Archive for October, 2008

F9- Economics of (Unconscious) Learning

October 26, 2008

One of the poll questions I often ask participants in my KM workshops is “Estimate what percent of your total knowledge (now) came from your formal schooling.” Almost all answers are below 50%. The average hovers around 20%, depending on the ages of the participants. Then I ask “Where did the 80% come from?” Their answers reveal three major sources: learning from doing/working, learning from study/reflection and learning from interaction/sharing with others.

But the shocking thing is this: while so much resources, time, planning, systems and institutional support systems were spent to gain 20% of our knowledge, we got the remaining 80% largely without planning, without technology and without systems and institutions. Let us admit it: we gained the 80% quite informally and unconsciously. “Unconscious learning” happens to us most of the time! If our learning while doing/working had been systematic and deliberate, the percentage would have been greater – the rationale for organizational learning and knowledge sharing (OL/KS)!

The causal sequence goes like this:
Knowledge worker learns (often unconsciously) while working => Her knowledge and expertise grows => Her salary expectation (and also the market value of her expertise) increases => Increase in her prospective future incomes

Next, let us explore what indicative or order-of-magnitude economic value of OL/KS we would get. The logic of the computations below is based on NPV computations mentioned in the previous blog, and the same M&E (monitoring & evaluation) framework we had been using in the past several blogs:

Let us invent a reference case: A 40-year old knowledge worker, with 20 years of working experience and earning $120,000 a year. She is able to command this salary level based on her excellent 20 years of work experience and track record.

Assuming she looks forward to 25 more years of productive employment, an estimate of her human capital is the present value of her income stream over the next 25 years. Assuming a flat salary profile (a deliberate underestimate) to age 65, 10% of gross pay going to cost of basic human necessities, and a discount rate of 5% p.a. then her human capital is worth over $1.63 million today. If she acquired 80% (from the poll above) of her expertise through work experience over the last 20 years, then the 20-year unconscious OL/KS was worth $1.3 million. (The rest is the money value of her formal education.)

Assuming a straight-line learning curve, then at age 40 the annual or incremental value of her largely unconscious learning from doing/working is about $65,000. That is over 6 months worth of salary. (I can email my Excel work file to anyone interested to know the computation details). For every $4 she was paid by her employer, she gained $2 worth of unconscious learning from working!

If she, or better, if the entire organization shifts to a conscious OL/KS learning mode, how much would this figure increase compared to the unconscious learning-from-doing mode? Would learning and knowledge sharing increase by 20%? or 50%?

Let us take 50% for the sake of illustration. This means that conscious OL/KS adds another $1 worth of learning for every $4 paid by her employer. Then the yearly incremental value of conscious OL/KS to her would be equivalent to 3 months’ salary, and the yearly benefit of a mature programmatic OL/KS to an organization could be estimated at 3 times its monthly payroll (or $1 benefit for every $4 that goes to the payroll budget).

These are merely order-of-magnitude guesses (it is all guesswork really).

What do you think?

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F8- Valuation of Intangible Assets

October 25, 2008

The private sector has a handy way of assigning market value to tangible and/or intangible assets: the capacity of the asset to generate earnings. Using the M&E (or monitoring & evaluation) framework proposed earlier, this is the same as saying that the value of 1 is the sum of all future 3 (after discounting):


Here are some examples

    1- Anticipation of future earnings: Buyers of stocks bid up the price of a stock when they believe its prospects for generating earnings in the future is very good. Stock buyers use indicators such as Price-Earnings Ratio for this purpose.

    2- Erosion of confidence: In contrast, if buyers of stocks lose confidence in a company’s ability to generate future earnings, they bid down the price of its stock. In the first two weeks of early October 2008, Dow Jones companies lost US$ 2.3 trillion (when their physical and other tangible assets stayed nearly the same). That is the market value of lost confidence (an intangible asset).

    3- Net present value: The value of the expertise of a consultant (an intangible asset) is the present value (assuming a reasonable discount rate) of the stream of her expected annual earnings (less necessary personal expenses) up to her retirement day. For example, the economic value of the expertise of a 45-year old consultant netting Euro 6,000 per month is nearly Euro 1 million at 5% annual discount rate (that is, a principal of Euro 1 million deposited in a bank account earning 5% yearly can support monthly withdrawals of Euro 6,000 up to age 65).

