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![First published in France in 2004 by Hermes Science/Lavoisier entitled “Management des
connaissances en entreprise”
First published in Great Britain and the United States in 2006 by ISTE Ltd
Apart from any fair dealing for the purposes of research or private study, or criticism or
review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may
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© GET and LAVOISIER, 2004
© ISTE Ltd, 2006
The rights of Imed Boughzala and Jean-Louis Ermine to be identified as the author of this
work has been asserted in accordance with the Copyright, Designs and Patents Act 1988.
___________________________________________________________________________
Library of Congress Cataloging-in-Publication Data
Management des connaissances en entreprise. English.
Trends in enterprise knowledge management / edited by Imed Boughzala [and] Jean-Louis
Ermine.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-1-905209-03-3
1. Intellectual capital--Management. 2. Knowledge management. I. Boughzala, Imed. II.
Ermine, Jean-Louis. III. Title.
HD53.M354 2006
658.4'038--dc22
2006006216
British Library Cataloguing-in-Publication Data
A CIP record for this book is available from the British Library
ISBN 10: 1-905209-03-7
ISBN 13: 978-1-905209-03-3
Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire.
Cover photo: created by Atelier Isatis, Dijon, France.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-7-2048.jpg)
![Chapter 1
Introduction to Knowledge Management
1.1. Introduction
1.1.1. Knowledge: a strategic value for the firm
In the last few years, with sudden and unexpected strength, Knowledge
Management (KM) has emerged as a major challenge in many enterprises. A set of
strategic elements has contributed to this emergence; for example:
– knowledge is a fundamental economical asset ([Edvinson 99], [Strassmann
98], [Stewart 97], [Foray 00]);
– knowledge is a strategic resource [OECD 96];
– knowledge is a factor in the stability of the enterprise;
– knowledge brings a decisive competitive advantage.
1.1.2. Objectives of KM
The strategic vision that leaders of an enterprise can have concerning their
knowledge capital is leading them to define some global objectives for managing
and optimizing this resource. These objectives are always articulated around three
key points:
– capitalize: know from where we come, so that we know where we are, to know
better where we are going;
Chapter written by Jean-Louis ERMINE, Institut National des Télécommunications.
Trends in Enterprise Knowledge Munugement
Edited by Imed Boughzala & Jean-LouisErmine
Copyright 02006, ISTE Ltd.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-23-2048.jpg)
![26 Trends in Enterprise Knowledge Management
1.2.1.1.2. Knowledge engineering
Knowledge engineering is a more sophisticated approach than transcription to
capturing parcels of tacit knowledge. It was developed along with expert systems
(or knowledge-based systems). These systems were intended to replicate the
reasoning of experts on specific knowledge domains. It was quickly perceived that
if powerful technologies were available to design such systems, the critical
difficulty resided in the capacity to transfer the knowledge of one or several human
experts into a computer program. Knowledge engineering therefore put methods in
place to collect the knowledge, most often from interviews, and to structure it
generally on the basis of models ([Rubiello 97], [Dieng 00]).
These methods can therefore be used profitably to clarify, from interviews with
knowledge holders, a part of the capital of tacit knowledge of the organization. A
typical example of this evolution is the MASK method that was used to specify
expert systems and became a method of knowledge capitalization, which was then
integrated into the general KM approach ([Ermine 02]).
1.2.1.2. Knowledge extraction
1.2.1.2.1. Knowledge extraction from data
All enterprises retain large quantities of data, resulting from their production
activities. These data are very diverse (technical, management, marketing, etc.) and
their mass doesn’t stop growing (it doubles every 20 months on average). Moreover,
there are other considerable masses of data called non-structured or semi-structured
data, which consist of textual data (and other types of media) that correspond to the
production of texts, cards, reports and other types of document. This informational
capital probably provides value for the enterprise’s production needs, but also could
be reused efficiently a posteriori for other needs. However, it has been shown that
hardly 10% of this capital is exploited. This can be explained by the difficulty in
reusing information that has been structured for objectives different from
capitalization and reuse.
However, big efforts are currently being made to validate these layers of
information accumulated as part of data processing for production. The objective is
to produce, from these layers, new information that is useful for action within the
enterprise, in other words producing “operational knowledge” in the KM sense. This
is manipulation of information with the objective of knowledge discovery, called
knowledge extraction from data (or “knowledge discovery from data” (KDD)),
which is also linked to similar concepts such as “text mining”, “data mining” or the
“data warehouse”.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-26-2048.jpg)
![Introduction to Knowledge Management 27
1.2.1.2.2. Knowledge extraction from texts
Knowledge extraction from texts (“text mining”) is the discovery of useful
information from “hidden patterns” buried in a large corpus of texts (sometimes
called non-structured or semi-structured information). Research engines now
process those types of texts, which are more and more abundant and include web
pages, a growing source of knowledge.
1.2.1.3. Supporting technologies for explicit (elicited) KM
After having extracted part of the knowledge capital, one has an informational
corpus that can be used for transferring or operating knowledge. To put this corpus
into effect, two kinds of systems can be used, which are as follows.
1.2.1.3.1. Knowledge servers
These are systems, usually part of a company’s intranet, through which one can
browse (in the most intelligent and ergonomic manner possible) for the elicited
knowledge. These systems do not solve problems directly for the users, but give a
rich and flexible method for retrieving knowledge that may be useful to solve an
operational problem.
1.2.1.3.2. Knowledge based systems
These are computer-based systems that “operate” the elicited knowledge, such
as, for example, expert systems. They use the elicited data and structures to solve a
precise “high-level” problem: decision support, process supervision, diagnostic,
resource planning, design support, etc.
1.2.2. Tacit KM
Knowledge elicitation is an approach that may be not chosen by some
organizations, for various reasons: difficulties in setting up such processes, which
may be long and time consuming, too high a direct cost, confidentiality problems,
problems with people, problems with the knowledge networks, etc.
Another possible approach can be derived from the way in which knowledge is
produced in organizations, more precisely from the different forms of groups and
functions that participate: networks, communities etc., in which knowledge is seen
as the result of a cooperative process in a collective action. The problem is then not
to elicit this knowledge, but to foster its creation, its sharing by managing the
cooperative work of a community of people. One then does not manage the
knowledge itself, but the community that creates it. This knowledge may then
remain tacit within the community, while being shared and operational. One may
then talk of “cooperative knowledge management” ([Soulier 02]).](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-27-2048.jpg)
![28 Trends in Enterprise Knowledge Management
The tacit/explicit approaches are not opposed but complementary. It is, for
instance, useful for a knowledge community that manages its own knowledge to
produces visible and tangible records, while, on the other hand, an elicited corpus of
knowledge needs a knowledge community to operate it and make it evolve.
Cooperative knowledge management has four key requirements ([Soulier 02]):
– identification of knowledge communities;
– exchange mechanisms that allow knowledge transfer within knowledge
communities;
– principles of managing and supervising cooperation;
– technologies supporting cooperative knowledge management.
Most of the time, there are already communities in the company (for specific
jobs, in specific professions, for projects, for given practices, specific interests, etc.).
One must analyze them and include them in a strategic schema, in order to optimize
their performance in terms of knowledge sharing and creation. The problem is to
map the communities, either existing or to be developed, so as to define for each
community, the issue, the type of the community, the nature of its need or the
problem it has to solve.
1.2.2.1. The functioning modes of knowledge communities
There are three types of way of working and exchanging information in a
community:
– The classic “division of labor”. A worker carries out a limited number of tasks,
with reduced autonomy in designing and performing the job. This is the most
common approach, even in new and modern forms arising from the introduction of
information technology. Dedicated structures analyze, design and codify the work to
be done. This type of work is supported by formalized links (planning of activities,
performance supervision, etc.), which do not facilitate cooperation. Cooperation
links are hidden, implicit and limited.
– The “coordination” type (“soft” cooperation). This relies on a better
coordination of activities, with information sharing and synchronization of tasks. It
is compatible with the Taylor point of view. The only problem is how to do it better
and more quickly. The consequence is the implementation of a global information
system with a fast communication function and generalized access to information
(the archetype is the company intranet and e-mail).
– The “cooperation” type (“strong” cooperation). This involves synergy, not just
coordination, between separated tasks. Working together establishes a community
with sound bases for:
- the nature of problems and of knowledge that are to be developed;](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-28-2048.jpg)
![30 Trends in Enterprise Knowledge Management
To pilot cooperation it is necessary to define:
– indicators of cooperation: how to recognize that there is a development of
cooperation within the different types of collective work (team, project, process and
network);
– indicators of results of the cooperation: what are the effects of the
cooperation on the knowledge capital?
Several criteria seem useful in recognizing that members of a network are
cooperating:
– they construct, from their individual representations, shared representations of
problems to solve, objectives to reach and goals to achieve;
– they communicate efficiently, using a common language, understanding the
language of the others and sharing their point of view;
– they move out of their domain (discipline, sectors, geographical, etc.) in
interdisciplinary actions;
– they accept the existence of conflicts (of criteria, of points of view, of
priorities), managing them in an appropriate time and proceeding to arbitration;
– they put some new applicable and evolutionary organization into place.
1.2.2.3. Supporting technologies for knowledge communities
The new types of work described above are tightly linked to rapid adoption and
dissemination of systems and technologies for information and communication
(ICT) within the organization. The rapid increase and development of new ICT has
had a considerable influence on knowledge management. There is sometimes
confusion (perhaps deliberate) between ICT and KM.
In classical information systems (databases, data banks, etc.), functionalities are
well known: an information system is by definition a system for processing, storing
and presenting information. Coming from computer networks, communication
technology had the clear functionality of data transmission. With the introduction of
new types of tools, especially web-based tools, these distinctions are no longer
clear; they are more complex and difficult to understand in depth from the user’s
point of view. In fact, the new ICT products must be analyzed from the point of
view of services, and those services justify their use in knowledge management
problems, especially cooperative work, in the sense defined above.
There are four types of services related to ICT ([Germain 98], [Bitouzet 97]):
– communication;
– coordination;](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-30-2048.jpg)
![32 Trends in Enterprise Knowledge Management
advantages and inconveniences of this kind of project deployment: the more
mistakes are upstream in the process, the more costly they are; risks of failure near
the end of the process are far from being negligible, early endings are not
exceptional, etc. Project management is centralized (in general by a dedicated
information systems), the project is linear (for example, the cost of realization of the
second half is half the total professional cost), it is planned, users are involved in a
sporadic manner (sometimes at the beginning of project, and at the end for training),
etc. These types of “roadmap strategies” for a knowledge management strategy
(unless, of course, it is reduced to an information system project) are often revealed
to be a failure. They are too linear and do not take enough account of incentive
factors. A “socio-technical” type of strategy is necessary.
One can build a new type of project strategy, radically opposite to the “roadmap”
one. It can be called the “water lily strategy”. This term expresses the idea of
“steady organic growth”, designating the cell growing process (meiosis in
morphogenesis), which processes by successive cellular division to create some
viable and complex structure.
The water lily evokes a well known childish riddle: “a water lily doubles its
surface every day; if it takes 40 days to cover half of the pond, how many days are
needed to cover the entire pond?”. An imprudent and too quick answer would be
“80 days”, assuming that as much time is necessary to cover that second half as the
first half. This answer neglects the nature of the water lily and the initial hypothesis!
If one transcribes this riddle into project management terms, it may become: “a KM
project is expensive; if the project costs €40 M to cover the needs for managing half
of the Knowledge Capital, how much will be needed for managing the entire
Knowledge Capital?”. A linear extrapolation of costs will undoubtedly tend toward
€80 M rather than €41 M! It is not usual to invoke the hypothesis of the water lily in
this kind of problem.
It is, however, the “water lily” strategy that is the most appropriate for a KM
project. It is the best way to include the change process, incentive factors, and the
emergence phenomenon in complex systems. The “water lily” strategy is a strategy
of constant effort and cumulative effect, which perfectly suits the cumulative
economic nature of knowledge ([Foray 00]). It indicates specifically that if efforts
are considerable to start the project (from a human or other resources points of
view), they will not be necessarily multiplied during the spread of the project. As
incentive factors are essential, one benefits from a leadership effect. The material
costs are not necessarily the most important; they do not therefore grow linearly, etc.
One of the main requirements of this type of project management is to minimize
costs and risks. The first “water lilies” are not too expensive. Stops, often
unavoidable on medium-term projects, are not damaging. Failures do not necessarily
imply completely revising the entire approach.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-32-2048.jpg)
![36 Trends in Enterprise Knowledge Management
1.4.1. Knowledge cartography
One of the first difficulties in a KM process is the impossibility of correctly
visualizing the available knowledge in the enterprise. The adage “one doesn’t know
what one knows” is truer for organizations than for people.
Upstream of all KM operations, knowledge cartography aims at putting in
evidence the knowledge capital of an enterprise. Organizations wanting to manage
their knowledge capital must therefore make a careful analysis of this knowledge
capital, in order to determine, in their strategy, what are the pieces of knowledge
they must preserve, develop, abandon, etc. Cartography then becomes a tool for
decision support and it is necessary to elaborate the specific criteria that make it
possible to assess, in the cartography, what are the most critical areas of knowledge
for the enterprise and why. One then speaks of critical knowledge cartography
([Peil 01]).
The knowledge map is a hierarchical visualization of domains that are useful to
professionals in the enterprise. A knowledge domain can be defined as the field of
activity involving a set of people for which one can group information and
knowledge. The cartography is articulated around axes defining the strategic
knowledge domains, often corresponding to missions of the organization. It thus
classifies, in a hierarchical manner, domains that form a decomposition of these
axes. Knowledge domains can (must) be linked to a set of people who maintain
knowledge and information (structured or semi-structured). The model may be
enriched by models of actors or information (documentary references, “best
practices”, etc.). This is especially important, for example, for the realization of a
knowledge server. The map is often represented as a graphical model.
The knowledge map built in the previous phase defines the distribution of
different knowledge domains according to the missions of the organization. The
next phase consists of establishing the critical character of the knowledge domains.
The criticality of a domain is an assessment of the risks/opportunities for the
enterprise linked to that domain. For instance, there may exist risks of losing
knowledge or know-how that could have serious consequences or there may exist
interests in developing a domain to obtain advantages for the enterprise (gain of
productivity, of market sectors, etc.). One must therefore define what is, objectively,
the criticality of a knowledge domain and provide a method of assessment that
allows the most critical knowledge domains in the cartography to be marked out.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-36-2048.jpg)
![38 Trends in Enterprise Knowledge Management
KM is the management of these processes, and especially the management of
their link to the knowledge capital of the enterprise. One can describe them in terms
of four generic classes, which correspond to the “petals” of the daisy, and a class
that corresponds to the heart of this model (Figure 1.1):
– The capitalization and sharing process. This achieves the “virtuous knowledge
cycle” and ensures the dissemination (the “recycling”) of the knowledge resource in
the enterprise.
– The interaction process with the environment. A system isolated from its
environment is a dead system. This is especially true for knowledge, fed by more
and more important information flows, which come from the environment of the
enterprise. The process transforms these fluxes of information into knowledge,
useful to the enterprise. They include, for instance, the processes of environmental
scanning, economic or strategic intelligence (“business intelligence”). Up to now,
this kind of process has been based on external information processing, and not on
interaction with the knowledge of the enterprise.
– The learning and creation process. This is an endogenous and collective
process that is the basis of knowledge evolution. It includes the issues concerning
the learning organization and of creativeness.
– The selection process by the environment. This is an evolutionary process,
selecting created knowledge, according to criteria of the market, of acceptability,
etc., that is both economic and socio-technical. It includes the issues concerning
marketing, customer relationships, etc. The problem of KM is to integrate this type
of issue in a strong relationship with the critical knowledge of the enterprise,
notably professional knowledge, for example.
– To this set of processes, one can add a fifth that is entirely internal to the
knowledge capital. It is an assessment that is qualitative, quantitative, financial, etc.
There already exist methods for valuing an intangible, or intellectual, capital.
However, there does not exist, as far as we know, a complete process for valorizing,
in the broad sense of that term, knowledge capital.
Ongoing research will allow the definition of a set of methods and of coherent
tools to manage these processes and to reach the KM objectives (see [Ermine 03]).](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-38-2048.jpg)
![Introduction to Knowledge Management 39
Figure 1.1. The Daisy Model: key KM processes
1.4.3. The KM actions
After the cartography of knowledge, i.e. the identification of appropriate
processes to put in place, has been established, the real operational phase begins. To
be efficient and sustainable, it must be integrated into the continuity and process of
progress. Enterprises did not wait for the “KM concept – or buzz word” before they
began to manage their knowledge. For a long time, they have set up procedures for
capitalization, for scanning, for training, for creativeness, etc. The KM processes
model, through the Daisy Model, makes it possible to foster and supervise those
actions.
Let us take an example: the capitalization and sharing process, which is the most
well known and most studied process in KM (Nonaka’s process), is a virtuous
knowledge cycle (see for example [Ermine 02]), in which a community elicits a tacit
knowledge that it possesses; this elicited knowledge is then disseminated in the
enterprise and, at the end, this elicited and shared knowledge is appropriated by
actors in the enterprise who recreate their own operational and personal know-how.
Therefore, there are three subprocesses: elicitation, sharing and appropriation. There
is also an alternative to this process of capitalization and indirect sharing and this is
a direct process in which the tacit knowledge of actors is shared directly with other
actors, who create for themselves their own tacit operational knowledge. This
Selection Interaction
Capitalization
and
Sharing
Learning
and
Creation
External Processes Internal Processes
Environment
Environment
Evaluation
Knowledge
Capital](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-39-2048.jpg)
![Introduction to Knowledge Management 41
- seminars, meetings, convention,
- expert ‘Yellow Pages’,
- etc.
1.4.4. Piloting processes and actions
A global and strategic implementation of KM in the enterprise can be piloted
from elements that have been described here: critical knowledge cartography, KM
processes, axes of progression, procedures and actions.
One then needs to set up a supervision process, including the surveillance of
processes with adequate indicators and a global assessment. This assessment, in
order to be consistent with a KM policy, must show the value added that is brought
to the knowledge capital of the enterprise, and the progression of the enterprise in its
“knowledge maturity”.
As tools of assessment, one can give as an example the grids of maturity
elaborated by the French KM club ([Club 00]).
1.5. Conclusion
KM is not a new concept in enterprises. Since social organizations have existed
(that is to say since the beginning of mankind!), human beings have always tried to
maintain a collective memory, to share some useful knowledge, and to constantly
create new knowledge. It is the cumulative and strategic dimensions of knowledge
identified in some new problems that have revealed the emergence of new
fundamental factors.
Among these new problems, some have had a negative outcome, described in
illustrative stories or more personal anecdotes, often painfully experienced. They
concern episodes in which the knowledge capital, which has been discussed above,
has been squandered thoughtlessly. It can be seen in reorganization plans, in
massive layoffs, in waves of departure for retirement, in business process
reengineering, in badly managed mergers or acquisitions. Badly transmitted
knowledge which is badly shared and badly preserved has already brought much
disillusion and loss, as much at the productivity level as at the human level.
There have been other more positive developments, for instance the major
evolution of means of information processing and communication. Information
technology has switched from storing, representing and retrieving data to a situation
that enables information sharing, resources sharing, coordination and communication.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-41-2048.jpg)
![42 Trends in Enterprise Knowledge Management
We have moved from an era where information was a very rare and strategic
commodity to an era where it is overabundant and widely available, where the
sending and receiving structures have become more important than messages
themselves. This evolution has brought some considerable gains, and triggered a
wild race in the implementation of these new technologies, which must now, after
the first euphoria, search for a new framework within the classical information
paradigm.
The “KM” paradigm emerges as an option, because what is now important is not
obtaining information, but ensuring that this information is operational in a
particular context and at a given moment, for the right person who must solve a
complex task with his or her necessarily limited cognitive capacity. This is what is
meant by the expression “the right information, at the right moment, to the right
people”. And this only describes half of the problem, which is the use of knowledge
as productive resource; the other half is, of course, the production and the evolution
of knowledge, without which one cannot speak of the use of knowledge capital.
