Intellectual Capital, Social Capital and Communities of Practice
John Pierce C Eng, FICS
This, the third of a series of articles on Managing Knowledge, visits the concepts of intellectual
and social capital and looks at communities of practice, with a real example; Fujitsu’s Café VIK.
Later articles will address learning, categorising and searching, and will attempt to define a
knowledge management system and suggest a path towards exploiting knowledge for profit.
I wrote in a previous article about knowledge having both a value and a cost. The value
is often discussed – look at any advertisement for knowledge management ‘systems’ or
consulting companies – but the cost is usually ignored. We shall return in a later article
to the concept of cost and the knowledge market, but let us first look at that of value. A
lot of the original work on this came from the Nordic countries, where Karl-Eric Sveibyi,ii
and Leif Edvinssoniii at Skandiaiv created the concept of Intellectual Capital.
Consider Microsoft’s market value. Subtract from that the financial capital, represented
by the assets on the
books, and you are left
with a very large positive
number. This is deemed
to represent the
which is further broken
down into structural or
and human capital
(Figure 1). A further
refinement is the
addition of customer
capital, which includes
the customers you have,
your reputation and
relationship with them, Figure 1 Financial and intellectual capital (after
what you know about them and the potential business that you might do with them.
Human capital, according to Edvinsson, is defined as the combined knowledge, skill,
innovativeness and ability of the company's individual employees to meet the task at
hand. It also includes the company's values, culture and philosophy. Structural capital is
defined as the hardware, software, databases, organisational structure, patents, trademarks
and everything else of organisational capability that supports those employees'
productivity - in a word, everything left at the office when the employees go home. He
includes customer capital as part of the structural capital. Many of the earlier attempts at
managing knowledge attempted to move the contents of the human capital box into the
structural capital one. Whereas it is valid to make explicit and to capture in systems and
processes as much knowledge as possible, this strategy can at best be of limited use if we
accept the premise (stated in an earlier article) that the really valuable knowledge is
actually in people’s heads.
Edvinsson has set up a company called Unicv. It has no employees and so, by definition,
cannot have any knowledge. Its value is said to be in its knowledge recipes (which I
surmise are like KnowNet’svi ‘knowledge objects’). Setting up such a company may
seem to be a bit off-the-wall right now, but it is certainly ground breaking and it is worth
taking a look at www.unic.net. Edvinsson describes this initiative as representative of a
shift from ‘being an enterprise’ to ‘being enterprising’.
Another term coming into
popular usage is social
capital. The definition in
Figure 2 is from the
excellent book by Cohen
and Prusak, ‘In Good
display evidence of their
membership of the real
world in that they warn
that it is not the key to organisational success, that it is neither a business strategy nor a
marketing plan, and that it has a downside, which they call “the ties that blind”. This
refers to the “groupthinkviii”; the self-reinforcement of perceived truths within the
community; the sanction against questioning the groups norms. These lead to peculiar
forms of blindness, for instance failure to perceive threats from changing market
conditions. In Digital (later Compaq, now HP), Ken Olsen (the founder, for those lucky
enough to be too young to know, and also famous for calling the Unix operating system
‘snake-oil’) decreed that the PC could not even be discussed, and so the company failed,
not surprisingly, to formulate a sensible reaction it.
Figure 2 Social Capital (from Cohen and Prusak, 2001)
Communities of practice are among the major sources of social capital in organisations.
Wenger and Snyderix define them as “groups of people informally bound together by
shared expertise and passion for a joint enterprise”. They continue: “managers cannot
mandate communities of practice. Instead, successful managers bring the right people
together, provide an infrastructure in which communities can thrive, and measure the
communities’ value in non-traditional ways.” Communities appoint their own leaders but
they need a lot of support - both from senior management and in terms of infrastructure
Communities of practice tend to be small;
Brown and Duguidx prefer the term
“Networks of Practice” for the larger
groups that probably don’t actually know
each other well, if at all.
