.
The Lube Knowledge Base was a big success. IT and Marketing worked together to develop a business strategy and computer systems to support it. When the Grease Expert System was launched in 1993, it marked the first time Mobil released an IT system to support a major marketing strategy at the same time the global marketing strategy was launched. Previously, IT would learn about new business strategies after they were in effect.
Today, 15 years later, it’s possible that someone at ExxonMobil could run the EH&S Expert System, answer a few of Jim’s questions, and get Jim’s expert advice, recommendations, and explanations. Despite the fact that Jim retired years ago.
How valuable is that to a corporation? What is the value of retaining 30 years of top-level corporate knowledge? What is the cost of capturing knowledge? What is the price of not capturing knowledge and having to deal with brain drain? How could you put a price on that?
Well, lawyers tell me that that’s relatively easy. What’s really hard is extracting, capturing, and retaining knowledge from people like Jim at Mobil and BP’s senior corrosion engineer Richard C. Woollam. There are methodologies, however, that take the pain out of the knowledge acquisition process and minimize the amount of time experts need to dedicate to the process.
Before today few companies really cared about knowledge management (KM) or made it a priority. Great companies, on the other hand, figured out long ago how to manage knowledge and treat it as Intellectual Property.
Now it's the law.
From now on if the knowledge of the corporation’s top experts and key personnel is lost, the company risks having to explain to shareholders, Congress, and regulators how that Intellectual Property was lost, why it was not retained, why it will cost $10 million and 5 years to regain that knowledge, and why the stock price went from $20 to $2 during lunch.
Companies better start asking themselves what is the risk if key people leave, get hit by a truck, or retire. What is the risk of not retaining the knowledge of top experts so it can be passed on to the next generation?
BP is paying the price for not managing knowledge. They need to steal a page from Mobil’s playbook and figure out how to manage knowledge to mitigate the risk of brain drain.
Icebergs can sink the Corporation Knowledge management requires eliciting, capturing, retaining, digitizing, automating and managing what your smartest people know. And then sharing it with those who need to know.
Imagine knowledge as an iceberg:
Knowledge management is really about transforming intangible tacit knowledge in people’s heads into tangible visible knowledge that can be shared.
"Its tangible, visible part that can be accessed by third persons, i.e. information, can be observed 'above the water.' Once it has been shared, it belongs to everybody.
A large, important part of it, i.e. tacit knowledge is intangible, invisible, as if hidden “under the water” and can be accessed on the first-person basis only."
Businesses often claim that their most valuable asset is their people. From now on, businesses are going to have to pay more than lip service to that idea. Now they need to elicit the tacit knowledge of their top people, transform it into digital intellectual capital or Intellectual Property (IP) assets, and value it on the books.
The cost of managing knowledge is much less than the risk of brain drain.
Just ask BP.
Note: BIZRULES CEO Rolando Hernandez was one of the lead designers of the Mobil Lube Knowledge Base.
Analysis: Lax regulations cause BP spill - By DONNA BORAKUPI Energy Correspondent Sep 13 2006 Analysis: Congress probes BP corrosion - By DONNA BORAK UPI Energy Correspondent Sep 6, 2006 BP audit: Key job vacant before spill - By BRAD FOSS, AP Business Writer, Fri Sep 8, 2006 Congress Investigates Alaska BP Pipeline Leak - by Scott Horsley, NPR Morning Edition, Sep 7, 2006 A Diminished Supply of Oil - NPR Understanding Knowledge Societies In twenty questions and answers with the Index of Knowledge Societies, Department of Economic and Social Affairs Division for Public Administration and Development Management, United Nations, New York, 2005