A Market Problem
The truth is that the real value comes less from managing knowledge and more — a lot more — from creating and exchanging it. And the key to achieving this goal is understanding that a company's really valuable knowledge resides largely in the heads of the most talented employees. Moreover, they will be unlikely to exchange their knowledge without a fair return for the time and energy they expend in putting it into a form in which it can be exchanged. Then it must also be worth the price of seeking it.
In short, effectively exchanging knowledge on a company-wide basis is much less a technological problem than an organizational one: encouraging people who do not know each other to work together for their mutual self-interest. There is, of course, a well-known, well-tested solution to making it possible to exchange items of value among parties who don't know each other. We call it a market.
Large public markets for knowledge have long existed, of course, through books and articles and through public services such as libraries. More recently, companies such as Amazon.com, America Online, and Yahoo! have served as external markets for public knowledge. But there are no equivalent internal markets for the valuable proprietary knowledge lodged within a company's own frontline employees.
So how does a company create effective internal markets when the product is something as intangible as the valuable knowledge gained from experience and personal thinking? Working markets need, among other things, valuable objects for trading, prices, exchange mechanisms, and competition among suppliers. Often, there are also standards, protocols and regulations, and market facilitators to make markets work better.
A valuable object to trade. Markets will form only around items valuable enough to justify the time and effort of buyers and sellers. Common knowledge, by definition, hardly needs trading. The opportunity lies in trading distinctive knowledge (see "Knowledge or Information?" at the end of this article).
From a buyer's perspective, the knowledge to be acquired from the market must be more insightful and relevant — as well as easier to find, gain access to, and assimilate — than alternative sources. Usually, knowledge available through most internal knowledge-management systems fails this test.
The trick is motivating authors to produce content that meets this standard. Almost all content produced by most companies — whether short internal memos or documents packed with charts — needs to be backed up with oral discussion. Companies must give the reader, who has no opportunity to talk with the expert, more insightful, more relevant, more accessible knowledge. The answer is a new internal equivalent of a signed article, in which the author is motivated to produce a high-quality document that is easily accessible to any user. Once knowledge is in this form, it can be traded in the market. This "knowledge object" allows a "buyer" of knowledge to understand an author's thinking without the parties having to talk to each other. The bad news for most companies is that documents generally fail to meet this standard.
Defining the item being traded creates the conditions for pricing the exchange. Authors, who are the suppliers to the market, need something that justifies their "costs," or effort, in return for creating the knowledge object. In internal knowledge markets, the price that authors receive is usually the enhancement of their own personal, internal reputation. Providing knowledge that catches the eye of peers and superiors and helps the author build a reputation can provide plenty of incentive. Buyers — those who seek knowledge — will have the motivation to go to the market if they believe that they will find valuable knowledge at a price, in time and effort, that is lower than, say, making numerous phone calls to locate an expert.
An exchange mechanism. The company's role now is to provide an exchange mechanism so that authors and knowledge seekers come to the market out of mutual self-interest. Meeting this goal requires investments in a technology infrastructure and in the staff to maintain it, in order to make the exchange possible.
An internal knowledge market has special characteristics. For starters, the company is the ultimate beneficiary of the effort to form and maintain a knowledge marketplace. Therefore the company, rather than the knowledge-seeking buyer, is responsible for rewarding authors to ensure that they are motivated to produce valuable knowledge objects.
Ensuring that authors are paid appropriately for their knowledge is often the hardest part of this equation. Internal knowledge can provide an employee with a performance advantage over his or her peers. But once that knowledge is codified, others can assimilate it, thereby negating the author's advantage. The trick, therefore, is to provide incentives so that individuals who contribute their distinctive, valuable knowledge enjoy greater internal recognition and success than they would have experienced if they had kept their knowledge to themselves. Thus, the company must create a culture in which smart people are expected to contribute valuable codified knowledge. Part of this culture is a reward structure — recognition, pay, and promotion — in which distinctive performers who contribute knowledge earn more than their noncontributing peers.
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