Money for knowledge - Inside Knowledge

Feature

posted 1 Jul 1999 in Volume 2 Issue 10

Money for knowledge

‘Money makes the world go round.’
This phrase has never been more appropriate in today’s business environment, where you can buy knowledge in chunks from a web site or even earn money in certain companies by giving away your ideas. But does money make knowledge sharing any easier? What incentives should companies choose to encourage their employees to share? Does altruism exits in the work place (or even at all !)? This debate is the focus of our first ’Your say’ column. If you would like to contribute to the next issue of ‘Your Say’ call the Editor on +44 181 785 2700 to find out what the next hot topic will be, or contact
km@ark-group.com

Knowledge creation

Should knowledge sharing be encouraged through monetary incentives or altruism? In my experience, both these schools of thought are wrong. Knowledge sharing is of course, the critical success factor for a successful knowledge based organisation, but very few people yet realise what this truly means!
First of all, knowledge sharing requires a shift in thinking; a shift from ‘scarcity thinking to abundance thinking in certain situations’.This is not as easy as it sounds. Secondly,knowledge sharing is not selfless, as it first appears, but paradoxically selfish. Properly understood, it is of enormous benefit both to the individual and the organisation. Thirdly, it is not as simple as ‘sharing’ versus protecting.
Why should we share? Our personal knowledge is often seen as our power, our value etc. If I share my knowledge with another person, then perhaps I lose my value and competitive edge’ etc.
Let me give you another view. Today, compared with 30 years ago the value of the content of a piece of knowledge has fallen dramatically in shelf-life, not least because of improved global communications technologies. Instead, the focus has moved to something even more important for competitiveness, i.e. the process of creating new knowledge. Knowledge sharing is a critical component of the knowledge creating process. To share knowledge means that tacit knowledge must be made explicit in a communicable form. The very process of doing this is very powerful, even insightful to the sharer - regardless of the benefit to the receiver at this stage. He/she will find that their personal reorganisation of knowledge,as a result of sharing, will reach a much higher level if done correctly. Secondly, the process of sharing knowledge in a collaborative team is even more intensified. The dynamics and outputs of true collaboration have yet to be fully realised. Teams, especially cross-functional teams, are the new primary unit of knowledge creation in a knowledge based organisation.

When knowledge sharing is seen in this new light we will realise that it is not just about rewarding people for sharing, nor is it about altruism. In the right circumstances, knowledge sharing is highly strategic to the organisation, and highly beneficial to the individual.
Ron Young is CEO of Knowledge Associates International. He can be contacted at:
ronyoung@knowledgeassociates.com
Knowledge Associates International

‘What’s in it for me?’

I would argue against paying for knowledge, but I believe that without some kind of reward system knowledge transfer will not happen. The reward system must be appropriate to the value of the knowledge and fit in with the organisational culture. There are many examples where knowledge sharing (publishing papers) is supported by a recognition/promotion system (e.g. academia and medicine). Ideally, knowledge sharing should be an unconscious activity but there are few situations where altruism has displaced the “knowledge is power” ethos. Amongst software engineers it is commonplace to find engineers sharing code modules (distilled knowledge?) and helping each other to solve problems without any visible reward system. However, this only takes place within a shared culture and a context where trust is not abused.
In commercial organisations, recognition systems are required to honour individuals for their knowledge contributions, but I would advocate prizes, trips, holiday, promotion and publicity rather than hard cash. Experience indicates that linking cash directly to the desired outcomes sometimes results in undesirable behaviour, creating volume rather than value. However, keeping score in some ways does help, as the Fujitsu knowledge trading system demonstrates. In this internal knowledge trading system, when one Fujitsu group accesses knowledge stored in the system by another group, a notional payment (“wooden” Yen) is debited from the user and credited to the originating group. At the end of the month a statement is published netting all the debits and credits, and showing what knowledge has been accessed. Management can use the results to measure knowledge flow, and reward individuals or groups who have created most value.
The ultimate test for the individual is “What’s in it for me?” If there is a perceived reward/advantage for knowledge sharing and an environment where sharing is encouraged and enabled, then positive attitudes and behaviours will flourish.
Bill Mitchell is a Knowledge Management Consultant within the DTI Knowledge Management Unit.
He can be contacted at: Bill.Mitchell@CUDV.dti.gov.uk

