Managed knowledge a valuable asset

Managed knowledge a valuable asset

By Bambang Wicaksono Witoyo

JAKARTA (JP): Unlike other kinds of company assets, knowledge
increases in value differently.

In comparison to capital assets, knowledge assets have two
distinct characteristics.

First, "harvesting" knowledge does not increase its value,
instead its value increases when used and "shared" with the right
people. Knowledge is a capital asset that grows in value as it is
used. When knowledge is used over and over again, it tends to
becomes polished and updated and consequently more valuable.

A second distinct characteristic of knowledge is that its
value is not only indexed to an individuals knowledge base, but
to the entire organization's knowledge.

This characteristic is double-faceted.

First it is marked by collectiveness. That is, if the
knowledge involves explanation of a certain process, then every
individual participating in the process would have his/her own
valued opinion on how to improve the existing situation. At the
same time, input to increase the value of existing knowledge need
not come only from those involved in the process; individuals and
groups outside the inner sanctum may possess fresh perspectives.

Knowledge has always been recognized as a key factor for
business success. However, only in the last decade, as the
competitive business environment intensified, has it become
crucial for business success. Only then did business players
understand that competing for rival business systems, and using
common industry management practices have its limitations.

To excel, companies cannot just implement common management
practices, they must tailor or even create new techniques for
their purposes. The best source for these tailoring and creating
opportunities comes from the collective knowledge within a
company.

This point deserves reflection. Standard analysis presupposes
that fresh perspectives to help reengineer processes originate
outside the company.

However, effective internal knowledge management can result in
solutions that are not only innovative, but more importantly
appropriate for the organization.

Greater appreciation for the intrinsic value of knowledge has
prompted initiatives at both micro and macro levels, accelerating
performance growth to levels that previously could only be
imagined.

Companies are not the only organizations that have created
growth by leveraging the value of knowledge. Community
organizations from a wide spectrum have experienced economic
growth from using a knowledge-based system of expansion.

A knowledge-based approach provides significant contributions
at both micro and macro economic levels.

How important is managing knowledge at the micro level?

In economics, the "micro level" concerns companies and
individual players.

Knowledge at this level is obviously important. We know that
an organization receives input from outside as well as inside its
boundaries; processing and creating output is information.

Here, information plays two roles. First, to ensure that
internal processes continue to work as expected and second, to
ensure that the organization displays appropriate growth as it
adapts to changes in its internal and external environments.

Excelling in these two roles will enable an organization to
survive. Taking the roles on board will enable an organization to
meet its short-term goals, and consequently succeed in achieving
its long-term vision. It's that simple. Like other successes,
growth arises from a solid foundation.

What are the specific components of these roles, which are
central to the longevity and health of an organization?

As a key ingredient to an organization's longevity, knowledge
needs to be managed to ensure that it continuously evolves to be
become more valuable. For example, the assembly procedure for
assembling a Swatch watch is knowledge that may continuously
evolve into ones that will reduce costs and time in the
production process.

However, so that the process or information optimally evolves
into something more valuable, it should be used and "shared" with
all the right people in the company.

These efforts have led companies to initiate programs to
regulate information known as Knowledge Management (KM).

KM is defined as the systematic approach to obtain the
collective knowledge of an organization. It includes gathering,
evaluating, consolidating, organizing, distributing and applying
the organization's knowledge.

Moreover, the value of KM applies to both manufacturing
companies and service providers.

One KM initiative is the development of the internal knowledge
database. A firm with a global perspective, such as Andersen
Consulting, provides an example of this approach.

Not only does the company share the expertise of its employees
across countries, but knowledge in the form of methodologies and
experiences are stored in databases accessible from any one of
its offices around the world. Stored information is used,
challenged and updated, continually increasing its value.

But even if a company has solid KM database systems, it should
realize the importance of employee retention as a key element to
keep knowledge evolving inside the company.

Chief executive officer of Hanigan Consulting in New York,
Maury Hanigan, said: "Companies don't always see the relationship
between recruitment and retention ... You keep hiring, and you're
still not in a stronger position than last quarter".

The option of recruiting experienced employees from outside is
available. However, companies run the risk of having to pay
higher compensation, accept lower company loyalty, and deal with
the new personnel's adjustment period. All these factors impede a
company's learning curve and impact on daily operations.

To put it simply, KM initiatives ensure the longevity of the
organization's operations through continual improvement of
available knowledge. This process encourages growth with minimal
interruption.

At the macro level, how has managed knowledge affected the
growth of major economies?

Here, the word "major" is used to distinguish between
developed economies and developing and underdeveloped ones. It
becomes evident that when we compare activities among economies,
we find that a key characteristic that separates the two main
economic groups is the establishment of infrastructure that
allows information sharing. One of the information vehicles that
optimize such infrastructure use is the Internet.

The Internet allows knowledge and information to be used and
shared by people at the macro level -- spanning from individual
interests to country concerns. With its almost limitless
potential, the Internet is a one-stop source of information.

To understand the Internet's substantial contributions, we
need to look at the impact it has had on two economic players:
sellers (organizations) and consumers. The relationship between
these two groups is critical.

As a information-sharing vehicle, the Internet has greatly
improved the relationship between vendors and consumers. Sellers
have more information on the needs of their target customers, and
consumers have more information to help them make better buying
decisions.

On the company's part, the Internet provides information about
consumers' needs, progress of the related products, and
information about the industry and its stakeholders, all at low
cost.

Access to such information provides businesses with ideas to
improve their products and services, and enhances internal
processes which enable them to be more competitive. Such measures
lead to higher expectation standards throughout the industry.

This, as a result, creates a synergistic effect, where the
whole is greater than the sum of its parts. If the improvement
effect is imitated by other industries, the result is continual
improvement in the whole economy.

As a two-way relationship, consumers also gain. From the
information they obtain from the Internet, consumers are able to
make better decisions regarding the product or service they buy,
pushing suppliers to be more competitive in their businesses.

Additionally, consumers can provide feedback, which will be
available for sellers to use on-line and real-time, further
increasing expectation standards throughout the industry. With
the support of the market economy, only the best players will be
given the opportunity to operate.

The value of managed knowledge is clear. But at what cost? And
how do we measure the return? Because the kinds of knowledge
management programs required by organizations vary, the costs
also vary.

The benefits obtained from such programs usually outweigh any
outlay, even though they are generally difficult to gauge.

One reason for these measurement difficulties is because the
impact of KM programs is massive and diverse, adding value
throughout the different activities in the organization and/or
the economy.

The main challenge for business leaders is to identify value-
adding KM programs that may be initiated in their companies.

As leadership guru Warren Bennis said: "The problem facing
almost all leaders in the future will be how to develop their
organizations' social architecture so that it actually generates
intellectual capital".

The writer is a change management analyst at Andersen
Consulting, a global consulting company in management and
technology.