First, I am not a KM practitioner though I am a life-long learner.

I read this post and thought of a Beijing Oplympics (summer 2008) crowd cheering (I was told that they were shouting) "More oil! More oil!". I understood then "oil" was "energy" to drive up towards better performance. There is no indication of "what drives people towards LO" in your diagram. I think many projects/organizations fail because "drive" is not designed/planned into the projects/org...