People-focused knowledge management

Four Management Initiatives
Tackling the six challenges requires drastic changes — at times
with a need to reinvent the business — rethinking and redesigning
operational and management practices, incentives, controls, and
culture, and above all learning how to obtain, retain, and serve cus-
tomers to their best advantage. For many enterprises, the challenges
have been met by pursuing four management initiatives:
1. Provide systematic and comprehensive knowledge manage-
ment distributed widely throughout the enterprise and guided
(not controlled) from central management. KM is backed up 
by monitoring, incentives, and detailed understanding of 
knowledge mechanisms to ascertain appropriate actions 
everywhere.
2. Pursue integrative management practices on personal, depart-
mental, and business unit levels, with collaboration and under-
standing of common goals and reinforced by measurements and
incentives to leverage the synergy of joint insights and efforts.
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3. Foster a widespread intellectual asset management mentality to
maximize the operational and strategic value of human capital
(people’s knowledge and their motivation to use and renew it),
structural intellectual capital, and information capital.
4. Establish people-focused management and organization of
knowledge-related work as a central condition to create and
leverage capabilities and to provide competitive products and
services in the global, knowledge-driven business environment.
Advanced enterprises manage the six major challenges successfully
by pursuing these initiatives. As a result, the challenges — and ways
to handle them competently — are becoming better understood,
although most challenges are not known in advance: they are novel.
In addition, information technology is becoming increasingly sophis-
ticated and continues to expand its support of most areas of the enter-
prise, making the availability of appropriate information better and
more timely. Still, the approaches and practices that vigilant organi-
zations pursue are becoming ever more people-focused and rely on
collaboration not only between people but also between organiza-
tional entities.
In philosophy, the new people-focus is quite different from the 
Taylorism era where the emphasis was on visible work and many
workers were treated as replaceable “programmable automata.”
Now, the focus has shifted to “invisible” and hard-to-observe intel-
lectual work that relies on independent initiatives, personal reason-
ing, and innovation. As the executive vice president of a large
enterprise stated: “Previously, we were concerned with what we saw
— work flows, information flows, how people worked with their
hands and so on. Now, to be competitive, in addition, we must focus
on how people work with their minds and how knowledge and
understanding are created, flows, and utilized and how it is
exchanged with outside parties. These are new challenges.”
The new practices have been found to be very effective and focus
on making individuals, teams, and groups work better — with better
understanding and insights, greater proficiency and foresight, higher
involvement and motivation, increased responsibility and versatility,
improved innovation and renewal, and increased building and
sharing of expertise to enable others and promote better practices.
All these changes rely on excellent tacit and explicit personal knowl-
edge and understandings and on competitive structural intellectual
capital assets. Knowledge management becomes a critical founda-
tion for the change, enabling the reinvention of the business by 
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systematic knowledge support, maintenance, and renewal. Compared
to past practices, advanced enterprises have, in effect, reinvented the
way they now conduct business.
The story does not end there. Significant leadership is required to
achieve the desired results. In addition, enterprises pursue and imple-
ment initiatives to create permanent practices for accountability and
for monitoring short-term and long-term results, both accompanied
by quick, flexible, and decisive retargeting when conditions change.
Open-loop and “hopeful” operation in a changing and competitive
world does not work (Sullivan & Harper 1997).
Enterprise Effectiveness Requires Good
Intellectual Capital Assets
The concept of intellectual capital (IC) is very important. IC in its
many forms allows us to identify action-oriented and order-focused
intellectual assets that are the main components that guide people
and enterprise behaviors. Action-oriented IC assets consist of knowl-
edge that people, organizations, and societies have about how to do
things. Order-focused IC assets deal with how to categorize, orga-
nize, structure, and think about personal lives, businesses and other
organizations, governments, and society in general in order to under-
stand them, to position them to their greatest advantage, and so they
can best fulfill their purpose.
From a static, “as-is” perspective, the enterprise IC assets are part
of the intangible capital, which for a company, together with tangi-
ble capital, make up its “market value.” Still, IC has a much greater
importance when considered from a dynamic perspective — from the
perspective of how well the enterprise will meet challenges as the
world around it changes and therefore how well it will succeed and
survive. IC assets, the intelligent capabilities, are needed to deal with
new situations and problems in ways that keep the enterprise strong
and prevent it from being vulnerable.
IC assets come in many forms. Personal IC assets consist of knowl-
edge and understanding that a person possesses and owns in the
forms of mental models, concepts, facts, rules, memories of incidents
and situations, and many other manifestations. These assets include
work-related personal relationships within or outside the organiza-
tion. They can also be personal notes and other types of physical arti-
facts, including electronic documents not owned by the enterprise.
Personal IC assets are the individual’s property and form the 
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foundation of each individual’s expertise or competence — their
ability to perform and act. Good and appropriate personal IC assets
are necessary for any individual to act effectively. In addition, people
must be motivated to use their expertise to deliver effective work. An
aggregated structure of IC entities is presented in Figure 1-4, which
is an adaptation and expansion of the Swedish financial company,
Skandia’s approach. There are many variants of IC considerations.
Our purpose here is to introduce the general concept, and the 
interested reader might consult the extensive literature to learn 
more (Amidon 2003; Chatzkel 2002; Edvinsson 2002; Edvinsson &
Malone 1997; Klein 1998; Roos et al. 1998; Stewart 1991, 1997,
2002b; Sveiby 1997).
The concept of IC and its categorizations allows us to identify the
strengths and weaknesses of areas of understanding and action 
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