    4- Due diligence process: Acquiring a corporation not listed in the stock exchange (market value is unknown because its stocks are not traded) involves a process of estimating its fair market price by looking at both historical financial performance (tangible assets) and prospects for future growth based on brand, network of customers, growth of customer base, soundness of management policies, vulnerabilities to competition, etc. (all intangible assets).

    5- Premiums: Beachfront hotels adjust the rates of their sea-facing rooms higher than land-facing rooms. The premium is the extra price guests are willing to pay for the scenic view (an intangible asset).

Robert Kiyosaki (author of “Rich Dad, Poor Dad”) defines an asset as anything that yields regular income. Contrary to accounting practice, he claims a family car should not be treated as an asset because it generates regular expenses!

Here is an illustrative list of ordinary things, both tangible and intangible, that generate regular income. Following the view of Kiyosaki, we can call them “assets” or “capital”.

    • Natural capital: “I sell 2 truckloads of mango fruits yearly from my 20 mango trees.”
    • Technology + structural capital: “We patrol our Marine Protected Area against poachers because it regenerates our fish stock.”
    • Social capital: “When I was a child, my godfather gives me a cash gift every Christmas.”
    • Customer capital: “My customers keep coming back and boost my sales because they trust me.”
    • (Negative) psychological capital: “That cooperative has been losing money because of its corrupt manager.”
    • Human capital: “The Philippine economy gets $15 billion yearly remittances from its overseas workers.”
    • Public infrastructure: “The new road enables me to sell my farm products to the town center every week.”
    • Human capital + access to cultural assets: “My part-time job is French and Niponggo speaking tour guide in Bohol province.”
    • Cultural capital + indigenous crafts: “Our Moriones tradition boosts our tourist income every March.”
    • Financial capital: “The trust fund yields $10,000 every year.”
    • Access rights to natural resources through a formal agreement: “Our agreement with the government gave us usufruct rights over our ancestral domain.”
    • Traditional access rights: “I gather and sell firewood from the communal forest every Saturday.”
    • Indigenous knowledge: “Knowing the forest intimately enables the Ayta to survive there for months.”
    • Structural capital: “My PowerPoint presentations attract more clients to my workshops.”

At the conference on “Knowledge Architectures for Development” at the Singapore Management University last March 2008, we proposed the term “metacapital” as a generic term to encompass these various forms of capital (see “Knowledge for Poverty Alleviation: A Framework for Design and Evaluation of Development Projects for Low-Income Communities”).

In monitoring & evaluation (M&E) of KM for development, the issue then is: how do we translate this private sector approach to the development sector? Any ideas?

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F7- Interactivity and Context

October 22, 2008

We saw earlier that knowledge is capacity for effective action.

Let us study the following observations about ineffective actions:

    1- An X-ray film enables a radiologist to make better diagnosis, but it is meaningless to a plant engineer. Specifications of a turbine enable a plant engineer to make design decisions, but it is meaningless to a radiologist. The right skill must go with the right information for effective action to result.

    2- A best practitioner fisherman tries to replicate his best practice in organizing fishermen to set up a marine protected area in another coastal community. He cannot duplicate the success he had in his home community. The right procedure does not work equally well in a different social or relational context.

    3- A winning BPI (business process improvement) team has been very effective in solving problems together and thus making many improvements over the last two years. After a team member transferred to another team, she found she could not work as well with her new team in similar problem solving sessions. Effective thinking together depends on good or well-established relationships; disruptions in the relationships reduce the effectiveness of a team. (Psychologists say the ease to retrieve knowledge within the context of team members who know well each other’s thinking styles and specializations comes from “transactive memory”.)

    4- Computers of the same brand and specifications were donated to school librarians in different locations in the country. After three years, some were working and others were not. The differences were found to be due to differences in availabilities of spare parts and skilled repairmen in the locality. The effectiveness of a technology depends on the socio-economic context within which the technology is embedded.

    5- An expert senior engineer who will soon retire was asked to take in an understudy who is scheduled to replace him after he retires. They were piloting a knowledge transfer process designed by the HR Director. The senior engineer and the understudy cannot work together due to differences in their working and thinking styles – something the two were largely unaware of. Frequent disagreements slowly led to erosion of mutual trust. After several months of trying, the senior engineer requested for a new understudy. Effectiveness of coordination depends both on right procedure and right relationship. The knowledge transfer process failed to consider differences in styles (incomplete procedure), which led to or worsened the relationship.

