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Sharyn Ch'ang |
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Amanda Horne |
People are rightly considered the most valuable assets of an enterprise. They are the source of ideas, experience and skills. Properly applied, this combination creates knowledge. Strategically leveraged, knowledge creates wealth. For an enterprise to realize the benefits of its knowledge, processes must be implemented to effectively capture and enable the sharing and application of knowledge by authorized users.
Sounds simple enough - but people are not property. They change roles and employers. Generally, save for their obligation to keep confidential information a secret, people cannot be controlled or restrained from plying their trade or using the know-how they have learned on the job. However, you can legitimately control and leverage the knowledge of your employees and contractors for the benefit of your enterprise by adopting appropriate knowledge management (KM) practices. The best KM systems transform knowledge into a form of IP, the most protectable type of intangible assets.
Indeed, those at the vanguard of the KM movement recognize, according to Hubert Saint-Onge, that
with the emergence of the knowledge era, it has become widely recognized that the intangible assets of an enterprise will be key to both its ability to create competitive advantage, and to grow at an accelerated pace. As a result, more and more organizations are showing increased attention to the creation of value through leveraging knowledge.
What is knowledge management?
In recent times, KM has attracted much attention. It is often presented as a term of art that describes something new. However, the notion is not really new - it's just that organizations are now recognizing that the skill, knowledge and experience of their employees and contractors are increasingly important in differentiating them from their competitors. Indeed, in a competitive, globalizing information economy, progressive CEOs now place a higher priority on the management of their firm's collective knowledge base, and are willing to pay a premium for accessing new sources of knowledge - whether through the recruitment of broader talent, or adopting KM systems that can manage and optimize the use of information.
There are a plethora of definitions for KM, but here is our definition:
Knowledge Management is about how an organization manages, retains and applies the information, data and know-how that is developed by and exists in its people, with the aim of achieving the organization's strategic vision and commercial goals. It encompasses the people-to-people processes of working together, communicating and sharing information to achieve a common purpose.
Tacit and explict
When it comes to capturing and sharing, two common terms are often used in the KM literature. Tacit knowledge resides in the heads of individuals. It includes insight, creativity and judgment, is unstructured and informal, and difficult or impossible to document. For example, it would be practically impossible to document how an expert computer hacker or software programmer with innate abilities and instincts performs their work in such a way that another could replicate. Explicit knowledge is formal, structured information or data that can be captured, documented and easily shared. Instructions on how to construct a piece of Ikea furniture or instructions in a computer software user manual fall into this category.
While an organization should be cognizant of both types of knowledge when it seeks to maximize its knowledge sharing abilities, the practical focus should be on developing and capturing explicit knowledge. Effective KM systems seek to distil as much tacit knowledge as possible to an explicit form. Once captured, this type of knowledge is protectable as a form of IP and more readily exploited for the benefit of the enterprise.
The essential elements of KM
Diagram 1: The IP/knowledge connection |
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Diagram 1 conceptually illustrates how the essential elements of KM - people, processes, technology and content - combine to form a potentially rich treasure of organizational IP. The elements are explained below.
Business strategy
The capture and use of the explicit and tacit knowledge of an organization will be most effective when the KM system supports the business strategy. Without the appropriate business strategy and associated vision, policies and procedures, there are usually no resources or a mandate to capture and leverage individual and organizational knowledge. The ultimate result? Poor corporate memory and competitive intelligence, and lost opportunities to transform knowledge into reusable IP.
It is important not only to have a business strategy, but for the strategy to be communicated to your employees. The reason is simple: when people work together - learning, sharing, developing products and servicing clients - they work best and achieve most when they do so with knowledge of the business goals. This approach has had great effect for numerous companies. For example, the R&D teams in Microsoft have a clear mandate to create new products that meet the corporation's business vision of being innovative and providing clients with new and updated software.
People
People are the originators of ideas, processes, deliverables and services. People work alone and together; they form a complex culture that, when managed (or not!), contributes to the organization's performance. The organizational challenge is to create a culture that brings people, their ideas, skills and experiences together. In today's competitive marketplace, that old adage of "two heads are better than one" has never been truer. Effectively supported by knowledge processes and technology, what people know and do can be harnessed for the benefit of the organization not only by saving on the cost of having to "reinvent the wheel" when someone leaves, but by creating a system by which existing knowledge can be developed further and valuable IP assets can be created.
Processes
KM-savvy organizations implement a series of processes, policies and procedures that address how people acquire, maintain, apply, and communicate the knowledge and expertise they bring to the organization. To maximize their effectiveness, these processes should accommodate cross-functional inputs and access, and be aligned and directed to achieving the business strategy. This can be achieved, among other things, by defining how the knowledge of the organization is identified, prioritized, and captured. Once these objectives are met, the process challenge is to disseminate quickly the useful knowledge throughout the organization, and convert it to tangible improvements in the organization's products, services and daily work practices.
It is worth noting that any such process that achieves these ends in a novel or inventive manner may itself be protectable as a patent. Once patented, you would exclusively control the use of the business process, and if strategically and operationally appropriate, you may even use the patent to provide a new source of revenue to the organization through licensing.
Technology
Technology has drastically changed the way people communicate and provides many ways to store, search for and exchange data quickly and efficiently. It supports the knowledge and people processes by enabling an organization to capture, securely store and retrieve content that is recordable. In many cases, the more sophisticated the technology, the greater the potential to realize the benefits of KM. For example, you've identified a star sales person on your team. Making an audio-visual record of what they say, how they present and their technique could prove invaluable as training for others.
| Knowledge management checklist Here are a few questions to help you focus on the adequacy of your KM processes, and identify where you might like to seek improvements. Does your organization:
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Technology also provides enhanced physical protection and commercialization opportunities for organizational IP. You can now manage your IP centrally, assign specific privileges to data, controlling who can view, print, amend, distribute and copy that data. These KM systems are also being used as contract management and compliance tools, even enabling royalties to be collected online.
Content
Last, but not least, there is content. Content is almost always a form of IP. While many in the KM discipline may not see content as IP, knowledge in the mind of the employee or innovator assists the organization only for as long as they actively contribute to the business. However, content in the form of databases, computer programs, training manuals, proposals, reports and a range of other original works have longevity as copyright assets and, if kept secret within an organization, also as confidential information. The undisputed benefit of owning the copyright in content (or keeping content a secret) is your exclusive ability to control its use and dissemination.
Knowing breeds success
Among other things, competitive advantage relies on an organization's innovative capacities. IP governance determines how the organization uses its collective knowledge and complex systems of people and processes to be innovative, and produce ideas that can be transformed into valuable assets. When you maximize knowledge-sharing strategies that result in better ideas, services and products, you improve your capacity to create IP. The processes of creating, protecting, leveraging and ultimately commercializing IP rely, therefore, on sound knowledge management practices.
You can't patent the people
But you can patent their ideas, and protect their innovation, outputs and deliverables as different forms of IP.
Recognizing knowledge as IP will provide not only properly identified, legally protected intangible assets that can be shared internally within an organization, but these may also be potentially marketable assets that could be licensed (or when no longer needed, even sold) to third parties to generate additional revenue.
In today's knowledge-based economy, a successful organization is one that can convert both individual and organizational knowledge into new market opportunities and enhance shareholder value through the leveraging of IP. And, as speed to market is essential to competitive advantage, the organization must continuously improve its processes to develop and commercialize new ideas, products and service lines. Effective knowledge management processes are critical to achieve these ends.
© Ernst & Young 2003. Sharyn Ch'ang is a partner and Amanda Horne is a senior manager with the firm in Sydney
