Knowledge trading, not knowledge management, is the key

Billions of dollars have been invested in knowledge management but the results aren’t making headlines. The money has been spent on everything (technology, integration, travel, salaries of “core teams”) except the creation of knowledge; there is no value attached to knowledge. Knowledge is neither an expense/investment head nor a revenue/profit head for a business unit; therefore, it’s not central to its goals and objectives. Creation and/or implementation of knowledge will remain a tertiary activity as long as it’s not linked to business results.

I propose a “Knowledge Trading” process within the organization, which will attach a real, tangible, monetary value to knowledge (and to the raw material required for creating knowledge). Individuals/teams can sell and buy knowledge/raw material for knowledge through a knowledge exchange. Business Units will have budgets for buying knowledge and creating knowledge. Market dynamics will control the processing, flow and use of knowledge within an organization; facilitated by technology.

Knowledge Trading answers the key question “What is knowledge?” Is it MIS reports? Is it customer feedback? Is it best practices? In this system, it’s what fetches a price. And the higher the price it fetches, the more valuable the knowledge is.

The first requirement for effective knowledge management is the mobility of “raw material”. Knowledge Trading will make the raw material for knowledge (memories of customer conversation, observations, reports, numbers in excel sheets, training sessions attended, problems solved in the field etc) mobile within an organization because individuals can get real money for this. Currently, there is no value attached to this raw material and therefore they are static inside every individual and his desktop. Efforts on the part of the organization to make employees share it are met with a natural indifference, because they are not paid for it; and whatever you are not paid for is not a part of the job. Value of the knowledge/ knowledge raw material created by an individual is neither a part of the compensation structure nor of the appraisal system.

The second step in effective knowledge management is having the right people process the raw material into knowledge packs.

Entrepreneurs will spring up within an organization who will buy raw material, process it, add value and create finished knowledge products, which will be up for sale within an organization; primarily for the business units/management. This suits the organization fine, because it’s really not concerned about how the knowledge is created, but rather with (a) the accuracy (b) the value (c) the timeliness (d) ready availability of the knowledge. In their enthusiasm, organizations expect everyone to create knowledge; this is impossible. Few have the talent to process the raw material to create knowledge.

The well-known dynamics of the market will influence the knowledge production and trading within an organization. In the beginning, there may be many individuals/groups trying to create a saleable knowledge pack. But with time, ability to access relevant raw material, quality of analysis and value-add and understanding of customers’ knowledge requirements will separate the winners and kill others. The “cost” of raw material, too, will undergo shifts over a period of time.

As a result, knowledge factories will be created within an organization, which will be geographically decentralized, have sources of raw material, minds that process it and a market in the top management of the organization; and not because the management wants to spread “knowledge management”.

Knowledge Trading aligns the compensation structure of employees with the earnings and profitability structure of the company. People within an organization, who make substantial intellectual property/knowledge contribution, will leverage it to make more money and rightly so; after all, the organization that leverages knowledge makes more money. In fact, there may be a seismic shift in the salary structure, where a substantial component will come from your knowledge trading. (This is in tune with the past; when company efficiency and productivity drove market success, compensation structure evolved to reward employees for increasing them).

The third step in effective knowledge management is for the different units of a company to accept the knowledge created elsewhere willingly and without any hostility.

Knowledge Trading will overcome the “not manufactured here” syndrome. When organizations try to dissipate any knowledge across geographies, there is a tendency to resist it with the classic “things are different here”. History has shown that trading best breaches such a protectionist wall. When you sell to others, you don’t hesitate to buy from others. Knowledge Trading will, therefore, increase the acceptance and implementation of “others’” knowledge for “my” good.

Knowledge Trading becomes a bottom-up process in an organization, because everyone is a producer of raw material for knowledge and therefore, everyone benefits. Technology adoption, implementation and innovations will come from within, bottom-up, instead of being thrust top down.

And the final step in effective knowledge management is for a business unit to leverage the knowledge for increasing its profitability.

Business Units will have budgets for buying knowledge and creating knowledge. Once trading is established, (incremental) return on knowledge investment/creation can be a key metric to evaluate (and compare across the company) the business performance of individual business units. This will, in turn, align the value of knowledge creation and management within an organization to the objective of business profitability and leadership.

By putting a value to knowledge generated, a continuous production line of new, improved, relevant knowledge is established.