Leveraging Your Hidden Brainpower.

Harness your company's knowledge before it walks out the door -- and takes your business with it.

As companies have searched for new business models, raced to enter new markets, and pushed to develop innovative products, knowledge management has become a key issue for an increasing number of CEOs. The importance of knowledge in business is clear--and indeed, equity markets regularly place more emphasis on such intangibles than on tangible assets.

What is less clear, however, is just what executives should do with that knowledge. As this roundtable illustrates, CEOs' questions about knowledge management have shifted from "Why?" to "How?" Their companies are struggling to create solid processes for finding, sharing, and reusing knowledge--and for measuring results to keep improving those processes.

CEOs are also finding that knowledge management is a multifaceted, far-reaching endeavor. Knowledge bases, networks, and other technology are important, but they're just one piece of the puzzle. In deploying systems at numerous companies, Louise Kirkbride of Broad Daylight has found that "the same technology in some organizations works brilliantly and in some it fails miserably." The point, of course, is that "it's an organization issue, not just a technology issue," she says.

"Right now I'm looking for practical approaches," said John Harker of InFocus. "What am I missing? What do we need to do to keep intellectual capital?"

In large part, that may be because valuable knowledge is not limited to patents or product designs, or any single part of the organization. Often, there is untapped potential in the company's knowledge about processes, customers, and supply chain operations. To cover so much territory, knowledge management must encompass everything from reward systems and training to culture and leadership. As James Copeland of Deloitte Touche Tohmatsu explains, "To make this work well requires a fundamental change in the way we do business. We'll either change our organizations or others will change them by sucking the talent and the intellectual capital out of them."

In short, CEOs are in the process of fusing the fundamental and often ethereal concepts of knowledge management with the basic principles of running a business and producing results. They're still in the early stages of that effort, and much work is ahead--but for those CEOs and companies that figure it out, the rewards should be great.

--Peter Haapaniemi

The KM Imperative

James Copeland (Deloitte Touche Tohmatsu): I'll start with a few statements that are perhaps hyperbolic, but they're not far from the truth. One is that every successful strategy is founded on the effective use of intellectual capital. It's not enough to just have the talent or the intellectual capital in the organization. That's like going public and raising a lot of money. You then have a lot of money. The question is, "What do you do with it and what kind of return can you generate?" That's the hard part.

Another point is that the cost and value of goods and services include an ever-increasing percentage of intangible assets. The classic example is the pharmaceutical industry, where you pay fractions of a penny for the actual material that goes into the pills and injections, and a fortune for the intellectual capital.

I would also call your attention to the stock market, where between 1980 and 2000 the relationship between the value of tangible and intangible assets went from a ratio of 1-to-1-with market value roughly equivalent to the value of the physical assets-to a ratio of 5-to-1. It may be 4-to-1 here after the last year, but it's still not 1-to-1. So there's an enormous amount of recognition in the marketplace that something is happening in companies that's not related directly to tangible assets, and I think that's an attempt to value the intellectual capital in those organizations.

There's real value in having the intellectual capital, but only if you find a way to make it valuable for the marketplace. That might be one reason the dot-com companies didn't realize their promise. They forgot that just accumulating the intellectual capital is not enough-that it finally has to produce something for the marketplace.

And technology is important, but that's not the answer. My firm sells technology, so that's hard for me to say. You can have the best information-sharing system in the world, and it can help remove some of the barriers and some of the resistance to sharing-but that's all it does.

The culture of the organization has to recognize the value of knowledge created and shared. And again, that gets back to this notion of why there isn't a bigger differentiation between the compensation of people who create value in a small way or a small, encapsulated way and those who share it and share it largely.

Jack Davis (Ventura Foods): We all are probably pretty good at identifying intellectual capital, and for lack of a better word, talent. What I think we all fall short on is getting that talent focused, and I believe that focus is where the real payoff is. If we're talking about leveraging this intellectual capital, this talent, we need to get it focused on moving that fulcrum point closer to the end of the lever so we can get that leverage. That's the responsibility of senior management. They have to get together and take the pool of talent they have and determine where the skill sets are, because every individual has a different skill set. They then have to get that talent focused.

We have to be careful with the people we recruit and put in that group. We have to be ultra-careful when one defects from that group and we bring a replacement in, because if we're pushing the fulcrum point in this direction, we don't want something to disrupt it the other way. That's a real challenge.