The implications are clear: effective action in any particular work context comes from the right combination of human capital, structural capital, relationship capital and technology (a tangible asset) suited to that context.

Thus, the impact of KM is attributable to the combination of knowledge assets, and not to any single knowledge asset. If knowledge asset A is added to an existing mix of knowledge assets B and C, the incremental improvement in productivity may be mistakenly attributed to A alone when in fact it was due to the interactive combination of A, B and C.

For example, let us say that a self-customizable and role-based portal was introduced in an organization’s intranet. As a result, the time spent in hunting for information was reduced by an average of 1.2 months per year per employee. Can we conclude that the company savings amounting to 1.2 months of payroll every year was solely attributable to the new portal? Maybe not. More precisely, the cost savings was attributable to the interactive or joint effect of: (a) technology (the new software), (b) structural capital (the configuration of each portal and the use of knowledge taxonomy tailored to each employee’s functional role) and (c) human capital (the skills of the employees in customizing and utilizing his or her own portal). Let me add: (d) the empowerment that accompanies a company policy of training and encouraging each employee to customize/personalize his/her own portal to suit his/her specific needs enhances motivation that contributes to the effectiveness of the portal!

Does this make sense to you?

By the way, the total economic impact is the present value of the annual productivity increments coming from use of the extra 1.2 months made available per employee. If this benefit is greater than the cost of the new portal and training of employees in its use, then the portal project was worthwhile.

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F6- “High-Octane KM” is Demand-Driven KM

October 13, 2008

Here is a story how CCLFI.Philippines applied the M&E (monitoring and evaluation) framework I described in my previous post.

In September 2005, the Executive Director of STREAMS (an international network of NGOs in water and sanitation, which was one of CCLFI.Philippines’ partners) asked for our help. STREAMS Board members flew to Manila and are meeting together with an Observer from their major funding sponsor, the Netherlands Government. She asked, can I please convince her Board that KM is important? My time slot was only one hour. And she warned that the Observer is avowedly sceptical of KM!

I did a quick workshop with the Board members, where I asked a series of 3 questions.

I asked the Chairwoman (the CEO of the Water Research Commission of South Africa) Question 1: To an outsider like me, can she please tell me in a few brief sentences what are the valuable development results their network wants to achieve?

I then wrote the key phrases on the whiteboard; the result was 2-3 key outcomes.

We next distributed metacards (similar to Post-Its) and felt pens to the Board members including the Observer. Then I asked them to write down (in short phrases) answers to Question 2: What programs, functions or projects of your network and its members are most important in achieving those development results?

We posted and clustered their answers on the white boards. After about 20 minutes discussion, we picked out a very important function or program. There was much debate what is the “most” important; so we settled for “a very important” program.

I next asked them to write down again in metacards, their answers to Question 3: What skills, information/knowledge, support systems and relationships are most important in implementing this program well?

Again we posted and clustered their answers. We then discussed the results and after about 30 minutes arrived at a priority shortlist of Generator Knowledge Assets or GKAs.

Finally, I concluded, “according to your collective judgement, the successful performance of your organization hinges on how well you manage these few Generator Knowledge Assets.”


Working backwards to identify CKAs

High-Octane KM: Working backwards to identify GKAs


In about one hour, the Board members saw: (a) the importance of KM to their organization, (b) the link between KM and their organization’s goals, and (c) that focused KM can be inexpensive.

Managing only the GKAs is “high-octane KM”. It is “lean and mean” KM.

During coffee break, the Observer approached me and said something to the effect that KM is indeed important.

I maintain that KM initiatives must be driven by the socially valuable outcomes an organization wishes to achieve or contribute to. One way to ensure this is to ask your internal and external customers’ needs and requirements. In other words, KM must be demand-driven, not supply-driven. “Knowledge push” or supply-driven KM tends to be expensive (e.g. big databases, portals and knowledge centers, knowledge mapping/inventories). “Knowledge pull” from users is more cost-effective (e.g. Help Desks) because the only effort you exert is whatever is needed to solve a specific problem or need of a specific user. High-octane KM is an example of demand-driven KM.

