KM in Europe

Although to varying degrees, European governments, companies and institutions have placed great value in knowledge management and the principles behind a knowledge-based economy. Sandra Higgison finds out how the discipline is developing within EU-member states and those that are soon to join.

It is undisputed that European countries have recognised the importance of the knowledge economy. Knowledge-management activities play a key part within government agendas, corporate strategies and pioneering research; examples of good practice here are not difficult to find. A report from the Organisation for Economic Co-operation and Development (OECD), Scoreboard 2001 – Towards a Knowledge-Based Economy[1], scored 30 OECD member countries against their investment in intellectual capital, such as research and development, education, patents and ICT. Of the top ten countries found to have the strongest potential in this future source of wealth creation, seven are located in Europe. However, Europe’s dominance here masks the varying levels of knowledge-related activities across the continent, most notably between EU member and non-member states. In March 2000, the European Council in Lisbon launched a ten-year programme, the Lisbon Strategy, to focus on the economic, social and environmental revitalisation of the European Union. The goal for 2010 is “to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”.[2] The EU has since initiated a number of programmes to understand intangibles and encourage innovation.

These projects demonstrate the shift that is taking place in the nature of the economy
and the drivers behind value creation: in the 20th century, companies valued margins, investment and asset productivity for comparative advantage; today, the 21st-century organisation must focus on intangible elements, such as the ability to innovate, harness intellectual property and manage risks, such as loss of reputation.[3] In terms of KM, the experiences of the region as a whole give a good indication of whether Europe will meet the goals set out in the Lisbon Strategy. Perhaps more importantly, the evolution of KM in more developed countries offers lessons for Eastern European nations at the early stages of harnessing the value of knowledge-based activities.

According to Leif Edvinsson, the world’s first director of intellectual capital at Skandia and today CEO of Unic, the ideas surrounding the knowledge economy first emerged in Europe around 1990, with Scandinavian countries playing a pioneering role. As with other regions, there were many forces influencing this development. “Globalisation, increased competitive pressures, deeper and wider European integration, an aging workforce and a shortage of qualified labour are just some of the factors that have necessitated better management of knowledge resources for survival in a unified Europe,” says Val Samonis, a certified professional consultant.

Edvinsson believes, though, that Europe’s industrial and manufacturing traditions, and its focus on hardware and products have blocked KM’s development. Yet there are elements within Europe’s mix of cultures that offer the region advantages over other regions. “Europe is more advanced with knowledge management than the US, mostly because European companies concentrate more on the cultural and social aspects of KM, while US firms look for a technology silver-bullet solution,” says Mariusz Strojny, knowledge-management co-ordinator at KPMG Central Eastern Europe. As Manon van Leeuwen, director of information society at the Foundation for the Development of Science and Technology in Extremadura (Fundecyt) in Spain, says, “Mediterranean cultures, for example, are based on sharing public spaces and developing their social lives within large groups that are open to interaction. It is therefore natural to continue sharing knowledge in an organisational environment".

As well as being a positive influence, workforce cultures and characteristics in Europe have had a negative impact on KM’s evolution. Until relatively recently, a job was considered to be for life. Individuals would start a career at the lower levels of a firm and work their way up based on experience and skills. “The insecurity that new labour markets bring with numerous job changes can hinder KM,” says van Leeuwen. “Employees feel less inclined to share knowledge as they believe it gives them power.” Tom Knight, managing consultant at Fujitsu Services, highlights how the culture of senior managers must also be addressed. “There is still a lot of dinosaur, command-and-control thinking among managers in the UK, which sits uncomfortably with the idea that their job is to facilitate knowledge work,” he says. “Flexibility and exploitation of knowledge assets are crucial to survival in a turbulent 21st century.”

Today’s KM world is indeed a restless one, but significant progress towards addressing these challenges is being made. Sweden, for example, is recognised as one of the highest investors in intangibles such as R&D, education and social infrastructure. However, there still remain numerous obstacles to overcome. Despite its early entry into the KM movement, the UK, for example, has had a difficult couple of years. “Knowledge management has taken a real battering,” says Knight. “The software industry is about halfway through a shake-out and some major consultancies no longer have consulting resources in KM due to blank order books.” As Edvinsson says, “The focus in Sweden today is on cost cutting and budgets, which might result in corporate anorexia. However, more companies are recognising the value of intangibles, so innovation is appearing higher on the agenda.”

Change and recovery are on the horizon. Analyst firm, Gartner recently claimed that KM is approaching the ‘plateau of productivity' on its hype cycle, having been stuck in the ‘trough of disillusionment' for some time.[4] Van Leeuwen also sees changes for knowledge management in Spain: “Two years ago, the main issue in KM was the implementation and application of ICT. The focus has now shifted towards a knowledge society that values people-based organisations and environments.” In addition, KM is no longer the playground of large companies; much good-practice work is coming from SMEs, non-profit organisations and the public sector.