Edward Kahn (EKMS): Everybody is grappling with what I call process- the systemic changes that tell you when you're not communicating knowledge or, when you have it, the analysis of what you've got. You can't do that without a process. And you have to prove to yourself that it will turn into money because the commitment from corporate leadership or the board won't be there unless you can tie it back to the money.

Aart de Geus (Synopsys): The key thing I'm interested in is how do you tie the intellectual value and capital that you have in individuals into intellectual capital you have in the company? You called it "company I.Q." On one hand you want to build up the individual as much as possible, to grow them and so on, and on the other hand you don't want to be dependent on any of the individuals, so the intelligence is really inside the company.

Edward Kopko (Butler International): Knowledge management reminds me of the quality movement of 20 years ago. Then we were saying, "I'm absolutely committed to quality, and I tell our people all the time to do it better." But the reality was that there was no process. There was no system of quality in most companies that could consistently and regularly develop the quality desired. In the past 20 years, we've advanced dramatically in that arena.

It seems like the same thing applies here. It is not good enough to just say, "I want to have more of my knowledge leveraged within my organization." The first thing they said in the quality movement was management has to commit. And when they say "commit," they don't mean casually commit. You have to commit to a full-blown process, resource it, and have it measured. So it sounds to me that if you really want to get passionate about this, you have to be passionate about having this be a process at the senior management level.

Copeland: And if you want support for that, just go find one of those places where people aren't sharing knowledge and ask them why not? What you'll find is that it's not evidently in their best interest to do that. And you say, "Well, what would we have to change in order to fix that?" And that's when it gets scary.

Richard Kielnert (Deloitte & Touche LLP): That raises a good point in the comparison of the quality initiative. Because if we look back at corporate America 10 or 15 years ago, many organizations created senior vice presidents of quality. And what the hell is that? What they did over the ensuing 10 years is essentially work themselves out of a job. They served as change agents, cheerleaders, focal points to elevate the attention and emphasis on quality, and then over time that responsibility was embedded back into the operating units.

Allen Lauer (Varian): I agree there's a similarity between managing knowledge and managing the quality process. We have to focus on the processes of knowledge management and try to figure out what they are to be able to make some progress. After we've done that, we have to recognize that this is a continuous improvement program. This is never-ending because your organization and your markets are always changing. So you have to make continuous improvement.

Kahn: I'm beginning to warm up to the analogy between the broader knowledge management or intellectual capital management and what I know, which is its junior cousin, intellectual property management.

I think it was in 1993, a co-speaker of mine who was building a licensing organization defined "intellectual property management" as the direct connection. That's the best definition I've ever heard, and I think it applies to intellectual capital management analogously and knowledge management. They're the direct connection of R&D to the marketplace.

So what I'm analogizing is that knowledge management is the direct connection from each employee to the organization.

John Brandt (CE): Dick, you're wrestling with this right now. Your stated goal, I believe, is that every customer will eventually buy eight other products from you if they buy one product, and that seems to require some of this throughout the organization. What is Wells Fargo doing?

Richard Kovacevich (Wells Fargo): Well, whatever we're doing, we're not doing as well as we need to, but we have a best practice program. One of my questions is: How do we measure success? If you don't measure it, it's not going to happen. It still seems to me we're talking very qualitatively, and that's harder to measure, and there are easier things to do.

But as we measure success, we see it and find out how it's being achieved and then share it across the system. The question is then, "How do you reward that sharing and does someone else have to discover why things aren't being shared automatically?" If you measure something and reward it, chances are it's in the culture and it will work.

Kahn: It is culture-does the company really believe it in their soul? I guess I'm a poet, not an engineer, but it has to be a soulful thing as well as a brilliant process thing.

John Harker (InFocus): I'm in high tech and have been for nine years, and superimposed on all of these things that we've been working diligently on-intellectual capital, intellectual property, and creating an environment-is a horrible sense of urgency. It's a full-time job CEOs have, and as this last malaise hit America, it hit with a suddenness in December that tells us, "You don't have a lot of time." What's happening for me here is that my friend and others are putting together diagnostic materials and analytical materials that someday will allow us to compress time and find out what that really means.

There are other things we've done that have helped us reshape a culture. And one of them seemed to work very well. We operated-as all companies seem to at times-in silence. Engineers thought manufacturing guys were stiffs; manufacturing guys knew the engineers were never liked; nobody liked marketing; and the cops from finance were never liked, let alone the auditors.

