The Holy Grail of the Knowledge Economy: Structural Capital

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. Read more

Knowledge is a fundamentally different kind of economic asset

You have probably heard of the the Knowledge Era. You know that we shifted from the Industrial to the Knowledge Era sometime in the recent past. What you may not understand is the implication of this shift for economics–and for your own organization.

The big difference comes from this simple fact: Knowledge is infinite. Yes, you heard me correctly. Knowledge is an infinite asset. Giving it away or selling it does not diminish your supply of knowledge. This infinite nature of knowledge conflicts with one of the most basic assumptions of the economics that most of learned in school: Read more

Exciting book about the economics of intangibles: From Poverty to Prosperity

If you took economics in school, your mind is trapped inside a box. It’s not alone. Most minds in our business and economic communities today are still inside that box.

But it’s time to break out of the box because the knowledge economy is here to stay. And the knowledge economy breaks some of the fundamental rules of economics as we know them. That’s because the economics we learned is based on the concept of scarcity. I sell you a shirt and I have one less in inventory.

Knowledge, in contrast, is not a finite asset. If I share an idea with you, my inventory of ideas doesn’t go down. We will probably collaborate to improve the idea. If I sell you a software license, my software doesn’t decrease in value, it will probably increase in value because I’ll get user feedback. Read more

The Enduring Value of IT and Process Investments

Yesterday, I had a meeting with some consultants who told me the story of a group of IT and accounting people from one of their clients screaming at each other because they could not find common ground to communicate about the cost and ROI of IT investments.

Then, last night, standing in the parking lot outside the Boston KM event, I had a long chat with an engineer who has been around tech and business for decades. He was very active in the Y2K adjustments (yes, that was a decade ago?!). He volunteered to me that people still don’t have a disciplined way of tracking their IT and processes.

This is one of the big reasons that IT and accounting people end up screaming at each other. It’s not that the individuals are at fault. It’s that they are working in a broken system. Read more

Lessons in Structural Capital: The Checklist Manifesto

There are two levels to the story of The Checklist Manifesto, a great new book by physician Atul Gawande.

The first level is about checklists: how to make them, how to use them and the extraordinary results that come from using them. The examples include hospitals that virtually eliminate hospital-acquired infections through the use of a simple checklist used in the operating room just prior to cutting the patient open. Other great examples are provided from the field of aviation. He explains that airline pilots not only have pre-flight checklists, they also have notebooks with sets of check lists to guide them through different kinds of crises. Construction provides another set of examples: how to assemble a complex skyscraper  by coordinating the work of dozens of subcontractors. There’s even an example about the rock bank Van Halen’s inclusion of a clause requiring a bowl of M&M’s with all the brown candies removed as a way of the band ensuring that the other requirements in their contracts related to the safety of the staging were also read and followed. Read more

Intangibles and Airplane Security

Last night on NPR, I listened to a report on the heightened security measures that are being put in place in airports around the world.

Listening to the report, I couldn’t help but think that our leaders are getting the balance between tangible and intangible efforts wrong. Read more

We are kicking off an innovative new project to optimize structural capital

We have just won a follow-up assignment with a client to look at how to grow by optimizing their structural capital.

Structural capital is the very unsexy name for all the re-usable knowledge and systems that are captured in your company. It includes everything from training materials to software, management information and processes. Structural capital stays in your company when your employees go home at night. It also makes every employee smarter when they come back in the next morning.

Structural capital is part of the knowledge factory of the 21st century business. Combined with human and relationship capital in a strong business model, it makes up 60-70% of the average company’s value–called intangible capital.

This company is looking to develop a scalable growth model. If they do not optimize their structural capital, they would have to keep adding headcount. While their growth plans will require new headcount, the optimization will make both new and existing staff more efficient–to get more growth out of everyone in the organization. This is the promise of the knowledge era. Are you optimized for growth?

Defining Intellectual Property: The Rest of the Story

A few weeks ago as we were circulating drafts of our book Intangible Capital: Putting Knowledge to Work in the 21st Century Organization, I posted about the dilemma we were facing of what to call structural capital What is the Right Definition of Intellectual Property.

In the initial draft, we made the case that all structural capital is intellectual property. The aim was to help businesspeople see that all knowledge is valuable and that IP, while important, is not the only kind of knowledge asset and is not the only strategy for protecting knowledge assets. Read more

Shedding Light on the Value and Performance of Intangible Capital

The first thing that most people ask when discussing intangibles is value. My answer is, “how can you value something for which you have no data?”

I do not mean to imply that it is impossible to develop data on your intangible capital. It’s just that most companies have not taken the necessary steps to accomplish this. How can you create a sound data set on your intangibles? Read more

Intellectual Capital Advice from Google’s Larry Page

In Larry Page’s commencement speech at the University of Michigan, he shares a lot of personal stories and also includes a gem about intellectual capital. The personal stories include his family’s connections to Michigan and a tribute to his Dad who was a professor there. He is an amazingly unassuming person. You won’t regret listening to the address.

What I want to talk about was one of his bits of advice at the end of his talk:

Technology and especially the internet can really help you be lazy. Read more

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