KM is therefore a new way of management. It is the management of an
intangible asset, which is a strategic asset of the organization, via flows of new type
(cognitive flows, which must be differentiated from information flows) that are
either generated by actors in the organization (competency flows) or used by these
actors (cognition flows) in their production activities, these actors becoming real
“knowledge workers”.
1.6. Bibliography
[Bitouzet 97] Bitouzet C., Fournier P., Tézenas du Montecel B., Management et intranet,
Hermès, 1997.
[Club 00]: Club Gestion des Connaissances, Ermine J.-L., Laude H., A Knowledge Maturity
Model, Proceedings of “Knowledge Management; Theory and Practice” Workshop (J.-L.
Ermine ed.), in PKDD’2000 (Principles of Knowledge Discovery from Data), 12
September 2000, Lyon, pp. 13-18.
[Dieng 00] Dieng R., Corby O., Giboin A., Goliebowska J., Matta N., Ribière M., Méthodes
et outils pour la gestion des connaissances, Dunod, Paris, 2000.
[Edvinson 99] Edvinson L., Malone M., Le capital immatériel de l’entreprise, Ed. Maxima,
Paris 1999.
[Ermine 02] Ermine J.-L., Initiation à la méthode MASK, CD-ROM from Troyes University
of Technology, France, 2002.
[Ermine 03] Ermine J.-L., La gestion des connaissances, Hermes Science Publications, 2003.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-42-2048.jpg)
![Introduction to Knowledge Management 43
[Foray 00] Foray D., L’économie de la connaissance, Repères, no. 298, Ed. La découverte,
Paris, 2000.
[Germain 98] Germain M., L’intranet, Economica, 1998.
[OCDE 96] OCDE, Mesurer le capital humain, vers une comptabilité du savoir acquis, 1996.
[OCDE 99] OCDE, L’économie fondée sur le savoir, des faits et des chiffres, 1999.
[Peil 01] Peil O., Aubertin G., Ermine J.-L., Matta N., La cartographie des connaissances
critiques, un outil de gestion stratégique des connaissances. CITE’2001, Coopération,
Innovation et Technologies, 29-30 November 2001, Troyes, pp. 287-308.
[Soulier 02] Soulier E., Zacklad M., Ermine J.-L., La gestion coopérative des
connaissances, EGC’2002, Extraction et Gestion des Connaissances, Actes de la
session industrielle, pp. 59-72, 2002.
[Stewart 97] Stewart T., Intellectual Capital, the New Wealth of Organizations,
Currency/Doubleday, New York, 1997.
[Strassmann 98] Strassmann Paul A., The Value of Knowledge Capital, American
Programmer, March 1998.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-43-2048.jpg)
![46 Trends in Enterprise Knowledge Management
contributed extensively to the destabilization of economies and to the rise of
uncertainties. The steady and repetitive characteristic status of information during
that period has gradually been replaced by an erratic flux of “perturbations” that
prevent economic agents from predicting, even approximately, the evolution of
variables in their environments. This is most often a pure, radical uncertainty that is
not computable using statistics.
This strong unpredictability is a consequence of the increasing complexity of
economic systems (from the Latin word complexus, meaning woven together): the
multiplication of products and services, of real or potential actors, of relationships
with partners or competitors (which are often entangled), as well as the increasing
complexity of technologies that have to be mastered. It generates a strong
uncertainty about the future, even the near future, and requires a necessary
mobilization of the cognitive resources of individuals and especially of
organizations. Facing this increasing complexity requires the production and the
management of knowledge, itself more and more complex, created from the
mobilization and the cohesion of a set of individual expertises [De Bandt 2001].
This is precisely the objective of Knowledge Management (KM).
But we need to go beyond the acceptance, which is today extensively shared, that
the intangible capital of the enterprise has become a key factor of performance, or
that information and knowledge constitute some strategic resources for
organizations. We propose in this chapter to address the problem of measuring and
assessing the intangible capital of the firm. It is, as we will see, an asset of a very
different nature from physical capital. Can one measure this asset? Can one value its
global or partial (through its components) impact on performance? Can one
distinguish the effects of physical capital and intangible capital, or must the measure
be global? In other words, what can we presently measure, and what do we want to
measure?
Before discussing some ways to answer to these difficult questions of measure
and assessment, we need to identify adequate concepts, in order to avoid building on
quicksand. What is the intangible capital of an enterprise? What are its components?
What makes the difference from physical capital? Is it sound to consider a
knowledge “stockpile” in the enterprise? What are the components of this
“stockpile”? Is it necessary to distinguish information and knowledge and, if yes,
what is the theoretical and practical range of this distinction? These questions
require a clarification, to avoid regrettable confusions, which are too frequent in the
present literature, as we can see. To clarify these concepts we will use recent
theoretical advances that analyze the firm as a processor of knowledge in the so-
called “knowledge-based economy”.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-45-2048.jpg)
![Can One Identify and Measure the Intangible Capital of the Enterprise? 47
2.1. The intangible capital: an essential and elusive concept
We need to refer to the basic theoretical sources. The economic notion of
“capital” [Cota 1991] sends us back to the idea of a set of possessions serving to
produce other possessions. We are driven very quickly to distinguish between the
capital circulating and the stationary capital, the latter being composed of lasting
indirect possessions that do not disappear physically during the process of
production (machines, buildings, infrastructures, etc.).
To deal with the relative imprecision of the extension of that concept (must we,
for example, include human capital, financial capital, etc.?), we need to make a clear
distinction between capital and production and to specify their relationship. Capital
is a stock that has a given value at instant t, while production is a flux (or income)
that has a duration, from time t to time t + 1. The production of equipment goods,
which is related to investment, is therefore a flux that feeds the capital. The
relationship is as follows: the capital at time t is enriched in period to t + 1 by the
gross investment in the period, but is also reduced as a result of economic
depreciation:
1 ( ; 1)
(1 )
t t t t
K K a I
( 1; ) ( ; 1)
t t t t t
K I aK
'
where a is a capital depreciation factor and ( ; 1)
t t
I is the gross investment during the
period (t;t+1). We van see, therefore, that if, for example, the depreciation of the
asset is greater than the gross investment during the period, the value of the capital
decreases. We can also see that if, after having defined the concept of capital, we
need its measure, i.e. to value the capital, it is necessary to measure both the gross
investment during the period and the depreciation of the capital. To do that, we
assume that we know how to value the capital at the instant t, which does not seem
obvious for intangible capital.
How can we distinguish physical capital and intangible capital? Cotta (1991)
proposes defining the goods of the intangible capital as “the set of knowledge that
allowed the creation of the existing material and intangible goods and that allows
today the use of material goods”. These intangible goods would be different from
material goods, being a set of goods that are either financially or physically created
by people in their effort to coping with their environment. Material or intangible,
these goods can be “long” or “short”, depending on whether their longevity is
greater or less than the duration of the production process (we recognize here the
distinction between circulating capital and fixed capital).](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-46-2048.jpg)
![48 Trends in Enterprise Knowledge Management
This definition emphasizes the notion of “knowledge”, as in the definition of
intangible investment I have already proposed (in [Epingard 1999]): joint production
by knowledge creation that is incorporated in a sustainable manner in people (human
capital), technical objects (technological capital) and organization (organizational
capital). If one makes the analogy with physical goods, the intangible investment
would be therefore a “flux” of knowledge that feeds the intangible capital that one
can assimilate into a “stock” of knowledge.
Is it really as simple as this? We do not believe that it is, because this analogy
relies on a supposed isomorphism between merchandise and knowledge, which we
have so far accepted without analyzing it, the founding cumulative hypothesis of the
positive theory of capital implying that some knowledge is added to existing
knowledge, other knowledge disappears and the value of intangible capital is an
arithmetic consequence. This hypothesis seems false to us, because knowledge does
not reduce to merchandise.
At this stage, it is important to distinguish carefully between information and
knowledge, terms that are too often considered, in a very reducing way, as
interchangeable. According to our concept, information is clearly located in the
domain of what is possible to codify. It takes the form of a set of formatted and
structured data that (and we must take account of this from now on) cannot generate
new information. It is the raw material of knowledge, the flux of messages that
increases it, restructures it or modifies it. However, as K. Boulding had already
noticed more than 30 years ago, knowledge must not be considered as a simple
“stock”, in the sense of a container that is filled and emptied from fluxes of
information, but rather as a “structure” that feeds himself with information, that may
become richer by its use.
Knowledge is a cognitive capacity and a learning capacity. It requires the
exploitation of information, pre-existing cognitive categories, interpretation codes
and various faculties (judgment, intuition, ability, etc.). What is rare today is not
information, which is available at lower and lower cost (it is the cost of creation that
is important, the marginal cost of reproduction is nearly zero), but the capacity and
expertise to sort it out and to exploit it, which relies on cognitive capacities.
Knowledge is therefore far from being reducible to information, as supposed
implicitly by the standard theory, which is extensively based on the technical
metaphor of information as a signal that it is merely emitted and transmitted to a
receiver, at the lowest possible cost and without distortion. Moreover, a frequent
mistake in the literature consists of considering that knowledge increases in linear
proportion to the accumulated information, which implies that the dimension of
interpretation is completely ignored. There is a big difference, in particular from the
point of view of cost, between duplication of information (marginal cost nearly zero)
and transfer of knowledge (cost often high). Knowledge is not, in most cases,](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-47-2048.jpg)
![Can One Identify and Measure the Intangible Capital of the Enterprise? 49
separable from its human support and is often difficult to transmit beyond its initial
production context, especially because it is partly tacit.
From this major distinction, and if we come back to the definition of intangible
capital as set of knowledge, we can wonder, on the one hand, what is the nature of
knowledge in the enterprise and, on the other hand, where it is stocked.
So, what is an intangible good? The most usual definition in the literature is a
definition by negation: an intangible good or asset is a non-material good, which
means non-observable or, more precisely, one of which only the effects can be
observed, like the invisible man whom one only knows by traces left on cushions
(when he removes his bandages, of course!) [Demotes-Mainard 2003].
Is it satisfactory to say that goods are material and services are intangible,
wonders J. De Bandt (2002). This would force us to recognize implicitly that the
expression “intangible goods” is an oxymoron, a contradiction in terms. However,
one must recognize that all goods which possess a physical envelope by definition
incorporate, in their value chain, intangible components to a more or less important
degree and, at present, to a more and more important degree. For example, the
physical support of a book or a software program has very little value compared to
the content, i.e. to the activities of design and production of the embedded
knowledge. Then one has to decide where to place the cursor; to what degree of
intangibility, in the “goods–services continuum”, can one speak of “intangible
goods”?1
The “intangible capital” of the enterprise is for us a set of assets that can be
described in terms of expertise and knowledge that may be able to produce a flux of
incomes for a long time. We then have to determine, on the one hand, how to locate
such a set of assets within the enterprise and, on the other hand, how to build a
typology of intangible capital that makes sense for cost measurement and value
creation in the enterprise.
For knowledge location, Machlup (1984) distinguishes three kinds of storage of
knowledge, corresponding to three kinds of capital:
– knowledge integrated in tools and machines;
1 P. Dumesnil [1995] writes: “[the] present use of the expression ‘capital’ or ‘intangible
investment’ appears to us perfectly paradoxical. It designates, most often, the embedding of
the language in something ‘material’. That this material is concerned with micro-physics and
can be embedded and reproduced at low cost, while using ‘small’ quantities of energy, makes
it by no means intangible.” This is why we consider that the qualifier “intangible” does not
describe the support, but the content in terms of knowledge of the productive asset that is
implied.](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-48-2048.jpg)
![52 Trends in Enterprise Knowledge Management
and the output of technical progress [Encaoua et al. 2004], can permit some
increasing yields because it possesses attributes that are fundamentally different
from a traditional good. Let us recall its two main distinctive features.
It is a public good3
: being essentially non-rival, it needs to be produced only
once, but it is not limited in use. One does not lose acquired knowledge and hence
that “input” has a multiplicative character. There is an important point to be made
here: because of its specific features and, in particular, the weakness of its marginal
cost of use, knowledge can be incorporated simultaneously into several supports.
Thus, the knowledge produced during the RD phases is included in technical
objects, but it can also be kept by the enterprise in tacit or codified form. On the one
hand, there is no simple link between an intangible investment type and an
incorporation type, while, on the other hand, it would not make sense to want to
“add” the human capital to the technological capital of the enterprise so that its value
appreciates, since the substance is in part common. We will come back to this point.
It is cumulative: we saw that RD generates positive externalities, because
present research is extensively based on past research. We noted that information
cannot generate any new information, whereas knowledge has this property of being
able to generate new knowledge and to become richer when it is used. Research also
improves learning capacities and existing knowledge absorption, which finally
becomes an intangible asset of the enterprise. One sees the importance of the
cumulative process that treats knowledge as input and as output of the production
process.
The intangible capital in the enterprise is constituted of a set of knowledge and
ability of both human and technological nature, plus the quality of the organization
(broadly speaking), which economic models hardly integrate because of its non-
measurability. However, it plays an essential role in the performance of enterprises.
This corporate knowledge is partly codified and partly tacit, especially the know-
how. An important part of the codified knowledge comes from tacit knowledge
conversion, which means that it is not expressible outside the action of the person
who retains it, because it is embedded in its human support4
. Through knowledge
3 This does not mean that some knowledge bases are not private, but that essentially
knowledge is non-rival, and that consequently it is not possible to guarantee an efficient
knowledge production process based exclusively on a market system, since sale to the
marginal cost (near zero or very weak) would not permit the producer to be remunerated. See
Foray [2000].
4 The importance of this tacit knowledge and the difficulty in codifying it can be seen in the
process of creation of an expert system. The expert is not indeed expert on its own expertise
and a part of the knowledge that he or she retains, like his or her ability, is not easily
expressible. To codify this knowledge is therefore an extremely complex operation, involving](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-51-2048.jpg)
![Can One Identify and Measure the Intangible Capital of the Enterprise? 53
codification, humanity exploits this unique faculty that he or she possesses,
according to A. Leroi-Gourhan, “to place his memory outside of himself”. But the
expansion of codified databases, due to the emergence of ICT, does not suppress the
existence and even the necessity of tacit knowledge. One could even say that it
reinforces them, because codified knowledge development causes learning activities
(needed for instance to exploit the knowledge) and new knowledge emergence and
ability, which reinforce and so on. Consequently, tacit and codified knowledge, far
from neutralizing one another, are in constant conversion5
, and are involved in a
dynamic interaction relationship that, via organizational learning, can initiate
virtuous spirals and increase the value of the intangible capital of the enterprise.
Intangible investments, such as RD, training, software creation and marketing,
contribute to the constitution of assets that do not necessarily have a commercial
value outside the organization, which means that they are specific assets in
Williamson’s sense. In fact, the more the constituted asset is specific and the more
tacit the embedded knowledge is, the farther we are from a notion of merchandise
exchangeable on a market, and vice versa6
. If one takes out a license or a patent, this
is one example of generic knowledge that is extensively codified, for which there
exists a market. On the other hand, the casual networks or a team’s collective ability
are very specific assets and the knowledge that they generate has a predominantly
tacit part. These specific assets, which are fundamental for the performance of the
enterprise, i.e., cannot be evaluated on the market. Between those two extremes (the
specific and perfectly identifiable asset on the one hand and the specific and non-
valuable – cannot be valued – asset on the other), there exist a multiplicity of
intermediate intangible assets characterized by the human dimension of their
incorporation (knowledge partly codified and partly tacit) and by the constituted
asset specificity (information system of the enterprise, for example, often partly
generic and partly specific). These intangible assets are in general at least partially
transferable on the market, and therefore are partially valuable, i.e. they can be
valued. This explains the difference between the accounting value of assets and the
global acquisition value of an enterprise; we will examine this point below.
The field of the intangible is, therefore, particularly difficult to define and to
evaluate, partly because of the hidden part of the iceberg, the most important part
probably, which is not directly measurable. However, the problem is that enterprises
not also translation, but also re-creation supported by a dedicated language. This is why tacit
knowledge and codified knowledge will never totally overlap.
5 See the pioneering work of Nonaka [1994], who proposes qualifying the transformation
processes for knowledge as follows: externalization for transformation from tacit to explicit
and internalization for explicit to tacit.
6 For a classification of intangible assets, see Duizabo and Guillaume (1996).](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-52-2048.jpg)
![54 Trends in Enterprise Knowledge Management
feel the need to understand their key factors of success, of which they strongly
recognize the intangible character, and to evaluate the contribution to their
performances. The problem is that intangible asset measurement remains at present a
real theoretical enigma.
2.2. Immaterial measurement: a theoretical enigma?
What do we know and what are we likely to want to measure? What we can
observe currently, when looking at the existing statistics on this question, is more a
mosaic of measures concerning partial elements, which are not always coherent,
rather than a global approach: “What appears to be missing is a global approach that
would integrate the different steps in a coherent way, to build a real observation
system”, Mr Demotes-Mainard (2003, p. 1), a French national specialist (INSEE) in
statistics about the information society, has pertinently commented.
However, these scattered and heterogeneous statistical analyses are not the only
obstacles to an appropriate understanding of the phenomenon. Difficulties in
measuring intangible assets are intrinsically related to the specific features that
differentiate them from physical assets, and essentially to the three following
features:
– Non-separability: it is often very difficult to isolate assets, or even to separate
the material and intangible aspects and to value them separately. Under these
conditions we must consider the global value; analysis carried out element by
element is meaningless. The problem is that even if we adopt a global approach, the
specificity of the intangible asset usually prevents the establishment of an organized
and efficient market that would permit the assignment of a price, in contrast to
financial or material assets. Assessment by the market of intangible asset is therefore
nearly impossible [Alcouffe 2003].
– The undetermined life cycle of these assets: it is much easier to observe the
material wear in a machine than the loss of value due to wear or obsolescence of
human capital. Furthermore, human capital has the property that it becomes more
valuable when used, via learning, which is what principally differentiates it from
physical capital. This does not mean that the risk of obsolescence is negligible with
regard to intangible assets; in a world of uncertainty and high rate of change, we see
a kind of “Schumpeterian” process of creative destruction, of unceasing creation of
new elements and destruction of old elements that constantly feeds back
accumulated knowledge and expertise. Maintaining intangible capital thus becomes
essential; it relies on the management of competences and know-how in
organizations and, therefore, of course, on knowledge management.
– The opacity of these assets, even if only partial: intangible assets are most often
very specific and are embedded in their human support, so that their quality is not](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-53-2048.jpg)
![This ebook is for the use of anyone anywhere in the United
States and most other parts of the world at no cost and with
almost no restrictions whatsoever. You may copy it, give it away
or re-use it under the terms of the Project Gutenberg License
included with this ebook or online at www.gutenberg.org. If you
are not located in the United States, you will have to check the
laws of the country where you are located before using this
eBook.
