"Many try to starve themselves into the future, instead of gorging themselves on brainpower". This firm statement, rejecting the downsizing route, and sounding the trumpet for intellectual capital, is a definitive statement of Leif Edvinsson's philosophy, so definitive that it stands on his visiting card. The card is unusually informative, including Edvinsson's striking colour image, the information that he ("Brain of the Year, 1998") is a "Global Knowledge Nomad", various other roles - and a drawing of a tree.
The drawing has an intellectual purpose. Edvinsson points to the tree and asks (rhetorically) which is the more creative - the leaves or the roots? You immediately see the answer: the tree. Edvinsson goes on to say that companies "need a cultivator, not a manager". His own career certainly makes him an arch-cultivator, a thinker and doer who is dedicated to nourishing the roots and growth of intellectual capital.
In the digital age, IT and IC (intellectual capital) are inseparable. You need brainpower to understand what the technology of information and communications can do for an organization. You need intellect to apply the technology and establish the 'digital nervous system' of the thinking, learning, reasoning company. The DNS is the pathway to the corporate brain - the repository of collective ideas and knowledge to which Edvinsson's ideas and knowledge are applied.
His principles are set out in Intellectual Capital, written with Michael Malone, which goes into every aspect of intellectual capital: including its "hidden roots" and the "hidden capabilities" of corporations. Edvinsson has devoted himself to getting these capabilities out of hiding - especially at Skania, the Swedish financial services company, where he is "director of intellectual capital". He is also a prime mover behind the building (in Norway, Sweden, Israel and Denmark) of half-a-dozen Future Centres, IKEA-like retail stores for intellectual capital: "you go in, bring out, assemble together".
At Lund University in his native Sweden, he is Visiting Professor in intellectual capital and knowledge economics. At Henley in Britain, he is honorary chairman of the Management College's knowledge management initiative. Another close concern, UNIC (which stands for Universal Networking Intellectual Capital), located in Stockholm, is "an experiment in intellectual property". Edvinsson describes UNIC as a "holding company for knowledge recipes - a network or alliance involving professionals in collaboration".
Among those professionals, Edvinsson occupies pole position. He was the world's first intellectual capital pro, and is thrilled to see how fast the competition has expanded. At a recent conference in Canada, some 500 people, including both academics and practitioners, gathered together. But directors of intellectual capital, working for corporations, are a much rarer breed. Edvinsson gets much authority from his directorial work at Skania. But his director colleagues number perhaps 20 world-wide.
As that indicates, knowledge management, for all its publicity (some would say hype), remains in its infancy. Many managers are thus unclear about where IC and KM - still unfamiliar initials - fit into the corporate scheme. Because intellectual capital is accumulated by people, in whom the brainpower resides, it's easy, but wrong, to identify KM as part of human resources management. It's more the other way round. As Edvinsson explains the relationship, "If you combine quality HR with very good structural capital - then you get intellectual capital".
The process thus falls into two distinct parts: "Human capital can't be owned by any organization. Structural capital can. The better the combination, the greater the intellectual capital". Structural capital means "all the codified dimensions that you leave behind when you go home". That takes in everything from processes to manuals, filing systems to software - much of it digital. As Edvinsson points out, "you don't start from scratch in the morning": the moment you log on, the computer links you with the intellectual capital structure. The work of the knowledge manager is to "transform thoughts" into this structure; and "the velocity of the transformation is absolutely critical".
Here tools like intranets and extranets play an essential role, increasing the speed of exchanges, multiplying their number, and enhancing the potential of the human capital. The same HC can provide you with various options and different outputs. The basic question for knowledge managers to answer is: "How do you leverage the potential of talented individuals?' Edvinsson offers two answers (1) Acknowledge the correlation between HC and SC (2) Take really good care of the knowledge workers.
Tender, loving care avoids burnout. It covers a whole range of corporate policies: notably work content, office design, working hours and the "urban planning" of the organization. Edvinsson observes that the context within which the knowledge worker operates has changed radically. He makes an analogy with handball players, who used to play for 30 minutes non-stop, take a break, and then play another half-hour. In the digital age, the situation is far more fluid: play proceeds in 40-second bursts. The knowledge worker's game has changed likewise.
