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TECH TALK: Tech’s 10X Tsunamis: Intellectual Capital: Wealth of Knowledge

August 12th, 2002 · No Comments

In his book “The Wealth of Knowledge“, Thomas Stewart talks about the three big ideas of the past two decades which have fundamentally changed how organisations run. The first two were Total Quality Management and Re-engineering. The third, he says, is Intellectual Capital. He writes:

At its core is the simple observation that organizations tangible assets cash, land and buildings, plant and equipment, and other balance-sheet items are substantially less valuable than the intangible assets not carried on their books. Among these are hard intangibles like patents and copyrights, information-age assets such as databases and software, and most important of all soft assets such as skills, capabilities, expertise, cultures, loyalties, and so on. These are knowledge assets intellectual capital and they determine success or failure.

A companys processes, the knowledge which is there in its people, the brand value which makes consumers pay a premium, the patents a company owns, the software systems that govern its business they are all part of intellectual capital. Intellectual capital has increasingly become the biggest differentiator in business. As knowledge-intensive industries like infotech and biotech permeate more of the world, the challenge before organizations is going to on how to build and grow their intellectual capital.

More than ever before, information and knowledge have become the centerpiece of business. For example, when we courier a package, we implicitly assume that the courier company has its transportation logistics in order and that the package will get to its destination. What we really want to know is the information about the package when was it delivered, who signed for it. In supply chains, inventory is the result of inadequate information. As companies use technologies like web services to break down information barriers, it is increasingly clear that information and knowledge derived from it is becoming a very important source of competitive advantage.

One of the key elements in the origins of intellectual capital is an Idea. Ideas are what drive entrepreneurs in fact, all that entrepreneurs have when they launch their business is their intellectual capital: their vision of how the world can be different. Ideas are powerful, ideas transform the ordinary into the extraordinary, ideas drive innovation. Says Jack Welch in Stewarts book:

An idea is not necessarily a biotech idea. Thats the wrong view of what an idea is. An idea is a error-free billing system. An idea is taking a process that used to require six days to do and getting it done in one day. We get 6 percent and 7 percent productivity increases routinely now, mostly because of ideas like that. Everyone can contribute. Every single person.

As intellectual capital becomes increasingly important for success, survivability and profitability, we should keep these words by Stewart in mind:

Organisations are complex human beings. They can adapt, grow and improve the way human beings do without having to be taken apart, their parts spread out over the garage floor by a consulting mechanic. Organisations are not so much collections of parts as they are connections of brain cells, nerves and sinews. To discover this is to discover the power of knowledge set free and of technology made human. It is to discover that its possible to improve not only a companys performance today, but its responsiveness, its repertoire of skills and its capacity to deal with the future.

Many of the technology tsunamis that we are talking about here are going to make a direct impact on the generation, processing and management of knowledge. This is the tsunami which the emerging enterprises in the world need to leverage as they target new markets. The organisation of tomorrow is going to be the ultimate information refinery. It is a theme we will return to soon when we discuss weblogs and RSS.

Tomorrow: PCs for USD 100

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