James Flavin, CEO, KiteEdge
Asset management businesses today have access to more information than ever. And the amount continues to grow, with forecasts of 463 exabytes of data being produced daily by 2025. Bringing all external and internal knowledge together to create insight often feels virtually impossible. Portfolio managers and analysts are increasingly frustrated as they are sure that someone in their organisation has experience or knowledge of a query they have, but how do they easily find them?
Interest in Knowledge Management systems (defined by Stanford University as platforms which: centralise all investment research in one place; enable sophisticated (non-key word based) search to systematically interrogate the interiors of all documents; and enable collaboration across complex organisations, identifying latent knowledge, and internal experts) is experiencing something of a renaissance.
Saving the hour a day that these people typically spend searching for information could result in significant improvements in investment decision-making and subsequent performance.
To turn knowledge into advantage requires a commitment to connect the unconnected, thereby empowering organisations to easily identify hidden knowledge assets, discover differentiation and use data for better outcomes. This is all about creating the right connections through people and knowledge. For active managers, in particular, the ability to fully access, share and exploit the (often enormous) information resources they have at their disposal could result in greater alpha generation, and potentially represent a new narrative to engage with clients and regulators.
Managers who commit to such an approach seek to gain not only improved performance but also memorialise their unique investment process via the collective search history conducted across the enterprise. To do so successfully requires a completely new technology framework which can leverage the attributes, advantages and potential performance diversification that active investment processes can offer versus passive strategies.
There are two core challenges managers face:
Information extraction – organisations typically have millions of documents locked in unhelpful formats. Unlocking this content, often purchased at extremely high cost, is vital. Historically, they have relied on people to manually find, then extract value from them which is expensive, inefficient and time-consuming. The optimal solution is to convert new and legacy documents (often PDFs) into a format that can be quickly used to create business value. By using Cognitive Artificial Intelligence, in combination with neural nets and other machine techniques, it is now possible to extract data points and convert documents into XML or XLSX formats, creating structured data sets that can be easily interrogated by the end-user. This enables organisations to finally be able to genuinely leverage the mass of external information they possess, adding it to their own internal knowledge and expertise.
Insight discovery – accessing published information is only one part of the core challenge. Liberating the knowledge and insight that rests in the heads of the people in the organisation, often widely distributed, particularly in global firms, has long been a goal of knowledge management programmes, yet too often they have fallen short. Finding a reliable, accurate and timely way to identify internal experts from across the organisation has proven elusive. Now, however, AI and Search technologies that work with (rather than against) the user to capture and release this hidden knowledge are available, creating an internal expert network that highlights the specialists who can answer questions on the subjects staff are currently exploring. By combining AI with human-derived ontologies, Boolean libraries and smart UX design, a platform can be created which adapts to the specific organisation creating a customised knowledge management solution.
With the knowledge that effective technology solutions now exist, asset management firms face a choice in how to proceed. Given the increasing pressures on businesses from competition, regulation and shifts in investment sentiment towards passive, managers must address this obvious source of advantage as soon as possible. While there will always be firms who are laggards, to ignore the benefits that new knowledge management solutions offer risks leaving them at a distinct competitive disadvantage, facing further fee pressure and missing an important marketing opportunity. Accordingly, assuming most firms take an active decision to address knowledge management (and several firms have appointed Heads of KM recently indicating this is the direction many will take), the focus turns to how will they implement a new programme?
Building a solution internally is often a tempting approach. Managers will have to consider the time-to-market implications, whether they are reinventing the wheel with third-party solutions now available and the long-established struggle of alignment with internal IT departments. The advantage of the in-house method is that, implemented correctly, managers can build and maintain their ontologies bespoke, ensuring they have a completely customised solution for their firm. This may lead to competitive advantage but at what time and cost? This is before considering the competitive implications of the internal project not meeting its objectives (which is frequently the case), and then having to start again from square one – often years later.
The alternative is obviously to outsource the solution to a trusted technology partner with an existing, demonstrable, domain-specific methodology. While this may be less customised initially, it should be a far quicker and cheaper approach requiring less maintenance, gaining access to updated software releases and delivering clear competitive advantage where time-to-market is key.
Whichever route managers choose to adopt, the initial step is to construct a specific roadmap of existing assets and requirements in order to optimise the way forward along the journey of mobilising knowledge.
Knowledge management has always been a leap of faith, to some extent, for organisations. In its emerging phase, this often felt like an act of blind faith, which many were reluctant to take. Fortunately, advancements in technology, particularly AI and machine learning, coupled together with expert ontologies have significantly improved the process. Today, that leap is no longer blind as it is rewarded with reliable and relevant discovery of valuable information and expertise to drive performance to new levels.
To find out more about how managers are creating the right connections between people and within knowledge, KiteEdge, an Engine Innovator firm, are conducting an online survey.
To participate, please click here.
All respondents will receive a summary of the survey results.