Copeland: In the summer it's flies, and in the winter it's auditors,

Harker: Yeah. So we brought in an outside facilitator whose book I read on how to get a quality program to pay out not in five years, but in one year. All of the top executives went off-site for three days, and at the end of that time we decided we had to work better cross-functionally, and if we were ever going to succeed cross-functionally, we had to change our behavior. They began to list a set of behaviors that we would all have to adhere to were we ever to work cross-functionally to achieve the greatness that this company should be.

And then at the end, we had them go back and rephrase it so there were no more than a dozen, and we asked them to sign that. And then we asked them to stand up and say, "I believe in this and I will support this, and if I don't, it will be a sign I'm resigning." And it was that last part that helped our culture change.

Copeland: One of the ways we've tried to capture and leverage knowledge is to find and create new ideas for services through what we call a venture board. This is an internal organization. We wanted to offer new, valuable services to the marketplace, and we figured that's best found in the minds of our people. So we told people to send in their ideas, And of course the response was less than overwhelming. So what we found we had to do was go out into the offices, convene meetings, and ask, "What are you doing that's smart for your clients?" We found a veritable gold mine of ideas-value that had already been created for clients. We knew those ideas worked, and there's no reason we couldn't use them for a thousand of our clients instead of just two of our clients,

Arnie Pollard (CE): If the idea is to proactively chase the ideas and people, then why doesn't the organization empower somebody within the firm to be the champion of that? Why not set someone loose such that his or her performance is tightly tied to successfully leveraging those kinds of individual ideas, and to recognizing in some meaningful way the sources of the ideas that work?

Copeland: In a way, we did that with the venture board, which had a chairman. The notion was that we'd basically give him a budget and carte blanche to go where he wanted, talk to whom he needed, and deputize people to go out and speak with others.

Our consulting group has a team, and their job is basically to go out and be the reporters of important knowledge from client service engagements back to the central organization. So if we're doing a major client service engagement, let's say we're installing an S.A.P. system for a company and tying in a lot of their business processes and three unique ideas come up out of that approach, then that team member's responsibility is to see that that information gets fed into the knowledge management system in a good and effective way.

And the whole concept of the venture board was to take the work out of the creation of the business plan, the market research, the vetting of the business plan. All of that was done and encouraged through that venture board. Then the idea would come from the venture board, not from the individual partner. It would have the support of the venture board when it came to our management and the board of directors.

Learning to Share

Brandt: To use a sports metaphor for a moment, the history of sports is littered with teams that had lots of individual stars on them, but never made it to the championship game. They never made it there because they didn't know how to get everyone to play together--they didn't know how to collaborate, they didn't know how to share creativity. How do you make that sharing happen in your organizations?

Kopko: We have a number of best-practices initiatives and sharing of processes in the company, and I've been very passionate about trying to develop the organization with learning plans and all the other things. But despite all those efforts, I'm consistently amazed at how little one part of the organization knows about what the rest of the organization knows. By definition, with all the change going on out there in the marketplace--the new technologies, the new business processes, and people finding success in different areas--it's an extremely large challenge to leverage that knowledge and take it into your organization in a deeper way, so you can take advantage of the big opportunities that may be uncovered in one small part of your organization.

Lauer: When you have a multidimensional business with factories around the world, the biggest thing is breaking down the barriers in the organization. It's easy for groups of individuals to get very focused just on what they're doing, and it takes a big communications job by top management to get people to take the time to see what's going on elsewhere in the company. If you leave it to them, it doesn't get done, quite frankly. It's a leadership issue and it takes a lot of the top managers' time.

So I think providing a structure for the organization to try to deal with this is a really good idea. We, of course, have got a long way to go. One of the most interesting challenges we have is managing sales forces in different cultures. It's very easy for them to become very isolated very, very quickly.

Brandt: Dennis, you're coming at this from an interesting perspective, in that you have to do this internally, but you're also helping other organizations do it.

Dennis Keller (DeVry): Yes. DeVry is a private, capital-driven university, and we're in the business of helping people create intellectual capital. We have 21 campuses, with 3,000 to 4,000 students on each campus. We have a long-standing system of sharing among the campuses within functions--student service, academics, other financial services. We try to bring the leaders or some member of each group from the campuses together once a year. That sets up internal and informal communications networks. They share because we've been able to maintain and build the ethic that the student is the heart of the effort. We take care of students on each campus, and it helps all of our campuses.

