To Understand Risk, First Understand Your IC

Today, 80% of the value of the average company is intangible. A lot of time is spent talking in the IC community about managing and measuring this value. But not enough time is devoted to managing the risk in intangibles.  Based on my conversations with risk management professionals, not enough attention is paid to intangible risks. So this month, I’ll be digging in on this issue. Read more

The way knowledge management should be understood – a new book recommendation

I first met Edna Pasher last year and was happy to receive a review copy of her new book with Tuvya Ronen, The Complete Guide to Knowledge Management: A Strategic Plan to Leverage Your Company’s Intellectual Capital. Here’s the review that I just posted at Amazon:

I have to admit that when I hear Knowledge Management, I used to think of the technical side of this discipline, the many experts I know in cataloging, storing, accessing and sharing knowledge, especially in its digital form.

This book is an effective reminder that the essence and the urgency of Knowledge Management is not in these technical skills but in the power of the people and shared experiences within organizations across the globe. The stories of successes and failures make a convincing case for the urgency of changing our management attitudes and practices.

It is so powerful because the book is built primarily on stories amassed over the fruitful careers of the two authors. The stories are synthesized in the accompanying text and through simple bullets at the end of each chapter. I’ll probably go back and review the bullets later but what sticks with me are the stories.

The authors don’t hit the reader over the head with this message—but the truth is that the process of knowledge management is actually subversive to industrial-era top-down practices. Rather than threatening us, the authors gently remind us the wisdom of shedding these old practices and adopting new ones that allow knowledge and innovation to flow freely—and fuel growth and the financial results that are still the measure by which business must be measured.

This is a great book that every modern manager should have by their desk—to pick up and flip to the applicable chapter when the old ways of doing business just aren’t panning out.

Smart Power at Africom and Boeing: A new business model for the intangible capital economy

Today’s New York Times explains the role of the U.S. military in this week’s multilateral efforts to create a no-fly zone over Libya. The effort is led by a group called Africom that is:

the military’s first “smart power” command. It has no assigned troops and no headquarters in Africa itself, and one of its two top deputies is a seasoned American diplomat…. is intended largely to train and assist the armed forces of 53 African nations and to work with the State Department and other American agencies to strengthen social, political and economic programs in the region, including improving H.I.V. awareness in African militaries and removing land mines.

This is the creation of a knowledge-based strategy for the U.S. military, leveraging its deep expertise in logistics, strategy and organizational development. If the U.S. did this ourselves, it would be too expensive—both in terms of dollars and political capital. But if the U.S. helps others do it, we are leveraging our knowledge and creating capacity in other nations.

There are huge political and strategic implications here that merit a lot of further discussion (as should any outsourcing decision in any organization). But for now, I want to focus on the “business model” of Africom. Because I see a parallel between this and the case of Boeing.

I’ve written a number of times about the Boeing 787, the new jet built with an unprecedented level of outsourcing and collaboration with Boeing suppliers. It hasn’t been an easy path and Boeing has received a lot of criticism. But I believe that Boeing is way ahead of everyone in taking this approach and learning from their mistakes long before others even think about trying this strategy.

And be sure that every successful organization will have to try this strategy in some form in the coming years. The essence of the intangible capital economy is maximizing the leverage of knowledge. And the best way to do that is to expand the network across which your knowledge is spread.

Smart Power. It’s about leveraging intangible capital.

Want to learn the basics of IC? Check out the free downloads from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization.

Who’s In Charge of Your Intangbiles?

