Tim Wood Powell     The value of knowledge

As you know by now, I am keenly interested in — some might say, obsessed with — the fact that value, far from being a static variable, is dynamic — it changes constantly. We must continually test our value model against the possibility that it is no longer optimal for current market needs.

My Nietszhe-inspired title refers to conversations I had during the past week, independently of each other, with two senior knowledge professionals, each of whom I respect highly. They both offered me their unsolicited opinions that, in effect, “knowledge is dead” insofar as a commercially viable service or product is concerned. They recommended that I pivot my practice away from the construct.

As the originator of “the knowledge agency” as a business model and marketing hook that I have used for over two decades, my attention was piqued. Our tenure as a firm covers two recessions (2000-01 and 2008-09) during each of which Knowledge was in effect declared dead, at least outside the academic world.

In the short term, the dire predictions were true. In both recessions, knowledge projects were delayed, then cancelled, then people let go, then finally whole KM departments and initiatives shut down.

However, I am not ready for — nor did I ever seriously consider — abandoning knowledge as an essential tool of business management and strategy. Part of the reason for this is that I realize that value dynamics are complex — and there may be long-term vectors in play that move more “slowly but surely” than immediate commercial concerns.

In researching the latest edition of my much-requested lecture “Metrics: The Language of Value,” I became aware of two significant long-term signals that KM is alive as a value-adding management practice.

The Baldrige Framework

The Baldrige Excellence Framework is used by representatives of the US Commerce Department to judge applicant firms’ “excellence,” as defined in the framework’s criteria. Of the seven major scoring criteria, Information and Knowledge Management (IKM) is one of them. IKM alone is said to be valued at 4.5% of the total excellence score.

I interpret this to mean that 4.5% of the management excellence of an enterprise can be attributed to its management of knowledge. I would extend this to mean that KM budgets, to be on parity, should be 4.5% of total enterprise budgets — a figure that widely exceeds the actual budgets for most of these initiatives.

Even so, this seems curiously low, given that intangible assets (many of which we would characterize as knowledge) are now said to be worth, on average, over 44% of total enterprise value — and much more than that, in some industries.

Regardless of which figure you prefer — 4.5%, 44%, or somewhere in between — the conclusion is the same: Knowledge is strategically essential, yet perpetually underfunded as an enterprise resource, relative to the benefits it produces.

ISO 9000

Another major quality scoring system comes from the International Standards Organization (ISO). This system is used by more than one million organizations worldwide. The latest ISO standards release includes, for the first time, a section on knowledge management — though it is not assigned a quantitative score.

The ISO 9001:2015 standard (Clause 7.1.6 – Organizational Knowledge) states that KM has three essential roles:

1. “Determine the knowledge necessary for the operation of [the Organization’s] processes and to achieve conformity of products and services
2. “Maintain and make available this knowledge ‘to the extent necessary’
3. “When addressing changing needs and trends,…consider [the Organization’s] current knowledge and determine or access any necessary additional knowledge and required updates.”  (Emphasis added.)

As I read the ISO standard, the essential roles of knowledge strategy are captured in Role 1, the initial determination of knowledge needs, and Role 3, the fulfillment of those needs dynamically as your competitive ecosystem, and your place within it, evolve.   Role 2  — ensuring the maintenance and availability of knowledge — represents the tactical ham in the sandwich.  This is, in my experience, the role that most knowledge managers focus on — often to the exclusion of the other two key roles — and execute pretty well.

That said, in both Roles 1 and 3 we as a discipline have significant work to do.  Role 1 (knowledge determination) is too often discharged episodically and reactively, rather than systematically and  pre-emptively as it should be.  Likewise, Role 3 (knowledge dynamics) is rarely addressed effectively. Throughout my work I have noted a stickiness and resistance to change within the epistemic resource architecture of many of my larger clients. This posture, while both short-sighted and ultimately self-defeating, is often just a natural byproduct of garden-variety bureaucratic inertia.

Management practice moves slowly. Many of us, for example, are using strategy models that were developed in the last century, long before the internet was a force and disruption was an accepted business strategy.

The relatively recent adoption of KM standards by the Baldrige framework and ISO 9000 are positive, meaningful signs of continued, albeit gradual, movement in the direction of taking knowledge seriously as a strategic resource.

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