Knowledge:The New Wealth of Nations and Communities

4th Executive Forum on Natural Resources Management4th Executive Forum on Natural Resources ManagementNatural Resources Knowledge Management in Southeast Asia

SEARCA, November 2007

Dr. Serafin D. TalisayonDirector, CCLFI.Philippines (a non-profit foundation for KM/KBD)

Chairman, KM Association of the PhilippinesChief Expert, Asian Productivity Organization

Outline

1. Global and national changes (macroeconomic view)Organizational changes (microeconomic view)

2. Changes in mental models (paradigm shifts) 2. Changes in mental models (paradigm shifts) needed among development managers

• Knowledge-based economy (KBE) and knowledge-development (KBD)

• Seeing and tapping the power of networks for development

• Knowledge for Poverty Alleviation (KPA) framework for communities

The global economy is changing.

Global shift to service economy

• The global economy has (lately) been creating more wealth through services.

• High-income countries have become predominantly service economies.

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Source: World Development Report 2000/2001 http://www.worldbank.org/poverty/wdrpoverty/report/tab12.pdf

predominantly service economies.

• The service sector is knowledge-intensive.

Intangible assets >> tangible assets

NYU-Brookings Institute Intangibles Research Project

Findings:

In 1978, tangibles: intangibles ratio = 80:20In 1978, tangibles: intangibles ratio = 80:20

In 1988, tangibles: intangibles ratio = 45:55

In 1998, tangibles: intangibles ratio = 30:70

Source: Patrick H. Sullivan “Value-Driven Intellectual Capital”, 2000

Price-to-Book Valueof Some Philippine Companies (March-April 2007)

Philweb Corp 23.0 Robinsons Land Corp 3.3

Pacific Online Systems 9.1 EEI Corp 3.2

PLDT 6.0 Megaworld Corp 2.1PLDT 6.0 Megaworld Corp 2.1

Benpres Holdings Corp 5.1 China Banking Corp 2.0

Jollibee Foods Corp 5.1 Union Bank of the Phil 1.9

Ayala Land Inc 4.9 BPI 1.8

Philex Mining Corp 3.8 San Miguel Corp 1.7

Globe Telecom 3.5 RCBC 1.6

Knowledge assets > Tangible assets

“Increasingly, intangible knowledge assets are dwarfing the value of tangible book assets at many companies.”

— S. L. Mintz, CFO MagazineFebruary 1, 2000

Source: http://www.cfo.com/printable/article.cfm/2988898

Intangible Assets > Tangible Assets

“The accounting system doesn’t capture anything, really.”

—Judy LewentChief Financial Officer,

MerckMerck

Knowledge assets > Tangible assets

“…coming out of the change in our economy from one that is industrial-based to one that is knowledge-based, where intellectual property, soft assets, and other intangibles increasingly make up the bulk of the asset base for wealth make up the bulk of the asset base for wealth production in our society… we must learn to better measure and account for these assets, and reflect that in the financial reports of corporations.”

— Commissioner Steven WallmanUS Securities and Exchange Commission

Source: http://www.beemanagement.com/magazine/intang.asp

Increasing Knowledge Contentof Goods

~ 80% of the cost of a Levi Strauss jeans is knowledge.

>50% of the cost of petroleum is knowledge (in 1997)

Source: Thomas Stewart: Intellectual Capital. Currency, 1997.

More and More, We are Buying and Selling Knowledge

~25% of the cost of the typical aluminum beer can is knowledge*

Freely downloaded Netscape Navigator 9 is 100% bits (pure

knowledge) and 0% atoms

*Source: Thomas Stewart: Intellectual Capital. Currency, 1997.

Buying Vitamin C or Buying Knowledge?

Generic Vitamin C P1 per 500-mg tablet

Poten-Cee

(Pascual Laboratories)P2.70 per 500-mg tablet

(Pascual Laboratories)

Cecon

(Abbott Laboratories)P4.50 per 500-mg tablet

“Weightless economy” 1

– Danny T. Quah, London School of Economics

Production is“dematerializing” 2

– Thomas Stewart, Fortune Magazine

1. http://www.unesco.org/courier/1998_12/uk/dossier/txt11.htm2. Thomas Stewart: Intellectual Capital. Currency, 1997.

Changing Paradigmsor Mental Models

“Smokestack” Knowledge or “learning

From… To…

“Smokestack” industries are going out…

Knowledge or “learning organizations” are coming in…

Development managers need to shift their paradigms or mental models

Knowledge-Based DevelopmentAsian Development Bank

*Source: Moving toward Knowledge-Based Economies – Asian Experiences. ADB, 2007.

World Bank’s KBE and KAM

Seeing New Opportunities for DevelopmentDevelopment

What is CommonAmong These Successful Ventures?

