As an increasing number of organizations strive to leverage their intellectual capital to drive innovation and adapt to rapid change, CLOs have the opportunity to be the fulcrum that pivots the knowledge of the workforce for organizational profit.
Knowledge is power. So said English philosopher Sir Francis Bacon in 1597.
The scientific method Bacon developed to collect knowledge through observation led, in part, to quantum leaps in our understanding of the world. As knowledge is collected and shared, it grows exponentially, setting off a chain reaction of new insights and innovations.
“The cumulative codified information base of the world is, within the next three years, scheduled to double every 11 hours,” said Nick Bontis, associate professor at the DeGroote School of Business at McMaster University in Canada, and associate editor of the Journal of Intellectual Capital. “That’s a fantastic statistic.”
Given that exponential growth in information, Bacon’s idea that knowledge is power has taken on a new dynamic in the 21st-century economy. More and more, businesses are realizing the role that the knowledge residing in their intellectual capital plays in creating economic power and value.
Learning executives, because they sit at the intersection between the organization’s strategic goals and the capabilities of its workforce, find themselves as the fulcrum that can leverage intellectual capital to drive growth, spur innovation and ultimately create value. But that role requires an expanded perspective on learning and a robust set of technical and social skills.
Turning Intangibles Into Tangible Results
From an economic perspective, value traditionally resides in the tangible assets — such as financial capital and real estate — that show up on a standard corporate balance sheet. But in a business environment driven by innovation, economists are focusing increasingly on intangibles, such as knowledge and relationships, as key creators of value.
“Ideas have always and everywhere been more valuable than the physical act of carrying them out,” said Ron Baker, founder of VeraSage Institute and author of Mind Over Matter: Why Intellectual Capital Is the Chief Source of Wealth. “Economies that create more ideas and test more ideas and turn those ideas into knowledge create a higher standard of living.
“It’s why architects make more than steel workers. And yet a lot of people confuse the physical act of carrying something out as being more important than generating the idea. And that’s simply not true if you study the economics of it.”
The U.S. Department of Commerce released a new report in January 2008 recognizing the increasing role that intangible assets play in driving growth. “Innovation Measurement: Tracking the State of Innovation in the American Economy” proposes that economists use a new set of measures aimed at balancing the traditional manufacturing measures of input and output with intangibles, such as intellectual capital and “innovation inputs.”
The report is the latest in an ongoing trend that began in the 1980s when Karl-Erik Sveiby and his colleagues in Sweden undertook the first real attempt to define intellectual capital and measure its value. As they explained it, the intellectual assets of the organization could be found in three main areas: human capital, structural capital and social capital.
Human capital is the organization’s talent, including their knowledge and competency. Structural capital is the intellectual property, systems and processes of the organization, and social capital is the value inherent in the organization’s relationships, customers and brand.
The idea garnered significant attention in the United States in 1991 when Thomas A. Stewart wrote an article for Fortune magazine called “Brain Power: How Intellectual Capital Is Becoming America’s Most Valuable Asset.” He went on to author two more books on the topic: Intellectual Capital in 1997 and The Wealth of Knowledge in 2001.
Spurred in part by Stewart’s work, the idea of intellectual capital took off in business circles. Skandia, a Swedish financial services organization, named Leif Edvinsson as the first director of intellectual capital. Other businesses soon followed Skandia’s lead and designated an organizational leader to manage and grow the intellectual capital of the organization. Those leaders face a significant challenge.
“With information bombardment getting worse, an organization has to somehow tap into a mechanism to be able to filter and harvest and extract the knowledge assets that they really need to be successful,” Bontis said. “At the end of the day, it’s still the human mind that has to act as the filter to be the decision maker. And we only have a certain amount of capacity.”
The CLO’s Role in Intellectual Capital
As the organization’s learning leader, the CLO makes strategic decisions that build the capacity of the organization’s human capital, enable knowledge sharing through its social capital and optimize structural capital to capture knowledge and make it available to workers.
“Intellectual capital is the stock of knowledge assets in an organization,” Bontis said. “Learning and development is the flow that helps build the stock of intellectual capital.”
As the head of the learning department, CLOs have the best understanding of learning methods and modalities and can strategically target the learning budget to build knowledge.
“Every dollar you spend on L&D is not the same,” Bontis said. “Certain dollars should be spent in certain ways for certain people. The CLO plays a role in the optimal allocation of resources, discriminating where is optimally best.”
The goal of that investment is to ensure the continued flow of learning and development to the workforce, keeping knowledge fresh and providing access to the latest information and tools.
“The danger is the obsolescence of knowledge,” Bontis said. “It’s like anything else. Technology, equipment — all of these things have an obsolescence rate, meaning they only last for so long and then they die out. Knowledge is the same way.”