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F5- A Proposed KM Framework

October 12, 2008

A source of confusion in the field of KM stems from the use of the very common word “knowledge.” Let us discern how KM gurus use this word, starting with the guru of all management gurus, Peter Drucker:

    “Knowledge is information that changes something or somebody — either by becoming grounds for action, or by making an individual (or an institution) capable of different or more effective action” – Drucker

    “Justified belief that increases an entity’s capacity for effective action” – Nonaka

    “Knowledge… should be evaluated by the decisions or actions to which it leads.” – Davenport and Prusak

    “Knowledge is the understanding of relations and causalities, and is therefore essential in making operations effective, building business process, or predicting the outcomes of business models.” – McKinsey & Company

    “I define knowledge as a capacity to act” – Sveiby

    “Knowledge is information in action” – O’Dell and Grayson

In KM, “knowledge” is capacity for effective action, which includes belief, understanding of cause-and-effect and information useful for effective action. It encompasses whatever helps you do your job well. Thus, information that is not actionable is not knowledge. “Effective action” is the operational, empirical or behavioral indicator of the result of applying knowledge well in a particular context.

The model we showed earlier (where, following the previous post, I expanded “knowledge assets” to “intangible including knowledge assets”) provides a simple KM framework. Because this framework links knowledge assets to results of KM, it also provides the foundation for monitoring and evaluation (M&E) of KM, or better, M&E in the management of intangible assets.

km-model3

This cause-and-effect model simply aims to highlight the fundamental link between knowledge and action, and between action and value creation. In actual practice and in specific work contexts, there are many factors that are in play: (a) effectiveness of an action is very dependent on context including relationships (discussed in blogpost entitled “F7- Interactivity and Context”), (b) value creation is dependent on users’ definition of what is valuable to them (discussed in blogpost entitled “F13- KM is for value creation: WHOSE value?”. Check also the ugly and messy “flies in the ointment” I pointed out in “F3- KM is for value creation”), (c) knowledge workers’ behavior depends on their personal values and inner motivation, support from peers or boss, incentive system, etc. (discussed in blogpost “F1- KM is Not Enough!”), and (d) learning and knowledge transfer depend much on power relations among many actors involved (discussed in blogpost “F14- M&E of KM for development”). I thank Charlie Dibsdale for reminding me to point these out.

1
M&E tools in use to track and assess Box 1 include: various intellectual capital accounting methods, knowledge mapping/inventory, social network analysis (SNA), blogs, completely unstructured story telling/listening, lessons-learned session (LLS), corporate knowledge taxonomies, number of uploads to a portal, World Bank’s KAM, etc. These are tools of “supply-driven KM”.

2
M&E tools in use that pertains to Box 2 include: key performance indicators (KPI), various productivity measures, activity checklists, number of hits of a webpage, action indicators in a project logframe, indicators in a Balanced Scorecard, Malcolm Baldridge measures of performance, etc. At the activity level, it is easy to attribute the action to whichever specific knowledge assets were used, but attribution gets more difficult at the project and especially at the program or organizational levels.

3
M&E tools in use to monitor and evaluate Box 3 include: number of problems solved, satisfaction scores by internal/external customers, value adding (vs. non-value adding), impact of training on workplace performance, post-project success stories by project beneficiaries, gross sales of a product/service, statistical correlations between knowledge assets and organizational performance measures, key result areas (KRAs), market value of a corporation, satisfaction survey among project stakeholders, etc.

Disaggregation and attribution of organizational results to specific factors is often difficult here. However, if the choice and design of a KM initiative is demand-driven (e.g. to solve a specific problem, to enhance a particular capability, to assist in making a particular type of decision or policy, to increase efficiency of a work process, etc.) then it is easy to devise a measure or indicator to check if indeed that demand or objective was met.

Please note that this framework is suited for M&E of KM. It focuses on the outputs or results of KM. Building upon my previous blog post F1, I also proposed an expanded KM framework that focuses on the inputs, the most important of which are motivated, loyal, curious and innovative knowledge workers (thanks to Daan Boom for pointing this out). See the blog “Practical exercise #15: ingredients of effective group action” I posted last February 28, 2009).

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F4- Unconscious KM and Conscious KM

October 8, 2008

We have seen from two previous posts that (a) intangible assets generally contribute more than tangible assets in producing the results that organizations value, and (b) knowledge assets are only a subset of intangible assets.