In terms of our outside customers, we can take three or four people from companies A, B, C, and D and put them with a high-quality resource and let them share across company lines. They can bring home knowledge that goes beyond the boundaries of their own organizations.

Joseph Griesedieck (Spencer Stuart): When you look at knowledge, first of all, you have to understand what it is you're trying to capture and how critical that is to your business--as well as what the cost is culturally, structurally, and financially to change the organization to capture that knowledge.

Pollard: Every company is different, so you need to diagnose where you can better leverage the individual knowledge that abounds in your organization to really make an impact. I think you need to do that diagnosis first, and then alter your processes in terms of the way things are measured and the way people are compensated.

Copeland: Yes, and knowing what needs to be shared may not be as important as knowing what doesn't need to be shared. This is one of those situations where you're faced with vast opportunities for sharing knowledge, and some of that is absolutely worthless. A big part of it is not going to make any more than perhaps an incremental difference in your organization, and there's a small portion of it that will revolutionize the way you do business. It's very important not to design a system or a process or a procedure or a management system that will share unimportant as well as important information, or your people will all be taken off message.

Taking the Measure of Knowledge Keller: If you're publicly traded or if you value your organization, the value of that intellectual capital is pretty clearly shown by the difference between the tangible assets and the market value of the company. For many companies, it's a very substantial asset, and that's a good way to get people's attention drawn to how important it is to make sure that knowledge within the corporation is shared where it's needed and that your systems enhance that.

Kopko: We have to measure how much [knowledge sharing] actually happens in the organization. It's like measuring how happy we make clients and then being able to say, well, that's not enough. If we have 10 examples of the sharing of knowledge, is that enough? Or can we improve upon that by consistently measuring it and having a process to drive it along?

Johannes Ziegler (Synesis): I had the luxury of spending several years thinking about this at the Stanford Computer Industry Project, and the concept the team came up with was the organizational I.Q.--how companies share information, make decisions, and align their operations internally and externally. The organization gets information from the customer, the market, but the challenge is to really get that information to the decision-maker and make quick and effective decisions. There are five principles behind that: external information awareness; internal knowledge dissemination; decision architecture; organizational focus and alignment; and finally, continuous innovation. (See sidebar, right.) Now those things make sense, but the question is how to actually manage and measure them.

Pollard: You've got a magical device that measures all that, right?

Ziegler: We're working on it. I think the challenge is to measure I.Q. where the action is. The method we're using is to force ourselves to translate those concepts into very specific questions for people on the working level. In product development, for example, we ask people about the status of the project, customer feedback, who is responsible for what kind of decisions, and how information is made available to them. Who makes certain key decisions? How long does it take to make that decision? How often do you interact with certain types of customers? By asking a cross-section of working-level people those questions and then comparing the answers to those in comparable companies, it's at least possible to see what practices have moved us forward.

That's a diagnostic tool that is then complemented by an improvement tool, where we come back six months later and say, "What have you actually done?" You have this initiative, driven by this person, with this amount of resources, and these functions were involved in it-so in other words, you have the qualitative description. Then we come back and re-measure and ask the same questions and see if they have actually improved.

Davis: As our businesses become more complex, it's much more difficult to determine the real value of intellectual capital or intangible assets. A case in point: We were looking at buying a major brand, and it's all goodwill or intangible assets, and the seller perceived that the value was the brand. During due diligence, we found that more than a third of the sales of the brand were the direct result of a relationship between the customer and a middle-level person within that company who was providing some consultative advice to these people. We decided not to buy the brand-although we hired the guy. [Laughter] The owners didn't understand the value.

Harker: It's heartening that there are people at this table who are focused on this at a scientific level. When that happens, the push will be to move this in a much faster way to figure out how we get the capability to the companies, how we get the commitment in the companies, and how we keep [knowledge] there so it doesn't walk out the door every night.

Ziegler: The question of making it tangible and measurable really is key. As long as it's soft and intangible, it will not get the management attention it really requires on a day-to-day basis.

People, Knowledge, and Rewards

Copeland: Ultimately, to make knowledge management work and work well, it's going to require a fundamental change in the way we do business and the way we reward our people. The key performance indicators...all of those things are going to have to change. It's not a particularly appetizing prospect because nobody likes to go through that much change, but I think we will either change our organizations or others will change them by sucking out the talent and the capability and intellectual capital.

