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There are many ways to approach this question.
First things first. Knowledge Management is based around processes that support a business goal. These can be radically different between companies, industries and individuals.
Personally, I think the best way to increase the use of institutional knowledge is to build capacity within your employees. What you want is not an information hierarchy where they are consulting a set array of sources, but an information web where your employees are connected to other people in their industry, other people in the company and the resources from a variety of different access points.
OK. So that’s the big, overall vision. On to important details.
1. Success: KM is useless without success. it’s a great idea, but implementation is the real work. Like Daniel Kim suggests, start small with a well identified scope. If it’s an intranet, make it a kick-ass intranet. If it’s a collaboration tool, it should be seamless. If it’s a story-collection project, edit those videos and audio and release them in a compelling way.
2. Guru: You will need to hire or promote someone as the hero/champion/guru who is 1) personable, 2) a fanatic about your particular program and 3) in a position that they have authority to make changes. KM strategy is C-level, putting it in the control of an out-of the way department will help that department, not the company
3. Communicate: Another facet not to forget is to communicate the process.Robert Scoble drives me nuts, but he is one of the best examples of a communicator to follow when you want to make substantive change. Of course Steve Jobs is also an excellent communicator who has overseen substantive change. By describing the process of KM, you’re doing it. Short, punchy updates on what the process is, with discussion and debate, help people internalize and use what you’re trying to convey. (in other words, find a way to blog about it)
4. Limits: KM is a service, like libraries, research, or the custodian. It doesn’t have all of the tools to make a company work. At best it’s a process optimizer, a time saver and a memory aid for the company. Don’t make big promises you can’t fulfill and don’t trust the word of software vendors.