The Value of Knowledge

The Economics of Enterprise Knowledge and Intelligence

Timothy Powell

• Publisher: De Gruyter Saur
• Year: 2020
• Print ISBN: 9783110590227
• eBook ISBN: 9783110590357
• Edition: 1
• Topic: Languages & Linguistics
• Subtopic: Library & Information Science
• Index: Languages & Linguistics

Knowledge is an economic asset of great importance and value to the modern organization; however, it is too often not managed carefully as such. This book presents practical frameworks and methods for the knowledge professional — and his/her organization — to identify, actualize, and maximize the economic value of knowledge.

1 Introduction to the Value of Knowledge

Do you ever come upon those existential stress tests – those moments of self-questioning when you entertain the possibility, however remote, that what you have been working on or thinking about is not fully worthy of the enormous attention you have paid it? I occasionally have such “purpose alignment” moments – but, over the years, I have trained myself to convert them into renewed inspiration for my work.

Not long ago I had one of these moments while riding New York City’s number 1 train uptown to Columbia University. Here I am, I thought, going to lecture to a group of students about the value of knowledge. These are people who are sacrificing many of their evenings and weekends, plus significant tuition funds, to hear what I, aided by their peers, am going to say. Surely in some sense they already understand the value of knowledge – so is my lecture by definition an absurdist exercise in redundancy? Am I wasting my time, and their money?

Certainly, university students understand the costs of knowledge. And it’s likely they understand intuitively that there are benefits there. But in a rigorous, empirical sense, they may be unable to clearly articulate these benefits, should they be queried. And it’s likely that they will at some point face such queries, as the benefits of knowledge are increasingly debated, both in households and in larger organizations, with questions like:

• For a family, what is the return on higher education? Is college “worth it”?
• For a business, what is the optimal amount to be spending on research and development?
• For the scientific community, who owns the rights to publish and profit from scientific research?
• For society, should consumers be compensated for the collection and use of their personal data?

On the whole, we as a society no longer take the benefits of knowledge for granted, nor assume that such benefits will somehow eventually materialize. But though we have become more empirical in what we expect from knowledge, we frequently lack the tools to rigorously test our experiences against such expectations.

My own consulting work and readings over four decades have convinced me irretrievably that understanding the value of knowledge is a non-trivial quest fully worthy of our highest thinking and greatest possible effort; that it is a question of great import that has no single, final, definitive answer, but that evolves and morphs even as we approach anything resembling such an answer. This is mostly because, in a world increasingly governed by data, evidence, and metrics, intuitions that something is true – though potentially useful as guideposts – no longer suffice as persuasive supports for action.

I have always been struck by the volume of literature in both the academic and business press about knowledge and knowledge management – the what to do of knowledge – while finding discussions of the financial and other justifications – the why to do it – inadequate or lacking entirely. Even a sweeping and thorough survey such as Hislop’s Knowledge Management in Organizations falls short on direct reference to the financial implications and organization impact of knowledge.¹ Knowing the tremendous power that financial ideas and financial executives have within most organizations, I have found this to be a critical omission – one that I vowed to correct in any ways available to me.

1.1 Purpose of this Book

The value of knowledge is highly contextual. The processes by which we explore it and come to understand it are as important as any measurements we may attempt to make of it. That said, our goal is not simply to understand the value of knowledge – it is to change it, for the better – to improve it qualitatively and maximize it quantitatively. This will remain our guiding principle herein.

Three anecdotes will serve to introduce this principle. Two of these come from my own experiences; the third comes from an early knowledge services leader best known for other endeavors.

1.1.1 My Summer of the Rabbits

During my youth, I was especially interested in biology. I worked hard at it and was able to win some student honors in the field. One such benefit was that in the summer preceding my final year in high school, I was selected to participate in a research internship at Jefferson Medical College, a major U.S. medical school in Philadelphia, Pennsylvania, USA.

There I worked under Dr. Eli Fromm, a biomedical engineer, on a project to understand the hormonal cycles of female rabbits. Dr. Fromm had developed a technique for surgically implanting small radio transmitters, each about two centimeters in diameter, into the rabbits. Attached to each radio was a transducer designed to measure the contractions of each rabbit’s uterus during its menstrual cycle. The radio would then transmit this data to a data collection device, where it could then be analyzed and correlated with data on the hormone levels in the test animals’ blood.

Along with learning basic techniques of incision and suturing, I quickly learned that I did not much care for the slicing open of rabbits and the splashing around in their bloody guts. To this day, I remember the “distinktive” smells of the operating room. Any thoughts I might have harbored of a career as a surgeon were dashed at that tender age.

