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Drawing from their work with more than thirty knowledge-rich firms, Davenport and Prusak--experienced consultants with a track record of success--examine how all types of companies can effectively ...
Drawing from their work with more than thirty knowledge-rich firms, Davenport and Prusak--experienced consultants with a track record of success--examine how all types of companies can effectively understand, analyze, measure, and manage their intellectual assets, turning corporate wisdom into market value. They categorize knowledge work into four sequential activities--accessing, generating, embedding, and transferring--and look at the key skills, techniques, and processes of each. While they present a practical approach to cataloging and storing knowledge so that employees can easily leverage it throughout the firm, the authors caution readers on the limits of communications and information technology in managing intellectual capital.
We believe market forces power its movement, working similarly to markets for more tangible goods. There is a genuine market for knowledge in organizations.' Like markets for goods and services, the knowledge market has buyers and sellers who negotiate to reach a mutually satisfactory price for the goods exchanged. It has brokers who bring buyers and sellers together and even entrepreneurs who use their market knowledge to create internal power bases. Knowledge market transactions occur because all of the participants in them believe that they will benefit from them in some particular way. In economists' jargon, they expect the transactions to provide "utility"
People search for knowledge because they expect it to help them succeed in their work. Knowledge is the most sought-after remedy to uncertainty. We all try to reach knowledgeable people when we see the need to deliver a solution to a problem. When we supply knowledge, we expect to benefit too. Within organizations cash is usually not involved in these transactions, but that should not disguise the fact that a market price system exists and payment is made or assumed. The knowledge market, like any other, is a system in which participants exchange a scarce unit forpresent or future value.
Understanding that there are knowledge markets and that they operate similarly to other markets is essential to managing knowledge successfully in organizations. Many knowledge initiatives have been based on the utopian assumption that knowledge moves without friction or motivating force, that people will share knowledge with no concern for what they may gain or lose by doing so. Companies install e-mail or collaborative software and expect knowledge to flow freely through the electronic pipeline. When it doesn't happen, they are more likely to blame the software or inadequate training than to face a fact of life: people rarely give away valuable possessions (including knowledge) without expecting something in return. This may be especially true in our current business climate. Even if only partially mindful of doing so, people make choices about how to spend their limited time and energy and base those choices on perceived self-interest. We don't expect a car salesman to sell us a car at cost, sacrificing his commission simply because we want to pay less. Nor does the salesman expect us to hand him money and walk out of the showroom without a vehicle. No one believes that such one-sided transactions happen in the marketplace or in most of life-even social transactions are generally based on some sort of exchange, as many sociological studies in exchange theory have shown. just because the object of exchange is intangible does not mean that the market forces are less strong. Knowledge initiatives that ignore the dynamics of markets (and, of course, human nature) are doomed to fail.
We will describe these markets for knowledge in organizations and develop a preliminary taxonomy of that market. We believe the only way to have a market that works well is, first of all, to recognize that market forces exist; second, to try to understand how it functions; and third, to make it more efficient. By talking about knowledge market inefficiencies-and diseconomies-we can get at some of the problems that inhibit knowledge exchange and the transformation of corporate knowledge into value, and can sketch the outlines of a more efficient market.
The Political Economy of Knowledge Markets
There really are no such things as "pure" markets-markets that can be understood solely in economic terms. As analysts from John Stuart Mill to Karl Marx to Thorstein Veblen to James March have argued, every market system is embedded in and affected by social and political realities. The value of anything exchanged depends strongly on the context of the transaction. Someone who pays $20,000 for a wristwatch no more accurate than a $20 Timex is obviously not buying a mechanism for telling time. The value of the $20,000 watch is mainly social; it buys the owner status in a society that looks up to or envies people who can afford to purchase and display such items.
Sociologist Harrison White has said that sociology, economics, and political science are the three lenses needed to see organizations fully; no one discipline can capture their whole meaning. We strongly agree that social, economic, and political realities must be taken fully into account to understand markets for knowledge. If the political reality of an organization is such that calculating and secretive hoarders of knowledge thrive, then potential knowledge buyers will have no currency valuable enough to tempt them to share their expertise. Knowledge exchange will be minimal. If it is considered a sign of weakness or incompetence within the culture of an organization to admit to a problem you can't solve on your own, then the social cost of "buying" knowledge will be too high. Once again, the knowledge market won't operate well. At Mobil Oil, where disapproval of "bragging" is embedded in the culture, the efficiency of the knowledge market was reduced because knowledge owners are reluctant to "advertise" their knowledge and were distrusted by their colleagues if they did. Similarly, a HewlettPackard vice-president who transferred from the United States to Australia found it difficult to encourage people to advertise their individual expertise in a democratic culture of "mateship" that discourages calling attention to individual performance. While these cultural norms can have positive impacts too, they inhibit internal knowledge markets.
We will look first at the players in the knowledge market: the buyers, sellers, and brokers who take part in knowledge transactions and drive knowledge markets. An individual can perform all three roles in a single day and sometimes plays more than one role simultaneously. It is quite common, for instance, to be a knowledge buyer, seller, and broker during the same conversation. To ensure clarity in the following discussion, we will look at the roles separately.
Knowledge buyers or seekers are usually people trying to resolve an issue whose complexity and uncertainty precludes an easy answer. Clearly, asking for the GNP of France or a list of the twenty largest U.S. banks is not a knowledge search; it is a request for data. Knowledge seekers are looking for insights, judgments, and understanding. They want answers to questions such as "What is this particular client like?" or "How did we manage to win that sale?" that require complex answers-answers imbued with all the emotional subtexts so important to our sensemaking. They seek knowledge because it has distinct value to them. It will help them make a sale or accomplish a task more efficiently; it will improve their judgments and skills and help them make better decisions. In short, it will make them more successful at their work.
This task of searching for knowledge accounts for a fairly substantial part of what many managers and executives do. A recent informal study done at Hughes Aerospace by Arian Ward estimated that between 15 and 20 percent of managerial time is spent specifically in knowledge search and responding to requests for knowledge...