Thomas A Stewart: Intellectual Capital and Knowledge Management

The Wealth of Knowledge followed in 2001, which built on the central tenets of his first book. In it, Stewart reveals how today’s organizations are applying the concept of intellectual capital in their day-to-day operations to increase their success in the marketplace. He argues that companies can make (and save) untold millions by managing their knowledge more effectively. At the core of the book is a four-step process which outlines how to use intellectual capital to improve performance and profitability as well as how to manage knowledge processes. Stewart goes on to discuss how organizations can use their current assets and boost their knowledge resources for the future. This book further cemented his position as one of the principal commentators on knowledge management.

The Four-Step Process for Managing Intellectual Capital

1. Identify and evaluate the role of knowledge in the organization. How knowledge-intensive is it? Who gets paid for what knowledge? Who pays? How much?
2. Match the profits with the knowledge assets that produce them. What are the expertise, capabilities, brands, intellectual properties, processes, and other intellectual capital that create value? What is the mixture of human-capital, structural-capital, and customer-capital assets?
3. Develop a strategy for investing in and exploiting intellectual assets. What is the value proposition, source of control, and profit model?
4. Improve the efficiency of knowledge work and knowledge workers. Bearing in mind that knowledge work does not necessarily follow the linear path that physical labor often does, how can knowledge workers’ productivity increase?

Both of his books focus on the importance of knowledge in an organizational context. As Stewart himself puts it, “Knowledge is our most important raw material; knowledge is our most value-adding process; and knowledge is our most important output.” He goes on to state that there is a sequence of methods in which organizations can take advantage of knowledge as a production factor, through knowledge-intensity strategies. There are three areas Stewart feels organizations should be focusing on if they are to succeed. These are:

• Organizations should look at how they can market knowledge.
• Organizations should examine the assets involved and how they can exploit them further.
• Organizations should look at methods to establish how they can manage the knowledge within it more effectively and efficiently.

Increasing Use of Knowledge

Stewart states that there are four methods to increase the use of knowledge in organizations:

• Eliminate obstacles, including unnecessary bureaucracy and overbearing superiors.
• Set clarity of purpose, direction and values.
• Set clarity of purpose around projects, because work is increasingly organized around projects and the clearer this is made in organizational design, the less likely it is that time and talent will be wasted and so will be directed more effectively.
• Use customer information more resourcefully.

He believes that knowledge management has a chance of being used as a means to achieve real change in the way that organizations operate. The key to accomplishing this goal is that organizations should begin to think of themselves in more organic terms rather than mechanical ones. They are human systems that can grow and adapt and improve. What is really important to Stewart is the balance between human interaction and technology. He also believes that the knowledge agenda needs to be discussed at the highest strategic levels so that everyone in the organization is able to get involved.

Ten Principles for Managing Intellectual Capital

1. Organizations don't own human and customer capital, they share ownership with their employees and business partners.
2. Organizations need to foster teamwork and communities of practice because interdisciplinary teams capture, formalize, and capitalize talent.
3. Organizational wealth is created around skills and talents that are proprietary and strategic.
4. Make it as easy as possible for customers to work with employees.
5. Make sure the knowledge needed is either ready-to-hand or easy to get.
6. Information and knowledge can and should be substitutes for expensive physical assets such as new software or database systems.
7. Knowledge work is custom work that depends less on mass-produced solutions than special relationships between supplier and customer.
8. Knowledge work is generally found downstream of the value chain and closer to customers.
9. Focus on information flows rather than material flows.
10. Human, structural, and customer capital work together to create intellectual capital.

Summary

Stewart’s fundamental arguments are that knowledge is valuable, and an explicit strategy is necessary to bring it to the customers. There is also a need to identify knowledge assets — the human, structural and customer capital — and find out where they are in the organization. Finally, there is a need to manage knowledge more efficiently so it can be transferred, shared and moved. Stewart cuts through the knowledge-management rhetoric to reassert the simple, revolutionary notion behind intellectual capital: true value in this economy is not the matter that companies own and sell, but the information, capabilities, and culture behind that matter.