Communities are, in many cases, about
“knowing a man who can”, and they enable
conversations that transfer knowledge
around the group. A lot of this would be
called gossip by some managers. That’s
just what it is, and you run a big risk by
preventing it. I’ll come back to this later.
Figure 3 Characteristics of communities of
Let me leave this topic for now with the
suggestion from Tom Boyle of BT that the
intelligence of a company may be measured
by its NQ; its networking quotient! IQ
purports to measure the intellectual
capability of an individual (or, if you are
cynical, the ability of said individual to
perform IQ tests); NQ, by contrast, attempts
to convey the extent to which people in
organisations organisations engage in
Fujitsu Services (then ICL) did a lot of
research into getting value from knowledge,
and chaired a consortium of Ciba Specialty
Chemicals, ICI, ICL, Neste, Monsanto,
Statoil and Unilever. Each wanted to
become better at managing its business
from a knowledge perspective. They visited world-class companies in Japan, the USA
Figure 4 Value from Knowledge (after
The Performance Group)
and Europe including 3M, Buckman Labs, Chevron, Dow, GM, SRI, Steelcase, Sun
Microsystems, Teltech, Fujitsu and Kao.
The main lessonsxi were that you need to start with a strategy (although this may seem
obvious). What this strategy might be is beyond the scope of this article, but it helps to
have one. It is very difficult to support the business strategy with knowledge (or IT
systems for that matter) if you don’t have one in the first place. The process of creating
value has to include both the creation and sharing of knowledge – most people forget
about creating it - and finally it requires all of the three enabling conditions: leadership,
culture and infrastructure. This is consistent with the findings of Nonaka and Takeuchi
(1995), in their classic work ‘The Knowledge-Creating Company’xii, which I would
suggest is mandatory reading for anyone interested in managing knowledge for profit.
Back in 1996 ICL decided to take its own medicine, or to ‘eat our own dog-food’ as the
current American parlance has it, and set up a knowledge sharing intranet. It was called
Café VIK, and we learned a lot from it - including a great deal about how not to do it.
VIK had many of the right ideas, and was way ahead of its time. In many ways it still is,
although it has become to some extent a victim of its
It was intentionally designed with a less “buttoned-up”
look and feel, and the human element, the hanging out
and chatting, was very much in evidence. It was
launched with a road show where the VIK team
travelled from office to office and, dressed as waiters,
served coffee at café tables. The VIK character (a
cartoon personality with wild red hair) was part of this.
VIK has recently been killed off; some of us were
convinced that he was based on one of our more senior
consultants, an assertion that he strongly denies. Did he
finally get rid of VIK? Alternatively, and much more
worrying in my opinion, someone in senior management
doesn’t like laid-back attitudes.
The need to build communities soon became apparent,
and a new version of VIK was launched to support
this. Six years on further improvements are still being added (and more are needed).
Figure 5. Eat your own dog
Once logged in you get your personalised page. This presents you with your chosen
communities and applications, news from these communities, corporate news, your
chosen tailored news services, discussion groups, event booking, and so on. You also
have access to external feeds such as those from Gartner, Ovum, Forrester, etc., and you
have some integrated applications such as self-service access to the HR system, room
You can visit most communities and see the “public” information. Within the
communities are those of which you are a member, and within which you can see
information private to that community.
The directory uses the corporate X.500 system, and has some useful features such as
“sounds like”, essential if, like me, you have a bad head for names. An increasing number
of people - shown in directory listings with a special icon beside their names - are putting
their profiles onto the system, creating a (voluntary) corporate ‘Yellow Pages’. Apart
from making it easier to find the right kind of person there is a photograph and room for
some “personality”, adding to the sense of knowing people that is so essential to building
Unfortunately, the use of communities has been far less successful than it might be, with
many people forming new ‘communities’ more or less as a place to put some information
on the intranet. Not only that, but perhaps in a misguided effort to make it easy for
people, anyone is allowed to set up a community without having even a basic
understanding of how the system hangs together, let alone the softer skills of managing
knowledge. The development of real communities has been ignored except in a limited
number of (very successful) cases, showing once again that technology on its own – no
matter how excellent – does not make a knowledge management system.