M&E of KM in development is therefore embedded in the larger issue of M&E of intangibles.

In late 1995, World Bank President Wolfensohn announced before the world’s finance ministers that the World Bank is not only a lending bank but also a “Knowledge Bank”. Of course, knowledge assets had always been creating value for the Bank even before 1995; but World Bank managers formally recognized this fact only after Wolfensohn’s announcement.

Organizations and projects are creating value from their intangible assets with or without any conscious or formal KM strategy/program. Their managers are managing their knowledge assets but they do not call what they are doing “knowledge management”. They use other terms such as “human resource management”, “succession planning”, “replication of best practice”, “role-based portal”, “work templates”, “mentoring”, “customer relations management”, etc. They are doing what we may call “unconscious KM” or management without a knowledge-based framework.

Various M&E tools for tracking intangible assets are in use in the corporate sector: KPIs (key performance indicators), Balanced Scorecard, Malcolm Baldridge criteria, ROI of training (Accenture model, Covey model, etc.), Sveiby’s Intangible Assets Monitor and Edvinsson’s Scandia Framework. (see: “KM Tools: Qualitative to Quantitative”)

Similarly, successful performance of a development project is attributable to the effective use of knowledge assets, even if its project managers were unaware of KM or were not consciously applying a KM framework. If a project manager formally adopts KM or hires a project KM officer, what does “M&E of KM” mean? The KM officer would likely want to justify his/her job by tracking only the incremental improvements as a result of the new KM program (value added by “conscious KM” over “unconscious KM”). But if a project manager is aware that intangible knowledge assets are creating value, he/she would prefer to track how ALL knowledge and other intangible assets are deployed and how they could ALL TOGETHER be managed more effectively. “M&E of intangibles” makes more management sense than just “M&E of KM”!

Let me tell two stories from our experiences in applying KM in development — stories about how “conscious KM” enables the manager to have “new eyes”.

1
In the Philippines, we scanned and studied 10 best practices from more than 950 anti-poverty projects. Why were they successful?

The answer surprised us: the communities concerned were successful because the projects leveraged on the wealth of intangibles that the “poor” communities already had: network of relationships (social capital), access to natural resources (natural capital + social sanction), dedicated leaders (human capital), useful linkages outside (stakeholder capital), collaborative practices (cultural capital), indigenous knowledge (intellectual capital), etc. The greater contribution of intangible assets is true both for community development as well as for corporate profit-making!  All these are described in our freely-downloadable e-book: “Community Wealth Rediscovered: Knowledge for Poverty Alleviation” from our website.

Many local communities are “poor” only in tangible assets — they are wealthy in intangible assets. People who call them “poor” are people whose development paradigm is based solely on financial or material (i.e. tangible) mental models.

Our research also opened our eyes in another way: KM for development is not just a matter of facilitating information/knowledge flows — this is a mental model that belies a development practitioner mindset, which is basically an outsider perspective. If we take an insider or community perspective, KM for development is suddenly different: it is now a process of recognizing, appreciating and leveraging on the wealth of intangible assets that a community usually already has.

2
A manager of one of our development partners once remarked, “I see no difference between a Lessons-Learned Session and the project evaluation that we already do.” We formulated the simple table below to help him see the difference. A project may be a “failure” (project objectives were not met) but it may have generated useful knowledge! Such knowledge should be captured via LLS to benefit next similar projects.

Traditional Project Evaluation versus Lessons-Learned Session

Traditional Project Evaluation versus Lessons-Learned Session

See an expanded version of this table in “Vertical versus Horizontal Learning”.

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F3- KM is for Value Creation

October 7, 2008

In the private sector, value is measured in terms of how much consumers are willing to pay for a product or service, or how much stock market buyers are willing to pay for stocks of a corporation. The key element is how much a consumer is willing to pay, which in turn depends on her/his satisfaction. KM starts with recognizing what internal and external customers WANT. On these criteria hinge management decisions, including KM.

There is an ugly fly in this ointment: most consumers make decisions with almost zero knowledge of the human, social, environmental and cultural costs inflicted elsewhere while producing what she/he buys. Do you agree that most corporate KM contribute to perpetuating this situation?