The traditional eight-hour day is irrelevant to people whose peak performance is only achieved for two to four hours a day. This has great implications: "Why should they commute two hours, then spend the day locked up in an ugly office?". That's another rhetorical question. The obvious answer - let them stay at home and connect via digital technology - takes you beyond traditional knowledge management, which is more collective, and into the new era, in which the prime currency is the peak ability of the individual, wired-up knowledge worker.
The old days, moreover, pitted one buyer against one seller: a monopsony versus a monopoly - "both inefficient market conditions". Knowledge workers faced a single, monopolistic buyer of their services, meaning that the employer got lower value added per man or woman. The new situation requires the knowledge worker to spend two to four hours "in one slot" and then move to another slot for another employer - acting more like consultants (or artists) than conventional employees.
Challenging the conventional wisdom is the name of Edvinsson's game. It is by no means everybody's sport. In the conflict between unconventional courage and the conventional search for security, the latter still wins hands down. Edvinsson cites statistics showing that in Europe only 15% of people have enough courage to go free-lance. The US numbers are higher, and growing, which may show deeper insight. "It's more efficient to be a freelance. You add greater value" - which should mean, other things being equal, that you earn more value for yourself.
This doesn't mean entering the New Economy: "Not new", says Edvinsson, who prefers to discuss "the New Economics". This means more than adding the greatest possible value. "It's also about renewal. Are you renewing with enough effect? Are you destroying more value than you create?". The answers run deeo into the heart of economic society. "If organizations are not creating the right circumstances, they are not creating wealth in society, just redistributing it".
Edvinsson speaks of intellectual capital as "the New Wealth of Nations". In the old, Adam Smith variety, wealth was created by trade - now "it's knowledge recipes". The vital search is for an organization's true efficiencies. He uses the computer as illustration. Its value as equipment is decreasing; but "if you load value into the computer, its worth is increasing". In the next generation of knowledge exchanges, the brain content of the computer will be put on line, with a tremendous multiplier effect.
One and one no longer equals only two, explains Edvinsson, with evident satisfaction, putting the exponential factor of networking at perhaps elevenfold. He uses financial derivatives as another analogy. When investments came singly, scarcity ruled. When futures were added, and subdivisions created, several units became available instead of one, "getting round scarcity and increasing marginal utility". In the same way, the networked company mutliplies its intellectual capital.
Edvinsson notes that failed dot.com companies often proved worthless because they lacked structural capital, which might have provided an asset worth real money to a purchaser. The stock market, he believes, looks for "transparency of intangible assets": and, always inventive, Edvinsson has been working on an intellectual capital rating scheme to provide just that - rating IT companies, schools, hospitals, even regions on their degrees of efficiency, renewal and risk.
"Can you support the risk with your investment?" is one of the hard-nosed questions which Edvinsson brings to this seemingly soft approach. Some 200 companies are now involved in this pioneering effort. It capitalises corporate culture, comparing cultural behaviour and the degree to which companies are thinking about the knowledge worker. In another pregnant analogy, Edvinsson thinks of Zen gardens, whose physical attributes (rocks, gravel, moss, etc) embody thought through their arrangement and tending.
Skania, the prime garden for Edvinsson's ideas, has been transformed over the past decade, growing to ten times its early-1990s value and establishing a top market position. While the company does have a hierarchy, that only occupies three layers, and doesn't impede a high degree of far-flung creativity. Edvinsson describes Skania as a "global community of 100,000 networkers, only 5% of whom are employees": the others, held together by digital contact, range from independent financial advisers to bankers.
Skania's direct employees work in offices designed on the "knowledge café" principle. Ten years ago, "we asked, where is the most free flow of knowledge? In the boardroom? The kitchen? The café?". The café was the answer. It couldn't be the boardroom, because exchange of knowledge at the top occupies less than 5% of executive time. Going down the structure, so the degree of knowledge exchange rises. It follows that the prime job of top people (returning to the tree analogy on Edvinsson's visiting card) is to cultivate the riches beneath them - and to enhance that wealth by every tender, loving means in their power.
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