While investing in learning is important, CLOs also must realize that much of the
organization’s knowledge gets transferred informally between its workers. Workers talk to each other at the watercooler, at lunch or in informal conversations throughout the day. These social opportunities are critical to building a workforce that leverages its intellectual capital.
“In the olden days in the factory, it was like, ‘Hey, stop talking, you guys, and get back to work!’” Baker said. “But in a knowledge environment, it’s more like, ‘Hey people, get back to work, start talking!’”
To facilitate knowledge sharing and build social capital, wireless research and development company Qualcomm creates knowledge-sharing events, such as employee trade shows and the annual Q-Tech Forum, an internal engineering conference. As part of that three-day event, employees write technical papers about specific products or projects and present them to their colleagues. The hundreds of papers and presentations generated then are archived online for continued access.
The idea is to encourage engineers to share knowledge with each other, something technical workers sometimes are reluctant to do.
“Sometimes in a tech organization, you have to reinforce the sharing-knowledge component through rewards or other kinds of recognition programs,” said Tamar Elkeles, vice president of learning and development for Qualcomm. “We’re doing it more through an open forum to say, ‘Come share your ideas with the rest of the company because it helps everyone understand more about what we’re doing.’”
Qualcomm also uses communication vehicles to find pockets of knowledge in the organization and actively transfer them to the extended enterprise. They solicit stories from employees about products, technologies and the work they’re doing for an internal newsletter, called “52 Weeks.”
“We take all of that information and create 52 different stories, one story a week, and we send those out to employees to learn about the organization — to learn about why we’ve made certain decisions, why certain products didn’t work or why certain technology is going to be the next great technology for the company,” Elkeles said.
New technology also has created significant new tools for knowledge sharing, including online collaboration tools such as wikis, social-networking sites and blogs.
“As CLOs, we need to be up on that technology and understand what some of the tools are that people can utilize to enhance the knowledge sharing in the company,” Elkeles said.
Before implementing knowledge-sharing practices or new collaboration tools, CLOs must have a good understanding of the organizational culture and its readiness to share. They should test new approaches with selected groups before implementing them across the organization.
“Part of it is trying to create processes and part of it is creating an open culture,” Elkeles said. “CLOs have a huge responsibility in maintaining or growing or adapting an organizational culture, and if the culture doesn’t support the knowledge sharing, then a big role for the CLO is to try to figure out how to make that happen.”
Cedric Coco, vice president of learning and organizational effectiveness for Lowe’s Companies Inc., said CLOs should take a holistic approach to create a learning “ecosystem” that integrates people, process and technology to leverage intellectual capital.
“The magnitude of growth of available information about any given topic has far exceeded what a man or woman has been able to retain,” he said. “You have to realize that as a cornerstone of your learning and development strategy, and then you figure out how to leverage technology, how to leverage job aids — how to leverage a systems approach around people, process and tools to make sure that you can stay in sync with that migration of data and human capability.”
Emerging technologies, including wikis, blogs and communities of practice, show promise but are not an all-encompassing solution.
“When you look at it at the end of the day, it’s even beyond technology, it’s even beyond the principles of a human’s ability to retain information,” Coco said. “It starts getting to the whole concept of social engineering.”
A social engineering perspective requires CLOs to cede control and ownership of knowledge to the workforce and focus instead on analyzing the community and shaping it for optimal performance.
“The majority of the knowledge of an organization exists in its people, not in the formal infrastructure around training and learning and development and HR,” Coco said. “You can’t try to control it. You have to figure out how do you facilitate it and foster the growth of that knowledge and capability.”
By taking a social engineering perspective, CLOs analyze the workforce, observe how they do their work, monitor performance and adjust tactics and strategies accordingly. Giving a worker e-learning or putting him or her in a training class may not be the right way to train the next-generation worker, for example.
“The way that they obtain knowledge, the way that they apply and leverage knowledge to get their work and their daily tasks done is different,” Coco said. “There’s a natural evolution with that.”
As social engineers, CLOs develop a workplace environment that incorporates the components of intellectual capital — the human, structural and social — to engineer results for the organization.
“The CLO’s role is to build an ecosystem that enables the employee and the company to deliver to the fullest of its capability,” Coco said. “So the whole thing is about, ‘How do I maximize the competitive advantage that any company has, which is its people, through enhancing and optimizing the capability of the workforce to satisfy customer needs and desires?’”
Knowledge is power, and today’s learning executives have a significant role to play in leveraging the power of that knowledge to deliver on the organization’s goals. It’s a role that requires a wide-ranging set of technical and social skills, an ability to adapt to a continually changing business climate and the ability to adjust to an ever-evolving set of responsibilities.
“The role that the CLO has is amazing to me because every time we turn around, there’s something new that’s added,” Elkeles said. “Part of that is the uniqueness of people in the learning role. Those people have tremendous capability to take on more and to do different and to add value to the organization as organizations continue to grow and change. I don’t think every function, every role has that. I think it’s a great time to be a CLO.”