What a suprising number of Knowledge Management experts do not know
What a surprising number of people working in KM don't know"
I’ve been reading Verna Allee’s wonderful book on the future of KM. It clears up a lot of mysteries for me on the trail to the big mystery that interests me most (more on that further down)
Here are some of Allee’s myths demolished and mysteries ‘solved’
The terms intangibles, intangible assets, knowledge assets and intellectual capital are all used by different groups to describe basically the same thing. The premise for thinking of intangibles as assets is that knowledge, relationships and ideas are more important for success today than physical assets.
A surprising number of people working in Knowledge Management are strangely unaware of the critical linkage between intangibles and the focus on knowledge. The early leaders in Knowledge Management – such as Saint-Onge, Sveiby, and Edvinnson – did not start with the knowledge question, they started with intangibles. Their first question: “How is Value really created?”. The response they came up with “Intangible assets are the real source of value in the knowledge economy”. Then another question came up. “What is the best way to fully utilise intangibles and how do you increase them?”. So that was the second piece of the puzzle. Fortunately, most of the early practitioners talked with each other fairly frequently. The view of enterprise that includes intangibles as assets takes us an important first step beyond industrial age management practices.
A living system view brings new understanding of how a business renews itself and creates value. Warning: once you go down the path of intangibles or intellectual capital, you will not want to go back to your old ways of thinking about value. Tom Stewart, Fortune editor who first brought awareness of intellectual assets to the general public suggests we simply drive a stake through the heart of our old accounting practices and declare them dead and buried.
The real foundation of the Knowledge Economy isn’t things, it isn’t bits and bytes, it isn’t the balance sheet; it is people and their intelligence. However, digital technologies help people connect with ach other and share images and documents to a degree and speed previously unimaginable. As a result, we have seen an explosion of sophisticated products and services that require huge amounts of intelligence, smarts and knowhow to create and deliver, but require negligible physical assets such as plants and machinery.
Intangibles are at the heart of all human activity, especially socioeconomic activity. Moreover, intangibles, knowledge and benefits are the very foundation of value creation. We exchange intangibles all the time as a key part of the way we do business. We can, of course, exchange knowledge for money in the form of a product or service. We can also exchange knowledge for other knowledge when we socialise with our peers, participate in professional symposiums or exchange expertise. Yet all this offering, trading, swapping, and exchanging of knowledge and other intangibles doesn’t fit what is generally understood as how markets work. Or does it? If we go back to the basics of economics, we find the molecular activity is the exchange. An exchange implies reciprocity, meaning the quality of the exchange is that it is fair or of comparable value.
The Brookings Institute Task Force on Intangibles, headed by the former SEC Commissioner Steven Wallman, points out that the value of any intangible asset comes from its interplay with other assets, and that attempting to value it on a stand alone basis is pointless. This is an important point. Intangibles are dynamic; they are not static like physical assets. So while some of the language of intangibles may be familiar, their behaviour (and compound impact) is not. Intangibles are very different.
With knowledge and other intangibles, there is no common unit of exchange. An executive team’s knowledge about the competitive environment cannot easily be converted into monetary value. Neither can your business network. But if one cannot assign a valuation to something, it cannot be traded in “the market”, where money is the agreed unit of value. This is not news to the intangibles systems experts. Quite a number of us even consider this to be “the problem”. These are the people who are trying to assign a value to intangibles so they can be traded in the market, or who are trying to assess intangible value in monetary terms to place a value on the company. To make such an attempt is to completely miss the point. It is simply the wrong question. This comes from believing the old rules can be stretched just a little to include intangibles. If intangibles worked the same way as tangibles, they would not be called intangibles! So we need to stop trying to drag them back into our old models of value creation. They are intangible and we must try to understand their market dynamics as intangibles, not by treating them as something else of trying to fond a way to count tem like monetary units.
The great hope and opportunity offered by the intangibles perspective is that at long last we may be able to reconcile our business and economic models with the fabric of society and the web of life.
Another term entering popular usage is social capital. The World bank defines social capital as “ the norms and social relations embedded in social structures that enable people to coordinate action to achieve desired goals. Harvard political scientist Robert Putnam describes it as “features of social organisations such as networks, norms and social trust that facilitate coordination and cooperation fore mutual benefit.” Don Cohen and Larry Prusak , co-authors of “In Good Company : How Social Capital Makes Organisations Work” suggest that social capital is a useful perspective for understanding behaviours and support that support or impede knowledge creation and sharing. In their view, “social capital consists of the stock of active connections between people, the trust, mutual understanding, and shared values and behaviours that bind the members of human networks and communities that make cooperative action possible”.
THE BIG MYSTERY
Emotional Literacy Why are so few organisations governed by knowledge flows which seeks to maximise:• the value dynamics of what stakeholders demand most ( ie those demands that will cause distrust and devaluation of the organisation if they are not delivered &• all the productivities that are openly possible now that we have knowledge workers and networking technologies.
Please vote on which of these reasons you feel underpin the Big Mystery or nominate others.
a) Dynamic valuation governance requires metrics that respect the system as a whole where the entire measurement culture to date has been based on separability. Its as if accountants only know the mathematical operand of addition and not that of multiplication which is more relevant when flows interact and compound.
b) Auditing pervasive connectivity: until the rapid emergence of global communications technology in the 1980s, most of a large company’s assets were tangibly separate. Today, the vast majority is interconnected in the intangible relationships of knowledge productivities and value demands. Companies that operate blind of this networked dynamic are at risk of having their goodwill zeroised.
c) Humanity has been lost from the organisational practices of many disciplines. Notably, the biggest professional group within each discipline now makes its own business case by touting extraction of the human being as a cost saving. This is what accountants build into their numbers; how IT platforms often justify their cost; how advertising appears to suggest marketing should broadcast promises rather than keep them or learn from customers in 2-way communications feedback. Professional vested interest in the opposite dynamic to the health of the client’s living system is one of ten common organisational diseases harming emotional intelligence, which we can simulate as actually being compounded by the bit part metrics ruling most organisations today. An example of another disease is bad news not passing up the hierarchy because there is a feeling that the messenger will be penalised.
d) The Catch 22: many mergers and acquisitions – and other deep partnership networking ideas fail. But then this is what would be predicted if you don’t have the right knowledge flows to govern and select such adaptations. Ultimately the greatest dividends of a networked economy are on ice until dynamic valuation of trust-flow shares governance in companies with the opposite mathematics currently monopolising accountancy and all its associated metrics of performance analysis.
e) Leaders from Henry Ford downwards used to preach that an organisation whose only purpose is measured by making the next profit number is unsustainable and will end in collapse. Today’s greatest non-transparency is a few powerful interest groups rewarding themselves short-term while they systematically destroy the goodwill and unique socio-economic purposes that all other stakeholders demand from organisations as living systems. The system of system breakdowns and terrors that will result locally from the world’s most powerful organisations behaving in closed ways and disrespecting trust of human relationship dynamics will lead to a world that is the opposite of every charter of human democracy and relationship reciprocity. This way ahead will lead to disaster because over time healthy human and social capital compounds strong economic states not vice versa
Cast your votes for which of 1-5 you agree with or nominate another
to me.