In the public and civil society sectors, the mainstream development value is sustainable development — which can be restated in KM language as: development of social, natural and economic capital in ways that are not at the expense of each other. The World Bank proposed a four-pillar model of the Knowledge-Based Economy (KBE). They then developed a widely-used KAM or Knowledge Assessment Methodology for measuring the progress of national economies along the four pillars. The limitation of KBE is that the four pillars pertain only to the economic dimension. The Asian Development Bank subsequently proposed a broader framework, marrying KM with sustainable development, and came up with Knowledge-Based Development (KBD). However, it has not come up with similarly practical indicators.

Communities and social groups are the primary actors in development. KM for development starts with recognition of the needs and values of a community. You will surely agree with me that KM starts with what a community truly WANTS.

There is a messy fly in this ointment: results valued by a social group may be harmful to another social group. Al Qaeda and the US Government want valuable (to each of them) results extremely at odds with each other — and each uses KM along their own definitions of what to them is effective action (both use manuals, mentoring, technology, learning-by-doing, websites, networks, etc. — all KM tools). More, milder situations exist, where the KM framework of the more powerful group prevails (sometimes unwittingly) over that of the less powerful.

In many places in our planet, development can hardly proceed because of conflict — a sign of eroded or damaged social capital. In fact social capital can be double-edged: some social groups achieve unity among insiders (improving “bonding” social capital or exclusive social capital) by cultivating greater enmity against outsiders or enemies (worsening “bridging” social capital or inclusive social capital -from Putnam, Woolcock, Bourdieu,etc.).

It is utterly urgent to, using KM language, cultivate bridging social capital to heal the differences between warring nations, religions and ethnic groups — and failure can be in the form of a global or regional nuclear war that can destroy all other forms of capital in the planet.

This morning, I received an invitation to help the Center for Bridging Societal Divides of the Asian Institute of Management formulate their KM framework. One of their missions is to provide training on Bridging Leadership. I keep experiencing these interesting and seemingly random “connections” in my KM work. Jung called this synchronicity.

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F2- Intangibles: More Essential for Value Creation

October 4, 2008

Let us “connect the dots”:

  • Starting in the 1980’s book values of corporations around the world constitute an increasingly smaller percentage of market values.
  • Corporations which excel in managing their intellectual capital (MAKE winners) grow twice faster than Fortune 500 corporations (Teleos).
  • The world economy is now creating more wealth from services than from industry or agriculture; global service trade has been growing faster than global commodity trade.
  • Human capital of a knowledge worker is what generates his regular income.
  • Remittances from overseas workers now constitute more and more of wealth creation in many developing countries.
  • Most successful anti-poverty projects are those which leverage on existing intangible assets of communities (Knowledge for Poverty Alleviation model).
  • Fukuyama observed a pattern, namely, that high-income economies are often also high-social trust societies.
  • Sustainability of CBRM projects hinges on intangible factors: sense of ownership, transparent and accountable managers, cohesiveness of the community, self-confidence and hope.
  • High trust (Covey) and low/managed ego (Marcum and Smith) reduce business costs.
  • High social capital was found (U.K. Office for National Statistics) to be correlated with better health, improved longevity, better educational achievement, lower rates of child abuse and less corruption in government.

What do we see here?

It seems to be happening across many sectors: intangibles have become more essential in creating value!

Do you agree? Is the inference correct? Or is it correctly worded?

We saw from my previous post (“KM is Not Enough!”) that intangibles largely overlap with knowledge assets. Managing intangibles has become the “the name of the game”. In fact, knowledge has become the prime creator and repository of wealth (see first six bullet points above).

We can now assert that the proper goal of KM should be to create value. The causal model or KM framework is:

From the previous post, we saw that “knowledge” is capacity for effective action, which includes information for effective action. The model defines what is “effective”: a decision or action is effective if it produces the result desired or valued by the actor. Knowledge is “what works” for a user.

The next issue is more knotty: what precisely is “creating value”? See you in my next blog post.

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F1- KM is Not Enough!

October 2, 2008
A simple exercise useful to introduce KM concepts to a workshop
group is to ask each one the question:

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“What helps you do your job well?” (KM gurus such as Sveiby, Drucker, Nonaka and O’Dell say essentially the same thing: that “knowledge” is capacity for effective action, including information to support effective action). Each participant is provided with metacards or Post-Its to write down their answers. Answers are then collected, clustered and posted in front for everyone to study.

