20MARCH/APRIL 2002 · IVEY BUSINESS JOURNALThe subject of intellectual capital has been discussed bymany organizations, and defined by some. Yet very few indi-viduals understand intellectual capital, and almost no onehas been able, formally at least, to put a value on it. That’swhy knowledge management (KM)–how an organizationmakes use of its intellectual capital–is one of the greatestchallenges facing senior managers today. Job titles such aschief knowledge officer (CKO) and chief learning officer(CLO) have been appearing in annual reports and career adswith increasing frequency. Moreover, these pioneering indi-viduals have been given the unenviable task of channellingan organization’s knowledge into initiatives that are expect-ed to become a source of competitive advantage. This article provides senior managers with a comprehen-sive overview of knowledge management. It also describeshow a chief knowledge officer can leverage his or her com-pany’s intellectual capital. The article consists of three sec-tions: a summary of the latest statistics on knowledgemanagement; an outline of the CKO’s main responsibilities;and a description of the challenges that senior managersface in implementing and sustaining an effective knowledgemanagement program. The latter includes a 10-step guidethat will enable managers to meet those challenges. STATISTICS TELL THE STORYIDC, an international research organization, has reportedthat Fortune 500 companies wasted $12 billion by dupli-cating knowledge work in 2000, e.g., simultaneous searchcosts, parallel research projects. (All amounts are in U.S.dollars unless otherwise indicated). At the same time,recent studies conducted at the Institute for IntellectualCapital Research in Dundas, Ontario provide strong evi-dence that knowledge management programs are not onlybecoming more prevalent but are resulting in tremendouscost savings. Just consider these facts:■ 25 per cent of Fortune 500 companies currently have CKOs;■ 80 per cent of Fortune 500 companies currently haveKM staff;■ From 1997-2000, the Ford Motor Company saved $914million, mainly due to effective knowledge managementprograms; Chevron has saved $650 million since 1991,while Texas Instruments has saved $1 billion since itlaunched KM programs in the mid-1990s. ■ The Canadian Centre for Management Developmentlaunched a formal cross-country KM training program forsenior federal government officials in 2001;■ Health Canada administered a KM diagnostic to identifyits knowledge bottlenecks in 2001;■ 95 per cent of CEOs polled at the 2001 World EconomicForum in Davos, Switzerland, said that KM was critical toorganizational success; and■ 91 per cent of Canadian business leaders polled by Ipsos-Reid in 2001 believed that KM practices have a direct impacton organizational effectiveness, and one-third of Canadianof the Chief Knowledge OfficerTHE RISING STARTHE RISING STARof the Chief Knowledge OfficerIn the knowledge economy, what you know is at least as important as who you know. That’s why the Chief Knowledge Officer has a key role in sustaining a firm’s competitive advantage. NICK BONTIS IS ASSISTANT PROFESSOR OF STRATEGIC MANAGEMENT AT THE DEGROOTE BUSINESS SCHOOL, MCMASTER UNIVERSITY, AND DIRECTOR OF THE INSTITUTE FOR INTELLECTUAL CAPITAL RESEARCH. BY NICK BONTISFeature#1 (BONTIS) 4/18/02 10:14 AM Page 20Feature#1 (BONTIS) 4/18/02 10:16 AM Page 2122MARCH/APRIL 2002 · IVEY BUSINESS JOURNALorganizations that have not under-taken a KM initiative expect to doso in the next 12 months.The CKO is highly regardedin the boardroom, and many of the initiatives above have been dri-ven by competent KM leaders(“CKO Wanted, Evangelical SkillsNecessary: A review of the ChiefKnowledge Officer position,” Knowledge and ProcessManagement, August 2001, 29-38). I have met many indi-viduals at KM conferences who carry business cards withthe word “knowledge” in the title. I have even met indi-viduals with creative titles such as “Idea Percolator” and“Imagination Evangelist.” I have interviewed more than 25 CKOs from around theworld and found that they had two principal functionalbackgrounds: 1) information systems personnel who wereable to understand which technologies can contribute to the capture, storage and sharing of knowledge, and 2) human resources professionals who were able to under-stand value alignment, incentive mechanisms and socialnetworking behaviour, all of which encourage deliberateknowledge exchange. The CKOs claimed that in order tosucceed in the future, they would need 1) more slack timefor dreaming, thinking and talking, and 2) more high-levelsupport from CEOs and board members.THE CHIEF KNOWLEDGE OFFICERBeing named the CKO of an organization requires that anindividual embody all that is good in knowledge manage-ment. Thus, the CKO often acts as a symbol or an icon thatother individuals in the organization look to for guidance. ACKO’s most important responsibility is to leverage the intel-lectual capital an organization creates. There are four waysthat a CKO fulfills that responsibility, and each one influ-ences the firm’s knowledge-sharing activities. A CKO must: 1. Promote stability in a turbulent business environment;2. Enable the speedy delivery of productions or services;3. Create high efficiency in the knowledge value chain bythe sharing of resources and realization of synergies;4. Enable the separation of work so that specialization isfeasible.The theoretical justification for knowledge sharing restson the fact that knowledge is not a scarce resource. Thus, itdoes not suffer from decreasing rates of return like mostfinite (or scarce) resources. Rather,knowledge benefits from increasingrates of return. In other words, itbehooves us to share it in order torealize its potential for creating syn-ergies throughout the organization.For example, if I have two diamondstones and I give you one, we willeach have half of the original total.However, if I give you half of my knowledge, we may endup with more than double the original total if we share andbuild it together.While the world’s codified knowledge base (i.e., all his-torical information in printed books and electronic files)doubled every 30 years in the earlier part of this century, itwas doubling every seven years by the 1970s. Informationlibrary researchers say that by the year 2010, the world’scodified knowledge will double every 11 hours. A vote forthe future value–and job