Sold for $30M to Yahoo

Leveraging on Collective Knowledge

Sold for $1.65B to

Google

Sold for $580M to News Corp.

A New Social Technology with its own Language is Emergingin Many-to-Many Knowledge Synergy

“wikis”

“crowd sourcing”

“peer production” or “peering”

“collaborative authoring”

Knowledge

Synergy/

Creation

“collective intelligence networks”

“Web 2.0”

“value networks”

“prediction markets”

sourcing”

“open source” communities“massively distributed

collaboration” “social networking”

• Metcalf’s Law: the potential value of a network increases as n2

• Knowledge, like information, allows multiple

What is the Driving Force?Network Economics

• Knowledge, like information, allows multiple consumption (sharing a copy does not diminish

the utility of the original)

• Knowledge when used/practiced appreciates (versus: physical capital which depreciates when used)

• Marginal benefit for new member increases with n, while marginal cost of new member decreases with n � B/C ratio accelerates

Prof. Robert MetcalfCalifornia State University

Learning Communities at UNDP: Lessons Learned (from Nileema Noble, UNDP Representative, Manila)

• The start-up phase constitutes voluntary membership of critical mass of active practitioners

• Network membership must visibly impact working behavior/style of

• Publicly announce contributors in consolidated responses [acknowledgement/recognition]

• Continuous monitoring of the performance of the networks –impact working behavior/style of

staff – problem-solving emphasis

• Allocation of dedicated resources and management support, e.g. knowledge network facilitators and network champions

• Face to face interaction between network facilitators/ contributors and members – key feature in establishing mutual trust and quality

performance of the networks –quarterly, biannually and annually

• A network needs to be thematically/topic focused – a network that does everything is at the end doing nothing.

• Option to post anonymously –people communicate, learn and share differently

Elements of Successful Networks(from a UK DFID-supported study in 2002)

Findings:

• Building participation: “Ensuring access to decision-making and opportunities to reflect on achievements”

• Building relationships and trust: “Secretariat has relationship-building as vital part of

Based on experiences of:

• CODEP: Conflict, Development and Peace Network

• IFRTD: International Forum for Rural Transport has relationship-building as vital part of

work”

• Facilitative leadership: “Emphasis on quality of input rather than control”

• Fostering diversity and dynamism: “Give members space to be dynamic”

• Decentralized and democratic governance: “Push decision making outwards”

• Capacity building: “Seek out additional expertise that is missing”

Forum for Rural Transport and Development

• Creative Exchange: the Network for Culture and Development

• IANSA: International Action Network on Small Arms

• FEWER: Forum on Early Warning and Early Response

“Who Breathes LifeInto a Knowledge Network?”

Network Roles

Main ResponsibilitiesWho Should be in

Charge?

Coordinator• Identifying and linking members• Organizing, troubleshooting and energizing

• Highly motivated individuals• Interested in particular topics• From any part of the organization

Support

• Providing specific resources• Assisting coordinator and network members

• Corporate staff e.g. HR, training, IT• Dedicated staff for larger Support members

• Offering continuous coaching

• Dedicated staff for larger communities

Editor• Validating content• Synthesizing and integrating

• Content experts

Sponsor• Providing resources and recognition• Guiding long-term strategic alignment

• Top management

From Buchel and Raub (2002) based on the experiences of the Geneva Knowledge Forum, a benchmarks and best practices exchange network among 16 big corporations: Daimler Chrysler, Deutsche Bank, ERC Group, Hewlett-Packard, Hoffman-La Roche, Holcim, Kuoni, Merck, Motorola, Novartis, Siemens, Swisscom, Swiss Re, UBS, Wintherthur Versicherung, and Xerox.

Range of Knowledge Products/ Services Knowledge Networks Offer

• Basic Portal

• Coordinator of training/mentoring programmes and adaptation of best practices

• Facilitator of designation, strengthening and networking of sub-regional centres and institutes

Networking and brokering of best practices

• Regional Help Desk

• Gateway to other networks, organizations, and relevant programs and databases

• Platform for e-communities

• Networking and brokering services

• Focused knowledge support for governmental and inter-governmental policy bodies

• Knowledge translation

Some Useful Toolsfor Tapping the Power of Networks for Development

• Solutions Exchange: Problem-driven knowledge sharing in a CoPhttp://www.solutionexchange-un.net.in/index.htm

• World Cafe: unleashing collective wisdom in addressing important issueshttp://www.theworldcafe.com/

• Open Space Technology: democratic and unstructured process for surfacing group choiceshttp://www.openspaceworld.org/

Source of picture: http://www.skaparlust.nu/bilder/ringen.jpg

A New Way of SeeingReframing “development”

Robert Kiyosaki

Jeffrey Sachs

April 2000

Dec 20052000

Hernando de Soto

Jeffrey Sachs

These authors are saying the same thing:stretch your concept “capital.”