Among dozens of workshop groups for which we facilitated this exercise, the result is almost always the same four clusters below:

      1. Skills, experiences, training, education,

attitudes

      , leadership skills,

self-motivation

      , health, etc.: we call this cluster HUMAN CAPITAL
      2. Support systems, access to information, manuals, guidelines,

vision/mission

      ,

empowering policies

      , learning procedures, business processes, etc.: we call this cluster STRUCTURAL CAPITAL (or some KM practitioners call this cluster PROCESS CAPITAL)
      3. External linkages/networks, relationships with customers and suppliers, teamwork and

trust

      within the organization, trust/reputation of the organization,

support from peers, inspiration and recognition of bosses

      , etc.: we call this cluster RELATIONSHIP CAPITAL (or sometimes called STAKEHOLDER CAPITAL or more narrowly as CUSTOMER CAPITAL)
      4. Technology/equipment, building and office space, facilities/furniture, financial resources,

conducive workplace,

      physical accessibility,

good pay and incentives

    , etc.: we call this cluster TANGIBLE ASSETS (meaning, they are included in the accounting system)

In 30 minutes, the group examines the clusters they made and is able to:

  • See the 3 components of INTELLECTUAL CAPITAL, namely, Human, Structural and Relationship Capital;
  • Learn that KNOWLEDGE ASSETS is almost synonymous with Intellectual Capital;
  • Grasp how the meaning of “knowledge assets” differs from the many meanings of “knowledge” among laymen;
  • Realize that Intellectual Capital is mostly INTANGIBLE (non-physical but generates value for the organization; not always entered in accounting systems or given money value);
  • See that both tangible and especially intangible assets contribute to performance and value creation;
  • Realize that accountants are seeing and measuring only one cluster: tangible assets;
  • Recognize the link between KM and performance or value creation;
  • See that improvement of performance is the result of good KM, and a basis for measuring KM impact;
  • Learn about KM terminologies;
  • Recognize that many areas of management overlap with KM (HR is about managing Human Capital; ICT is about managing some of the Structural Capital; and CRM is about managing some of the Relationship Capital).

We also discover that good relationships (both within and outside the organization) are important for effective performance. Yet arguably, relationship is not exactly “knowledge” isn’t it? That is why a minority of KM practitioners refuse to acknowledge or agree with St. Onge that Customer Capital is part of Intellectual Capital, or at least claim that Stakeholder Capital is not a “Knowledge Asset” (please allow me to interchangeably use the economic term “capital” with the accounting term “asset” here). Despite this debate, it is clear that to achieve effective action, or to improve individual or organizational performance, we must manage relationships — whichever way we scope or define “knowledge”.

One way I say it, is that human capital is EMBODIED knowledge, structural capital is EMBEDDED knowledge and relationship capital is ENCULTURATED knowledge — or am I stretching the meaning of “knowledge” too much here?

Another issue crops up: “knowledge” is not entirely intangible because technology is embedded knowledge, and technology is NOT intangible. This is the reason that some KM practitioners use the popular People-Process-Technology model of KM. I am not comfortable with this KM model; I prefer the more complete People-Process-Relationship-Technology model. In any case, this is another debatable point.

Motivation or Energy or what?

Motivation or Energy or what?

But what is more interesting is that the workshop groups also notice a fifth cluster (examine the entries in bold italics above) that cuts across the four clusters. What the groups cannot agree on is how to label this cluster. Is it Motivational Factors? Is it Energy? What do we call it? (my CCLFI colleagues prefer the latter neutral term). This leads to another realization, which is really self-evident: that a knowledge worker may know HOW to do a job, but he or she may not WANT or be WILLING to do it. Managing knowledge assets is not enough; we also need to manage motivational factors. We need to pay attention to both the Head and the Heart to achieve more effective action.

My bottom line is this: we can accept, reject or change terminologies including the term “knowledge management” as long as we adequately cover all the pertinent factors that affect or contribute to good performance of a knowledge worker or to value creation by a private or public organization. Accordingly, it appears from the above data that “managing intangible assets” is more comprehensive than “managing knowledge assets” or “knowledge management”.

What do you think?

(I read a conference paper last July in Kuala Lumpur on this topic which you can download from http://www.cclfi.org/downloads. It is entitled “Some Stories about How Personality and Culture Come into Our Knowledge Management Practice”)

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