Growing intellectual capital: how it relates to the bottom line

March 1, 2000
People the most important element

PART I: This is the first in a three-part series exploring the three elements of knowledge management - people, processes, and technology. Part I focuses on people. Subsequent articles will focus on processes and technology.

"In today's economy, the most important resource is no longer labor, capital or land, but knowledge," - Peter Drucker.

The most important and most challenging component of knowledge management is people. "Our people are our most important asset." While this brings a cynical smile to most corporate faces, it is an absolutely true statement.

Through the years, corporations have treated employees with generally a bit more sentiment than other assets. But an interesting evolution has occurred. The corporate balance sheets are showing a steady decrease in physical assets and a steady increase in intellectual capital assets. Intellectual capital is the know ledge contained in processes, manuals, software, and guidelines. Predominantly, it thrives in living, breathing knowledge vessels - people.

Mergers, acquisitions, downsizing, economic downturns and upturns, plus the e-everything onslaught have caused a steady drain of the petroleum industry's intellectual capital. People with key knowledge of the oil and gas business are disappearing on a daily basis. The once ironclad emotional contract between company and employee, which was intact through retirement, has radically changed.

Today, there is no contract - just a tenuous relationship based on mutual benefit. The company expects the employee to contribute constantly to revenue, intellectual capital, and selling the company. The employee fully expects to increase their own marketability, do projects that look great on the resume, continually learn and be highly compensated for their contributions. Both sets of expectations are constantly changing and elevating.

What was considered a job well done today may be of little value tomorrow. What may have been eye-popping compensation yesterday is only the ante to play the game today. When either the company or the employee fails to recognize and realize these morphing expectations, the relationship abruptly ends.

Capture the knowledge

The knowledge management challenge is to increase the company's intellectual capital, in spite of the industry-jumping, extremely mobile employee. One possible solution might be to digitally capture all the knowledge in the organization. Unfortunately, this is virtually an impossible task because you generally do not know what you know, until you need to know it, and much know ledge is created along the way to the knowing.

But, the task can be attempted by understanding the work processes that will indicate where people interactions occur and where decisions are made. Decisions indicate where knowledge is needed, used, stored, and typically created. Thus, the knowledge trail can be mapped.

Once the knowledge map is understood, processes can be implemented to record the knowledge that occurs at the decision points. Convincing the participants to "record" an ordinary part of their job becomes the challenge. These types of knowledge capture results in a rather mechanistic dispersion of knowledge.

Another knowledge management mode is storytelling. This can be combined with various recording methods to both spread the know ledge and capture the knowledge around certain events or projects. John Seely Brown, Xerox CEO, states: "When people speak of tacit knowledge, they tend to think about what is known by an individual. Tacit knowledge exists between people, too. I say something; you say something; I say something and we will scaffold this thinking into something neither of us understood before. In that participation, something new comes into being."

Storytelling continues to gain momentum in the knowledge management community. The environment must be built to encourage storytelling. It is also a practice to have a historian follow the storytellers recording their knowledge.

Think of the storytelling that occurs around the water coolers, lunchrooms, golf courses, and bars. The extra value in this case is in the interaction between the storyteller and the listeners. What occurs is that the topical conversation enriches the original knowledge. So in effect, we are tapping the formal and informal environments where storytelling occurs. The perceived intrusion influences the product and might be a bit touchy to implement.

Communities of practice (CoP) or interest are another means of spreading knowledge. CoP refers to a group of people naturally working together, bound by a common interest, problem, or goal. This method generally keeps the know ledge within the community. Furthermore, it offers a comfortable environment where people of similar interests can congregate, physically or virtually. The interactions of the community members can be highly charged generating knowledge at a furious rate.

Typically, communities need a governing person or moderator to keep them on track, ensure contributions are relevant, converge ideas, publish group findings and best practices, and most importantly, to administer the group health and dynamics. Certain communities need moderators to identify cessation while in other groups, moderators are needed for occasional re-charging.

Both storytelling and communities of practice are more organic means of growing knowledge. Storytelling requires a company culture tolerant of watching and recording. Communities of practice need the company infrastructure to find and reward moderators. Either of these are wonderful ways of growing knowledge.

One final statement is that technology makes virtual communities a reality along with storytelling events. Going virtual brings an explosion of participants into the picture, which greatly enriches the knowledge growth. However, careful planning is needed to ensure that technological and cultural infrastructures are capable of supporting a virtual environment.

What and who

Some companies practice a method of know ledge management that values those who "know who knows," rather than capturing what their employees explicitly know about the science or business of the organization. This strategy utilizes the role of a knowledge broker who can identify those who have the knowledge required for a project and can quickly assemble these individuals to come together as a team.

In this scenario, the knowledge is not necessarily contained within the company, but it is easily accessed. Team members are selected based solely on their knowledge of particular subjects, process, technologies, etc. When a project is completed, the members disperse.

By using the knowledge broker strategy, the onus to develop and maintain knowledge within the company is gone. The transient nature of employees becomes a benefit because they bring with them the knowledge acquired from other projects, companies and even other industries to bear on the current project.

By embracing this knowledge strategy, the organization nature of knowledge growth is encouraged and facilitates the co-mingling of experiences across companies and industries. Through the knowledge broker and experts, knowledge spreads quickly, taking advantage of every medium available and ultimately is used in ways that would not even be recognized by the original creator or contributor.

Technology is an enabler and allows for solutions to scale. Processes indicate direction and provide templates for successful practices. But people are the key element, the holders of knowledge. They create and challenge best practices, seize opportunities for innovation, make decisions, capitalize on experiences, and sow knowledge throughout organizations. People are also the only ones who determine whether or not knowledge will be shared.

There are two distinct theories regarding people sharing knowledge. The first is that sharing is innate and all that is needed is the right environment. The other is that people have been trained since childhood not to share so that it takes the proper combinations of culture, incentives and rewards, coercion, persuasion, and nurturing to realize sharing within an organization.

Regardless of which theory you believe, the success of knowledge management hinges upon engaging all the individuals involved, whether they are employees, suppliers, or customers. When the human or cultural challenge is met, then intellectual capital grows, perceived value increases, and the Wall Street investment dollars follow.


Michael Vollmer is a consultant in Landmark's Information Management Consulting group. He holds a BS in psychology and sociology and an MBA.

Tessy Phillips is a Product Marketing Manager for Landmark Graphics Corporation. She holds a BS in Computer Science from the University of New Orleans.