Title: London Souvenirs
Creator: Charles William Heckethorn
Release date: October 26, 2013 [eBook #44044]
Language: English
Credits: Produced by Al Haines
*** START OF THE PROJECT GUTENBERG EBOOK LONDON
SOUVENIRS ***](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-60-2048.jpg)
![abound, and are almost daily raided by the police, when some
actually respectable people are found mixed up with the rascaldom
which supports these clubs. A perfect mania seems to have seized
the lower orders of our day to gamble; but formerly, for instance, in
Walpole's time, in the latter half of the last century, the upper
classes were the worst offenders, of which the just-mentioned
statesman and epistolary chronicler of small-beer, which, however,
by long keeping has acquired a strong and lasting flavour, gives us
many proofs. 'Lord Sandwich,' he reports, 'goes once or twice a
week to hunt with the Duke [of Cumberland], and, as the latter has
taken a turn of gaming, Sandwich, to make his court—and fortune—
carries a box and dice in his pocket; and so they throw a main
whenever the hounds are at fault, upon every green hill and under
every green tree.' Five years later, at a magnificent ball and supper
at Bedford House, 'the Duke was playing at hazard with a great heap
of gold before him. Somebody said he looked like the prodigal son
and the fatted calf both.' Under such circumstances it could not fail
that swindlers par excellence sometimes found their way among the
royal and noble gamblers. There was a Sir William Burdett, whose
name had the honour of being inscribed in the betting-room at
White's as the subject of a wager that he would be the first baronet
who would be hanged. He and a lady, 'dressed foreign, as a Princess
of the House of Brandenburg,' cheated Lord Castledurrow (Baron
Ashbrook) and Captain Rodney out of a handsome sum at faro. The
noble victim met the Baronet at Ranelagh, and addressed him thus:
'Sir William, here is the sum I think I lost last night. Since then I
have heard that you are a professed pickpocket, and therefore I
desire to have no further acquaintance with you.' The Baronet took](https://image.slidesharecdn.com/2156748-250609111450-4b9bbd5b/75/Trends-In-Enterprise-Knowledge-Management-Pierrenoel-Favenneceds-70-2048.jpg)
Trends In Enterprise Knowledge Management Pierrenoel Favenneceds
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- 5. Trends in EnterpriseKnowledge Management
- 6. Trends in Enterprise KnowledgeManagement Edited by Imed Boughzala Jean-Louis Ermine Series Editor Pierre-Noël Favennec
- 7. First published inFrance in 2004 by Hermes Science/Lavoisier entitled “Management des connaissances en entreprise” First published in Great Britain and the United States in 2006 by ISTE Ltd Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address: ISTE Ltd ISTE USA 6 Fitzroy Square 4308 Patrice Road London W1T 5DX Newport Beach, CA 92663 UK USA www.iste.co.uk © GET and LAVOISIER, 2004 © ISTE Ltd, 2006 The rights of Imed Boughzala and Jean-Louis Ermine to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. ___________________________________________________________________________ Library of Congress Cataloging-in-Publication Data Management des connaissances en entreprise. English. Trends in enterprise knowledge management / edited by Imed Boughzala [and] Jean-Louis Ermine. p. cm. Includes bibliographical references and index. ISBN-13: 978-1-905209-03-3 1. Intellectual capital--Management. 2. Knowledge management. I. Boughzala, Imed. II. Ermine, Jean-Louis. III. Title. HD53.M354 2006 658.4'038--dc22 2006006216 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library ISBN 10: 1-905209-03-7 ISBN 13: 978-1-905209-03-3 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire. Cover photo: created by Atelier Isatis, Dijon, France.
- 8. Table of Contents Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 PART 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Chapter 1. Introduction to Knowledge Management . . . . . . . . . . . 23 Jean-Louis ERMINE 1.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 1.1.1. Knowledge: a strategic value for the firm . . . . . . . . . . . . 23 1.1.2. Objectives of KM . . . . . . . . . . . . . . . . . . . . . . . 23 1.1.3. KM: a new and complex approach . . . . . . . . . . . . . . . 24 1.2. The two types of approaches to KM . . . . . . . . . . . . . . . . . 24 1.2.1. Knowledge elicitation . . . . . . . . . . . . . . . . . . . . . 25 1.2.1.1. Tacit knowledge elicitation . . . . . . . . . . . . . . . . 25 1.2.1.2. Knowledge extraction . . . . . . . . . . . . . . . . . . 26 1.2.1.3. Supporting technologies for explicit (elicited) KM . . . . . 27 1.2.2. Tacit KM. . . . . . . . . . . . . . . . . . . . . . . . . . . 27 1.2.2.1. The functioning modes of knowledge communities. . . . . 28 1.2.2.2. Knowledge community supervision . . . . . . . . . . . . 29 1.2.2.3. Supporting technologies for knowledge communities . . . . 30 1.3. The key factors of success in KM processes . . . . . . . . . . . . . 31 1.3.1. The water lily strategy. . . . . . . . . . . . . . . . . . . . . 31 1.3.1.1. The pilot project(s). . . . . . . . . . . . . . . . . . . . 33 1.3.1.2. The federation of KM projects . . . . . . . . . . . . . . 33 1.3.1.3. Project deployment. . . . . . . . . . . . . . . . . . . . 34 1.3.2. Change factors . . . . . . . . . . . . . . . . . . . . . . . . 34
- 9. 6 Trends inEnterprise Knowledge Management 1.4. KM: an action for continuous progress. . . . . . . . . . . . . . . . 35 1.4.1. Knowledge cartography . . . . . . . . . . . . . . . . . . . . 36 1.4.2. The repository of KM processes . . . . . . . . . . . . . . . . 37 1.4.3. The KM actions. . . . . . . . . . . . . . . . . . . . . . . . 39 1.4.4. Piloting processes and actions . . . . . . . . . . . . . . . . . 41 1.5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 1.6. Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Chapter 2. Can One Identify and Measure the Intangible Capital of the Enterprise? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Patrick EPINGARD 2.1. The intangible capital: an essential and elusive concept . . . . . . . . 47 2.2. Immaterial measurement: a theoretical enigma? . . . . . . . . . . . 54 2.3. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 2.4. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Chapter 3. Complexity Theory: Dynamics and Non-Linearity are the Only Reason for Knowledge Management to Exist . . . . . . . . . . 65 Walter BAETS 3.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 3.2. The knowledge era . . . . . . . . . . . . . . . . . . . . . . . . . 66 3.3. The complexity paradigm. . . . . . . . . . . . . . . . . . . . . . 68 3.4. What should be understood by KM: the corporate view . . . . . . . . 73 3.5. Research perspective on KM . . . . . . . . . . . . . . . . . . . . 75 3.6. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 PART 2. Academic Studies . . . . . . . . . . . . . . . . . . . . . . . . 79 Chapter 4. Value Creation through Intangibles: Emerging Good Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Nigel COURTNEY, Clive HOLTHMAN and Chris HENDRY 4.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 4.2. A remedy for our times . . . . . . . . . . . . . . . . . . . . . . . 83 4.3. Dispensing with the mystery . . . . . . . . . . . . . . . . . . . . 84 4.4. Value creation in the 21st century . . . . . . . . . . . . . . . . . . 88 4.4.1. Selecting an approach . . . . . . . . . . . . . . . . . . . . . 88 4.4.2. Taking a balanced view . . . . . . . . . . . . . . . . . . . . 90 4.5. Evidence of good practice . . . . . . . . . . . . . . . . . . . . . 90 4.5.1. Theme 1: brand value . . . . . . . . . . . . . . . . . . . . . 91 4.5.1.1. B&Q . . . . . . . . . . . . . . . . . . . . . . . . . . 91 4.5.1.2. Whitbread . . . . . . . . . . . . . . . . . . . . . . . . 92
- 10. Table of Contents7 4.5.2. Theme 2: knowledge . . . . . . . . . . . . . . . . . . . . . 93 4.5.2.1. Bloomberg . . . . . . . . . . . . . . . . . . . . . . . 93 4.5.2.2. The UK Fire & Rescue Service . . . . . . . . . . . . . . 94 4.5.3. Theme 3: innovation . . . . . . . . . . . . . . . . . . . . . 95 4.5.3.1. Intercos . . . . . . . . . . . . . . . . . . . . . . . . . 95 4.5.3.2. mmO2 . . . . . . . . . . . . . . . . . . . . . . . . . 96 4.5.4. Theme 4: reporting intellectual capital . . . . . . . . . . . . . 97 4.5.4.1. Austrian Research Centers (ARC). . . . . . . . . . . . . 97 4.5.4.2. Celemi . . . . . . . . . . . . . . . . . . . . . . . . . 98 4.6. Key messages . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 4.7. About the authors . . . . . . . . . . . . . . . . . . . . . . . . . 100 4.8. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Chapter 5. Learning-by-Doing Knowledge Externalization: From Boundary Objects to the Emergence of Tacit Knowledge . . . . . . . . . 103 Jean-Michel VIOLA and Réal JACOB 5.1. Learning-by-doing KM . . . . . . . . . . . . . . . . . . . . . . . 104 5.2. A process of externalization: knowledge strategy at Power Corp. . . . 105 5.2.1. Mapping as a knowledge audit and mapping as scenario planning . 107 5.2.2. Criticality assessment scales as decision rules . . . . . . . . . . 107 5.2.3. Modeling as a learning tool, as co-creation of knowledge . . . . 107 5.2.4. Plans as road maps addressing more specifically the need for tacitness . . . . . . . . . . . . . . . . . . . . . . . . 108 5.3. The tacit output of externalization: the importance of boundary objects . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 5.3.1. Externalization creates critical boundary objects. . . . . . . . . 109 5.3.2. Refining the classical definition of tacit knowledge . . . . . . . 109 5.3.2.1. Tinkering . . . . . . . . . . . . . . . . . . . . . . . . 110 5.3.2.2. Judgment . . . . . . . . . . . . . . . . . . . . . . . . 110 5.3.2.3. Connectivity. . . . . . . . . . . . . . . . . . . . . . . 110 5.3.2.4. Coordination. . . . . . . . . . . . . . . . . . . . . . . 111 5.4. Conclusions and lessons learned. . . . . . . . . . . . . . . . . . . 111 5.5. Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 Chapter 6. Approaches and Methods for Valuing Knowledge Management Performance . . . . . . . . . . . . . . . . . . . . . . . . 115 Aurélie DUDEZERT 6.1. KM performance: the aims of an evaluation . . . . . . . . . . . . . 116 6.1.1. The knowledge-based view: a theoretical relation between KM and organizational performance . . . . . . . . . . . . . . . . . 116 6.1.2. What is performance for KM? . . . . . . . . . . . . . . . . . 117 6.1.3. What is KM? . . . . . . . . . . . . . . . . . . . . . . . . . 118
- 11. 8 Trends inEnterprise Knowledge Management 6.2. Method of research and inquiry . . . . . . . . . . . . . . . . . . . 119 6.3. Macro-organizational approaches to valuing KM performance. . . . . 119 6.3.1. The competitive performance of KM . . . . . . . . . . . . . . 120 6.3.2. The financial performance of KM . . . . . . . . . . . . . . . 121 6.4. Micro-organizational approaches to valuing KM performance . . . . . 122 6.4.1. The process-based approach to the performance of KM . . . . . 122 6.4.2. The systemic approach to the performance of KM . . . . . . . . 123 6.5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 6.6. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Chapter 7. ICIS for Knowledge Management: The Case of the Extended Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Imed BOUGHZALA 7.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 7.2. Concepts and definitions . . . . . . . . . . . . . . . . . . . . . . 132 7.2.1. Inter-company co-operation and the extended enterprise . . . . . 132 7.2.2. ICIS and KM . . . . . . . . . . . . . . . . . . . . . . . . . 132 7.3. MeDICIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 7.4. Models for ICIS design . . . . . . . . . . . . . . . . . . . . . . . 138 7.4.1. The business model . . . . . . . . . . . . . . . . . . . . . . 138 7.4.2. The co-operation model . . . . . . . . . . . . . . . . . . . . 139 7.4.3. The agent model . . . . . . . . . . . . . . . . . . . . . . . 140 7.4.4. The communication model. . . . . . . . . . . . . . . . . . . 141 7.4.5. The co-ordination model. . . . . . . . . . . . . . . . . . . . 142 7.4.6. The CPS model . . . . . . . . . . . . . . . . . . . . . . . . 143 7.5. Discussion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 7.6. MeDICIS life cycle. . . . . . . . . . . . . . . . . . . . . . . . . 145 7.7. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 7.8. About the author . . . . . . . . . . . . . . . . . . . . . . . . . . 147 7.9. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 Chapter 8. Knowledge Management and Environment Scanning: A Methodological Guide to Improving Information Gathering . . . . . . 149 Thierno TOUNKARA 8.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 8.2. Modeling of the interaction process between the corporate knowledge of the firm and its environment . . . . . . . . . . . . . . . . 150 8.3. General approach . . . . . . . . . . . . . . . . . . . . . . . . . 151 8.3.1. Requirements specification for environment scanning . . . . . . 151 8.3.2. Description of the approach . . . . . . . . . . . . . . . . . . 151
- 12. Table of Contents9 8.4. Knowledge book . . . . . . . . . . . . . . . . . . . . . . . . . . 153 8.4.1. Methodological tools . . . . . . . . . . . . . . . . . . . . . 154 8.4.1.1. Methodological tools for MASK application . . . . . . . . 154 8.4.1.2. Classification of the knowledge to be modeled according to the type of environment scanning. . . . . . . . . . . 155 8.4.2. Case study: Renault . . . . . . . . . . . . . . . . . . . . . . 157 8.5. Construction of axes . . . . . . . . . . . . . . . . . . . . . . . . 157 8.5.1. Construction of a partition . . . . . . . . . . . . . . . . . . . 159 8.5.1.1. Methodological tools for the elaboration of a partition . . . 159 8.5.1.2. The grid of criteria for the grouping of the models into classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 8.5.1.3. The grid of semantic links . . . . . . . . . . . . . . . . 161 8.5.1.4. Renault case study: an example of grouping by connectivity . . . . . . . . . . . . . . . . . . . . . . . . . 162 8.5.2. Extraction and grouping of information into classes . . . . . . . 162 8.5.3. Identification of themes . . . . . . . . . . . . . . . . . . . . 163 8.5.3.1. Qualitative evaluation grid for the criticality of themes . . . 163 8.5.3.2. Approach and illustration. . . . . . . . . . . . . . . . . 163 8.5.4. Construction of the visual synthesis . . . . . . . . . . . . . . 164 8.6. Elaboration of the “environment scanning focus”. . . . . . . . . . . 165 8.7. Evaluation of our approach . . . . . . . . . . . . . . . . . . . . . 167 8.8. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 8.9. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Chapter 9. The Concept of “Ba” within the Japanese Way of Knowledge Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Pierre FAYARD 9.1. A Japanese concept . . . . . . . . . . . . . . . . . . . . . . . . 172 9.2. “Elementary, my dear Watson!”. . . . . . . . . . . . . . . . . . . 173 9.3. The Human Health Care (HHC) program . . . . . . . . . . . . . . 176 9.4. Shaping a new way of functioning for organizations . . . . . . . . . 178 9.5. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 9.6. Further reading . . . . . . . . . . . . . . . . . . . . . . . . . . 179 PART 3. Club Workshop Studies . . . . . . . . . . . . . . . . . . . . . 181 Chapter 10. The Knowledge Maturity Model . . . . . . . . . . . . . . . 183 Jean-François TENDRON 10.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 10.2. Work methodology of the commission on “Aspects économiques de la gestion des connaissances” (economic aspects of KM) . . . . . . . . 184 10.3. The Knowledge Maturity Model (KMM) . . . . . . . . . . . . . . 186
- 13. 10 Trends inEnterprise Knowledge Management 10.4. Use of the KMM . . . . . . . . . . . . . . . . . . . . . . . . . 188 10.4.1. Raising consciousness about KM . . . . . . . . . . . . . . . 188 10.4.2. Evaluation of a community’s maturity in terms of KM . . . . . 190 10.4.2.1. Example of evaluation . . . . . . . . . . . . . . . . . 190 10.4.2.2. Example of reactions . . . . . . . . . . . . . . . . . . 192 10.5. Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 10.6. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 10.7. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Chapter 11. Knowledge Mapping: A Strategic Entry Point to Knowledge Management . . . . . . . . . . . . . . . . . . . . . . . . . 197 Gérard AUBERTIN 11.1. Why map corporate knowledge? . . . . . . . . . . . . . . . . . . 197 11.2. What knowledge and competencies should be mapped? . . . . . . . 199 11.3. How is knowledge/competency mapping performed? . . . . . . . . 202 11.3.1. Defining the mapping goal . . . . . . . . . . . . . . . . . . 202 11.3.2. Identifying knowledge . . . . . . . . . . . . . . . . . . . . 202 11.3.2.1. Conceptual approach to identifying knowledge . . . . . . 203 11.3.2.2. Process-based approach to identifying knowledge. . . . . 204 11.3.2.3. Identifying knowledge using automatic mapping tools. . . 205 11.3.3. Building the areas of the knowledge map . . . . . . . . . . . 205 11.3.4. Representing knowledge: the area-based mapping model . . . . 206 11.3.4.1. Formal model . . . . . . . . . . . . . . . . . . . . . 206 11.3.4.2. The graphical model . . . . . . . . . . . . . . . . . . 208 11.4. What are the operational uses and mapping tools? . . . . . . . . . . 209 11.5. Knowledge mapping and criticality study . . . . . . . . . . . . . . 210 11.5.1. Defining criticality. . . . . . . . . . . . . . . . . . . . . . 210 11.5.2. The criticality study as risk assessment . . . . . . . . . . . . 210 11.5.3. Defining critical factors . . . . . . . . . . . . . . . . . . . 211 11.5.4. Preparing an assessment schedule and performing the criticality study . . . . . . . . . . . . . . . . . . . . . . . . . 212 11.5.5. Calculating area criticality . . . . . . . . . . . . . . . . . . 213 11.5.5.1. Different critically average values . . . . . . . . . . . . 213 11.5.5.2. Assessments differences. . . . . . . . . . . . . . . . . 214 11.5.5.3. Non-discriminating criterion. . . . . . . . . . . . . . . 214 11.5.6. Analyzing results . . . . . . . . . . . . . . . . . . . . . . 215 11.6. How to manage a mapping project . . . . . . . . . . . . . . . . . 215 11.6.1. Opportunity study . . . . . . . . . . . . . . . . . . . . . . 215 11.6.2. Managing change . . . . . . . . . . . . . . . . . . . . . . 215 11.6.3. Action principles. . . . . . . . . . . . . . . . . . . . . . . 216 11.7. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 11.8. Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
- 14. Table of Contents11 Chapter 12. Knowledge Management and Innovation (Innovation Maturity Model) . . . . . . . . . . . . . . . . . . . . . . . 219 Jean-Marie BEZARD 12.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 12.2. The evolution and path dependence hypothesis . . . . . . . . . . . 220 12.3. Innovation factors. . . . . . . . . . . . . . . . . . . . . . . . . 221 12.3.1. Case studies . . . . . . . . . . . . . . . . . . . . . . . . . 221 12.3.2. The Innovation Maturity Model (IMM) . . . . . . . . . . . . 221 12.4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 12.5. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 Chapter 13. Technology and Knowledge Management (Technology Maturity Model) . . . . . . . . . . . . . . . . . . . . . . 227 Olivier LEPRETRE 13.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 13.2. Knowledge diffusion vehicle. . . . . . . . . . . . . . . . . . . . 228 13.3. The limits of the diffusion of knowledge . . . . . . . . . . . . . . 231 13.4. The need for global vision . . . . . . . . . . . . . . . . . . . . . 235 13.5. The Technology Maturity Model (TMM) . . . . . . . . . . . . . . 236 13.6. Following a TMM approach . . . . . . . . . . . . . . . . . . . . 237 13.7. Application of TMM . . . . . . . . . . . . . . . . . . . . . . . 239 13.5. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 PART 4. Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Chapter 14. Once-upon-a-time Knowledge Management at Mann+Hummel Automotive France . . . . . . . . . . . . . . . . . . . 245 Nathalie LE BRIS 14.1. The increasing importance of knowledge sharing for Mann+Hummel France . . . . . . . . . . . . . . . . . . . . . . . . . 245 14.2. An approach based on core knowledge cartography . . . . . . . . . 246 14.2.1. What are the needs of the employees? . . . . . . . . . . . . . 246 14.2.2. A cartography that allows us to build an action plan . . . . . . 247 14.2.3. Actions from the Nonaka virtuous circle. . . . . . . . . . . . 250 14.2.4. A well appreciated approach . . . . . . . . . . . . . . . . . 252 14.3. Implementation of lessons learned . . . . . . . . . . . . . . . . . 252 14.4. Knowledge explicitation. . . . . . . . . . . . . . . . . . . . . . 253 14.5. Sharing of explicit knowledge . . . . . . . . . . . . . . . . . . . 254 14.6. Direct transfer of knowledge. . . . . . . . . . . . . . . . . . . . 255 14.7. KM: an everyday task based on people more than on technology . . . 255
- 15. 12 Trends inEnterprise Knowledge Management Chapter 15. Thales System Engineering Community of Practice: A Knowledge Management Approach. . . . . . . . . . . . . . . . . . . 257 Cécile DECAMPS and Michel GALINIER 15.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 257 15.2. The knowledge sharing approach. . . . . . . . . . . . . . . . . . 258 15.3. The Systems Engineering Community of practice at Thales . . . . . 259 15.4. Why is there a KM portal dedicated to the Systems Engineering Community? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 15.5. The Systems Engineering portal . . . . . . . . . . . . . . . . . . 262 15.5.1. Functionalities supporting SE community animation and management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 15.5.2. Functionalities supporting access to SE community people and competencies . . . . . . . . . . . . . . . . . . . . . . . . . . 263 15.5.3. Functionalities supporting access to documents and other kinds of content. . . . . . . . . . . . . . . . . . . . . . . . . . . 263 15.6. Rolling out/organization. . . . . . . . . . . . . . . . . . . . . . 265 15.7. The associated support organization . . . . . . . . . . . . . . . . 265 15.8. Balance and perspectives . . . . . . . . . . . . . . . . . . . . . 266 15.9. Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . 267 Chapter 16. Appraising the Knowledge in a Radio-pharmacy Center based on Process Mapping and Knowledge Domain Cartography . . . . . 269 Rita Izabel RICCIARDI and Antonio Carlos DE OLIVEIRA BARROSO 16.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 16.2. The importance of knowledge identification and evaluation within organizations . . . . . . . . . . . . . . . . . . . . . . . . . . 270 16.3. The case study . . . . . . . . . . . . . . . . . . . . . . . . . . 270 16.3.1. History and context of the Radio-pharmacy Center . . . . . . . 270 16.3.2. The Center profile and key comments on its knowledge issues . . . . . . . . . . . . . . . . . . . . . . . . . . 272 16.4. The KM project. . . . . . . . . . . . . . . . . . . . . . . . . . 275 16.4.1. Study of processes . . . . . . . . . . . . . . . . . . . . . . 275 16.4.2. Knowledge identification (“enabling knowledge”) . . . . . . . 275 16.4.3. Construction of the knowledge cartography . . . . . . . . . . 276 16.4.4. “Criticality” analysis . . . . . . . . . . . . . . . . . . . . . 277 16.4.5. Setting up a KM plan of action . . . . . . . . . . . . . . . . 279 16.5. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279
- 16. Table of Contents13 Chapter 17. Case Study: Knowledge Preservation for a Nuclear Reactor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281 Marta EPPENSTEIN 17.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 281 17.1.1. Atucha-type reactors . . . . . . . . . . . . . . . . . . . . . 282 17.2. Practical approaches . . . . . . . . . . . . . . . . . . . . . . . 282 17.2.1. Strategy analysis. . . . . . . . . . . . . . . . . . . . . . . 282 17.2.1.1. Different approaches to the map . . . . . . . . . . . . . 283 17.2.1.2. Identification of knowledge axes. . . . . . . . . . . . . 284 17.2.2. Identification of the critical knowledge: approaches . . . . . . 285 17.2.2.1. Rare or unable of replacement . . . . . . . . . . . . . . 285 17.2.2.2. Usefulness for the company . . . . . . . . . . . . . . . 285 17.2.2.3. Difficult to obtain. . . . . . . . . . . . . . . . . . . . 286 17.2.2.4. Difficult to use . . . . . . . . . . . . . . . . . . . . . 286 17.2.3. Building the knowledge map . . . . . . . . . . . . . . . . . 287 17.2.4. Knowledge server . . . . . . . . . . . . . . . . . . . . . . 287 17.3. Technical development: analysis factors . . . . . . . . . . . . . . 289 17.3.1. Knowledge transfer and capitalization . . . . . . . . . . . . . 289 17.3.2. Human resources . . . . . . . . . . . . . . . . . . . . . . 290 17.4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 17.5. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 17.6. Further reading . . . . . . . . . . . . . . . . . . . . . . . . . . 292 The Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295
- 17. Preface Knowledge Management Today theeconomy of knowledge is already a reality. It is recognized by the European Union as a major factor in durable growth. Recent studies by the OECD1 have shown the influence of Knowledge Management on the productivity of companies. Companies constantly test, in a precise or diffuse way, the consequences of actions that touch their knowledge capital, whether in a positive way (if, for example, their know-how leads to an increase in market share), or in a negative way (if, for example, knowledge is lost for one reason or another: reorganization, retirements, etc.). Knowledge Management (KM) started from a number of basic problems and has now developed to become a real discipline with its own problems, methods and tools. It is a developing discipline that borrows from various fields: economics, management, social sciences, information sciences and technologies, educational studies, etc. The aims of KM are ambitious: to set up devices (organizations, methods and tools) that develop, in a very extensive sense, the knowledge capital that any social organization accumulates during its life cycle. The challenge for companies is strategic: productivity, competitiveness, continuity … But there is a long way to go. After an “information revolution” that was carried out almost under duress, will we go forward to a “knowledge revolution” (it would be more relevant to speak about a “revolution through knowledge”)? The path is being built step by step, and the directions are all still far from being marked out. There is still much room for creativity, innovation and experimentation. 1 Organization for Economic Co-operation and Development, http://www.oecd.org.