Nor has KM been restricted to the EU. Non-member states are making considerable progress with their own initiatives. Alongside the much-celebrated early pioneers in Europe, such as Edvinsson’s and Karl-Erik Sveiby’s work with intellectual capital and measuring intangibles, important work has also come from beyond EU borders. Strojny pinpoints trailblazers in Eastern Europe. “I believe the term ‘knowledge management’ was used for the first time in a book by Hungarian scientist, Pal Tomcsanyi. And probably the first book to use the term intellectual capital was connected to Polish economist Michal Kalecki.[5]

For countries soon to join the EU, knowledge management is not common practice and many look to more developed nations as benchmarks. This is certainly true for Poland and Lithuania. Strojny traces Poland’s KM history back to 2000 when the Cracow Knowledge Management Institute was founded at which point only multi-national companies had KM programmes. Today, these companies still inspire national firms. “I admire their new-frontier mentality and vision, and their ability to develop integrative thinking across functional areas of the business at both the highest and lowest management levels,” says Samonis. Lithuania has had similar experiences although Samonis notes that biotechnology and laser-research firms have well developed practices.

The Polish government expressed some interest in the knowledge-based economy in 2001, with exploratory conferences and meetings. There have also been some programmes initiated within Polish companies. Overall awareness, however, remains low. “Unfortunately the present government focuses on current problems and has not picked up the initiative started in 2001. I would estimate that, in terms of KM deployment, Polish companies are behind by roughly five to ten years.” In Lithuania, Samonis has identified a gap between KM theory and practice that prevents companies from developing their own initiatives. “This is a problem inherited from the communist period, along with a lack of collaboration between institutions.” However, the biggest challenge for these countries is how to raise awareness and answer fundamental questions, such as should we engage in KM? How do we deploy it? Can we afford it?

The issues currently dominating KM in the EU are good examples of areas that Eastern European countries can learn from and perhaps avoid facing in the future. Today, knowledge management in the UK, for example, must emphasise how value will be generated. Knight warns that even though the industry is recovering, it is still early days; investment decisions need a cast-iron case. “Project-management efficiencies, workgroup support through information management and improving e-mail practices to reduce overloads may be bread-and-butter stuff, but all bring business benefit.” Knight also highlights the changing role of KM in the public sector, where the potential for knowledge management hasn't quite been fulfilled despite promising government initiatives. “Attention has been diverted towards meeting the Freedom of Information Act deadlines,” he says. He expects these initiatives to fail unless departments recognise how KM can be used to improve the efficiency and effectiveness of individuals and workgroups.

The future for knowledge management across the EU will revamp the corporate agenda. Van Leeuwen highlights issues likely to appear in Spain. “The connection between talent management and KM will be important as firms recognise that they have to manage the whole professional life of a person within their organisation,” she says. Knight makes his own predictions: “Expect KM to form part of the wider conversation around business transformation, linked to remote and mobile infrastructures and new forms of organisational design.” Edvinsson envisages yet more developments. “We need to understand how the knowledge worker is affected by new illnesses, such as burn out and stress, and how we can redesign work’s context for the knowledge worker,” he says. “Modern brain research and neurology work show the importance that good context has to your brain. These are areas that are largely neglected today.”

While these are all areas emerging economies, such as Poland and Lithuania need to be aware of, their big event is accession to the EU. Samonis and Strojny agree that even though knowledge management may not be a burning issue at the moment, it soon will be. “Lithuania has to be ready to withstand European competitive pressures,” says Samonis. “Initially, the country will compete on lower labour costs, but this advantage will be short lived.” Strojny agrees and hopes that Polish companies will recognise KM’s value and foster an entrepreneurial spirit that adopts its principles soon after accession.

It is clear that organisations, governments and institutions see the need for widespread KM practices. The evolution of KM, the challenges overcome and experiences to date within the EU offer valuable lessons to Eastern European countries. Although currently early days here, accession to the EU promises to be the catalyst that will focus attention on KM as the discipline most likely to offer long-term competitive advantage. Despite varying levels of adoption across Europe, the foundations for a sustainable knowledge economy have been set, which makes the goals specified in the Lisbon Strategy seem truly achievable.

References

1. Scoreboard 2001 – Towards a Knowledge-Based Economy (OECD, 2001)
2. Presidency Conclusions on the Lisbon Strategy 2000-2003 by Theme (European Council, 2003)
3. ‘The 2003 European intangibles summit’ (Prism, 2003)
4. Feiwel, G., R., The Intellectual Capital of Michal Kalecki: A Study in Economic Theory and Policy (University of Tennessee Press, 1975)
5. Caldwell, F., Viewing Powerhouse Vendors through the lenses of KM (Gartner, October 2002)

Leif Edvinsson is CEO of Unic. He can be contacted at leife@unic.net

Tom Knight is managing consultant at Fujitsu Services. He can be contacted at tom.knight@services.fujitsu.com

Manon van Leeuwen is director, information society at Foundation for the Development of Science and Technology in Extremadura (Fundecyt). She can be contacted at manon@fundecyt.es

Val Samonis is a certified professional consultant. He can be contacted at val@samonis.com

Mariusz Strojny is knowledge management co-ordinator, CEE at KPMG Polska. He can be
contacted at mstrojny@kpmg.pl