The Wealth of Knowledge

Citation

Mesa, W.B. (2003), "The Wealth of Knowledge", Journal of Consumer Marketing, Vol. 20 No. 5, pp. 491-493. https://doi.org/10.1108/jcm.2003.20.5.491.4

Thomas Stewart’s most recent book on intellectual capital, The Wealth of Knowledge, asserts knowledge is the most important resource for any business operating in today’s post‐industrial marketplace. The industrial market focus had the aim of managing prediction. Today, managing knowledge is the aim because predictive environments are no longer the pervasive characteristic of the marketplace. In a nutshell, managing knowledge – its processes, its products, its creation – are the aims of businesses, since all of these aspects of knowledge directly impact on the nature of marketing services and extending the life of products.

Stewart’s book is framed into three major sections. Part I, “The theory of a knowledge business”, briefly describes and defines the nature of a knowledge economy; Part II, “The disciplines of a knowledge business”, details out the parameters of managing knowledge; and Part III, “The performance of a knowledge business”, ventures into the realm of actually measuring knowledge returns and productivity. Part II is the substantive core of the book and this review will accordingly focus on that part of the book. However, a brief descriptive on Parts I and II will be provided before diving into the particulars of managing knowledge found in Part II.

Part I of this fascinating book provides a quick review of the paradigm shifts that have occurred in the economy. Perhaps the most important chapter in Part I is Chapter 1, which provides a definition of the three pillars of the knowledge economy. First, knowledge is what businesses today buy, sell and do; second, knowledge is an asset to be managed; third, given that knowledge is an asset and it is what is bought, sold, and done, new strategies, vocabularies and techniques are in order so that managing the asset is possible.

Knowledge, as Stewart defines it, is relational and highly dependent on context. For example, information can be data or communicating meaning, depending on the context and the user. Knowledge, then, is basically three parts: what is known by employees; what is known about customers; and what exists explicitly in documents (information, data, etc.). Combined, the three knowledge types comprise intellectual capital, a comprehensive and multidimensional resource to be managed.

Part III is a forecasting venture in measuring knowledge because the measurement methods, though potentially effective, are not the standard fare (perhaps at least yet) found in management, marketing or accounting textbooks. Moreover, the test of time will determine the robust forms of measurement techniques, thereby yielding a long‐term basis to the practice of knowledge management. This part of the book is basically a continuation of Stewart’s first outline of measuring knowledge found in his first book on the subject, Intellectual Capital (1997). Part III provides a landscape of research possibilities in the areas of human performance, finance/accounting, marketing and management.

Now, the central question, with which the book is concerned in Part II is: if knowledge is what an organization does, buys, and sells, what is the basic strategy for managing knowledge? That question is based on a simple yet important principle about knowledge management – “Like pearls, knowledge assets form around irritants, such as real business needs” (p. 85). Real business needs in post‐industrial market structures are driven by consumer needs, tastes, and preferences, which are less than stable or predictable. Citing Peter Drucker from his book, Management Challenges for the 21st Century, Stewart asks: “What is the job?” and “What is the knowledge base required to do the job?” (p. 85). The answer: “Knowledge assets are created by asking customers what they expect you know and can do” (p. 85). Thus, knowledge requires a stimulant – the customer and market competition – to produce results for the profitability of a business.

A viable strategy that can be used to manage the ephemeral nature of knowledge assets is provided by Stewart in a basic four‐step process (p. 77):

1. 1.

   (1) Identify and evaluate the role of knowledge in your business – as input, process, and output. If knowledge exists, does it produce anything or is it sheltered from irritants – real business needs?

2. 2.

   (2) Match the revenues you have just found with the knowledge assets that produce them. What are the knowledge assets that exist in which value is created for the business? For example, these could be brands, processes, expertise, and such.

3. 3.

   (3) Develop a strategy for investing in and exploiting your intellectual assets. What are the business imperatives of the organization that inevitably determine what is budgeted and what is not? What is the substance of the profit model? If it is not around real business needs chances are it is not around knowledge assets.

4. 4.

   (4) Improve the efficiency of knowledge work and knowledge workers. Knowledge work is not linear (hence the question, “What is the job?”). Thus increasing productivity is based on creating and keeping spending customers, which are the irritants – real business needs.

Given the principled strategy for knowledge management cited above, the next question is: to what end? Clearly, the answer is around real business needs that yield the selling of knowledge products. Says Stewart, “Selling knowledge products is one of the major business opportunities of our time” (p. 135).

However, what is a knowledge product? Stewart concisely bundles knowledge products into two types: first, productized knowledge – an organization has knowledge but needs to coherently glue it together to form a product; second, knowledgized product – an organization has knowledge but needs to add knowledge to it, increasing the value to customers. In essence, each type of knowledge product is the outcome of irritants – real business needs – in which knowledge assets form.

The most valuable knowledge assets that form products or add value to products are those that are created through processes that create new knowledge and processes that share knowledge. That is, given the reality of business needs, processes to support the creation and cultivation of knowledge must exist. First, creation of knowledge – sparked by innovation – takes effort and investments in time and money. Products and services are quickly becoming commoditized or obsolete, so that the need to invent, bundle and customize is imperative – particularly for strategic marketing. Some questions to ask are: is innovation a part of strategy? Where is the responsibility for innovation “housed” (individuals, teams, leaders, etc.)? Is there a structure or process to innovation?

Importantly, the driver for knowledge creation is learning from customers – asking them what they expect you know and can do. Value creation for either productized knowledge or knowledgized products is more often collaboration between buyer and seller. Think of it this way – customers are investing in the business when the entity actually learns from the customer. Buyer learning processes will emphasize communication, not data mining. Customer learning processes will integrate business functions with those outside sales, service and marketing. These learning processes reveal the value to both parties – business and customer. Customer learning processes should be so vital to operations that without such a process one cannot imagine conducting business. Those irritants of real business needs rooted in the customer stimulate the creation of various knowledge products.

Second, sharing knowledge is vital to cultivating the knowledge that has been created. Importantly, the more that knowledge is used, the more valuable it becomes. Thus, without processes in which knowledge is shared, knowledge is not used, and if it is not used it loses value, and if it losses value will the customer clearly see increased value in the knowledge product being sold?

Stewart provides various approaches to sharing knowledge, from team meetings to Web‐based indexes (expertise, Yellow Pages, and lessons learned). Central knowledge resources using information technologies are efficient means for various entity functionalities to connect and/or draw the information needed. The key, though, is that entity functions communicate. Without communication or the means to do so, sharing can not possibly take place.

Real business needs – in essence the customer and market competition – stimulate the creation of knowledge and the sharing of knowledge. Strategically managing that knowledge requires that the knowledge assets be defined, linked to revenues and efficiently exploited. Perhaps the questions that remain are: if knowledge becomes commoditized, can it begin to lose value becoming a fungible good? If so, are consumers merely purchasing a reshuffle of goods/services they were buying in the first place? Hopefully, real innovation will limit the generic knowledge product.