Exercise: A New Way of Seeing

STRETCHING now our concept of “capital” to include anything that

can be used to create value or anything that can yield regular income:

• Natural capital: “A mango tree yields fruit every year.”

• Social capital: “My godfather gives me a cash gift every Christmas.”

• Intellectual capital: “As author I get royalty from each book sold.”

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• Intellectual capital: “As author I get royalty from each book sold.”

• Customer capital: “My customers keep coming back because they trust me.”

• Human capital: “Our economy gets $14B yearly remittances from its overseas workers.”

• Public infrastructure: “This new road enables me to sell my products to the town center every week.”

• Stakeholder capital e.g. property rights granted by government: “Usufruct rights over 10 thousand hectares of ancestral forest lands via KEF-DE,R lease contract”

• Indigenous knowledge: “Knowing the forest intimately enables the Aeta to find food and survive there for many days.”

“Brainy Consultant”

Tangible assets Laptop (cost=P150,000)

Human capitalPhD, 45 years old

20 years experience

Structural capital Nil

Stakeholder capital Nil

Average annual income = P3.5 millionMarket value ~ NPV = P33.3 million

Workshop Facilitatorwith “Super Toolbox”

Tangible assets Nil

Human capitalMS graduate, 35 years old

10 years experience

Structural capital65 modules for 15 workshops, 44 workshop tools/techniques

Stakeholder capital Nil

Average annual income = P1.7 millionMarket value ~ NPV = P16.2 million

“Well-Connected”Insurance Salesman

Tangible assets Nil

Human capitalHS graduate, 25 years oldTraining from insurance co

Structural capital Policy and coverage templates

Stakeholder capitalAccreditation with well-known

insurance company; personal network of finance officers, well-known

Average annual income = P.8 millionMarket value ~ NPV = P7.6 million

Good Practices in Poverty Reduction

• Leveraging on a country’s unique human capital: Tuvalu Maritime School to build on the Pacific region’s natural seafaring skills

• Building on local social capital for enterprise development: Shakti, a rural consumer goods distribution system set up by Hindustan Lever Ltd (subsidiary of Unilever), run by 250,000 women entrepreneurs; Grameen bank, famous network of self-help microfinance cooperatives in Bangladesh

• Setting up structural capital that empowers farmers: provide farmers

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• Setting up structural capital that empowers farmers: e-Choupals provide farmers latest prices of farm produce via the Internet

• Innovation of new and more appropriate community enterprise models:Cultural eco-tourism by UNDP GEF Small Grants Programme

• Knowledge networking for capabilities critical to low-income communities:Locally-Managed Marine Area Network (LMMA) links community-managed resource management groups in Asia-Pacific

• Government recognition of property rights to ancestral domain of an indigenous group: public lands converted to productive capital assigned solely to Ikalahans.

*Source: Moving toward Knowledge-Based Economies – Asian Experiences. ADB, 2007.

KPA Framework(Knowledge for Poverty Alleviation)

KM for CommunitiesKM for Communities

Anatomy of Success & Vulnerabilitiesof a Water and Sanitation Project for Tbolis

Peace and Equity Foundation in partnership with CCLFI.Philippines

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Usual concept of “poor” community:� inadequate financial assets

� inadequate local infrastructure

“Poor”

local

infrastructure

“Poor” Community

financial assets

KPA FrameworkTo manage much inherent community wealth and many external leverages

local infrastructure

Social capital

The so-called “poor” should be more precisely labelled as only “financially poor.”

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“Poor” Communityfinancial assets

Human capital

Cultural capital

Stakeholder capital Natural

capitalTechnology

Access rights

Structural capital

Communities need to learn how to manage its intangible assets

• Communities inherently own forms of wealth unrecognized as such:• Human capital, e.g. “sophia” in transformational leaders

• Cultural capital

• Social capital: networks of relationships, trust, reputations and integrity, informal roles

• Projects should acquire and develop exogenous forms of capital:

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• Projects should acquire and develop exogenous forms of capital:• Access rights: key is legitimacy

• Stakeholder capital: keys are political and institutional supports

• Structural capital: keys are ownership, empowerment and productive capacity

• Technology: keys are appropriateness and competitiveness

• Natural capital: keys are sustainability and productive capacity

• Financial capital

• Framework is useful for project risk management:• Some assets can be negative: factionalism is negative social capital and a

leader’s personal weakness diminishes his human capital

A New Way of Seeing

KM provides a framework that enables recognition of valuable intangible assets in a person, organization, community or nation.

Otherwise –

You cannot manage what you can hardly see.

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You cannot manage what you can hardly see.

“The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.”

– Marcel Proust

Thank you

DiscussionQ&AQ&A

You may continue to ask me:serafintalisayon@gmail.com