We have talked a lot about the knowledge factory and management to this point. But we have never really addressed the unspoken question. Who should be in charge of the intangible side of your business (your “knowledge factory”)? The dynamism of the layers of networks that make up the knowledge factory is leading to changing roles and the emergence of new roles. Should there be a C-level person in charge of intangible capital? If so, what should that person’s title be? Read more

Knowledge Workers: Special Challenges at the Highest and Lowest Levels

Over the years, we have worked in companies of all sizes to help them grow their businesses and adapt to changing global and local markets. So we have to confess that we have had our share of experience with employees within our client companies that do not buy into the vision that we have put forth here about knowledge workers. The greatest skepticism comes at both ends of the employee spectrum—the highest-level and the lowest-level knowledge workers. Read more

The Role of a Manager in the Knowledge Era

In the knowledge era, the ability to access and leverage knowledge for competitive advantage is critical to corporate success. But knowledge is rarely concentrated at the top of organizations. There is still a need for top-down communication and direction but this must be balanced with knowledge flows from the bottom up and the outside in to organizations—and changes the job of a manager. Today’s manager is always working to balance these knowledge flows.

So what is the right balance? Read more

Are Managers Even Necessary?

Do knowledge workers need to be “managed?” Many will tell you no. This view says that if workers are smart enough to be “knowledge workers,” then they are smart enough to organize themselves. This thinking is also consistent with the view of networks as living organisms capable of self-organization.

There are a few interesting examples of a “leaderless” approach to management. One is the Orpheus Chamber Orchestra, which has no conductor and fills all other leadership roles on a rotating basis. Another example was Ternary Software, a small development shop that was run democratically from 2001 to 2006 through consensus (one of the founders has since left the company to productize and evangelize this management approach). Read more

Outsourcing and the Networked Business

Last night, I attended the Association for Strategic Planning’s meeting at Suffolk University. The guest was Amit S. Mukherjee, author of The Spider’s Strategy: Creating Networks to Avert Crisis, Create Change, and Really Get Ahead. Amit gave a great talk showing the history of productivity leaps in business (he made the case that weapons manufacturers often lead the way). He, like us, sees the beginning of a new era of business roughly a decade ago.

So it was fun to open my file this morning for the next installment of excerpts from our book. The next topic is about the kind of shift that Amit described last night. And there is more to come in the coming days about what this means to managers. Maybe we can get him to comment along the way….

Today a lot of the work done for organizations is no longer done inside the organization by its own employees. Instead, partners with greater expertise or more efficient operations take on an aspect of your organization’s work. A big driver of this trend has been the differing costs of labor across the globe. During the past couple decades, countries like China grew their manufacturing base while information technology jobs went to countries like India. In intangible capital vocabulary, this converted internal human and structural capital into relationship capital.

Outsourcing has actually been around for a long time. In a course we delivered for mid-level information technology managers, we used an article about the outsourcing of IT jobs called, The End of Corporate Computing, by Nicholas Carr. Carr made an analogy between current trends in the IT market and the shift that occured when companies started purchasing their power from external suppliers in the early 20th century. One of the drivers of this shift was the efficient allocation of capacity. Carr points out that most corporate data centers use less than half the computing capacity of their computers. It’s not just the capacity; it is also about the work to maintain huge numbers of machines. This was an early call for the increased efficiency of what is now called cloud computing—solutions hosted on servers that can be managed more efficiently than can thousands of standalone personal computers.

All this is to say that the job of the manager has clearly migrated from being an internally-focused role that worked within a strict hierarchy to one that focuses on maximizing the effectiveness of the entire network of an operation. The makeup of your corporate knowledge factory and its many subsidiary networks can and will change over time. 

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

Are Workers a Cost or a Resource in Your Organization?

Businesspeople today are facing two simultaneous challenges: the current lackluster economy and the shift to the knowledge economy. The lackluster economy makes it tempting and often necessary to cut headcount. People are one of the major expenses in a business and are often seen as a cost as opposed to a resource. But success in the knowledge economy depends on a strong cadre of people to fuel your intangible capital. People are both the source of knowledge and the medium by which your organization learns, adapts and innovates.

Why do we make this distinction? Read more

How Many Workers Are Knowledge Workers?

The change in the American workforce has been evolving slowly over the past century. Over this time, the dominant jobs have shifted from materials extraction and processing to information processing. The trend was constant and consistent over the century for the primary and tertiary sectors. The secondary sector actually peaked at 50% in 1960 and then trended back down to end the century where it started. The following chart is from PBS The First Measured Century (a fun book and website). Read more

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