Norm Shockley (Acclaim Technology): But how do you do that? When a guy can go somewhere else and make a million dollars, and you say, "Okay, how am I going to do that when there's an economy that's out of balance and I've got these dot-coms simply going crazy and wasting money and their spending is all out of whack?" You can't pay people that kind of money and be profitable.

Copeland: Well, you can't pay them that kind of money in your present business model. You have to have a different model. That's one of the things we're struggling with right now.

An important step in managing knowledge is converting the mindset within the organization to recognize that people are not a cost, but rather they're an enabler for the creation of revenue and wealth. If you don't believe that and you don't plan that way and think that way, then the organization really doesn't value its intellectual capital. [You also have to] know who the people are who are most critical to the success of the organization. I would guess that most companies don't know that. Most organizations even at this stage in the development of this economy do not know the people up and down the organization who are absolutely critical.

de Geus: Somebody said the differentiator of the future will be to have employees that care for a company, and that starts with the company caring for the employees. Caring means finding the talent, stimulating it, and aligning it. I would propose that the finding and stimulating has to be done everywhere, and that the alignment has to be done top-down. If you have people who care, a lot of the knowledge just becomes available very easily.

Human capital is not distributed evenly, meaning some people are worth a heck of a lot more than others. To find talent and key people, we need to have an organization that keeps finding them on its own--because as a top management team, there's no way you can get all of the key people and then sort of promote them yourself. There's no way we can do it all. We always know the same people. We know the same stars--but where are the new stars?

One of the mechanisms we've found works well is a regular HR review with top management, where you talk through an entire cone [of the organization], all the way down to the lowest-level person. Everybody is color-coded in terms of who are the key contributors, who has high potential, who has been in the job for too long, who could go somewhere else. For the top three layers, there are succession plans with names in place, people within the organization, but also most importantly, from outside the organization. We want the managers to talk about all this-just talk about it. And out of that, we realize that some know their people very well, some don't, and most importantly, you find all of these nuggets you can motivate just by moving them a little bit.

Kopko: Art, I think you're right on the money. I look at baseball as a model. The New York Yankees is probably one of the best human-asset management organizations going. If you were to ask them to do an assessment of what their organization is like, they could name who their top prospects are, how many pitchers they have, how many first basemen they have, how many emerging outfielders they have. They do a very, very detailed review of their human assets regularly, and they're debating that very fiercely in terms of who's going to be coming up to the "big team" at some point down the road.

We have a review now of skill sets-to see the skill sets we have, particularly in technology. Are they senior skill sets? Are they early developmental skill sets? If you don't have the right human assets to leverage later-that is, if you have too many "left fielders" in your low-level players- you know you're not going to have a good overall team later on.

Kahn: My concern was that this would be a fad. When I shared that with my marketing communications manager, she said, "Don't sell it short. Knowledge management is as important as TQM." There was a lot of B.S. and puff and hype around TQM, but then it became real. Knowledge management will become real only when the chairman of General Motors and the janitor on the paint line both care about it. Their compensation and their futures in their jobs should be tied to the communication of ideas between one sales force and another, between one customer set and another.

You have to do it low and high at the same time.

Kovacevich: Our rewards system is based on various criteria, and the percentage differs by where you are in the organization. At my level, it's totally based on the company's performance, as you would expect. If you look further down, there's individual performance, there's your team or immediate group performance, there's performance for one level above you, and then there's the total company performance.

Every company that has a variable compensation system or a variable compensation element has all four of these, but the percentage is different, depending upon where you are in the organization. For example, 100 percent of our people, even part-time tellers, have stock options, so that's the company performance mechanism. You have a cash bonus, and in my case that's 100 percent determined by the company's performance. To a person running a [bank], about 80 percent would be based on that store-level performance, and only 10 percent for the region, and so on. So we are recognizing that there isn't just one performance level and there isn't one compensation system. We're trying to align what we're measuring to reward the behavior.

When you're performance-based, it's a much more complicated job to measure that. Much more complicated. There's no way to keep this simple. As we got into more complexity in how we measured it, we had to get more complex in how we reward, and it's a learning experience. The bad news is, this is hard to do. The good news is, this is hard to do. The fact that it's hard is actually a positive, not a negative. The only thing that [competitors] can't duplicate easily today is something that's difficult to execute.

