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Symposium ushers in the knowledge-based economy

This article appears in the issue August 1998 [Volume 7, Issue 9]

Microsoft (www.microsoft.com)--a company with a relatively minor physical plant and raw product inventory--is capitalized at $200 billion. By comparison, General Motors (www.gm.com)--a bastion of the Industrial Age, whose global facilities and inventory stand second to none--is capitalized at only $40 billion. What's happening?

As corporations increasingly value intangible over tangible assets--or knowledge over inventory--the entire definition of success has shifted. These days, success is measured by the ability to innovate--to create and dismantle markets. To reach their goals and beat the competition, corporations must continuously one-up their own products and services. To succeed, an organization must take stock of its intellect. This is the impetus behind knowledge management.

In February, The Delphi Group (www.delphigroup.com) convened a panel of knowledge management practitioners to discuss the dynamics influencing the knowledge-based economy. Participants on the panel, moderated by the author, included Scott Cooper, the general manager of imaging and document management products at the Lotus (www.lotus.com); Ed McNierney, the chief technology officer of Eastman Software (www.eastmansoftware.com); and Jordan Libit, who since has left his position of senior VP of business development and strategy at FileNet (www.filenet.com) to pursue other interests.

What is knowledge management?

Knowledge management enables organizations to find new ways to readily share both their explicit knowledge (that which is easily codified and stored online) and their tacit knowledge (that which is elusive and collectively held in the brains and experiences of employees).

The knowledge-aware organization is able to react quickly to external demands, leverage internal resources intelligently and anticipate external market directions and course changes. Getting to this point requires fundamental shifts in corporate direction and leadership, but the potential rewards are significant.

The first challenge in understanding knowledge management lies in differentiating it from information management. Too often, organizations falsely believe that establishing an effective information management strategy embodies their knowledge management initiative. Survival in the knowledge-based economy requires linking information to other information, to people and to processes, spawning innovation.

Cooper observed, "It is the intersection of information and human cognition that creates knowledge. It is the process by which information is used to create something actionable. That is the goal of knowledge management."

Effective knowledge management requires much more than simply having the right software system and adequate training. It requires corporate leadership that views collective knowledge sharing and innovation as the fulcrum of competitive advantage. This poses a huge challenge in organizations where employees hoard information to protect their jobs, and security considerations more often reward secrecy over open sharing. In contrast, knowledge management compels employees to share their knowledge, and management to value those who do.

"Sharing knowledge within the organization is as big a challenge in many ways as sharing it with a competitor," said Libit.

Knowledge-aware organizations are continuously reinventing themselves in order to seize opportunities and realize the full potential of corporate talents. They possess an agility that lets them chart their own course through volatile and competitive markets. These organizations have amassed two kinds of knowledge: external and internal.

External knowledge reflects awareness of the competition, regulations and market trends, as well as the ability to anticipate a market. Internal knowledge includes an understanding of core competencies, know-how, strengths, weaknesses and lessons learned from past experiences.

Implementing KM

Amassing this knowledge--and making it accessible--poses the greatest challenge to organizations. Implementation of the knowledge chain requires corporate leadership and group acceptance, said McNierney.

"It may sound simple," he said, "but your employees better be motivated in the same direction as your corporation. Corporate mission and an employee value statement are important, but you also have to act in ways that clearly demonstrate this."

But beware of what Libit labeled the "information egotist," those employees who measure their worth by the knowledge they have that others lack. "Employees are inherently competitive. Refocus your company as a learning organization and build in creative ways for employees to collaborate," suggested Libit.

Incentive systems that reward employees for actively participating in the knowledge chain are at play in many successful knowledge-based enterprises. Front-end incentives that reward employees for contributing knowledge may not work as well as systems that reward employees for how often their contributed knowledge is reused to positive ends.

"It is not the tidbits of knowledge that an employee holds that make him or her valuable," explained Cooper. "It is the ability to continuously innovate and create new tidbits that is valuable."

Making effective CKOs

"It is versatility and a sense of strategic leveraging of intellect that translates into an effective CKO," said McNierney.

"It is asking a lot to assume that individuals, with little precedent to go on, will be disciplined enough to contribute to, administer and manage the evolving knowledge base," said Frappaolo. That realization is behind the move to establish a chief knowledge officer (CKO).

"The CKO sits between the CEO and the CIO. He or she is to the business process what the CIO is to technology," explained Frappaolo. Some organizations, viewing knowledge management as an extension of information management, have mistakenly attempted to reposition their CIO as the CKO. This can subliminally focus the knowledge management effort on technology and information availability, rather than on innovation and collaborative creativity.

"Some CEOs could fill the role of CKO," observed McNierney.

Industry-specific experience is not what is important. The ability to manage business knowledge in a flexible and innovative manner, leading the company in interesting ways, is what counts.

Technology, creativity & innovation

Knowledge management is not primarily about technology, but organizations will find it impossible to be competitive in the knowledge-based economy without it.

"Innovation and creativity are a business process, but few organizations have ever thought of them that way before," observed Cooper. Knowledge management technology acts as a facilitator, both in processing explicit and tacit knowledge and presenting them in a format appropriate to the user and business situation.

Operating a network that provides a seamless infrastructure for open communication is fundamental to a knowledge management initiative. The Web has dramatically altered the need for and viability of knowledge management and has driven down the cost of putting a knowledge infrastructure in place.

"For many, it is difficult to understand the role of technology in innovation. But it is a critical realization," said Cooper.

Within this network, organizations must determine the role that specific technologies can play in each of


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