Knowledge Management

CT024-3-M

The Knowledge Value Chain

Dr Alan Eardley
 Learning Outcome

• Explain how knowledge assets are different

• Describe the cost of knowledge
• Explain knowledge Value creation

Knowledge Management Introduction

 An observation…

“An era in which the key economic resource

is knowledge is startlingly different from an era
in which the key (economic) resources were
capital, raw materials, land (plant) and
labour…”
James Martin 1996

These factors make up the conventional value chain

Knowledge Management Introduction

 The ‘old’ value chain

Assets Goods are

Land Capital Plant Material Labour
sold and
delivered
to paying
customers
Least Most Sales
value value -
Value adding activities
Costs
=
Management is to add value by using assets PROFIT

What is the Knowledge Management value chain?

Knowledge Management Introduction
 Knowledge assets are different…

• Renewable –increasing over time (but is its ‘shelf

life’ decreasing?)
• At more than one place at a time
• Permanently useful or temporarily (it can be ‘time
sensitive’ or useful in the short term)

Knowledge Management Introduction

 Knowledge assets are different…

• Used without being consumed

• ‘Selling’ knowledge does not reduce the supply
or the ability to sell the same knowledge again
• Once ‘sold’, it can never be reclaimed
exclusively
• Some buyers need only to purchase knowledge
once…

Knowledge Management Introduction

 Costs of knowledge

• Knowledge production costs are independent of

the number of users
• Demand for knowledge is controlled by the
users, not the producers
• Knowledge production costs are much greater
than the costs of knowledge reproduction

Knowledge Management Introduction

 Costs of knowledge

• The greatest ‘build-up’ of costs is at the front-

end of knowledge production
• It is difficult to correlate the cost and value of
knowledge, particularly with tacit knowledge

Knowledge Management Introduction

 Intellectual capital

“Intellectual capital is intellectual (i.e. knowledge)

material (i.e. assets) that can be put to use to
create wealth (i.e. to add value)”
Stewart (1997)
[My italics]

Knowledge Management Introduction

 Intellectual capital

Intellectual capital includes:

• Explicit knowledge in the form of knowledge
assets (usually recognised as being ‘owned’ by
the organisation)
• Tacit knowledge in the form of personal
knowledge (usually ‘owned’ by the individual
who is employed by the organisation)

Knowledge Management Introduction

 Knowledge value creation

• Difficult to measure the value of knowledge

• Value is extracted from knowledge assets when
the knowledge contained is used
• Value can be increased by filtering knowledge
• Sharing knowledge increases its value
• More shared knowledge = more value
• Difficult to judge the value of knowledge assets in
advance – so uncertain investment
• Value is not tightly related to acquisition cost
Stewart 1997

Knowledge Management Introduction

 Knowledge value chain

“The flow of knowledge through a series of

stages (i.e. a process) where its value is
increased at each stage”
Simard 2004
• Creation
• Use
• Management
– Preservation (keeping)
– Sharing (spreading)
– Integration (consolidation)

Knowledge Management Introduction

 Knowledge acquisition value
chain

Acquisition Data Information Knowledge Decision

or Creation Mgt. Mgt. Mgt. Making

Inputs Data Information Knowledge Wisdom

Sensing Facts Meaning Understanding Judgement

Knowledge (asset) creation or acquisition

is the first part of the value-adding process
Knowledge Management Introduction
Simard 2004
Creating knowledge is not enough

Knowledge acquisition without preservation will

not guarantee long-term competitive advantage
• Bell Laboratories invented lasers
• Rolls-Royce and the jet engine
• Xerox and….
– GUI and object-oriented programming
– Laser printers
– Ethernet
• CERN and the Internet…

Knowledge Management Introduction

 Knowledge use value chain

Author Reporter Analyst ‘Marketer’ ‘Champion’

or Researcher or Advocate

Individual Compile Recommend Targeted Opinion

Publish Represent Influence Promote Set agenda

Knowledge has value only through the results of its use

Simard 2004
Knowledge Management Introduction
 Knowledge management value chain

‘Custodian’ ‘Network’ Senior Executive

or Knowledge Manager Manager Manager
Worker

Preservation Sharing Integration Management

Availability Interface & Inter-operability Organisation

Transmission

Knowledge has most value at the ‘upper end’ of the chain

Simard 2004
Knowledge Management Introduction
 KM linking past, present & future

Past Present Future

Capture Share & Learn &
& Archive Integrate Adapt

KM Infrastructure
• Processes
• People
• Assets
Simard 2004

Knowledge Management Introduction

 Knowledge preservation value chain

Codifier ‘Librarian’ Systems ‘Provider’ Manager

Capture Organise Archive Retrieve Maintain

Inventory Mapping Storage Access Continuity

Capacity

KM is only as good as the ability to preserve knowledge

This is called ‘Corporate Memory’ in organisations
Knowledge Management Introduction
Simard 2004
 Corporate memory - assets

• Basic IT infrastructure
• Archiving and content management systems
• Interfaces and data entry
• Databases and data warehousing
• Information repositories & records management
• Knowledge repositories & ‘knowledge mapping’
• Libraries and archives, digital and traditional

Knowledge Management Introduction

 Knowledge retrieval - issues

• Access to content
• Interfaces and browsers
• Search engines
• Extraction or retrieval tools
• Manipulation tools

Knowledge Management Introduction

 Knowledge networking value chain

‘Hoarding’ Conversation Presenting Networking

& emails & Publishing & Collaborating

Individual Colleagues Groups Community

Personal Dialogue Dissemination Broadcasting

The value of a knowledge network increases

as the number of its members increases
Simard 2004

Knowledge Management Introduction

 Methods of sharing knowledge

• Personal conversation, dialogue, discussion

• Advice, briefing, recommendation
• Mentoring, teaching, example-setting, imitation
• Interrogation (Q&A), knowledge extraction
• Presentations, lectures, speeches, stories
• Manuals, hand-books, text books, training
• Meetings, workshops, conferences, forums
• Networks, communities of practice (CoP)
Simard 2004

Knowledge Management Introduction

 Knowledge sharing technology

• ‘Talking’ (face-to-face and virtual)

• E-mail (individual, list servers, distribution lists)
• Social networking systems (chat rooms, forums)
• ‘Communities of interest’
• Groupware, workgroups, team working
• ‘Knowledge fairs’, workshops, conferences
• ‘Knowledge cafes’, ‘information centres’

Knowledge Management Introduction

 Knowledge synergy value chain

Creator Co-ordinator Analyst Synthesiser

Isolated Organised Integrated Holistic

Element Structure Relationships Systemic

Knowledge value synergy – the whole is often greater

than the sum of the parts

Simard 2004
Knowledge Management Introduction
 Finally…

“ Products are [often] physical manifestations of

knowledge and their worth [i.e. value] largely, if
not entirely, depends on the value of the
knowledge they embody ”.
Leonard-Barton 1995
[My comments in brackets]
This implies that knowledge should be processed just as
physical goods are processed, and value can be added in a
similar way. This is the basis of Knowledge Engineering.

Knowledge Management Introduction

 Reading

• Leonard-Barton, D. (1995) Wellsprings of Knowledge:

Building and Sustaining the Sources of Innovation,
Harvard Business School Press.
• Simard, A. (2004) Knowledge Management: A Value-
Chain Approach. Presentation to the Interdepartmental
Knowledge Management Forum, National Resources
Canada. October 27th.
• Stewart, T.A. (1997) Intellectual Capital - The New Wealth
of Organizations, Doubleday.
• Martin, J. (1996) Cybercorp: the New Business
Revolution, Amacom.
Knowledge Management Introduction