- 18. 16 Trends inEnterprise Knowledge Management Two French KM players have joined together to produce this book. The GET and INT The Groupe des Ecoles des Télécommunications (GET) constitutes one pole of reference within the French network of public research in Information and Communication Sciences and Technologies. Its research force includes about 550 full-time-equivalent-researchers, and its scientific activity is likely to be doubled by 2005. The GET is composed of four “high” Engineering and Management Schools, to which three establishments created jointly with universities have been added, in the form of GIE (Economic Grouping of Interest). Among the GET schools, the National Institute of Telecommunications (INT) is unique: for 25 years, it has been made up of two schools on the same campus: an engineering school (Telecom INT) and a management school (INT Management). This combination has constituted a major asset, because today, more than ever, this double competence has become both essential and natural and is focus of concern of most companies. It is thus natural that INT is developing along the axis of Knowledge Management, which lies between the management of companies and the science and technology of information and communication. The Club Gestion des Connaissances: the Knowledge Management Club The Club Gestion des Connaissances is an association of companies founded in 1999. Its founder members were PSA Peugeot Citroen, Microsoft France, Cofinoga and OSIS group (Bull). It includes within its structure organizations of all types and all sizes. Already members of this club are: industrialists such as PSA Peugeot Citroën and Thales; software producers such as Microsoft and SAP; French state organizations such as the General Direction of the Armament (DGA) and the National Navy; research organizations such as the National Office of Studies and Aerospace Research (ONERA), the National Institute of Research and Safety (INRS), the National Center of Space Studies (CNES), Hydro-Québec (Canada) and Radio-France; service companies such as Cap Gemini Ernst and Young and Cegos; and SMEs (small and medium-sized companies). The companies and organizations that decided to found the Club Gestion des Connaissances considered that knowledge is economic capital, a factor in productivity,
- 19. Preface 17 stability anddetermination of competitive assets. They wished there to be no delay in French and European companies compared to their world competitors in this field. Its objectives are: – to develop intersector dialogue and debates between decision makers and experts; – to help managers to locate their actions within the major evolutions in this strategic field; – to propose thinktanks, meetings, documents, etc., so that in a very short time rich and global information could be collected; – to increase the dialogue between all players and to extend networks; – to provide the members with a set of concepts and operational tools that will helping to implement developments within knowledge management in their organizations. The club functions through thematic workgroups, which study topics identified as crucial for knowledge management: economic aspects, innovation, continuous progress, competence management, business intelligence, knowledge cartography, etc. Each commission, under a chairman, produces deliverables that are integrated into the club knowledge capital to be shared by all the members. Special events allow members to come together for more informal exchanges. The Knowledge Management seminar INT and the Club Gestion des Connaissances joined together to organize a seminar entitled Trois jours pour faire le point sur le Knowledge Management (Three days to provide a progress report on Knowledge Management) in April 2003. This seminar stressed the importance of KM as a key factor in success and a lever of growth and innovation. This provided a progress report on the whole of theoretical and practical work in this field over recent years. On one hand, recognized researchers in the field presented concepts, methods and tools of KM. On the other hand, players in the economic/business world shared their experiments and their thoughts by presenting experience feedback, case studies and concrete syntheses. The contributions and exchanges were rich and relevant. The points of view presented were very varied and characteristic of trends in the field. In order that exchanges on these days would not remain confidential, it was decided to produce a book based on the meeting. One will thus find here the major part of the discussions that took place at this seminar. One can thus position the whole of original French work in the field, work that is interdisciplinary based on two complementary points of view: that of companies and that of researchers.
- 20. 18 Trends inEnterprise Knowledge Management The original French version of this book, entitled Management des connaissances en enterprise, was published in March 2004 by Hermès Lavoisier as part of the Technical and Scientific Collection of Telecommunications (CTST). The content of this book clearly reflects the subjects tackled during the seminar, which corresponded, as far as we could tell, to the major concerns of the companies starting in KM. Trends in applied Knowledge Management This book is a translated and augmented version of the original French book with a more international dimension. It includes contributions from authors in different countries (e.g., the UK, Canada, Holland, Argentina, Brazil). It reflects only the opinions and work of that “knowledge network” of contributors, who are, for the majority, recognized as dynamic actors in that field. The work does not claim to be exhaustive on the subject, which would be rather pretentious in a field that some would like to see marked out already, whereas it is only now emerging. Introduction Three introductory chapters are given first. Jean-Louis Ermine gives an overview of KM, from a pragmatic and rather engineering point of view. Every succeeding chapter is more or less a detailed study of what is presented there. Patrick Epingard gives an introduction to KM from an economic point of view. This is the fundamental reason why applied KM is set up in companies. Walter Baets gives an introduction to KM from a rather epistemological point of view. The fundamental hypothesis here is that KM is based on complex system theory, which is the framework of each succeeding chapter (even if it may sometimes be hidden!). Academic studies The second part of the book is written by academics. It compiles and analyses many applied KM studies and cases. Nigel Courtney, Clive Holtham and Chris Hendry analyze the experiences of eight varied organizations in managing their intangible assets in the UK, other EU states and the USA. Jean-Michel Viola and Réal Jacob, giving the example of a large Canadian company, show how knowledge elicitation triggers a learning process and tacit knowledge creation. Aurélie Dudezert gives an overview of the different methods and approaches used in companies to value KM performance. Imed Boughzala shows how inter-company co-operative information systems may support KM in the framework of the extended enterprise. Thierno Tounkara puts
- 21. Preface 19 forward aproposal to link KM and environment scanning, which is a frequent question but one with few answers. Finally, Pierre Fayard gives a very different point of view on KM, inspired by the Japanese concept of “Ba”, returning to the sources of KM, which is greatly influenced by the Japanese School led by Professor Nonaka. French KM Club studies The third part of the book is an overview of the pragmatic work of the companies of the French KM Club and tools that have been designed and are currently applied in these companies and some others. Jean-François Tendron describes a general evaluation tool, called the “Knowledge Maturity Model”, dedicated to revealing the capacity of a company in managing its knowledge capital. Gérard Aubertin proposes a methodology for elaborating a knowledge map of a company and a strategic assessment of each identified knowledge domain, using “Critical Knowledge Factors”. Jean-Marie Bézard describes a tool dedicated to evaluating the capacity of a company to be innovative (“Innovation Maturity Model”). Olivier Lepretre, with the tool “Technology Maturity Model”, analyzes how information and communication technologies are used in a company to fulfill KM requirements. Case studies The last part of this book gives a number of case studies Nathalie Le Bris describes KM experience in a European automotive industry. Cécile Decamps and Michel Galinier describe how Thales, a worldwide defence industry, organises “Communities of Practice” for KM. The last two case studies are in the nuclear field, which is particularly involved in KM, a top priority in the world for that domain: the first is by Rita Izabel Ricciardi and Antonio Carlos de Oliveira Barroso concerning a radio-pharmacy centre in Brazil, while the second by Marta Eppenstein concerns a nuclear power plant in Argentina. Conclusion We hope, with these contributions to show both that KM is alive and concerns a wide range of issues, and that interaction between companies and researchers is fertile. This is because it is true, in this field, that real problems of research are born out of real problems in the real world. Imed Boughzala, Jean-Louis Ermine
- 22. PART 1 Introduction Trends inEnterprise Knowledge Munugement Edited by Imed Boughzala & Jean-LouisErmine Copyright 02006, ISTE Ltd.
- 23. Chapter 1 Introduction toKnowledge Management 1.1. Introduction 1.1.1. Knowledge: a strategic value for the firm In the last few years, with sudden and unexpected strength, Knowledge Management (KM) has emerged as a major challenge in many enterprises. A set of strategic elements has contributed to this emergence; for example: – knowledge is a fundamental economical asset ([Edvinson 99], [Strassmann 98], [Stewart 97], [Foray 00]); – knowledge is a strategic resource [OECD 96]; – knowledge is a factor in the stability of the enterprise; – knowledge brings a decisive competitive advantage. 1.1.2. Objectives of KM The strategic vision that leaders of an enterprise can have concerning their knowledge capital is leading them to define some global objectives for managing and optimizing this resource. These objectives are always articulated around three key points: – capitalize: know from where we come, so that we know where we are, to know better where we are going; Chapter written by Jean-Louis ERMINE, Institut National des Télécommunications. Trends in Enterprise Knowledge Munugement Edited by Imed Boughzala & Jean-LouisErmine Copyright 02006, ISTE Ltd.
- 24. 24 Trends inEnterprise Knowledge Management – share: switch from individual intelligence to collective intelligence; – create: create and innovate to survive. Note that these objectives of management are indeed “paradox injunctions” (“Knowledge is Power”!) and imply that KM is an important challenge for managers which involves long-term change and new visions of the enterprise. 1.1.3. KM: a new and complex approach KM is henceforth part of the real life of the firm. But to understand what the management of knowledge in an organization concerns in reality is not easy, because nearly all components of the firm are involved. KM involves strategy, because it is a new type of management responding to a new socio-economic environment and a new vision of the organization. It involves the structure of the organization because the knowledge is created through complex networks, connected to the environment that can challenge the classic structures. It concerns many processes that have already been put in place in organizations (fortunately, human beings have managed their knowledge for a long time!), but that have to be reviewed from new perspectives, optimized or developed. It concerns the staff of the organization, the human resources, which are the heart of the issue, because knowledge is created, is shared and evolves only through people, who must mobilize themselves personally and collectively for this objective. It concerns information and communication technologies (ICT), which are powerful vectors for KM if they are used efficiently. In the following, we will attempt to give a set of points of view that will allow a better understanding of these issues. 1.2. The two types of approaches to KM Knowledge capital in the enterprise is intangible capital, which is not visible in the organization; even its content remains elusive. It can be agreed now that the content of such capital is both hidden in and scattered amongst two essential components of the enterprise: – Human and social capital: the quintessence of the knowledge in the enterprise (“core knowledge”) is in the heads of its employees. This is in any case its ultimate place before it is used operationally. It is in a tacit form, and hardly (or even not at all) expressible, according to the adage: “we know more than we can say”. This tacit knowledge capital, tightly linked to the human capital, is at any one time both
- 25. Introduction to KnowledgeManagement 25 collective and individual and develops through the knowledge networks of the organization (“knowledge workers”), who constantly produce and use this precious and operational knowledge. – Information capital: enterprises have stored, for decades, huge amounts of information, which they stock and distribute with more and more sophisticated methods. Employees of the enterprise constantly use this gigantic system of information for their operational activities; they acquire information and give it a precise sense within their operational context so as to transform it into knowledge that is useful to their profession. Unfortunately, for the right person to find the right information at the right moment becomes a difficult task, when the available amount of information is considered. The potential knowledge is buried in masses of information and is not easily accessible. Therefore, managing knowledge capital is problematic, because of its two- headed character, with the two types of capital, human and information, and the hidden, tacit or buried character. To approach this issue, two main approaches are possible: – the first is to address (at least partially) the hidden character of knowledge by making it explicit, using either the tacit knowledge in knowledge networks or knowledge buried in information systems; – the second is to retain the hidden character (especially the tacit aspect) of the available knowledge and to managing the knowledge networks. We are going to examine briefly how these two approaches can be put into effect. 1.2.1. Knowledge elicitation Depending on whether one is interested in tacit knowledge in networks in the organization or knowledge buried in information systems, elicitation of the knowledge capital can be based on two distinct approaches. 1.2.1.1. Tacit knowledge elicitation 1.2.1.1.1. Knowledge transcription The first type of approach is what we will call knowledge transcription: some tacit knowledge can be elicited simply by transcribing it in a more or less structured manner. This is the case in setting up quality systems (of which the first rule is “record what you have to do”), in files reporting experience, or in the producing publications. Furthermore, “secondary documents” can be used to synthesize knowledge contained in the primary documents.
- 26. 26 Trends inEnterprise Knowledge Management 1.2.1.1.2. Knowledge engineering Knowledge engineering is a more sophisticated approach than transcription to capturing parcels of tacit knowledge. It was developed along with expert systems (or knowledge-based systems). These systems were intended to replicate the reasoning of experts on specific knowledge domains. It was quickly perceived that if powerful technologies were available to design such systems, the critical difficulty resided in the capacity to transfer the knowledge of one or several human experts into a computer program. Knowledge engineering therefore put methods in place to collect the knowledge, most often from interviews, and to structure it generally on the basis of models ([Rubiello 97], [Dieng 00]). These methods can therefore be used profitably to clarify, from interviews with knowledge holders, a part of the capital of tacit knowledge of the organization. A typical example of this evolution is the MASK method that was used to specify expert systems and became a method of knowledge capitalization, which was then integrated into the general KM approach ([Ermine 02]). 1.2.1.2. Knowledge extraction 1.2.1.2.1. Knowledge extraction from data All enterprises retain large quantities of data, resulting from their production activities. These data are very diverse (technical, management, marketing, etc.) and their mass doesn’t stop growing (it doubles every 20 months on average). Moreover, there are other considerable masses of data called non-structured or semi-structured data, which consist of textual data (and other types of media) that correspond to the production of texts, cards, reports and other types of document. This informational capital probably provides value for the enterprise’s production needs, but also could be reused efficiently a posteriori for other needs. However, it has been shown that hardly 10% of this capital is exploited. This can be explained by the difficulty in reusing information that has been structured for objectives different from capitalization and reuse. However, big efforts are currently being made to validate these layers of information accumulated as part of data processing for production. The objective is to produce, from these layers, new information that is useful for action within the enterprise, in other words producing “operational knowledge” in the KM sense. This is manipulation of information with the objective of knowledge discovery, called knowledge extraction from data (or “knowledge discovery from data” (KDD)), which is also linked to similar concepts such as “text mining”, “data mining” or the “data warehouse”.
