Human Knowledge Capital

Tags: #HumanCapital, #KnowledgeCapital, #TalentDevelopment, #HarunDagli, #HospitalityCode

When we look at the Market Value of a company, businesses are regularly graded on the value of their assets: They report to their shareholders about the physical assets they own, their cash in hand, and revenues and profits, both past and expected. Traditional assessment of a company’s performance has relied upon traditional factors of production – land, labour and capital.

It was recognized, that in contrast to the knowledge of individual employees, such corporate memory does form part of a company’s capital. Accordingly, “knowledge” has become a key production factor, however, the financial accounts are still dominated by traditional factors of production, including buildings and machinery. Hence, there is an imperative need for developing an understanding of “knowledge capital”, or the so-called intangible assets. The topic is not only pertinent to individual enterprises, but also to national economies that are making a rapid transition to a society based on knowledge work.

As the world economies transition from the world of “atoms” to the world of “bits,” they would be expected to plan, devise and implement information and knowledge management systems that provide a differential advantage in terms of “Intellectual Capital”.

Knowledge assets may be distinguished from the traditional factors of production – in that they are governed by what has been described as the ‘law of increasing returns’. In contrast to the traditional factors of production that were governed by diminishing returns, every additional unit of knowledge used effectively results in a marginal increase in performance. The success of companies such as Microsoft is often attributed to the fact that every additional unit of information-based product or service would result in an increase in the marginal returns. Given the changing dynamics underlying international performance, it is not surprising that some less developed economies with significant assets in ICT knowledge and Internet-related expertise are hoping to leapfrog more developed economies.

But when it comes to measuring their knowledge assets — the value of those can be harder to gauge. However, the entrepreneurial management of knowledge assets can be critical to the success of any business.

Understanding the Value of Knowledge

There's no doubt that the people within an organization are valuable and in today’s technology-driven world human assets are the most valuable assets for the companies. However, we need to accept that we do not have the same intellectual capital for all our people in a company. To be able to manage knowledge capital, we need to first understand these differences and manage them accordingly.

There are three types of human knowledge capital. Each one has a different level of value, these are:

1.Commodity Knowledge

Unskilled and semiskilled labour are usually included in this type. Skills and abilities that are readily available in the market and needed across a broad range of industries fall under this type of knowledge. In simple terms, the individual performing the task is not uniquely skilled and is, therefore, less important than the task performed.

This does not mean that people fall under this category is not important, the aim is the categorise the workforce we have in different intellectual capital types and manage them accordingly.

Commodity skills usually don't add much value to the customer and are simply a labour cost for your company, not an asset. Some commodity skills can be automated so you can focus more resources on higher-level knowledge capital.

2.Leveraged Knowledge

The roles that require leveraged knowledge capital are quite varied, from quality assurance people, auditors, and testers to machinists and marketing specialists. Because of the specialized nature of the tasks, these skills are harder to replace.

People fall into this category has industry-specific skills (not company specific), has some specialisation with a longer learning curve and provides moderate value added for the customers but can generate some revenue.

We can enhance this category assets by changing the role of tasks and improve their skill set to add more value and effectively make them proprietary.

3.Proprietary Knowledge

All key companies are built on this type of skills and knowledge. An organization's intellectual capital is its proprietary knowledge and is the source of greatest customer value. The talent and expertise of the people who create the product or deliver the service are the reasons customers choose you and not your competitor.

One of the wrong assumptions of a successful company is the key management team are the reason for their success. In truth, proprietary knowledge is not reserved for only company executives, the source of this capital lies in mainly experts such as engineers, project managers, sales executives, researchers who represent unique and irreplaceable skills.

At this point, I need to highlight that all three types of knowledge are important; a company can't get rid of one type in order to increase anot