Varying incentives
According to knowledge-based theory, a firm’s competitive advantage rests on its ability to protect and integrate individuals’ specialised and tacit knowledge. Integration implies sharing knowledge between individuals and groups. Knowledge sharing is thus a mission critical activity.
Deciding on the best approach is a complex problem, and a conceptual framework is useful for analysing the issues. One such framework is the Knowledge Supply Model(tm), which divides the firm into three sections. These are critical for determining the firms’ choice of knowledge suppliers, as well as suppliers’ fit with particular classifications:

Level of Suppliers’ Knowledge: the extent of the suppliers’ tacit and explicit knowledge.

Firm Specificity of Knowledge: the degree to which suppliers’ knowledge is specific to the functions or processes of one or a few firms.

Value of Knowledge: the importance of suppliers’ knowledge to the firm’s business activities.There are also three classifications of knowledge suppliers internal to the firm:

Core Group: The firm’s senior knowledge workers responsible for overseeing the firm’s operations and its high-level knowledge integration functions. This group’s knowledge value is very high.

Associate group: Employees who provide knowledge for controlling the main operational functions of the firm, e.g., finance, marketing, production, and R&D. The group’s knowledge value is high.

Peripheral Group: Employees who manage the interface to external suppliers and customers, and supports internal functions where the level of firm specific knowledge involved prevents them being externalised. The group’s knowledge value is low.
As we have seen over the years, the explicit nature and low value of the Periphery’s knowledge makes them candidates for replacement by automated solutions. However, the Core and Associates’ valuable tacit knowledge protects them from automation. As firms begin to realise that knowledge provides the basis for competitive advantage, incentives for Core and Associates to develop and share knowledge will be critical.

Implications
As the knowledge supplied by the Periphery is highly amenable to automation, initiatives to promote knowledge sharing among these individuals are largely unnecessary. Requirements for knowledge sharing between members of the Associate group are high. For this group technology, teamwork and training facilitate knowledge sharing, but are not an incentive to share. A classic example of how to motivate associates effectively is the professional partnership. The incentive for young lawyers and accountants in practice is that they may as a result be promoted to the Core (i.e. become a partner) and receive a share of their firm’s equity. With the potential for such a large payoff, these firms ensure their associates share knowledge without having to pay them high salaries or bonuses. Monitoring (and periodically recognising) their performance is all that is necessary.
In the Core, knowledge sharing is critical. Continuing with the partnership example, the most powerful incentive for members of the Core to share knowledge is the overall success of the enterprise from which they will all gain, and the reduced risk of individual/collective decision errors that could adversely affect its members’ fortunes.

Summary
The partnership structure provides great incentives for knowledge sharing and development. Little wonder that it is often used in knowledge intensive fields. Similar incentives, however, can be created in corporate structures through share ownership and stock option schemes. It is often said that knowledge is power. As sharing knowledge implies forfeiting power, firms unwilling to provide ownership-based incentives will likely have to pay significant performance-based rewards to motivate employees to share their knowledge. Accurately measuring and compensating workers for such knowledge sharing is very difficult. Nevertheless, firms unable to do this or unwilling to create an internal structure conducive to knowledge sharing will not survive long in today’s ultra competitive marketplace.
Alan Burton-Jones is author of the forthcoming book, Knowledge Capitalism: Business Work and Learning in the New Economy. (Published by Oxford University Press)
He can be contacted at:alan@burton-jones.com

