case study in the knowledge management

Knowledge Leverage : The Ultimate Advantage By Touraj Nasseri
Read More in...A Case For Knowledge Management: Rethinking Business Technology Management for the New World of Uncertainty "...the first book on knowledge-driven organizations and knowledge workers that can survive and thrive in the new world of uncertainty and risk...." at www.kmbook.com Case Studies in Knowledge Management
Just imagine that your company is suddenly struck by a knowledge blight that erases all your corporate knowledge from the storage media including the employees' minds. The difference between the market values of the company before and after the blight struck is the value of the company's intellectual capital. Organizations fulfill their purposes and maintain their raisons d'être by what they know and how well they harness their knowledge. This fact should be a compelling reason for organizational governance and management to nurture most diligently the people and the systems that create, preserve, disseminate, renew and deploy knowledge. Is this so?, or are organizations squandering their supreme resource: the power and the product of the human mind? Is the advent of the knowledge economy thrusting the knowledge factor into the cores of corporate strategies?In a company, as in an economy, physical and mental or intellectual capital generate all the economic wealth and value. Intellectual capital is made up of human and knowledge capital. Human capital comprises individual talents and knowledge that is acquired through education, training, experience, and cognition. Knowledge capital is the documented knowledge that is available in such forms as research papers, reports, books, articles, manuscripts,patents and software. Knowledge capital consists of the artifacts of the human mind that are also stored outside the minds of their authors, and can therefore be available to whoever seeks them.The effective interaction and integration of the two kinds of intellectual capital is essential for maximizing its productivity.Clearly intellectual capital is the fundamental input to all wealth generating processes. Without knowledge natural resources could not be developed, and most of the value of manufactured goods consists in their knowledge contents. So physical assets owe most of their value to intellectual capital, and yet most companies are not organized to benefit fully from leveraging intellectual capital. The challenges to capitalizing on the knowledge advantage include: integration of intellectual capital with strategy; and monetary evaluation of intellectual capital.Knowledge and Business StrategyOnce a business has conceived its strategic intent, it must determine the capabilities, and the management systems it needs to achieve them. Strategic intents typically endeavor to explicate and communicate corporate ambitiousness: being the number one in providing certain customer benefits; being the world leader in a specific technology; delivering products with the best performance-to-cost ratio; and delighting stakeholders beyond their wildest expectations. The ambitious differentiation that drives strategies requires relentless innovation to improve every aspect of business: product development, engineering & manufacturing, business processes, marketing , learning, product delivery, customer relations, and sales & distribution. Innovation in a company is nourished and driven by knowledge-based capabilities and by management systems that leverage the capabilities. The potential inherent in well managed intellectual capital extends its impact well into the future as it adapts, renews, and replaces capabilities so that strategies remain responsive to rapid change and much uncertainty. Intellectual capital is therefore a company's most important strategic resource for competing and winning, and its management must match its importance. Dynamic and effective intellectual capital management determines a company's intellectual gap as the difference between its current and needed intellectual capital. It examines how effectively the current intellectual capital is used. It then designs and implements the most efficient mechanisms to close the gap in both intellectual capital and its management. As business conditions and strategies change new gaps are created and the system needs the dynamism to anticipate and respond appropriately . Intellectual capital management strongly influences many strategic decisions involving allocation of considerable resources of a company. These include :• The kind , quantity and quality of information that should be gathered . Information needs, in general, to be processed before it becomes knowledge that directly enlightens decisions. Information acquisition should therefor serve the knowledge needs of the company; this will also prevent information pollution.• What learning systems and environments should be created to encourage building and renewing human capital.• What kinds of knowledge and talent should the prospective employees command to support the human capital development strategy.• What information infrastructure should be installed so that it can best facilitate creation, tracking, storage and sharing of knowledge to support strategic and operational objectives .• What systems should be installed to safeguard intellectual capital ,and to ensure its quality and reliability. • What processes are to be implemented to mobilize intellectual capital for developing distinctive corporate capabilities that are essential to the strategy of the company. • What R&D programs to fund so that they can create the future knowledge that is needed.• What part of the R&D should be done in house, what part should be outsourced, and what part should be done collaboratively with competitors, suppliers and customers.• What kinds of business relationships and alliances should be established with external providers of strategic knowledge and technology.• What incentives and corporate culture are needed to foster and inspire efforts to enhance corporate intellectual prowess.Much confusion and waste of resources can result if companies do not have an intellectual capital management system to provide a coherent process for making decisions on questions of the kind listed above to yield the highest strategic value.Knowledge And Its Monetary WorthThere is difficulty in evaluating intellectual capital by the prevailing accounting rules that are used to evaluate physical capital. It seems that this difficulty has regrettably discouraged investment in intellectual capital. Not withstanding this,there cannot be any reasonable doubt that intellectual capital is very valuable. Just imagine that your company is suddenly struck by a knowledge blight that erases all your corporate knowledge from the storage media including the employees' minds. The difference between the market values of the company before and after the blight struck is the value of the company's intellectual capital. You might wish to continue the thought experiment by estimating how much will it cost to recreate the lost intellectual capital and to restore it to its original functionality, and you will have a measure of the lost value. Worthy efforts are underway to ascribe monetary value to intellectual capital. The difference between market value and asset value as recorded on the balance sheet has been used as a measure of the intangibles which include corporate knowledge. Brands, another intangible asset, are routinely evaluated and paid for handsomely in business transactions. The experience with "brand" evaluation may be helpful to the efforts to put a monetary price on intellectual capital. Intellectual capital manifests its value by how it is managed to enhance the performance and development of a company on the route to achieve its strategic intent. For any company it is possible to assess the contribution of intellectual capital to increased market share and profits through new products and faster product developments,through cost reduction,and by positioning the company for seizing future opportunities. The management system that is in place to leverage intellectual capital can measure continually its effectiveness by company-specific metrics, and demonstrate the real business worth of intellectual capital . Emerging Trail BlazersRecognizing the critical importance of intellectual capital to sustainable business success, a few notable companies have taken the leadership in launching considerable and serious efforts to understand and enhance intellectual capital management. The members of this select club include Sweden's Skandia, Canadian Imperial Bank of Commerce,and Hughes Space & Communications, to name but three. Some organizations have created chief knowledge officer or equivalent positions to provide stewardship and management for knowledge, as the chief financial office was established for financial capital. They are also designing processes for measuring and enhancing the business value of their intellectual capital. Some companies have installed systems that facilitate networking and information diffusion. Even though a holistic approach to intellectual capital management has not yet been applied , these pioneering efforts are commendable and inspiring. Enlightened self interest and survival instinct will encourage other companies to follow this lead and focus management attention on intellectual capital. After all business would seem to have given information technology,which is but a tool for managing intellectual capital , a good deal of attention and resources. The difficulties of accounting for intellectual capital as if it were physical capital is no excuse for a lackadaisical approach to intellectual capital managment. Senior executives might wish to start the process of heightening awareness of the knowledge factor in their companies by finding out what proportion of their intellectual capital has been mapped and what proportion of it is being productively used to achieve strategic objectives.