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I often write about the problems of poorly organized knowledge work, and recently have had the opportunity to derive the financial costs of these problems. So here are some figures for your amusement.

Regular readers know what I am talking about. If you're not familiar with the knowledge work problem, you can find a summary of it in my latest column for bptrends.com.

First, how many knowledge workers are there?

It is hard to estimate this in many parts of the world, particularly in developing countries where the rate of societal change is fast. So for estimation purposes I focused only on the US and Europe, calculating numbers of knowledge workers in these regions as follows:

• Estimates of the proportion of knowledge workers in the US economy vary from 59% (“The Growth of Information Workers in the US Economy”, Professor Edward Woolf, New York University, published in Communications of the ACM, October 2005) to 80% (”Management Information Systems For the Information Age”, Haag et al, McGraw-Hill, 2006). I assume 59%. The size of the US workforce in 2004 was 138.5 million, giving 81 million knowledge workers in the US.
• A report prepared for the Knowledge Economy Programme in November 2007 (“Knowledge Work and Knowledge Workers in Europe”, November 2007, Katerina Rüdiger and Alana McVerry) concluded that “in 2005 just over forty per cent of the European workforce was employed in knowledge based industries as defined by Eurostat”. I assume 40%. The size of the European workforce is given in Eurostat figures for 2007 as 235 million (the “Active population” out of a “Total population” of 487 million), giving 94 million knowledge workers in Europe.

This gives 81 + 94 = 175 million knowledge workers in the US and Europe.

Now for the money. In late 2007 the research firm Basex carried out market research on the average time per day lost to "distractions" - in other words, to the inability to control collaboration with colleagues (“Information Overload: We Have Met the Enemy and He Is Us”, Jonathan B. Spira, David M. Goldes, March 2007, basex.com).

They found that:

1. The typical loss of time due to distractions is 2 hours per day;


2. The average salary cost per hour of a knowledge worker is $21;


3. Hence the average cost per person per month of distractions is $21 * 2 * 20 = $840.

In actual fact, the true cost of distractions is likely to be far higher, since every interruption breaks the flow of concentration. Recent case studies based on my consulting work (documented in previous postings to this blog) showed that allowing software developers to work without interruption doubled their productivity.

However, let's keep it simple and use Basex's figures.

Finally, suppose that a platform based on new techniques could remove just half of this cost - i.e., $420/worker/month.

What would you pay for such a platform? At least $20/worker/month, surely. Perhaps you would pay $100/worker/month - even, at a pinch, $200/worker/month, which would still provide over 100% ROI.

TAKE AWAY

Pick a figure between $20 and $200 and multiply it by 175 million. Then add a bit for the world beyond the US and Europe (which is hardly insignificant). And remember these are monthly amounts.

Clearly the market for knowledge work tools is huge - potentially hundreds of billions of dollars per annum. Surely this dwarfs any other software market - even dwarfs them all put together.

The reason, of course, is that structuring knowledge work is not an IT problem at all, but a business problem. So improving knowledge work directly improves business, and hence is worth a fraction of global GDP rather than a fraction of total corporate IT budgets.

Of course, every software vendor on the planet claims this for their tools! However, they only get away with it (when they do) since they are selling to people who already believe that better IT means better business! Talk to a few knowledge workers, and you hear a different story - a story along the lines of, "well, IT hasn't improved my life".

Most knowledge workers are now doing longer hours, and suffering more personal stress, than ever before. Unfortunately, their human right to a better deal doesn't come into corporate accounts. Fortunately, the financial reality is that a better deal is on the way.

The current crop of knowledge worker tools (basically, shared workspaces with no process context, or process tools based on software design techniques) may not deliver the goods. But with a market this size, it won't be long before real-world techniques such as Human Interaction Management, aka HIM, and corresponding new tools such as HumanEdj, find their way onto your desktop - and you get your life back.

Posted by keithhb in Management |Digg This|Add to del.icio.us

Posted by: Jonathan Spira at July 13, 2008 11:47 PM

Posted by: Jon Mell at July 14, 2008 08:15 AM