There is a publishing wizard that enforces some standards (though not enough, in my
view), including tagging, an essential aid to classification and subsequent retrieval - of
which more in a later article. There is also life-cycle management, with an “electronic
nagging” system that keeps reminding you to update your content until you do something
about it. The search has also been improved, and now includes an ‘active search’ that
presents documents with concepts similar to the ones you looked at. This whole area of
classification, concept abstraction and searching, is one into which we need to put
considerable effort in the future. Improvements are, fortunately, on-going.
Many of the problems are caused, in my opinion, by poor publishing policies,
inappropriate use of communities and a lack of understanding of the publishing, tagging
and search features. More training wouldn’t go amiss, but a more intuitive
categorisation, based on a well-developed taxonomy, would be better. (It has been said
that this is probably a contradiction in terms. For example, how can a well developed
taxonomy be shared satisfactorily to the extent of giving a common understanding to a
culturally diverse group? I believe that we can do a lot better than we have, even if the
solution isn’t perfect.) And we need to put a lot more effort into the softer side of things.
As I said, it’s not just a technology issue.
Before leaving Fujitsu’s experiences
with VIK let me summarise by
saying that it’s a journey. We’ve
learned a lot, and continue to add
new features to Café VIK. We have
also taken what we learned from
VIK and elsewhere and defined an
approach, which I shall discuss in a
later article, based on networks of
communities, and the different roles
and contexts in which you might contribute or use information in these communities.
Figure 6 It's not a technology issue!
But as well as technology you need to think about the environment, physical and on-line,
and how conducive it is to casual conversation. Larry Prusak, talking at a conference in
Brussels in November 2000, suggested that conversation was the only way to actually
transfer knowledge. His fear was that someone would bring out a new product:
“Conversation Management” software! Maybe I should register that. ☺
Marketing Director, Fujitsu Services, Ireland
John has worked in the IT industry for over 25 years. Currently marketing
director with Fujitsu Services, he has worked as a consultant, in sales, as a
project manager and in technical support. Immediately prior to his current
appointment he was responsible for business development in ICL's e-
John was elected chairman of the Irish Internet Association in January
2002. He also chairs the Wexford information society initiative, WINC,
which was set up by the local authorities and associated bodies to bring
information era skills to the south-east.
He was a member of the Learning Advisory Group of the first Information Society Commission,
chairman of the E-Commerce Association of Ireland, a founding member of Irish Computer
Aided Design Association, a director of the Irish Unix Users Group, director of the Irish
Computer Society and chairman of the OU MBA Alumni Association, as well as non-executive
director of Glockenspiel Ltd, which provided software development tools.
Awarded a BSc and MSc by the National University of Ireland, an MBA by the Open University
and a Master of IT by AIIM, he is a chartered engineer and a fellow of the Irish Computer
Society. His main research interest is managing knowledge.
In his spare time he goes fishing and gets lots of practical experience for his website
http://www.knowledgeboard.com Page 8
i Sveiby, K-E., (1989). The Invisible Balance Sheet (www.sveiby.com)
ii Sveiby, K-E., The New Organisational Wealth (Berrett-Koehler Publishers, 1997)
vi Apostolou, Mentzas, Young and Abecker: Consolidating the Product versus Process Approaches in
Knowledge Management; www.know-net.org, 2000
vii Cohen, Don and Prusak, Lawrence. In good company: how social capital makes organizations work.
Harvard Business School Press, 2001
viii Janis, I., Groupthink, 2nd edition, Houghton Mifflin Boston, 1982
ix Wenger, X and Snyder, Y., Communities of Practice, the Organizational Frontier, HBR Jan-Feb 2000
x Brown JS and Duguid P.,: The Social Life of Information; Harvard Business School Press, 1999
xi Value from Knowledge: Managing from the knowledge perspective. The Performance Group and
xii Nonaka, Ikujiro and Takeuchi, Hirotaka, The knowledge-creating company: how Japanese companies
create the dynamics of innovation Oxford University Press, 1995
Minggu, 26 Agustus 2007
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