- 27. Introduction to KnowledgeManagement 27 1.2.1.2.2. Knowledge extraction from texts Knowledge extraction from texts (“text mining”) is the discovery of useful information from “hidden patterns” buried in a large corpus of texts (sometimes called non-structured or semi-structured information). Research engines now process those types of texts, which are more and more abundant and include web pages, a growing source of knowledge. 1.2.1.3. Supporting technologies for explicit (elicited) KM After having extracted part of the knowledge capital, one has an informational corpus that can be used for transferring or operating knowledge. To put this corpus into effect, two kinds of systems can be used, which are as follows. 1.2.1.3.1. Knowledge servers These are systems, usually part of a company’s intranet, through which one can browse (in the most intelligent and ergonomic manner possible) for the elicited knowledge. These systems do not solve problems directly for the users, but give a rich and flexible method for retrieving knowledge that may be useful to solve an operational problem. 1.2.1.3.2. Knowledge based systems These are computer-based systems that “operate” the elicited knowledge, such as, for example, expert systems. They use the elicited data and structures to solve a precise “high-level” problem: decision support, process supervision, diagnostic, resource planning, design support, etc. 1.2.2. Tacit KM Knowledge elicitation is an approach that may be not chosen by some organizations, for various reasons: difficulties in setting up such processes, which may be long and time consuming, too high a direct cost, confidentiality problems, problems with people, problems with the knowledge networks, etc. Another possible approach can be derived from the way in which knowledge is produced in organizations, more precisely from the different forms of groups and functions that participate: networks, communities etc., in which knowledge is seen as the result of a cooperative process in a collective action. The problem is then not to elicit this knowledge, but to foster its creation, its sharing by managing the cooperative work of a community of people. One then does not manage the knowledge itself, but the community that creates it. This knowledge may then remain tacit within the community, while being shared and operational. One may then talk of “cooperative knowledge management” ([Soulier 02]).
- 28. 28 Trends inEnterprise Knowledge Management The tacit/explicit approaches are not opposed but complementary. It is, for instance, useful for a knowledge community that manages its own knowledge to produces visible and tangible records, while, on the other hand, an elicited corpus of knowledge needs a knowledge community to operate it and make it evolve. Cooperative knowledge management has four key requirements ([Soulier 02]): – identification of knowledge communities; – exchange mechanisms that allow knowledge transfer within knowledge communities; – principles of managing and supervising cooperation; – technologies supporting cooperative knowledge management. Most of the time, there are already communities in the company (for specific jobs, in specific professions, for projects, for given practices, specific interests, etc.). One must analyze them and include them in a strategic schema, in order to optimize their performance in terms of knowledge sharing and creation. The problem is to map the communities, either existing or to be developed, so as to define for each community, the issue, the type of the community, the nature of its need or the problem it has to solve. 1.2.2.1. The functioning modes of knowledge communities There are three types of way of working and exchanging information in a community: – The classic “division of labor”. A worker carries out a limited number of tasks, with reduced autonomy in designing and performing the job. This is the most common approach, even in new and modern forms arising from the introduction of information technology. Dedicated structures analyze, design and codify the work to be done. This type of work is supported by formalized links (planning of activities, performance supervision, etc.), which do not facilitate cooperation. Cooperation links are hidden, implicit and limited. – The “coordination” type (“soft” cooperation). This relies on a better coordination of activities, with information sharing and synchronization of tasks. It is compatible with the Taylor point of view. The only problem is how to do it better and more quickly. The consequence is the implementation of a global information system with a fast communication function and generalized access to information (the archetype is the company intranet and e-mail). – The “cooperation” type (“strong” cooperation). This involves synergy, not just coordination, between separated tasks. Working together establishes a community with sound bases for: - the nature of problems and of knowledge that are to be developed;
- 29. Introduction to KnowledgeManagement 29 - the identification of objectives; - convergence of reasons why people work together. 1.2.2.2. Knowledge community supervision Implementation of knowledge communities may be performed through their life cycle. This leads to the definition of: – management commitment in the different phases in the cycle; – indicators for supervision and control; – adequate supporting tools. The different phases in a community development are as follows: – Emergence: a community is created based on a knowledge domain. This creation arises from aggregation according to affinities. It is spontaneous (a community cannot be prescribed). Management is not a player, but may be an observer. The main need is connection between players. – Structuring: the emergent community starts to collaborate. It is consolidated by peer co-option. Information sharing leads to coordination, but every player is autonomous. The community is still informal, driven by the participants themselves. Management is still an observer. The needs are for coordination and for mutual information. – Becoming official: the community is structured and active enough to become visible to the organization (if it is too premature, it stops). The community becomes coherent through a shared common goal. Management becomes involved so as to give a sense of the company strategic objectives and to give official recognition, together with resources. The needs are then for collaborative work. – Consolidation: the community works and produces on a regular basis, and this work is integrated in collective action. Management periodically evaluates the actions and productions of the community. The needs are then for sharing and capitalization. – Dissociation: well anchored communities tend to withdraw into themselves, and some outside signs illustrate this (development of a jargon, group thinking). Management must clearly observe these phenomena and must facilitate cooperation and transfer of knowledge between communities. It is necessary to know how to stop a community, in the same way that one can stop a project. This dissociation maybe generated internally by players having their creative capacity blocked and finding in the emergence of another community the necessary rebirth of the expression of their knowledge need.
- 30. 30 Trends inEnterprise Knowledge Management To pilot cooperation it is necessary to define: – indicators of cooperation: how to recognize that there is a development of cooperation within the different types of collective work (team, project, process and network); – indicators of results of the cooperation: what are the effects of the cooperation on the knowledge capital? Several criteria seem useful in recognizing that members of a network are cooperating: – they construct, from their individual representations, shared representations of problems to solve, objectives to reach and goals to achieve; – they communicate efficiently, using a common language, understanding the language of the others and sharing their point of view; – they move out of their domain (discipline, sectors, geographical, etc.) in interdisciplinary actions; – they accept the existence of conflicts (of criteria, of points of view, of priorities), managing them in an appropriate time and proceeding to arbitration; – they put some new applicable and evolutionary organization into place. 1.2.2.3. Supporting technologies for knowledge communities The new types of work described above are tightly linked to rapid adoption and dissemination of systems and technologies for information and communication (ICT) within the organization. The rapid increase and development of new ICT has had a considerable influence on knowledge management. There is sometimes confusion (perhaps deliberate) between ICT and KM. In classical information systems (databases, data banks, etc.), functionalities are well known: an information system is by definition a system for processing, storing and presenting information. Coming from computer networks, communication technology had the clear functionality of data transmission. With the introduction of new types of tools, especially web-based tools, these distinctions are no longer clear; they are more complex and difficult to understand in depth from the user’s point of view. In fact, the new ICT products must be analyzed from the point of view of services, and those services justify their use in knowledge management problems, especially cooperative work, in the sense defined above. There are four types of services related to ICT ([Germain 98], [Bitouzet 97]): – communication; – coordination;
- 31. Introduction to KnowledgeManagement 31 – resource sharing; – information sharing. Among those services, one can distinguish between the basic services limited to communication software (communication and coordination) and services with added value based on the information system of the company. However, this distinction becomes fuzzy in the new usages of ICT (e-mail may be used as an information base and information bases may be linked to communication tools, as on a website). This set of services helps the collaborators in organizing knowledge sharing and working in a cooperative way, especially through knowledge communities. However, one must not forget that although a technical platform may be necessary, it is neither a prerequisite nor a goal. Cooperative KM is really a problem of organization and method. 1.3. The key factors of success in KM processes A KM process is put in place to optimize knowledge use and evolution in an enterprise. It concerns in a crucial manner knowledge players: experts, specialists, competent people without whom the knowledge capital would not have added value. As it is an element of strategic management, management must be strongly implicated at many hierarchical levels. Here resides both the strength and the weakness in knowledge management: cohabitation of two fundamental networks, the knowledge network and the power network. This is why a KM project does not look like a classic project, because two poles of decision, completely different, must cohabit to construct a common system: a KM system. The setting up of a KM system in an enterprise is therefore delicate, and a certain number of unusual factors must be taken into account. We enumerate some of them here. 1.3.1. The water lily strategy One key factor in a KM project is the project deployment strategy. There is a radical difference compared with a classic project. Let us take the example of an Information System project. The project deployment strategy is composed of a needs analysis, a specification and a roadmap that predicts a progressive and linear implementation, integrating users progressively through, in most cases, a training program. One now knows the
- 32. 32 Trends inEnterprise Knowledge Management advantages and inconveniences of this kind of project deployment: the more mistakes are upstream in the process, the more costly they are; risks of failure near the end of the process are far from being negligible, early endings are not exceptional, etc. Project management is centralized (in general by a dedicated information systems), the project is linear (for example, the cost of realization of the second half is half the total professional cost), it is planned, users are involved in a sporadic manner (sometimes at the beginning of project, and at the end for training), etc. These types of “roadmap strategies” for a knowledge management strategy (unless, of course, it is reduced to an information system project) are often revealed to be a failure. They are too linear and do not take enough account of incentive factors. A “socio-technical” type of strategy is necessary. One can build a new type of project strategy, radically opposite to the “roadmap” one. It can be called the “water lily strategy”. This term expresses the idea of “steady organic growth”, designating the cell growing process (meiosis in morphogenesis), which processes by successive cellular division to create some viable and complex structure. The water lily evokes a well known childish riddle: “a water lily doubles its surface every day; if it takes 40 days to cover half of the pond, how many days are needed to cover the entire pond?”. An imprudent and too quick answer would be “80 days”, assuming that as much time is necessary to cover that second half as the first half. This answer neglects the nature of the water lily and the initial hypothesis! If one transcribes this riddle into project management terms, it may become: “a KM project is expensive; if the project costs €40 M to cover the needs for managing half of the Knowledge Capital, how much will be needed for managing the entire Knowledge Capital?”. A linear extrapolation of costs will undoubtedly tend toward €80 M rather than €41 M! It is not usual to invoke the hypothesis of the water lily in this kind of problem. It is, however, the “water lily” strategy that is the most appropriate for a KM project. It is the best way to include the change process, incentive factors, and the emergence phenomenon in complex systems. The “water lily” strategy is a strategy of constant effort and cumulative effect, which perfectly suits the cumulative economic nature of knowledge ([Foray 00]). It indicates specifically that if efforts are considerable to start the project (from a human or other resources points of view), they will not be necessarily multiplied during the spread of the project. As incentive factors are essential, one benefits from a leadership effect. The material costs are not necessarily the most important; they do not therefore grow linearly, etc. One of the main requirements of this type of project management is to minimize costs and risks. The first “water lilies” are not too expensive. Stops, often unavoidable on medium-term projects, are not damaging. Failures do not necessarily imply completely revising the entire approach.
- 33. Introduction to KnowledgeManagement 33 The “water lily” strategy usually comprises three phases. 1.3.1.1. The pilot project(s) The first “water lilies” are persuasive projects. They are autonomous projects, concerning a restricted part of the knowledge capital. It is often possible to identify such projects that have already emerged spontaneously (often a long time ago) in the enterprise: it is indeed true that the knowledge acquisition has been (fortunately!) a common and pragmatic practice for a long time. These pilot projects, concerned with knowledge capitalization, sharing or creation can be revealed or initialized by knowledge cartography. Some of their features are as follows: – They concern a small knowledge domain (“too small”), but meaningful. – They are performed by people convinced of the necessity to act on their knowledge and who are therefore susceptible to take a leadership role in a general approach. – They are based and achieved locally in units. They are not necessarily supported by the management (it is necessary, however, to get an “understanding neutrality” on the part of management). This means that the considerable effort involved in getting, from the beginning, “top management commitment”, which is often a prerequisite for strategic projects but sometimes a delaying or even blocking factor, can be avoided. – They show real life examples of the ways in which knowledge capital can be shared. Pilot project(s) are the yeast of a global and strategic KM approach. They are a significant “bottom up” approach, in which people who produce and use knowledge in their daily practice (“knowledge workers”) prove the need and the possibility of capitalizing, sharing or evolving this knowledge within their context. A pilot project must show that working on knowledge is useful, and that original added value is created compared with a more classic project (quality, documentation, data processing, etc.). It provides a concrete and pragmatic starting point for communicating to management and the other people in the company and contributing to awareness in this domain. 1.3.1.2. The federation of KM projects The first water lilies simply emerge, which is a typical phenomenon related to the complexity of a knowledge system. This emergence phenomenon must be carefully managed in the first phase. Then, a life cycle similar to the one described in section 2.2 is followed. Coordination tasks must be undertaken to gather and to federate the different projects, and, while the strategic and global dimension is not still major, it begins to appear. Cooperation tasks then take place, giving an official status to this federation of projects organized as a network (the KM network of the enterprise).
- 34. 34 Trends inEnterprise Knowledge Management Several points are addressed: – the definition of a common objective that gives sense to the set of projects, and a unified shared view; this makes it possible to become persuasive and take a leading role for the rest of the enterprise; – the official status legitimating through actions of communication and explanation by the hierarchies concerned; this makes it possible to give a formal structure to the network, and means to support it, as well as strong recognition of the project; – regular and coherent communication on KM inside (and maybe outside) the enterprise. 1.3.1.3. Project deployment The network of “water lilies” being now in place, one must ensure its “steady organic growth” in order to cover the set of needs of the enterprise for the management of its knowledge capital. This project deployment may be usefully initialized by critical knowledge cartography (see below). The set of critical domains and corresponding actions can thus be defined and included in a global plan. KM processes (see below) must be put in place, with assessment tools. Global supervision tools must also be put in place (as balanced scorecards or the Intellectual Capital Navigator). Communication and incentives must be especially studied, because a global project must mobilize a large number of people to enrich and to bring alive the KM system. This last point often implies a deep change in habits and beliefs. Incentives are not always of the classical kind and often rely more on intellectual or non-material satisfactions than on material rewards. The key factors of success are also (and maybe especially) a part of these incentives, which are the essential drivers for change in this type of project. This is the topic of the following paragraph. 1.3.2. Change factors The setting up of a KM system goes through a certain number of delicate phases that must take account of the bivalent nature of the project. These phases are key factors of success, to which it is necessary to pay careful attention. Among these factors are the following: – The “mirror step”: a KM system is built with knowledge holders. One of the first factors of incentive and acceptance for the system is that these people recognize themselves in the implemented knowledge. It must be a structured and valorizing picture of them. This step is essential. If knowledge holders do not recognize themselves in the system, it will not have any chance of being validated thereafter.
- 35. Introduction to KnowledgeManagement 35 This first step allows the concerned “knowledge network” to become a supporter of the project. – Consensus: knowledge implemented in the system must be consensual, reflecting the individual knowledge that is part of it. Consensus is not natural, especially in a company. It requires a specific and sensitive process. – Legitimating: consensus between participants is not sufficient to validate the knowledge put into the system. This cannot be validated in the classic sense, because it deals with personal and collective knowledge that is very particular to the enterprise, at the highest level, and for which an external reference model never exists. The only possible validation is obtaining a consensus from a “peer group”, in general constituted by other players in the knowledge network or related players. – Approval: the knowledge, once legitimized, must be endorsed by the hierarchy that gives it an official and productive status in the organization. This stage is the starting point for project dissemination and for use in the company. – Appropriation: it is clear that a knowledge management system does not have an interest if there is no appropriation and no evolution of the knowledge in the enterprise. This is a final step, which initializes a “virtuous knowledge cycle”. Up to now, very few know how to perform this phase correctly. This set of key factors shows, if a demonstration is still needed, that KM in an enterprise is a complex process, which must be implemented progressively and with a rather long perspective. In this domain, as in many others, there are no miracle tools or methods capable of solving all problems. In this domain, more than elsewhere, we deal with knowledge, a matter that has concerned human beings since the beginning of mankind! 1.4. KM: an action for continuous progress KM is not a new concept, fortunately. Right from its start, any enterprise manages its knowledge, its know-how, generating documents and procedures, and disseminating them, for example, via training and organizing exchanges of any form with their collaborators. What is new is the strategic dimension of knowledge, as resource of competitiveness and performance. It obliges the enterprise to have a global, conscious and reasoned approach to its knowledge capital. This is a long- term process to be achieved progressively, starting from the set of actions of the KM type that have already been carried out in the organization (most often without knowing that this is KM). It is also a cultural process that must gradually develop in daily work, and not a revolution that must change everything. In a word, it is a process involving continuous progress that relies on what already exists. This process takes place in several steps that we will outline here.
- 36. 36 Trends inEnterprise Knowledge Management 1.4.1. Knowledge cartography One of the first difficulties in a KM process is the impossibility of correctly visualizing the available knowledge in the enterprise. The adage “one doesn’t know what one knows” is truer for organizations than for people. Upstream of all KM operations, knowledge cartography aims at putting in evidence the knowledge capital of an enterprise. Organizations wanting to manage their knowledge capital must therefore make a careful analysis of this knowledge capital, in order to determine, in their strategy, what are the pieces of knowledge they must preserve, develop, abandon, etc. Cartography then becomes a tool for decision support and it is necessary to elaborate the specific criteria that make it possible to assess, in the cartography, what are the most critical areas of knowledge for the enterprise and why. One then speaks of critical knowledge cartography ([Peil 01]). The knowledge map is a hierarchical visualization of domains that are useful to professionals in the enterprise. A knowledge domain can be defined as the field of activity involving a set of people for which one can group information and knowledge. The cartography is articulated around axes defining the strategic knowledge domains, often corresponding to missions of the organization. It thus classifies, in a hierarchical manner, domains that form a decomposition of these axes. Knowledge domains can (must) be linked to a set of people who maintain knowledge and information (structured or semi-structured). The model may be enriched by models of actors or information (documentary references, “best practices”, etc.). This is especially important, for example, for the realization of a knowledge server. The map is often represented as a graphical model. The knowledge map built in the previous phase defines the distribution of different knowledge domains according to the missions of the organization. The next phase consists of establishing the critical character of the knowledge domains. The criticality of a domain is an assessment of the risks/opportunities for the enterprise linked to that domain. For instance, there may exist risks of losing knowledge or know-how that could have serious consequences or there may exist interests in developing a domain to obtain advantages for the enterprise (gain of productivity, of market sectors, etc.). One must therefore define what is, objectively, the criticality of a knowledge domain and provide a method of assessment that allows the most critical knowledge domains in the cartography to be marked out.
- 37. Introduction to KnowledgeManagement 37 The criticality is evaluated according to criteria that are not necessarily easy to define. Criticality criteria for determining the strategic importance of a knowledge corpus can be of various kinds, and very dependent on the culture and the situation of the enterprise. Generally, one can distinguish two types of criteria: – factual criteria for evaluating the nature of knowledge independently of the content of this knowledge (depth, width, complexity, etc.); – strategic criteria for evaluating the adequacy of the considered knowledge to the missions or strategic objectives of the organization. 1.4.2. The repository of KM processes The knowledge cartography makes it possible to visualize the available knowledge capital on one hand and, on the other hand, via the criticality analysis, to discover, while justifying them, opportunities and threats that are associated with different knowledge domains. It enables a focus, therefore, on the most critical domains and puts priorities on the different aspects of a coherent plan of action for KM. It remains, then, to put devices in place (organizations, methods, tools) in order to reduce the criticality of the domains concerned. Rather than considering separate devices, which would look more like a panoply of tools than an integrated process, an alternative approach would consist of piloting the action by setting up a KM process, in a classical way, as for quality. Up to now, a consolidated approach to what a KM process can be does not exist, as such an approach exists, for example, for industrial manufacturing or design. KM has still to build a repository of processes whose strategic objective is to reduce the knowledge criticality, according to the type of identified criticality, and whose tactical objective is to bring added value to knowledge capital. A possible framework is given, for instance, by the “Daisy Model”, which defines and details the key processes in KM. These processes are both internal, such as capitalization and sharing or creativeness and learning, and external, such as environmental scanning or business intelligence, which must start from internal knowledge and feed it back, or customer relationship marketing, which acts as a filter on the immense potentialities of creation and evolution of knowledge in the enterprise.
