Understanding Today's Capital: Thomas Stewart Delves into His Keynote at Online Information 2006
Jinfo Blog

By Monique Cuvelier

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Think for a minute: what did you buy yesterday? A newspaper? A tank of petrol? Online advertising space? A local area connection? If you're like most people in the Western hemisphere, most of the things you spend your money on are less about the materials than the thought that went into making them. The value in a newspaper isn't the printed pulp, but the team of people that researched and wrote the news.

More than ever, today's world values knowledge over materials, and knowledge workers have become valuable commodities.

As knowledge assets, or intellectual capital, become the cornerstone of a global market economy, the only way for companies to compete is to become smarter about managing those assets. For information professionals, this means becoming better at anticipating what's of value and how to disseminate their knowledge.

Such has been the mantra of Thomas Stewart, who pioneered the field of knowledge management and intellectual capital, and who will be presenting his ideas at Online Information 2006 in London as the main keynote speaker. The editor-in-chief of the magazine the Harvard Business Review recently spoke with FreePint to expand on his theories and identify how information professionals can use them in their own work.

Stewart helped to start the world-wide focus on knowledge management in 1991 with a seminal article in Fortune magazine titled "Brainpower: How Intellectual Capital is Becoming America's Most Important Asset". A few years later, he helped to expand his theories with his influential book "Intellectual Capital: The New Wealth of Organizations". This showed that knowledge is one of the most important assets developed in the modern economy. In "The Wealth of Knowledge: Intellectual Capital and the Twenty-first Century Organization" (2001), Stewart built upon his ideas, giving practical strategies to companies who could use KM to achieve competitive advantage.

On Tuesday, 28 November, he will be presenting 'Ideas, Creativity and Knowledge Are Capital: Everything Else Is Just Money'. This speech outlines the theories in his books, in particular what he calls 'the three pillars of the knowledge economy':

• Knowledge is what we buy and sell
  
  
• Knowledge assets separate winners from the also-rans
  
  
• Knowledge defines our work and describes what we do.
  
  

Stewart's mastery is in spotting a complicated idea and slicing it into these easily understood pieces. These slices add up to the revolutionary idea that the value of our economy isn't the stuff you can hold in your hand, but the people and processes that make it up.

In his book "The Wealth of Knowledge: Intellectual Capital and the Twenty-first Century Organization" Stewart explains the pillars:

'The knowledge economy stands on three pillars. The first: Knowledge has become what we buy, sell, and do. It is the most important factor of production. The second pillar is a mate, a corollary to the first: Knowledge assets -- that is, intellectual capital -- have become more important to companies than financial and physical assets. The third pillar is this: To prosper in this new economy and exploit these newly vital assets, we need new vocabularies, new management techniques, new technologies, and new strategies. On these three pillars rest all the new economy's laws and its profits'.

'Knowledge is what we buy and sell'

The first of the pillars Stewart identifies has to do with collateral in our economy, which is to say the product of our minds.

'If you ask [a knowledge worker] what it is they sell, they're not selling keystrokes, not any physical product. A remarkable number of things you buy are actually knowledge or information or equipment that helps you manage it', Stewart explains from his office in Cambridge, Massachusetts, USA. 'What they are paid for is for some kind of expertise they add to the raw materials other people buy'.

People do buy things they can touch and hold, such as computers and cars, but such purchases are no longer the primary driver of our economy. Information professionals, on the other hand, keep the economy running but don't trade in the tangible. Their value -- and the basis of the economy -- lies in what they know. The difference between this and past economies is that there are more people dealing in information now and fewer auto workers and butchers and weavers and people who produce tangible items.

Stewart says in his book "Intellectual Capital: The New Wealth of Organizations" that ' ... between 1979 and 1994, the number of people employed by America's biggest industrial corporations fell by nearly a third, from 16.2 million to 11.6 million'. In their places are companies such as the Finnish electronics company Nokia, which has a subsidiary employing only five people but annual sales of around $160 million.

'Knowledge assets separate winners from the also-rans'

After Stewart's 1991 article in Fortune magazine first started making ripples, firms began hiring Chief Knowledge Officers and deploying knowledge management task forces to help their companies succeed. They neglected, however, to define what kind of knowledge their company was producing and how they could leverage it.

"Five years ago an analyst at Forrester Research reported that six out of seven knowledge-management projects were being undertaken without anybody ever having asked for, or anyone offering, a promised return on investment', Stewart said in an earlier interview. 'My urgent message: if you don't know why you're doing knowledge management, you shouldn't be doing it'.

This gives rise to his second pillar: know what your knowledge assets are so you can deploy them in a strategic context. A knowledge asset is something that transfers raw materials into something more valuable, such as the formula for Coca-Cola.

'Knowledge assets explain more and more of the added value in the economy', Stewart says. 'This behoves us to define what those assets are. That's part of the job that knowledge workers have to do. We can all get caught up in the daily flow of data, but we need to understand how to leverage it create value'.

Knowledge defines our work and describes what we do

Once a company determines what kind of knowledge assets it has, it can start to apply those to the company's workings. The trick is to look beyond the flow of data and see the big picture.

'It's like the old story about the three brick layers', Stewart says. 'They're all working and asked what they're doing. One says, "I'm laying bricks". The other says, "I'm building a wall". The last says, "I'm building a cathedral"'.

In a company like Reuters, he says, in comes a perishable stream of data, in other words the 'bricks'. Above that is the 'wall', or the company's step of making sure the data is reliable and the flow is constant. The 'cathedral' is seeing what all the data and how it's arranged adds up to.

'How does Reuters compete with Thomson compete with Bloomberg?' Stewart asks. 'If I'm the CEO of Bloomberg, I might say, "I've got a solid wall, it's reliable. How do I arrange this into something better?"'.

Why it matters to the information worker

Leaders of businesses can see the impact of understanding intellectual capital in terms of monetary gain. But as the stewards of knowledge, information professionals also need to gain a better understanding, Stewart says.

'Information workers tend to take a view from the customer in, rather than from the industry out', he says. 'Information and knowledge management need to start with demand, not supply. If you start with that, you get something much more useful. Imagine a librarian building a library without thinking how a reader would look for stuff'.

His apt example: the original manuscript of Beowulf. It was hidden for years under an obscure codex (Cotton Vitellius A. xv, or the Nowell Codex), named after the nobleman Robert Cotton who owned it. The books in his library were noted by their shelf position, which were all named for the busts of the roman emperors who topped the shelves. The Vitellius A.xv was the 15th book on the first shelf under the Vitellius bust. That was his Dewey decimal system.

'Too much knowledge stuff has been set up that way', Stewart says. 'Cotton was thinking only of supply, not of demand. We're not asking, "Who's using this? Why? How do we decide how people do this? What's the business use of this knowledge?".

'This has happened in every office I've ever worked. There are two ways to get ahead, and they're interrelated. You can get only so far by being the world's best brick layer: you'll only become the A-number-one brick layer. If you want to make the jump to wall maker, you have to start understanding the wall and expressing the wall. Cathedral designers don't need to know much about bricks'.

Related FreePint links:

• Excerpt in VIP Insider <http://web.vivavip.com/go/vip/36>
  
  
• "Routes into Knowledge Management" By Steve D'Arcy <http://www.freepint.com/issues/210900.htm#tips>
  
  
• "Knowledge Management Does Not Grow on Bonsai Trees" By Sheena Thompson <http://www.freepint.com/issues/140705.htm#feature>
  
  

Related FreePint links:

• Harvard Business Review Online <http://www.hbsp.harvard.edu/products/hbr/index.html>
  
  

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