But there was another aspect of the project toward which I gravitated – which I now see was the beginning of an important career step for me. Someone needed to go to Jefferson’s medical library – a first-rate facility – to determine what other work had already been done in this and related fields, what trends were developing in the field, and which researchers were especially active in this field worldwide. I volunteered.

I was conducting what two decades later we would come to call competitive intelligence. This was during the late 1960s, about three decades before the Internet was generally available, so my research was manual – slow, difficult, and narrow compared to what would be possible today. But for me, it was fascinating and even fun at times – and I was told that it added significant value to the overall research effort.

1.1.2 Thoreau and the Pencils

The early nineteenth century thinker and writer Henry David Thoreau is perhaps best-known for his nature writings, and in particular his six-month hiatus from civilization spent living alone and “off the grid” on Walden Pond in Concord, Massachusetts, USA outside Boston.

Thoreau came from a family that was financially comfortable due to their ownership of a pencil factory (when pencils were among the leading information technologies of the day). After Henry graduated from Harvard College, he co-founded a grammar school at which he taught – and later became known worldwide for his naturalistic, philosophical, and political writings.

For most of his life, he stayed involved in the family business. There came a time when the prosperity of the business was under threat from German and French pencil makers, who had come to dominate the global pencil market through innovative manufacturing processes not used in the USA at the time. While not formally trained in engineering, Henry conducted research at Harvard University’s library to identify specifically what his rivals were doing – namely, adding clay to bind the graphite and other ingredients, thereby making a higher-quality product.

Thoreau Pencils soon adapted this innovation to their own operations. With this infusion of competitive intelligence, the family business surpassed its domestic rivals and regained its financial footing. It was this success that enabled Henry to publish his first books and to take his famous “time off” at Walden (Petroski 1990). Ironically, it seems that the great writer did not leave behind any published writings on his work methods or business innovations – though they would likely be of only historical interest today.

1.1.3 A Tale of Two Recessions

Each of the preceding stories illustrates the value of knowledge to the enterprise – a scientific research laboratory in the first case, a manufacturing business in the second. In each case, knowledge was an enabler – an “empowerer,” even – of the results, outcomes, and impact sought by the organization (i.e., better research in the first case, better products in the second).

During my studies with Dr. Sidney Winter and others at the Yale School of Management, my own readings of Peter Drucker, Herbert Simon, James March, and others, and my subsequent consulting career working for firms in a range of industries, I became convinced that knowledge is the hidden economic resource that underpins all other resources. On the strength of that insight, in 1996 I founded the firm that eventually became known as The Knowledge Agency^®. My original vision was that we would help organizations define and actualize this heretofore latent asset. We had several significant successes early on – and were able to compete with much larger firms for the business of large clients, based on this niche we had helped to define.

That remains my vision to this day – though now tested and tempered by the many client experiences and vicissitudes that have since intervened. My faith in this model was challenged by the “tech bubble” recession that hit the U.S. in 2000–2001. I remember the day a large pending proposal I had submitted with a colleague to one of the Big Four consulting firms was cancelled – and the roughly 400 knowledge professionals employed by that firm were let go or reassigned. During that time a private investor with whom I had been meeting, with the idea that he might help to fund my development efforts, began what turned out to be our last conversation by asking, “So, Tim, now how are you planning to sell this knowledge stuff?”

I improvised an answer to his question, though I was not as prepared for it as I should have been. Which brings me to my primary motivation for writing this book – namely, that I want you, dear reader, to be prepared for these kinds of questions when you face them in your own work (as it is almost assured that you will).

But don’t all knowledge workers know already that their work is valuable? Isn’t that why they choose that career path in the first place? And don’t they all know that “knowledge is power”? In short, do I pursue the fool’s errand of preaching to the converted?

Perhaps I do – but too often, our clients do not “get” this connection between knowledge and value – and specifically,...

Table of contents

• Title Page
• Copyright
• Contents
• Series Editor’s Foreword: About Knowledge Services A Broader Perspective for Managing Intellectual Capital
• 1 Introduction to the Value of Knowledge
• 2 Knowledge as an Enterprise Function
• 3 Knowledge as an Economic Resource
• 4 The Knowledge Value Chain
• 5 Increasing Knowledge ROI
• 6 Knowledge to Value
• 7 Knowledge Strategy
• Other books by Timothy Powell
• Acknowledgments
• Intellectual Property Notices
• Index