The online Knowledge Market

For as long as civilisations have existed people have traded. Ancient land and sea routes ensured active trade took place in goods. As societies matured, financial markets developed and information trading emerged. Now information in the form of the `promises` that are financial trading instruments swap hands millions of times around the world during any twenty-four hour period.
We’ve spent the best part of the last two years building an on-line knowledge market, iqport. Built to operate solely on the Internet, iqport provides an on-line, real-time market for knowledge trading.
It aims to organise and concentrate knowledge into specific subject areas or communities. These communities of interest will be self-managed and responsible for converting expertise and raw data into saleable knowledge. Each knowledge asset will come with its own wrapper that describes its content and price. The price is set, as in any market by what purchasers are prepared to pay for a commodity depending on the value it confers upon them. Price can be moved up or down by the seller depending on the volumes they want to create in the market. People who have purchased the asset can also place comments on the wrapper.
Contrary to conventional free - or even premium-based - Internet search engines, iqport matches the buyers of knowledge with the sellers of knowledge, allowing knowledge to be effectively traded. Membership is free, and costs are only incurred when knowledge is purchased. It supports this process with an internal currency, pegged to the value of the US dollar with which users of iqport can trade with other knowledge providers and build up wealth or convert that internal currency into a hard currency of their choice at a time of their choosing. Thus iqport sets a new business paradigm, by bringing liquidity to the global knowledge market and helping people use the Internet to trade knowledge for profit and/or competitive advantage.

Money for your virtual wares

For many, the concept of charging for knowledge is troublesome, for some it is an anathema. Somehow the dissemination of knowledge should only be carried out under altruistic principles. The problem is that altruism has never been an efficient or effective way of distributing goods or services.
We believe that the human motivations of fear, risk and desire for wealth drive the market, and that a knowledge market based on answering these motivations is both morally acceptable, and essentially lies at the heart of business trading. It is not merely morally acceptable in the way that it will produce new wealth, but in the way it will allow wealth to be distributed. This market is constructed in such a way that it embraces wider constituencies of interest than models of capitalism have been able to do previously.
For further explanations of why we believe it is morally acceptable to charge for knowledge, lets go back in time. In the last ten years our working lives have changed dramatically. In the West initially, and now globally, the concept of business process re-engineering initially postulated by American academics including James Champey has destroyed many of the co-operative social processes within companies and institutions that had been taken for granted for over a century. Instead, in the fight for survival individuals have had to become focused and, in turn, selfish, co-operating only when it suits them to achieve a specific and short-term aim.
This, now irreversible process has also produced some interesting, and in most ways undesirable by-products. In the manic rush for production, conventional notions of training have disappeared. Why is this? The time needed for conventional training is simply not available, and more importantly, with the move to assignment-based working, new skills need to be learned on an ongoing basis. Conventional training approaches just cannot fulfil these tight time-schedules.
The old adage `time is money` has never been more true! Knowledge that allows an individual to make best use of the scarce commodity of time is bound to attract a value, and the current global market for knowledge is imperfect/In order to correct this, people need to be encouraged to make tacit knowledge available, and others need to help create markets by being able to repeatedly spend money to secure these assets. If the right infrastructure is in place then individuals who never previously had access to certain sorts of information will now be open to new opportunities.
Also, economies in the world which are poor by conventional standards can be hugely knowledge rich. A trading infrastructure, which even protects them from the vagaries of their own national currency, and can help them create the financial resources with which to make a purchase could bring huge benefit to both individuals and their economies. They can benefit either in terms of creating wealth by realising hard currency immediately; or using that wealth to trade for information previously unavailable in that locality.
For example, one only has to think of Russia where pure mathematics has continued to be taught and developed to a standard long ago abandoned in the West to see the potential trade opportunities. Russian academics could easily trade new and complex algorithms with software firms that need them to develop new products.
Another positive facet of a knowledge trading infrastructure is its ability to make available and valuable previously dormant or wasted knowledge. Take, for instance the situation in Western countries where a generation of post-war baby boomers are retiring from the wealth creating economy. These people possess a lifetime of learning - knowledge that can made available cheaply and simply through an online market.
As the post-industrial economy emerges, we are entering a new era where the creation of knowledge markets and the enabling of knowledge trading will liberate new wealth for those with previously unrealisable assets. Although we are dealing with a new and different type of economy, in many ways it will rely on some similar principles to previous trading relationships; the most important of these being that a value can be assigned to a commodity by market forces. We believe that knowledge does have value, and we have now created an open and global market that can decide exactly what that value is./Nick Hynes is Chief Executive Officer of iqport. Freddie McMahon is Chief Strategy Officer of iqport.
They can be contacted at:
nick.hynes@iqportfoundation.com
freddiemcmahon@iqportfoundation.com
www.iqport.com