- 38. 38 Trends inEnterprise Knowledge Management KM is the management of these processes, and especially the management of their link to the knowledge capital of the enterprise. One can describe them in terms of four generic classes, which correspond to the “petals” of the daisy, and a class that corresponds to the heart of this model (Figure 1.1): – The capitalization and sharing process. This achieves the “virtuous knowledge cycle” and ensures the dissemination (the “recycling”) of the knowledge resource in the enterprise. – The interaction process with the environment. A system isolated from its environment is a dead system. This is especially true for knowledge, fed by more and more important information flows, which come from the environment of the enterprise. The process transforms these fluxes of information into knowledge, useful to the enterprise. They include, for instance, the processes of environmental scanning, economic or strategic intelligence (“business intelligence”). Up to now, this kind of process has been based on external information processing, and not on interaction with the knowledge of the enterprise. – The learning and creation process. This is an endogenous and collective process that is the basis of knowledge evolution. It includes the issues concerning the learning organization and of creativeness. – The selection process by the environment. This is an evolutionary process, selecting created knowledge, according to criteria of the market, of acceptability, etc., that is both economic and socio-technical. It includes the issues concerning marketing, customer relationships, etc. The problem of KM is to integrate this type of issue in a strong relationship with the critical knowledge of the enterprise, notably professional knowledge, for example. – To this set of processes, one can add a fifth that is entirely internal to the knowledge capital. It is an assessment that is qualitative, quantitative, financial, etc. There already exist methods for valuing an intangible, or intellectual, capital. However, there does not exist, as far as we know, a complete process for valorizing, in the broad sense of that term, knowledge capital. Ongoing research will allow the definition of a set of methods and of coherent tools to manage these processes and to reach the KM objectives (see [Ermine 03]).
- 39. Introduction to KnowledgeManagement 39 Figure 1.1. The Daisy Model: key KM processes 1.4.3. The KM actions After the cartography of knowledge, i.e. the identification of appropriate processes to put in place, has been established, the real operational phase begins. To be efficient and sustainable, it must be integrated into the continuity and process of progress. Enterprises did not wait for the “KM concept – or buzz word” before they began to manage their knowledge. For a long time, they have set up procedures for capitalization, for scanning, for training, for creativeness, etc. The KM processes model, through the Daisy Model, makes it possible to foster and supervise those actions. Let us take an example: the capitalization and sharing process, which is the most well known and most studied process in KM (Nonaka’s process), is a virtuous knowledge cycle (see for example [Ermine 02]), in which a community elicits a tacit knowledge that it possesses; this elicited knowledge is then disseminated in the enterprise and, at the end, this elicited and shared knowledge is appropriated by actors in the enterprise who recreate their own operational and personal know-how. Therefore, there are three subprocesses: elicitation, sharing and appropriation. There is also an alternative to this process of capitalization and indirect sharing and this is a direct process in which the tacit knowledge of actors is shared directly with other actors, who create for themselves their own tacit operational knowledge. This Selection Interaction Capitalization and Sharing Learning and Creation External Processes Internal Processes Environment Environment Evaluation Knowledge Capital
- 40. 40 Trends inEnterprise Knowledge Management alternative process may be supported, for example, by face-to-face training, communities of practice, shared experience, etc. For a given knowledge domain, where the criticality is caused by a bad capitalization and/or bad sharing, one can analyze the problem via either the direct or the indirect process. For example, for the indirect process, the questions are: what the procedures have been put in place for elicitation? For sharing? What procedure guarantees that actors appropriate knowledge that is available from the knowledge bases in their daily work? And so on. These simple questions permit the identification of hiatuses, the definition of some reasonable progress axes on the basis of those that already exist, and the identification of solutions that should be put in place in this process. These solutions are extremely numerous and must be analyzed deeply before a decision is made, because the corresponding investments are often significant. Let us give some examples of possible tools: – for the indirect capitalization and sharing process; – for elicitation: - knowledge modeling (knowledge books, knowledge engineering, story telling, etc.), - knowledge transcription: - secondary documents, - authoring: cards (return on experience, quality documents, etc.), documents, reports, publications, etc.), - etc., – for sharing: - collaborative spaces, - digital diffusion (push, pull, profiles, etc.), - document diffusion, - browsers, - etc., – for appropriation: - operational training, - e-learning, - etc., – for the direct capitalization and sharing process: - knowledge communities,
- 41. Introduction to KnowledgeManagement 41 - seminars, meetings, convention, - expert ‘Yellow Pages’, - etc. 1.4.4. Piloting processes and actions A global and strategic implementation of KM in the enterprise can be piloted from elements that have been described here: critical knowledge cartography, KM processes, axes of progression, procedures and actions. One then needs to set up a supervision process, including the surveillance of processes with adequate indicators and a global assessment. This assessment, in order to be consistent with a KM policy, must show the value added that is brought to the knowledge capital of the enterprise, and the progression of the enterprise in its “knowledge maturity”. As tools of assessment, one can give as an example the grids of maturity elaborated by the French KM club ([Club 00]). 1.5. Conclusion KM is not a new concept in enterprises. Since social organizations have existed (that is to say since the beginning of mankind!), human beings have always tried to maintain a collective memory, to share some useful knowledge, and to constantly create new knowledge. It is the cumulative and strategic dimensions of knowledge identified in some new problems that have revealed the emergence of new fundamental factors. Among these new problems, some have had a negative outcome, described in illustrative stories or more personal anecdotes, often painfully experienced. They concern episodes in which the knowledge capital, which has been discussed above, has been squandered thoughtlessly. It can be seen in reorganization plans, in massive layoffs, in waves of departure for retirement, in business process reengineering, in badly managed mergers or acquisitions. Badly transmitted knowledge which is badly shared and badly preserved has already brought much disillusion and loss, as much at the productivity level as at the human level. There have been other more positive developments, for instance the major evolution of means of information processing and communication. Information technology has switched from storing, representing and retrieving data to a situation that enables information sharing, resources sharing, coordination and communication.
- 42. 42 Trends inEnterprise Knowledge Management We have moved from an era where information was a very rare and strategic commodity to an era where it is overabundant and widely available, where the sending and receiving structures have become more important than messages themselves. This evolution has brought some considerable gains, and triggered a wild race in the implementation of these new technologies, which must now, after the first euphoria, search for a new framework within the classical information paradigm. The “KM” paradigm emerges as an option, because what is now important is not obtaining information, but ensuring that this information is operational in a particular context and at a given moment, for the right person who must solve a complex task with his or her necessarily limited cognitive capacity. This is what is meant by the expression “the right information, at the right moment, to the right people”. And this only describes half of the problem, which is the use of knowledge as productive resource; the other half is, of course, the production and the evolution of knowledge, without which one cannot speak of the use of knowledge capital. KM is therefore a new way of management. It is the management of an intangible asset, which is a strategic asset of the organization, via flows of new type (cognitive flows, which must be differentiated from information flows) that are either generated by actors in the organization (competency flows) or used by these actors (cognition flows) in their production activities, these actors becoming real “knowledge workers”. 1.6. Bibliography [Bitouzet 97] Bitouzet C., Fournier P., Tézenas du Montecel B., Management et intranet, Hermès, 1997. [Club 00]: Club Gestion des Connaissances, Ermine J.-L., Laude H., A Knowledge Maturity Model, Proceedings of “Knowledge Management; Theory and Practice” Workshop (J.-L. Ermine ed.), in PKDD’2000 (Principles of Knowledge Discovery from Data), 12 September 2000, Lyon, pp. 13-18. [Dieng 00] Dieng R., Corby O., Giboin A., Goliebowska J., Matta N., Ribière M., Méthodes et outils pour la gestion des connaissances, Dunod, Paris, 2000. [Edvinson 99] Edvinson L., Malone M., Le capital immatériel de l’entreprise, Ed. Maxima, Paris 1999. [Ermine 02] Ermine J.-L., Initiation à la méthode MASK, CD-ROM from Troyes University of Technology, France, 2002. [Ermine 03] Ermine J.-L., La gestion des connaissances, Hermes Science Publications, 2003.
- 43. Introduction to KnowledgeManagement 43 [Foray 00] Foray D., L’économie de la connaissance, Repères, no. 298, Ed. La découverte, Paris, 2000. [Germain 98] Germain M., L’intranet, Economica, 1998. [OCDE 96] OCDE, Mesurer le capital humain, vers une comptabilité du savoir acquis, 1996. [OCDE 99] OCDE, L’économie fondée sur le savoir, des faits et des chiffres, 1999. [Peil 01] Peil O., Aubertin G., Ermine J.-L., Matta N., La cartographie des connaissances critiques, un outil de gestion stratégique des connaissances. CITE’2001, Coopération, Innovation et Technologies, 29-30 November 2001, Troyes, pp. 287-308. [Soulier 02] Soulier E., Zacklad M., Ermine J.-L., La gestion coopérative des connaissances, EGC’2002, Extraction et Gestion des Connaissances, Actes de la session industrielle, pp. 59-72, 2002. [Stewart 97] Stewart T., Intellectual Capital, the New Wealth of Organizations, Currency/Doubleday, New York, 1997. [Strassmann 98] Strassmann Paul A., The Value of Knowledge Capital, American Programmer, March 1998.
- 44. Chapter 2 Can OneIdentify and Measure the Intangible Capital of the Enterprise? The world of economics is changing in depth. Leverages of development are moving from matter and energy to information, knowledge and organization, in other words, from tangible to intangible. The rapid growth of information services, which are invading the industrial sphere more and more, are driving a new way of articulating offer and demand, one that is co-productive in nature and which appears to be at the heart of processes of value creation. The recent explosion, without precedent in our history, of costs related to intangible investment, that is, dedicated to R&D, training, software, market exploration and organization, has put design and knowledge management activities in a central position in the performance of enterprises as well as nations. The multiplication and the extension of networks, while ensuring the storage and the diffusion of information on a large scale and at an ever-decreasing cost, has the tendency to transform the world into an immense informational spider’s web. This has the effect of displacing efficiency towards network structures and relational systems. We are entering, at least in the industrialized countries, a transition phase, from an economy founded on rationalization of material activities and intensive energy resources to an economy founded on information and knowledge, the stakes in which are considerable for enterprises. These enterprises face an environment that is more and more uncertain. Since the 1950s, their environment has changed drastically. The globalization of economics and of markets and the growing importance of networks are factors that have Chapter written by Patrick EPINGARD. Trends in Enterprise Knowledge Munugement Edited by Imed Boughzala & Jean-LouisErmine Copyright 02006, ISTE Ltd.
- 45. 46 Trends inEnterprise Knowledge Management contributed extensively to the destabilization of economies and to the rise of uncertainties. The steady and repetitive characteristic status of information during that period has gradually been replaced by an erratic flux of “perturbations” that prevent economic agents from predicting, even approximately, the evolution of variables in their environments. This is most often a pure, radical uncertainty that is not computable using statistics. This strong unpredictability is a consequence of the increasing complexity of economic systems (from the Latin word complexus, meaning woven together): the multiplication of products and services, of real or potential actors, of relationships with partners or competitors (which are often entangled), as well as the increasing complexity of technologies that have to be mastered. It generates a strong uncertainty about the future, even the near future, and requires a necessary mobilization of the cognitive resources of individuals and especially of organizations. Facing this increasing complexity requires the production and the management of knowledge, itself more and more complex, created from the mobilization and the cohesion of a set of individual expertises [De Bandt 2001]. This is precisely the objective of Knowledge Management (KM). But we need to go beyond the acceptance, which is today extensively shared, that the intangible capital of the enterprise has become a key factor of performance, or that information and knowledge constitute some strategic resources for organizations. We propose in this chapter to address the problem of measuring and assessing the intangible capital of the firm. It is, as we will see, an asset of a very different nature from physical capital. Can one measure this asset? Can one value its global or partial (through its components) impact on performance? Can one distinguish the effects of physical capital and intangible capital, or must the measure be global? In other words, what can we presently measure, and what do we want to measure? Before discussing some ways to answer to these difficult questions of measure and assessment, we need to identify adequate concepts, in order to avoid building on quicksand. What is the intangible capital of an enterprise? What are its components? What makes the difference from physical capital? Is it sound to consider a knowledge “stockpile” in the enterprise? What are the components of this “stockpile”? Is it necessary to distinguish information and knowledge and, if yes, what is the theoretical and practical range of this distinction? These questions require a clarification, to avoid regrettable confusions, which are too frequent in the present literature, as we can see. To clarify these concepts we will use recent theoretical advances that analyze the firm as a processor of knowledge in the so- called “knowledge-based economy”.
- 46. Can One Identifyand Measure the Intangible Capital of the Enterprise? 47 2.1. The intangible capital: an essential and elusive concept We need to refer to the basic theoretical sources. The economic notion of “capital” [Cota 1991] sends us back to the idea of a set of possessions serving to produce other possessions. We are driven very quickly to distinguish between the capital circulating and the stationary capital, the latter being composed of lasting indirect possessions that do not disappear physically during the process of production (machines, buildings, infrastructures, etc.). To deal with the relative imprecision of the extension of that concept (must we, for example, include human capital, financial capital, etc.?), we need to make a clear distinction between capital and production and to specify their relationship. Capital is a stock that has a given value at instant t, while production is a flux (or income) that has a duration, from time t to time t + 1. The production of equipment goods, which is related to investment, is therefore a flux that feeds the capital. The relationship is as follows: the capital at time t is enriched in period to t + 1 by the gross investment in the period, but is also reduced as a result of economic depreciation: 1 ( ; 1) (1 ) t t t t K K a I ( 1; ) ( ; 1) t t t t t K I aK ' where a is a capital depreciation factor and ( ; 1) t t I is the gross investment during the period (t;t+1). We van see, therefore, that if, for example, the depreciation of the asset is greater than the gross investment during the period, the value of the capital decreases. We can also see that if, after having defined the concept of capital, we need its measure, i.e. to value the capital, it is necessary to measure both the gross investment during the period and the depreciation of the capital. To do that, we assume that we know how to value the capital at the instant t, which does not seem obvious for intangible capital. How can we distinguish physical capital and intangible capital? Cotta (1991) proposes defining the goods of the intangible capital as “the set of knowledge that allowed the creation of the existing material and intangible goods and that allows today the use of material goods”. These intangible goods would be different from material goods, being a set of goods that are either financially or physically created by people in their effort to coping with their environment. Material or intangible, these goods can be “long” or “short”, depending on whether their longevity is greater or less than the duration of the production process (we recognize here the distinction between circulating capital and fixed capital).
- 47. 48 Trends inEnterprise Knowledge Management This definition emphasizes the notion of “knowledge”, as in the definition of intangible investment I have already proposed (in [Epingard 1999]): joint production by knowledge creation that is incorporated in a sustainable manner in people (human capital), technical objects (technological capital) and organization (organizational capital). If one makes the analogy with physical goods, the intangible investment would be therefore a “flux” of knowledge that feeds the intangible capital that one can assimilate into a “stock” of knowledge. Is it really as simple as this? We do not believe that it is, because this analogy relies on a supposed isomorphism between merchandise and knowledge, which we have so far accepted without analyzing it, the founding cumulative hypothesis of the positive theory of capital implying that some knowledge is added to existing knowledge, other knowledge disappears and the value of intangible capital is an arithmetic consequence. This hypothesis seems false to us, because knowledge does not reduce to merchandise. At this stage, it is important to distinguish carefully between information and knowledge, terms that are too often considered, in a very reducing way, as interchangeable. According to our concept, information is clearly located in the domain of what is possible to codify. It takes the form of a set of formatted and structured data that (and we must take account of this from now on) cannot generate new information. It is the raw material of knowledge, the flux of messages that increases it, restructures it or modifies it. However, as K. Boulding had already noticed more than 30 years ago, knowledge must not be considered as a simple “stock”, in the sense of a container that is filled and emptied from fluxes of information, but rather as a “structure” that feeds himself with information, that may become richer by its use. Knowledge is a cognitive capacity and a learning capacity. It requires the exploitation of information, pre-existing cognitive categories, interpretation codes and various faculties (judgment, intuition, ability, etc.). What is rare today is not information, which is available at lower and lower cost (it is the cost of creation that is important, the marginal cost of reproduction is nearly zero), but the capacity and expertise to sort it out and to exploit it, which relies on cognitive capacities. Knowledge is therefore far from being reducible to information, as supposed implicitly by the standard theory, which is extensively based on the technical metaphor of information as a signal that it is merely emitted and transmitted to a receiver, at the lowest possible cost and without distortion. Moreover, a frequent mistake in the literature consists of considering that knowledge increases in linear proportion to the accumulated information, which implies that the dimension of interpretation is completely ignored. There is a big difference, in particular from the point of view of cost, between duplication of information (marginal cost nearly zero) and transfer of knowledge (cost often high). Knowledge is not, in most cases,
- 48. Can One Identifyand Measure the Intangible Capital of the Enterprise? 49 separable from its human support and is often difficult to transmit beyond its initial production context, especially because it is partly tacit. From this major distinction, and if we come back to the definition of intangible capital as set of knowledge, we can wonder, on the one hand, what is the nature of knowledge in the enterprise and, on the other hand, where it is stocked. So, what is an intangible good? The most usual definition in the literature is a definition by negation: an intangible good or asset is a non-material good, which means non-observable or, more precisely, one of which only the effects can be observed, like the invisible man whom one only knows by traces left on cushions (when he removes his bandages, of course!) [Demotes-Mainard 2003]. Is it satisfactory to say that goods are material and services are intangible, wonders J. De Bandt (2002). This would force us to recognize implicitly that the expression “intangible goods” is an oxymoron, a contradiction in terms. However, one must recognize that all goods which possess a physical envelope by definition incorporate, in their value chain, intangible components to a more or less important degree and, at present, to a more and more important degree. For example, the physical support of a book or a software program has very little value compared to the content, i.e. to the activities of design and production of the embedded knowledge. Then one has to decide where to place the cursor; to what degree of intangibility, in the “goods–services continuum”, can one speak of “intangible goods”?1 The “intangible capital” of the enterprise is for us a set of assets that can be described in terms of expertise and knowledge that may be able to produce a flux of incomes for a long time. We then have to determine, on the one hand, how to locate such a set of assets within the enterprise and, on the other hand, how to build a typology of intangible capital that makes sense for cost measurement and value creation in the enterprise. For knowledge location, Machlup (1984) distinguishes three kinds of storage of knowledge, corresponding to three kinds of capital: – knowledge integrated in tools and machines; 1 P. Dumesnil [1995] writes: “[the] present use of the expression ‘capital’ or ‘intangible investment’ appears to us perfectly paradoxical. It designates, most often, the embedding of the language in something ‘material’. That this material is concerned with micro-physics and can be embedded and reproduced at low cost, while using ‘small’ quantities of energy, makes it by no means intangible.” This is why we consider that the qualifier “intangible” does not describe the support, but the content in terms of knowledge of the productive asset that is implied.
- 49. 50 Trends inEnterprise Knowledge Management – knowledge retained by individuals; – knowledge that circulates because it is not restricted to a specific knowledge holder; it can be freely disseminated, or not, such as, for example, scientific knowledge. It seems to us that Machlup disregards an essential support of knowledge storage:2 the organization. This term must be understood in two ways: as a means of coordination within a set of rules on the one hand and as a collective entity on the other hand. Organizational knowledge is distributed among actors and is, at the same time, crystallized in structures. It can in no way be reduced to the sum of individuals, even though they may be very rich, and even though, of course, the knowledge of the organization is built from the knowledge of the individuals that compose it. It includes a set of coordination and decision rules, explicit or tacit (routines, habits), as well as the collective know-how embedded in the organization. It also includes a “collective memory” supported by the information system of the enterprise. This is why organizational learning is now an important topic: an organization can learn and store its knowledge in a collective memory. This way of learning and developing fundamental expertise is a strong leverage for performance. To spotlight organizational capital, the KM pioneering authors Edvinson and Malone proposed the equation: intangible capital = human capital + structural capital the latter being defined by the authors as “What remains in the enterprise when employees have gone home” (client files, licenses, information systems, quality, etc.). A major difference between human capital and structural capital is, of course, that the first does not legally belong to the enterprise, while the second may be an object of negotiation, which is essential from the creditors’ point of view. It should be noted that although structural capital is essential for competitiveness, it is almost completely absent in the private accounting of enterprises (one cannot presently activate expenses that are permitted to constitute it). If one wants to measure it and to value its effects on competitiveness, one needs an extra type of accountant, which is an unsolved problem. Theories that are more especially interested in the effects of intangible capital on economic growth, and in particular theories of endogenous growth, whose leading idea is that technical progress depends on the choice of agents so that a more or less 2 We emphasize the locations of knowledge retained by the enterprise. However, only a part of the “knowledge stockpile” is localized, while another part is distributed, as a result of the knowledge diffusion process.
