The growing value of knowing

Tangible assets are not the only basis of a company's value - `knowledge' is the hot topic, says Roger Trapp

As combine harvesters continue their annual crawl across cornfields, those who look beyond the sheer size of these behemoths will realise that they are symbols of an industry that has moved far beyond its simple origins. Though farmers remain in close contact with the land, theirs is a more and more complex business rather than the "way of life" it is still sometimes fondly seen as. And not just because of the sophisticated machinery now used.

According to Thomas A Stewart, author of Intellectual Capital (Nicholas Brealey, pounds 16.99), farmers - particularly those in the United States - increasingly practise "precision agriculture". By making use of global positioning system satellites, they are able to use just the right amounts of irrigation or fertiliser in individual fields to maximise their yields. Optimal production is largely attributable to knowledge.

And it is because businesses in many other sectors are realising that it is what they know that often gives them a edge over their rivals that "knowledge management" is becoming the hot management topic. For example, one of the factors behind recent restructuring in the drugs industry is the desire to make more efficient use of information in individual laboratories with the aim of getting new products to market faster. Commentators, such as Gavin Barrett of the management centre PA Sundridge Park, are increasingly suggesting that management of this area of the business will be vital to companies' survival.

Mr Stewart, a senior editor at the US magazine Fortune, was one of the first to notice this, writing an article called "Brainpower" in 1991. That article was an early attempt to understand what was really behind companies' value. After all, if a company like Microsoft can be valued at billions of dollars despite having little plant or machinery, something must be wrong with the traditional way of weighing up assets.

In the meantime, various organisations have sought to grasp the phenomenon. Business Intelligence, which produces reports and organises conferences, has published a weighty tome, Creating the Knowledge-Based Business, and in October is organising a London event devoted to identifying, measuring and leveraging intellectual capital. Consultancies, such as the brand specialist Interbrand, also see the increasing awareness of intangible assets as an endorsement of their longstanding backing for greater understanding of the concept of goodwill - which accountants have regarded as covering the gap between the price paid for a company and the value of its tangible assets.

By explaining the development of the processes involved in the creation of a single can of beer as well as describing the work of increasingly sophisticated farmers, Mr Stewart explores much of the theory behind "knowledge management" before moving on to the practicalities.

This emphasis on the here and now is also a preoccupation of others. While the very title of Business Intelligence's report indicates its purpose, Karl Erik Sveiby, an academic at Australia's Queensland University of Technology who has linked up with the consultancy Celemi, says putting the theory into practice can be more difficult than it looks. "Companies built on knowledge assets and other intangible assets make up the fastest- growing business sector, yet few achieve their potential performance and profitability because they do not know how to exploit their intangible assets," he says.

Leif Edvinson, director of intellectual capital at the assurance and financial services division of the Scandinavian insurance company Skandia, suggested to a senior executive that the company ought to be managing intellectual capital. The operation now produces an intellectual capital report alongside its regular report and accounts.

But this is not an easy area. Celemi stresses that "it is not enough to just read about a new methodology ... To fully leverage the benefits of your intangible assets, you need the support of the whole organisation behind you".

This idea is supported by Mr Stewart, who says that in many organisations - even consultancies, law firms and other businesses traditionally seen as the home of knowledge workers - the culture and reward systems mitigate against the transfer of knowledge. A firm that pays its partners strictly according to the amount of business they bring in will not necessarily be most effective at ensuring that the right people serve the right clients and so develop the firm's reputation.

Likewise, what will work in one form of organisation will not always work in another. The international professional services firm Arthur Andersen sets great store on the database of best practice it has established - pointing out that this enables staff to draw on the past experience of their colleagues and so avoid "reinventing the wheel". But only in a very cohesive organisation like Andersen will personnel feel obligated to contribute to the database. Equally, many observers point out that, while such a "pipeline" approach suits the sort of projects that Andersen's consulting arm takes on, other types of work may require people to actually meet and tease out the answers to problems.

This is especially true of "tacit" knowledge - often described as "the stuff we don't know that we know". It covers the sort of information a consultant, say, may have picked up about an industry simply by being involved in it for a while. He or she may think that everybody knows what they know and be surprised when a colleague probes them on it. Moreover, adds Mr Stewart, they may be surprised at how much they know once the questioning has stopped

Suggested Topics
News
peoplePaper attempts to defend itself
Voices
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Latest stories from i100
iJobs Job Widget
iJobs Student

KS2 PPA Teacher needed (Mat Cover)- Worthing!

£100 - £125 per day: Randstad Education Crawley: KS2 PPA Teacher currently nee...

IT Application Support Engineer - Immediate Start

£28000 per annum: Ashdown Group: IT Software Application Support Analyst - Imm...

Year 2 Teacher needed (Mat Cover)- Bognor Regis!

£100 - £120 per day: Randstad Education Crawley: Year 2 Teacher currently need...

Data Analyst / Marketing Database Analyst

£24000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits