The Holy Grail of the Knowledge Economy: Structural Capital

June 28, 2010 by  

If you understand human and relationship capital, you can start a business. If your business creates value for your customers, you can earn a good living. But you will never grow large or particularly rich with just these two kinds of knowledge assets. This is because the real promise of the knowledge economy comes in the creation of structural capital, that is, knowledge that gets captured and institutionalized in an organization.

When people say that “all our assets walk out the door at night” they are showing their ignorance of structural capital. A really successful business has standardized processes and shared knowledge that stay in the company when people go home at night. Some, but far from all, structural knowledge can be protected legally and will become intellectual property. But, at this point, that distinction isn’t important. First you want to understand how structural capital is formed and managed.

Before we move forward, let us admit that structural capital, like so many of the terms used in intangibles management, has a branding problem. We can’t tell you how many consultants and businesspeople have told us, “We can’t use that phrase in front of my clients/managers,” fearing that they would draw blank stares. We use the phrase because it’s the phrase used in the literature and it is actually a nice description of what it is: knowledge that has been captured and becomes part of the organization. It is the infrastructure of the knowledge factory that is your intangible capital.

In our experience, businesspeople have no problem with the term when it is used to explain the potential within their organization. We recently had this kind of experience with a management team. We had been hired to help them think about how to scale their organization. They already had offices all across the country but they had only tapped a small portion of their potential market. We came up with a summary that showed that they had strong competencies and strong relationships. But the structural capital was weak. The General Manager got it immediately and asked us to do a structural capital gap analysis. Not only did he understand the concept, he packaged it for us as a new offering for our firm!

Once you understand the concept of structural capital, we think that you will embrace it too. Having said all that, our advice is to use a name that resonates with your individual organization. Choose one that works: structural knowledge, organizational knowledge, knowledge infrastructure, organizational capital or anything else that works. The important thing is to get beyond the name and get people in your organization to focus on the concept.

Because the truth is that structural capital is the Holy Grail of knowledge economy. It is the way that your organization captures knowledge and makes it re-usable. Remember what we said in Chapter 1 about how knowledge is an infinite asset? It is through structural capital that you can realize this promise and make your business scalable.

Watch in the coming days for discussion of the four basic forms of structural capital: culture, organizational knowledge, intellectual property (IP), and processes. Please know that there is a lot of overlap between these forms. Organizational knowledge, for example, can be converted to process and may even be protected as IP. We make the distinction mainly to be able to talk about specific characteristics of the individual forms even though all structural capital is, at its roots, captured knowledge of one form or another.

Adapted from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization by Mary Adams and Michael Oleksak

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