- 50. Can One Identifyand Measure the Intangible Capital of the Enterprise? 51 important part of resources can be dedicated to the costs of RD or training are especially interested in two components of it, linked to two types of specific externalities: – Human capital, which includes the set of knowledge and ability (expertise) embedded in individuals, having the potential to increase their efficiency, must be distinguished from physical capital on at least two points: it is not appropriable by others (property of exclusive rights and non-rivalry), and it is far less limited than physical capital, from the point of view of innovation and creativeness, as well as learning (it is produced from itself). We should also note that human capital is a much more opaque entity than physical capital, even though quality signals (diplomas, title, etc.) may limit this opacity, which generates assessment problems. The source of enrichment of human capital is obviously in education and learning, but authors such as Lucas (1988) also integrate in their model a hypothesis of knowledge externality, the idea being that the capital human of an individual is much more rich and efficient if he or she can share and exchange that knowledge with other people whose human capital is itself rich. There is, in fact, a positive externality of networking for human capital: while increasing his or her level of expertise, the individual also increases that of others, via the enriched quality of their exchanges, and this is reciprocal. This also happens at an inter-businesses level, as for instance in Silicon Valley. The problem is that, even though one is conscious of the importance of these knowledge externalities, it is difficult to measure them, and in particular to isolate their effect on growth rate. – Technological capital, which is initiated by RD investments, is considered by Romer (1990) as a semi-public good, which means that it is in one part appropriable (protection and profit making by the sale of patents) and in another part non-rival (the possession of knowledge by an individual does not prevent another individual also having it). It is precisely this character of non-rivalry of technological knowledge that makes it possible to increase scalable yields: not being incorporated intrinsically in a physical object, knowledge can be used in numerous activities at a very weak marginal cost (compared to the cost of creation). When, for example, one constructs two identical factories, one only incurs the cost of the innovation once. Technological externality is related to RD, and more extensively to the innovation in process or product. It is based on the fact that every agent can take advantage of the available technological knowledge, knowledge that is itself the result of a long process of intangible capital accumulation over time. This technological externality is both interagent and intertemporal. The effects of technological capital and human capital are combined to increase the productivity of the enterprise. The knowledge they carry, which is both the input
- 51. 52 Trends inEnterprise Knowledge Management and the output of technical progress [Encaoua et al. 2004], can permit some increasing yields because it possesses attributes that are fundamentally different from a traditional good. Let us recall its two main distinctive features. It is a public good3 : being essentially non-rival, it needs to be produced only once, but it is not limited in use. One does not lose acquired knowledge and hence that “input” has a multiplicative character. There is an important point to be made here: because of its specific features and, in particular, the weakness of its marginal cost of use, knowledge can be incorporated simultaneously into several supports. Thus, the knowledge produced during the RD phases is included in technical objects, but it can also be kept by the enterprise in tacit or codified form. On the one hand, there is no simple link between an intangible investment type and an incorporation type, while, on the other hand, it would not make sense to want to “add” the human capital to the technological capital of the enterprise so that its value appreciates, since the substance is in part common. We will come back to this point. It is cumulative: we saw that RD generates positive externalities, because present research is extensively based on past research. We noted that information cannot generate any new information, whereas knowledge has this property of being able to generate new knowledge and to become richer when it is used. Research also improves learning capacities and existing knowledge absorption, which finally becomes an intangible asset of the enterprise. One sees the importance of the cumulative process that treats knowledge as input and as output of the production process. The intangible capital in the enterprise is constituted of a set of knowledge and ability of both human and technological nature, plus the quality of the organization (broadly speaking), which economic models hardly integrate because of its non- measurability. However, it plays an essential role in the performance of enterprises. This corporate knowledge is partly codified and partly tacit, especially the know- how. An important part of the codified knowledge comes from tacit knowledge conversion, which means that it is not expressible outside the action of the person who retains it, because it is embedded in its human support4 . Through knowledge 3 This does not mean that some knowledge bases are not private, but that essentially knowledge is non-rival, and that consequently it is not possible to guarantee an efficient knowledge production process based exclusively on a market system, since sale to the marginal cost (near zero or very weak) would not permit the producer to be remunerated. See Foray [2000]. 4 The importance of this tacit knowledge and the difficulty in codifying it can be seen in the process of creation of an expert system. The expert is not indeed expert on its own expertise and a part of the knowledge that he or she retains, like his or her ability, is not easily expressible. To codify this knowledge is therefore an extremely complex operation, involving
- 52. Can One Identifyand Measure the Intangible Capital of the Enterprise? 53 codification, humanity exploits this unique faculty that he or she possesses, according to A. Leroi-Gourhan, “to place his memory outside of himself”. But the expansion of codified databases, due to the emergence of ICT, does not suppress the existence and even the necessity of tacit knowledge. One could even say that it reinforces them, because codified knowledge development causes learning activities (needed for instance to exploit the knowledge) and new knowledge emergence and ability, which reinforce and so on. Consequently, tacit and codified knowledge, far from neutralizing one another, are in constant conversion5 , and are involved in a dynamic interaction relationship that, via organizational learning, can initiate virtuous spirals and increase the value of the intangible capital of the enterprise. Intangible investments, such as RD, training, software creation and marketing, contribute to the constitution of assets that do not necessarily have a commercial value outside the organization, which means that they are specific assets in Williamson’s sense. In fact, the more the constituted asset is specific and the more tacit the embedded knowledge is, the farther we are from a notion of merchandise exchangeable on a market, and vice versa6 . If one takes out a license or a patent, this is one example of generic knowledge that is extensively codified, for which there exists a market. On the other hand, the casual networks or a team’s collective ability are very specific assets and the knowledge that they generate has a predominantly tacit part. These specific assets, which are fundamental for the performance of the enterprise, i.e., cannot be evaluated on the market. Between those two extremes (the specific and perfectly identifiable asset on the one hand and the specific and non- valuable – cannot be valued – asset on the other), there exist a multiplicity of intermediate intangible assets characterized by the human dimension of their incorporation (knowledge partly codified and partly tacit) and by the constituted asset specificity (information system of the enterprise, for example, often partly generic and partly specific). These intangible assets are in general at least partially transferable on the market, and therefore are partially valuable, i.e. they can be valued. This explains the difference between the accounting value of assets and the global acquisition value of an enterprise; we will examine this point below. The field of the intangible is, therefore, particularly difficult to define and to evaluate, partly because of the hidden part of the iceberg, the most important part probably, which is not directly measurable. However, the problem is that enterprises not also translation, but also re-creation supported by a dedicated language. This is why tacit knowledge and codified knowledge will never totally overlap. 5 See the pioneering work of Nonaka [1994], who proposes qualifying the transformation processes for knowledge as follows: externalization for transformation from tacit to explicit and internalization for explicit to tacit. 6 For a classification of intangible assets, see Duizabo and Guillaume (1996).
- 53. 54 Trends inEnterprise Knowledge Management feel the need to understand their key factors of success, of which they strongly recognize the intangible character, and to evaluate the contribution to their performances. The problem is that intangible asset measurement remains at present a real theoretical enigma. 2.2. Immaterial measurement: a theoretical enigma? What do we know and what are we likely to want to measure? What we can observe currently, when looking at the existing statistics on this question, is more a mosaic of measures concerning partial elements, which are not always coherent, rather than a global approach: “What appears to be missing is a global approach that would integrate the different steps in a coherent way, to build a real observation system”, Mr Demotes-Mainard (2003, p. 1), a French national specialist (INSEE) in statistics about the information society, has pertinently commented. However, these scattered and heterogeneous statistical analyses are not the only obstacles to an appropriate understanding of the phenomenon. Difficulties in measuring intangible assets are intrinsically related to the specific features that differentiate them from physical assets, and essentially to the three following features: – Non-separability: it is often very difficult to isolate assets, or even to separate the material and intangible aspects and to value them separately. Under these conditions we must consider the global value; analysis carried out element by element is meaningless. The problem is that even if we adopt a global approach, the specificity of the intangible asset usually prevents the establishment of an organized and efficient market that would permit the assignment of a price, in contrast to financial or material assets. Assessment by the market of intangible asset is therefore nearly impossible [Alcouffe 2003]. – The undetermined life cycle of these assets: it is much easier to observe the material wear in a machine than the loss of value due to wear or obsolescence of human capital. Furthermore, human capital has the property that it becomes more valuable when used, via learning, which is what principally differentiates it from physical capital. This does not mean that the risk of obsolescence is negligible with regard to intangible assets; in a world of uncertainty and high rate of change, we see a kind of “Schumpeterian” process of creative destruction, of unceasing creation of new elements and destruction of old elements that constantly feeds back accumulated knowledge and expertise. Maintaining intangible capital thus becomes essential; it relies on the management of competences and know-how in organizations and, therefore, of course, on knowledge management. – The opacity of these assets, even if only partial: intangible assets are most often very specific and are embedded in their human support, so that their quality is not
- 54. Can One Identifyand Measure the Intangible Capital of the Enterprise? 55 directly observable; this generates a large uncertainty concerning future income, which remains even when a market valuation exists. Let us think, for example, about the market in life-long learning and certain types of service that have observable costs (often high, for example, training related to human resource development). Their impact on the constitution of sustainable intangible assets, and therefore on the performance of the enterprise, remains very uncertain. Even if we consider the recent evolution of accounting practice, which is aimed at partially integrating, under some restraining conditions, the expenses of RD, software, brands and intellectual creation, we are far from obtaining a faithful accounting of the value of the intangible assets of the enterprise. In fact, accountants, guided by the prudent principle of only accounting for elements that are part of the legal capital of the enterprise, are led by legal, financial and economic logic, which necessarily creates a bias in their judgment on what really constitutes the economic assets of the enterprise, and they can only provide a distorted picture. From a strictly accounting point of view, intangible capital is characterized, not only by the so-called “incorporeal” assets (patents, licenses) that are the visible part of the iceberg, but by the goodwill or overvalue (economic value – patrimonial value) that characterizes the potential that the enterprise has created over time (a set of scientific, technological and commercial expertise, as well as quality of management, social climate, know-how, etc.). Formally, if B is the benefit of the enterprise, CNA the corrected net asset and i the rate of sure investment of capital, the goodwill is equal to k(B – i.CNA), where k is a rate that allows this “super- profit” to be capitalized over several years. Here we see the idea, developed by the Austrian economists that the value of the enterprise depends on its future potential (goodwill) and not on its past states (net assets valued to their historic value). The overvalue therefore represents the gap between the price paid for the acquisition of an enterprise and the accounting capital value of the enterprise. It is thus assumed to represent a measure of the value of the intangible assets purchased at the date of acquisition. From a financial point of view concerning the goodwill, one can consider the intangible asset as a fund, the value of which depends on its capacity to generate profits during its life cycle. If, for instance, the enterprise reduces the accounting value of its goodwill, previously registered as part of its assets, this means that it is noting the loss of value of its intangible assets. It is therefore clear that, in order for the corresponding investments to be worth considering, the value of constituted asset must be greater than its patrimonial value. However, a problem remains: outside accounting conventions, what do we measure and what do we know we are measuring? When we speak of the value of an asset, it is very important to distinguish the input, which means what is performed,
- 55. Another Random Documenton Scribd Without Any Related Topics
- 59. The Project GutenbergeBook of London Souvenirs
- 60. This ebook isfor the use of anyone anywhere in the United States and most other parts of the world at no cost and with almost no restrictions whatsoever. You may copy it, give it away or re-use it under the terms of the Project Gutenberg License included with this ebook or online at www.gutenberg.org. If you are not located in the United States, you will have to check the laws of the country where you are located before using this eBook. Title: London Souvenirs Creator: Charles William Heckethorn Release date: October 26, 2013 [eBook #44044] Language: English Credits: Produced by Al Haines *** START OF THE PROJECT GUTENBERG EBOOK LONDON SOUVENIRS ***
- 61. LONDON SOUVENIRS BY CHARLES WILLIAMHECKETHORN AUTHOR OF 'THE SECRET SOCIETIES OP ALL AGES,' 'LINCOLN'S INN FIELDS,' ETC. LONDON CHATTO WINDUS 1899 CONTENTS I. GAMBLING-CLUBS AND HIGH PLAY II. WITTY WOMEN AND PRETTY WOMEN III. OLD LONDON COFFEE-HOUSES IV. OLD M.P.S AND SOME OF THEIR SAYINGS V. FAMOUS OLD ACTORS VI. OLD JUDGES AND SOME OF THEIR SAYINGS VII. SOME FAMOUS LONDON ACTRESSES VIII. QUEER CLUBS OF FORMER DAYS IX. CURIOUS STORIES OF THE STOCK EXCHANGE
- 62. X. WITS ANDBEAUX OF OLD LONDON SOCIETY XI. LONDON SEEN THROUGH FOREIGN SPECTACLES XII. OLD LONDON TAVERNS AND TEA-GARDENS I. THE GALLERIED TAVERNS OF OLD LONDON II. OLD LONDON TEA-GARDENS XIII. WILLIAM PATERSON AND THE BANK OF ENGLAND XIV. THE OLD DOCTORS XV. THE LOST RIVERS OF LONDON XVI. ROGUES ASSORTED XVII. BARS AND BARRISTERS XVIII. THE SUBLIME BEEFSTEAKERS AND THE KIT-KAT AND ROTA CLUBS XIX. HAMPTON COURT PALACE AND ITS MASTERS LONDON SOUVENIRS I. GAMBLING-CLUBS AND HIGH PLAY. Philosophers may argue, and moralists preach, the former against the folly, and the latter against the wickedness of gambling, but, as may be expected, their remonstrances pass but as a gentle breeze over the outwardly placid ocean of play, causing the fishes—the familiars of the gambling world—languidly to raise their heads, and mildly to inquire: 'What's all that row about?' Gambling is one of the
- 63. strongest passions inthe human breast, and no warning, no exhibition of fatal examples, will ever stop the indulgence in the excitement it procures. It assumes many phases; in all men have undergone disastrous experiences, and yet they repeat the dangerous and usually calamitous experiments. In no undertaking has so much money been lost as in mining; prizes have occasionally been drawn, but at such rare intervals as to be cautions rather than encouragements; and yet, even at the present day, with all the experience of past failures, sanguine speculators fill empty shafts with their gold, which is quickly fished up by the greedy promoters. Some of the now most respectable West End clubs originally were only gambling-hells. They are not so now; but the improvement this would seem to imply is apparent only. Our manners have improved, but not our morals; the table-legs wear frilled trousers now, but the legs are there all the same, even the blacklegs. But it is the past more than the present we wish to speak of. Early in the last century gaming was so prevalent that in one night's search the Leet's Jury of Westminster discovered, and afterwards presented to the justices, no fewer than thirty-five gambling-houses. The Society for the Reformation of Manners published a statement of their proceedings, by which it appeared that in the year beginning with December 1, 1724, to the same date in 1725, they had prosecuted 2,506 persons for keeping disorderly and gaming houses; and for thirty-four years the total number of their prosecutions amounted to the astounding figure of 91,899. In 1728 the following note was issued by the King's order: 'It having been represented to his Majesty that such felons and their
- 64. accomplices are greatlyencouraged and harboured by persons keeping night-houses ... and that the gaming-houses ... much contribute to the corruption of the morals of those of an inferior rank ... his Majesty has commanded me to recommend it, in his name, in the strongest manner to the Justices of the Peace to employ their utmost care and vigilance in the preventing and suppressing of these disorders, etc.' This warning was then necessary, though as early as 1719 an order for putting in execution an old statute of Henry VIII. had been issued to all victuallers, and others whom it might concern. The order ran: 'That none shall keep or maintain any house or place of unlawful games, on pain of 40s. for every day, of forfeiting their recognisance, and of being suppressed; that none shall use or haunt such places, on pain of 6s. 8d. for every offence; and that no artificer, or his journeyman, husbandman, apprentice, labourer, mariner, fisherman, waterman, or serving-man shall play at tables, tennis, dice, cards, bowls, clash, coiting, loggating, or any other unlawful game, out of Christmas, or then out of their master's house or presence, on pain of 20s.' There were thus many attempts at controlling the conduct of the lower orders, but the gentry set them a bad example. The Cocoa-Tree Club, the Tory chocolate-house of Queen Anne's reign, at No. 64, St. James's Street, was a regular gambling-hell. In the evening of a Court Drawing-room in 1719, a number of gentlemen had a dispute over hazard at that house; the quarrel became general, and, as they fought with their swords, three gentlemen were mortally wounded, and the affray was only ended by the interposition of the Royal Guards, who were compelled to knock the
- 65. parties down withthe butt-ends of their muskets indiscriminately, as entreaties and commands were disregarded. Walpole, in his correspondence, relates: 'Within this week there has been a cast at hazard at the Cocoa-Tree, the difference of which amounted to £180,000. Mr. O'Birne, an Irish gamester, had won £100,000 of a young Mr. Harvey, of Chigwell, just started from a midshipman into an estate by his elder brother's death. O'Birne said: You can never pay me. I can, said the youth; my estate will sell for the debt. No, said O'Birne, I will win £10,000; you shall throw for the odd £90,000. They did, and Harvey won.' It is not on record whether he took the lesson to heart. The house was, in 1746, turned into a club, but its reputation was not improved; bribery, high play, and foul play continued to be common in it. Another chocolate-house was White's, now White's Club, St. James's Street. As a chocolate-house it was established about 1698, near the bottom of the west side of St. James's Street; it was burnt down in 1773. Plate VI. of Hogarth's 'Rake's Progress' shows a room full of players at White's, so intent upon play as neither to see the flames nor hear the watchmen bursting into the room. It was indeed a famous gambling and betting club, a book for entering wagers always lying on the table; the play was frightful. Once a man dropped down dead at the door, and was carried in; the club immediately made bets whether he was dead or only in a fit; and when they were going to bleed him the wagerers for his death interposed, saying it would affect the fairness of the bet. Walpole, who tells the story, hints that it is invented. Many a highwayman— one is shown in Hogarth's picture above referred to—there took his chocolate or threw his main before starting for business. There Lord
- 66. Chesterfield gamed; Steeledated all his love news in the Tatler from White's, which was known as the rendezvous of infamous sharpers and noble cullies, and bets were laid to the effect that Sir William Burdett, one of its members, would be the first baronet who would be hanged. The gambling went on till dawn of day; and Pelham, when Prime Minister, was not ashamed to divide his time between his official table and the piquet table at White's. General Scott was a very cautious player, avoiding all indulgence in excesses at table, and thus managed to win at White's no less than £200,000, so that when his daughter, Joanna, married George Canning he was able to give her a fortune of £100,000. Another club founded specially for gambling was Almack's, the original Brooks's, which was opened in Pall Mall in 1764. Some of its members were Macaronis, the fops of the day, famous for their long curls and eye-glasses. 'At Almack's,' says Walpole, 'which has taken the pas of White's ... the young men of the age lose £10,000, £15,000, £20,000 in an evening.' The play at this club was only for rouleaux of £50 each, and generally there was £10,000 in gold on the table. The gamesters began by pulling off their embroidered clothes, and put on frieze garments, or turned their coats inside out for luck. They put on pieces of leather to save their lace ruffles; and to guard their eyes from the light, and to prevent tumbling their hair, wore high-crowned straw hats with broad brims, and sometimes masks to conceal their emotions. Almack's afterwards was known as the 'Goose-Tree' Club—a rather significant name—and Pitt was one of its most constant frequenters, and there met his adherents. Gibbon also was a member, when the club was still Almack's—which,
- 67. indeed, was thename of the founder and original proprietor of the club. Another gaming-club was Brooks's, which at first was formed by Almack and afterwards by Brooks, a wine-merchant and money- lender. The club was opened in 1778, and some of the original rules are curious: '21. No gaming in the eating-room, except tossing up for reckonings, on penalty of paying the whole bill of the members present. 30. Any member of this society that shall become a candidate for any other club (old White's excepted) shall be ipso facto excluded. 40. Every person playing at the new quinze-table shall keep fifty guineas before him. 41. Every person playing at the twenty-guinea table shall keep no less than twenty guineas before him.' According to Captain Gronow, play at Brooks's was even higher than at White's. Faro and macao were indulged in to an extent which enabled a man to win or to lose a considerable fortune in one night. George Harley Drummond, a partner in the bank of that name, played only once in his life at White's, and lost £20,000 to Brummell. This event caused him to retire from the banking-house. Lord Carlisle and Charles Fox lost enormous sums at Brooks's. At Tom's Coffee House, in Russell Street, Covent Garden, there was playing at piquet, and the club consisting of seven hundred noblemen and gentlemen, many of whom belonged to the gay society of that day (the middle of the last century), we may be sure the play was high. Arthur's Club, in St. James's Street, so named after its founder (who died in 1761), was a famous gambling centre in its day. A nobleman of the highest position and influence in society was detected in cheating at cards, and after a trial, which did not
- 68. terminate in hisfavour, he died of a broken heart. This happened in 1836. The Union, which was founded in this century, was a regular gambling-club. It was first held at what is now the Ordnance Office, Pall Mall, and subsequently in the house afterwards occupied by the Bishop of Winchester. In the early days of this century the most notorious gambling- club was Crockford's, in St. James's Street. Crockford originally was a fishmonger, and occupied the old bulk-shop west of Temple Bar. But, having made money by betting, 'he gave up,' as a recent writer on 'The Gambling World' says, 'selling soles and salmon, and went in for catching fish, confining his operations to gudgeons and flat-fish'; or, in other words, he established a gambling-house, first by taking over Watier's old club-house, where he set up a hazard bank, and won a great deal of money; he then separated from his partner, who had a bad year and failed. Crockford removed to St. James's Street, where he built the magnificent club-house which bore his name. It was erected at a cost of upwards of £100,000, and, in its vast proportions and palatial decorations, surpassed anything of the kind ever seen in London. To support such an establishment required a large income; yet Crockford made it, for the highest play was encouraged at his card-tables, but especially at the hazard-tables, where Crockford nightly took his stand, prepared for all comers. And he was successful, and became a millionaire. When he died he left £700,000, and he had lost as much in mining and other speculations. His death was hastened, it is said, by excessive anxiety over his bets on the turf. He retired from the management of the club in 1840, and died in 1844. The club was soon after closed, and
- 69. after a fewyears' interval was reopened as the Naval, Military, and Civil Service Club. It was then converted into dining-rooms, called the Wellington. Later on it was taken by a joint-stock company as an auction-room, and now it is again a club-house, known as the Devonshire Club. We referred above to Watier's Club. It was established in 1807, at the instigation of the Prince of Wales, and high play was the chief pursuit of its members. 'Princes and nobles,' says Timbs in his 'Curiosities of London,' 'lost or gained fortunes amongst themselves.' But the pace was too fast. The club did not last under its original patronage, and it was then, when it was moribund, taken over by Crockford. At this club, also, macao was the favourite game, as at Brooks's. One of the most objectionable results of promiscuous gambling is the disreputable company into which it often throws a gentleman. 'That Marquis, who is now familiar grown With every reprobate about the town.... Now, sad transition! all his lordship's nights Are passed with blacklegs and with parasites.. The rage of gaming and the circling glass Eradicate distinction in each class; For he who scarce a dinner can afford Is equal in importance with my lord.' This is just what happened when gambling-hells were openly flourishing in London, and what happens now when gambling-clubs
- 70. abound, and arealmost daily raided by the police, when some actually respectable people are found mixed up with the rascaldom which supports these clubs. A perfect mania seems to have seized the lower orders of our day to gamble; but formerly, for instance, in Walpole's time, in the latter half of the last century, the upper classes were the worst offenders, of which the just-mentioned statesman and epistolary chronicler of small-beer, which, however, by long keeping has acquired a strong and lasting flavour, gives us many proofs. 'Lord Sandwich,' he reports, 'goes once or twice a week to hunt with the Duke [of Cumberland], and, as the latter has taken a turn of gaming, Sandwich, to make his court—and fortune— carries a box and dice in his pocket; and so they throw a main whenever the hounds are at fault, upon every green hill and under every green tree.' Five years later, at a magnificent ball and supper at Bedford House, 'the Duke was playing at hazard with a great heap of gold before him. Somebody said he looked like the prodigal son and the fatted calf both.' Under such circumstances it could not fail that swindlers par excellence sometimes found their way among the royal and noble gamblers. There was a Sir William Burdett, whose name had the honour of being inscribed in the betting-room at White's as the subject of a wager that he would be the first baronet who would be hanged. He and a lady, 'dressed foreign, as a Princess of the House of Brandenburg,' cheated Lord Castledurrow (Baron Ashbrook) and Captain Rodney out of a handsome sum at faro. The noble victim met the Baronet at Ranelagh, and addressed him thus: 'Sir William, here is the sum I think I lost last night. Since then I have heard that you are a professed pickpocket, and therefore I desire to have no further acquaintance with you.' The Baronet took
- 71. the money witha respectful bow, and then asked his Lordship the further favour to set him down at Buckingham Gate, and without further ceremony jumped into the coach. Walpole writes to Mann, in 1750, that 'Jemmy Lumley last week had a party of whist at his own house: the combatants, Lucy Southwell, that curtseys like a bear, Mrs. Bijean, and Mrs. Mackenzy. They played from six in the evening till twelve next day, Jemmy never winning one rubber, and rising a loser of £2,000.... He fancied himself cheated and would not pay. However, the bear had no share in his evil surmises ... and he promised a dinner at Hampstead to Lucy and her sister. As he went to the rendezvous his chaise was stopped, and he was advised by someone not to proceed. But proceed he did, and in the garden he found Mrs. Mackenzy. She asked him whether he was going to pay, and, on his declining to do so, the fair virago took a horsewhip from beneath her hoop, and fell upon him with the utmost vehemence.' Members of clubs were fully aware of the nefariousness of their devotion to gambling. When a waiter at Arthur's Club was taken up for robbery, George Selwyn said: 'What a horrid idea he will give of us to the people in Newgate?' Certes, some of the highwaymen in that prison were not such robbers and scoundrels as some of the aristocratic members of those clubs. When, in 1750, the people got frightened about an earthquake in London, predicted to happen in that year, 'Lady Catherine Pelham,' Walpole tells us, 'Lady James Arundell, and Lord and Lady Galway ... go this evening to an inn ten miles out of town, where they are going to play at brag till five in the morning, and then come back, I suppose, to look for the bones of their husbands and families under the rubbish.' When the rulers of the nation on such an occasion, or any other occasion of public
- 72. terror, possibly causedby their own mismanagement of public affairs, hypocritically and most impertinently ordered a day of fasting and humiliation, the gambling-houses used to be filled with officials and members of Parliament, who thus had a day off. There was one famous gambling-house we find we have not yet mentioned, viz., Shaver's Hall, which occupied the whole of the southern side of Coventry Street, from the Haymarket to Hedge Lane (now Oxenden Street), and derived its name from the barber of Lord Pembroke, who built it out of his earnings. Attached to it was a bowling-green, which sloped down to the south. The place was built about the year 1650, and the tennis-court belonging to it till recently might still be seen in St. James's Street. II. WITTY WOMEN AND PRETTY WOMEN. Certain waves of sentiment or action, or both combined, have at various times passed over the face of European society. A thousand years ago the Old Continent went madly crusading to snatch the Holy Sepulchre from the grasp of the pagan Sultan, who, sick man as he is, still holds it. The movement had certain advantages: it cleared Europe of a good deal of ruffianism, which never came back, as it perished on the journey to Jerusalem, or very properly was killed off by the justly incensed Turks, who could not understand by what right these hordes of robbers invaded their country. Then another phase of society madness arose. Some maniac, clad in
- 73. armour, on ahorse similarly accoutred, would appear, and challenge everyone to admit that the Lady Gwendolyne Mousetrap, whom he kept company with, and took to the tea-gardens on Sundays, was the most peerless damosel, and that whoso doubted it, would not get off by paying a dollar, but would have to fight it out with him. Then another mailed and belted chap would jump up, and maintain that the Countess of Rabbit-Warren—who was the girl he was just then booming—was the finest woman going, and that that slut Gwendolyne Mousetrap was no better than she should be. Of course, as soon as the King and Court heard of the shindy between the two knights a day was appointed when they should fight it out, the combatants being enclosed in a kind of rat-pit, officially called lists, whilst the King, his courtiers and their gentle ladies looked at the sport; and if one of the knights was killed, or perhaps both were killed, or at least maimed for life, the Lady Gwendolyne and the Countess of Rabbit-Warren, who, of course, both assisted at the spectacle, received the congratulations of the Court. Sometimes one of the knights would funk, and not come up to the scratch; then he was declared a lame duck, and the lady whom he had left in the lurch and made a laughing-stock of would erase his name from her tablets, and shy the trumpery proofs of devotion he had given her, a worn-out scarf or Brummagem aigrette, out of an upper window. This was called the age of chivalry. Then a totally different eruption of the fighting mania—which is, after all, the universal principle in human action—took place. A vagrant scholasticus would appear in a University town, and announce that he was ready to hold a disputation with any professor, Doctor of Divinity, or Master of Arts, on any mortal subject, the more subtle, and the more
- 74. incomprehensible, and themore mystical, the better. Thus, one such scholasticus got into the rostrum at Tübingen, and addressed his audience thus: 'I am about to propound three theses: the answer to the first is known to myself only, and not to you; to the second, the answer is known neither to you nor to me; to the third, the answer is known to you only.' This was a promising programme, and, indeed, proved highly edifying. 'Now, the first question,' resumed the scholasticus, 'is this: Have I got any breeches on? You don't know, but I do; I have not. The second question, the answer to which is known neither to you nor to me, is: Shall I find in this town any draper willing to advance on credit stuff enough to make me a pair? And the third question, the answer to which is known to you only, is: Will any of you pay a tailor's wages to make me a pair? And now that the argument is clearly before you, we may proceed to the consideration of the parabolic triangulation of the binocular theorem;' and then he would bewilder them with a lot of jaw- breaking words, which then, as now, passed for learning. This was called the age of scholasticism. It was succeeded by the Renaissance, which, after a good boil-up of its intellectual ingredients, settled down into a literary mud, an Acqui-la-Bollente, a Nile mud, pleasant to the soul, and fertilizing to the mind, the protoplasm of diarists and letter-writers, of whom—to mention but three—Evelyn, Pepys, and Horace Walpole were prominent patterns in the seventeenth and eighteenth centuries. It is with the latter, Horace Walpole, of Strawberry Hill, we are chiefly concerned. Horace Walpole, after enlarging a cottage into a Gothic castle, with lath and plaster, and rough-cast walls, and wooden pinnacles, filled it with literary and artistic treasures. But he
- 75. also gathered aroundhim a select social circle, which included Garrick, Paul Whitehead, General Conway, George Selwyn, Richard Bentley, the poet Gray, Sir Horace Mann, and Lords Edgcumbe and Strafford. And of ladies there was no lack; there were Mrs. Pritchard, Kitty Clive, Lady Suffolk, the Misses Berry, and—would you believe it?—Hannah More! It was the age for chronicling small-beer and home-made wine, gossip, scandal, and frivolity; and Horace Walpole enjoyed existence as a cynical Seladon or platonic Bluebeard amidst this bevy of lively, gay-minded, frolicsome beauties, young and old. Happily, or unhappily, for him, he did not become acquainted with the Misses Berry before 1788, when he was seventy-one years of age. He took the most extraordinary liking to them, and was never content except when they were with him, or corresponding with him. When they went to Italy, he wrote to them regularly once a week, and on their return he installed them at Little Strawberry Hill, a house close to his own, so that he might daily enjoy their society. He appointed them his literary executors, with the charge of collecting and publishing his writings, which was done under the superintendence of Mr. Berry, their father, who was a Yorkshire gentleman. When Walpole had succeeded to the Earldom of Orford he made Mary, the elder of the two sisters, an offer of his hand. Both sisters survived him upwards of sixty years. Little Strawberry Hill, which we just mentioned as the residence of the Misses Berry, had, before their coming to live in it, been occupied by Kitty Clive, the famous actress. Born in 1711, she made her first appearance on the stage of Drury Lane, and in 1732 she married a brother of Lord Clive, but the union proved unhappy, and was soon dissolved. She quitted the stage in 1769, leaving a splendid reputation as an
- 76. actress and asa woman behind her, and retired to Little Strawberry Hill, where she lived in ease, surrounded by friends and respected by the world. Horace Walpole was a constant visitor at her house, as were many other persons of rank and eminence. It was said of her that no man could be grave when Kitty chose to be merry. But she must have been a woman of some spirit, too, for when it was proposed to stop up a footpath in her neighbourhood she placed herself at the head of the opponents, and defeated the project. She died suddenly in 1785, and Walpole placed an urn in the grounds to her memory, with the inscription: 'Here lived the laughter-loving dame; A matchless actress, Clive her name. The comic Muse with her retired, And shed a tear when she expired.' The Mrs. Pritchard mentioned above was also an actress, of great and well-deserved fame. She lived at an originally small house, called Ragman's Castle, which she much improved and enlarged. It had, after her, various occupants, and was finally taken down by Lord Kilmorey during his occupancy of Orleans House, near which it stood. Another of the constant visitors at Strawberry Hill was Lady Suffolk, Pope's 'Chloe.' She was married to the Hon. Charles Howard, from whom she separated when she became the mistress of the Prince, afterwards George II., who, as Prince, allowed her £2,000 a year, and as King £3,200 a year, besides several sums at various times. He gave her £12,000 towards Marble Hill, the mansion still
- 77. facing the Thames,which became her residence. Her husband lived long enough to become Earl of Suffolk, and dying, left her free to marry, when she was forty-five, the Hon. George Berkeley, who died eleven years after. She survived him twenty-one years, and supplied her neighbour, Horace Walpole, with Court anecdotes and scandal during all that period. Walpole calls her remarkably 'genteel'—a favourite expression of his, though now so vulgar!—and, in spite of her antecedents, she was courted by the highest in the land. Such were the morals of those days. According to Horace Walpole, her mental qualifications were not of a high order, but she was gentle and engaging in her manners, and she was a gossip with a good memory—and that answered her host's purpose admirably. Pope also made great use of her reminiscences. Like Dr. Johnson, Horace Walpole liked to fill his house with a lot of female devotees; but whilst Johnson seemed to prefer a parcel of disagreeable, ugly, and cantankerous women, always quarrelling among themselves and with everybody else, Walpole liked his women to be young and fair, full of life and mirth. By what strange circumstance was the cynical and sarcastic Walpole led into a sort of friendship with the mild and pietistic Mrs. Hannah More? It was in 1784 that this queer friendship began. It appears that about that date Hannah More had discovered at Bristol a milk woman who wrote verses, just such verses as Hannah More and Walpole—neither of whom had an idea of poetry—would consider wonderful. A subscription must be started for the benefit of the milkwoman, and Hannah More applied to Horace Walpole, who set up for a Mæcenas, though he always expressed the utmost contempt for authors, for a contribution. Of course, Hannah More did not make this application
- 78. without a doseof fulsome compliment to Horace Walpole's genius, and he went into the trap, subscribed, and expressed his admiration of the milkwoman's poetry. The woman's name was Yearsley; she was quite ready to receive the money, but, having evidently a very high opinion of her own doggerel, she refused to listen to the literary advice given to her by Horace Walpole and her patroness, with whom she very soon quarrelled. Walpole condoled with Hannah thus: 'You are not only benevolence itself, but, with fifty times the genius of Dame Yearsley, you are void of vanity. How strange that vanity should expel gratitude! Does not the wretched woman owe her fame to you? ... Dame Yearsley reminds me of the troubadours, those vagrants whom I used to admire till I knew their history, and who used to pour out trumpery verses, and flatter or abuse, accordingly as they were housed and clothed, or dismissed to the next parish. Yet you did not set this person in the stocks, after procuring an annuity for her.' By this letter we see what were Horace Walpole's ideas of patronage: flattery and a pittance, independence and the stocks. Walpole was open to flattery. Dr. Johnson was not— at least, not from a woman; he despised the sex too much to care for their praise. When Hannah More laid it on very thick in his case, he fiercely turned round on her and said: 'Madam, before you flatter a man so grossly to his face, you should consider whether or not your flattery is worth his having.' And, with all his admiration for her character, Walpole could not help sneering at what he called her saintliness, and venting his sarcasm on her silly 'Cœlebs in Search of a Wife,' the absurdity of which has, indeed, been surpassed by a few modern novels of the same tendency. The last we hear of their friendship is that he made her a present of a Bible—fancy the satyr's
- 79. leer with whichhe must have presented it to her! She paid him out for the implied irony by wishing that he would read it. Among the ladies who were neighbours of Horace Walpole, we must not omit Lady Mary Wortley Montagu, who lived for some years in a house on the south side of the road leading to Twickenham Common. She may justly be considered as one of the witty, if not of the pretty, women of Walpole's time. He detested her. Probably he was somewhat jealous of her, for her letters from Constantinople on Turkish life and society earned her the sobriquet of the 'Female Horace Walpole.' He writes of her thus whilst she was living at Florence: 'She is laughed at by the whole town. Her dress, her avarice, and her impudence must amaze anyone.... She wears a foul mob, that does not cover her greasy black locks, that hang loose, never combed or curled; an old mazarine blue wrapper, that gapes open and discovers a canvas petticoat. Her face swelled violently on one side, and partly covered with white paint, which for cheapness she has bought so coarse that you would not use it to wash a chimney.' In another letter he describes her dress as consisting of 'a groundwork of dirt, with an embroidery of filthiness.' When he wrote of her then, she was about fifty years of age, and seems to have retained none of the beauty which distinguished her in her earlier years. She was not only coarse in looks, but in her speech and writings, which shock modern fastidiousness. She was not the woman to please Horace Walpole, who, even when in the seventies, liked nothing better than acting as squire or cicerone to fine ladies. Lady Mary was not one of them. She was, in fact, what we now should call a regular Bohemian; and was it to be wondered at? She had been introduced into that sort of life when she was a girl only
- 80. eight years oldby her own father, Evelyn, Earl of Kingston. He was a member of the Kitcat Club, whose chief occupation was the proposing and toasting the beauties of the day. One evening the Earl took it into his head to nominate his daughter. She was sent for in a chaise, and introduced to the company in dirty Shire Lane in a grimy chamber, reeking with foul culinary smells and stale tobacco-smoke, and elected by acclamation. The gentlemen drank the little lady's health upstanding; and feasting her with sweets, and passing her round with kisses, at once inscribed her name with a diamond on a drinking-glass. 'Pleasure,' she says, 'was too poor a word to express my sensations. They amounted to ecstasy. Never again throughout my whole life did I pass so happy an evening.' Of course, the child could not perceive the hideousness of the whole proceeding and its surroundings: if the kisses were seasoned with droppings of snuff from the noses above, which otherwise were not always very clean— even at the beginning of this century Lord Kenyon, Chief Justice of the King's Bench, was an utter stranger to the luxury of a pocket- handkerchief, and had no delicacy about avowing it—it did not detract from the sweetness of the bon-bons with which she was regaled. The founder of the Blue-Stocking Club, Mrs. Montagu, née Elizabeth Robinson, was another of Walpole's witty and handsome lady friends. As a girl she was lively, full of fun, yet fond of study. In 1742 she was married to Edward Montagu, M.P., a coal-owner of great wealth. As a girl the Duchess of Portland had called her 'La Petite Fidget'; but after her marriage she became more sedate, and a great power in the literary world. She established the Blue- Stocking Club, of which herself, Mrs. Vesey, Miss Boscawen, Mrs.
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