Harker: We changed our compensation systems. We used to reward stars and individual effort. We went to almost 80 and 90 percent rewards in cash or stock, which we give monthly or quarterly to good performers in terms of team-type things and reinforcing collaboration. Once that gets in, the light goes on.

Kovacevich: This isn't a mystery in our business, in the sense that we believe that the loyalty is to people, not to the brand. Our customers are loyal to their bankers; they're not loyal to Wells Fargo. If their banker goes somewhere else, about 60 percent of the customers will probably go with them. That's what a service business is-a loyalty to individuals. Yet, if you look at what most financial institutions do in terms of what they spend time on and what they value, they're worried about technology, they're worried about senior people's compensation. [Those are our competitors], so don't tell them, but there's no relationship between what is really important and how they run the business.

Davis: We need to make the commitment to investigating and understanding the true intelligence of the people inside our company, and spend as much time on that as what we do when we go outside to find somebody new. I think that doing that will bring a better understanding, that it's important to put exciting plans in place and to reward people for profitable ideas down through the organization at all levels.

Driving It Home

Robert Lear (CE): I'm impressed with the worth of effective knowledge programs. I'm also impressed with the fragility of them. A weak link in the chain can ruin the process. The CEO has to be dedicated, the direct reports have to be dedicated, all the sub-supervisors and the people who they contact, they all have to be impressed with and knowledgeable about the whole thing.

Louise Kirkbride (Broad Daylight): If knowledge management is going to be successful, it has to be aligned with overall corporate goals. If it is not focused on the overall corporate goals, it becomes a distraction and won't succeed.

Shockley: Knowledge management is obviously very important, and it's something we've probably neglected for a long time, with so much growth over the last several years. I think it's going to be here for the long term, and technology has certainly enabled us to deliver on it now, as well.

Kleinert: To me, knowledge has three M's: message, medium, and motivation. Message--you have to define the business-critical information in your organization. Medium--you need some sort of system to provide the right type of information to the right people at the right time. But most important, I think, is the motivation side. You have to motivate people both to populate a system and to use it. And that gets into the amorphous cultural area comprised of rewards, both monetary and non-monetary; communications, both pull and non-pull; measurement; and finally, but not least, leadership.

Kopko: I'm not a believer in organizations having too many initiatives and getting too many silos of processes that aren't integrated properly because they tend to fail. So if you're going to try to make this a long-term, successful initiative, I really do believe it needs to be a subset of your quality issues. The reason I say that is that the things we've talked about regarding knowledge management should end up showing up in customers being happy, employees being happy, shareholders seeing a return. So if you have a quality system, this should just be incorporated into it, and you can add an additional sophistication into your quality initiatives to be able to recognize and measure it.

Harker: When you get down into this knowledge piece, this intellectual capital piece, in my mind, you need capability and commitment--you can't have one or the other. You've got to have both.

Carol Evans (CE): When we talk about knowledge capital in our organization, the issue of resources comes up a lot. What I'm hearing here is that you have to put your money where your mouth is. You have to spend the money to create the knowledge base and the processes and the sharing opportunities.

Kirkbride: People will do a lot to make their life and their jobs easier, and they will do very little just for an amorphous greater good. I'll give you two examples. One is a major company in Silicon Valley. The place where [our systems are] installed is sales support for a particularly successful product. So 1,500 salespeople were calling 14 marketing people. The marketer's lives were miserable because they were getting calls from around the world, 24 hours a day on an emergency basis for information about products. They made the investment individually to build a knowledge base so they could all sleep at night. So this project was enormously successful. And it wasn't six months or 18 months until this knowledge base was built--it was three months.

At another company in Silicon Valley, another group that was not supporting a successful product was given the charter to go find a knowledge management tool. But it's probably going to fail because nobody calls them. The only reason they would invest in creating this knowledge is an amorphous greater good, so they won't do it. My feeling is that knowledge management works where there's obvious money to be made by doing knowledge management.

Griesedieck: When we started pushing knowledge management, we made speeches about it, we tried to make it part of the culture. But at the end of the day, we finally had to just get serious and say it's also going to impact your compensation. Today, 20 percent of a person's total compensation sits within this area. I don't care how big a rainmaker you are, if you aren't putting information in the database, you're going to get 20 percent of your compensation taken away. So you can do everything you want to change the culture of the organization, but at the end of the day you also have to tie it to some kind of measurement system, which we have on a monthly basis, and to the compensation system.

Kahn: Overall, I think the culture for doing this is being created. The tools are being created. It's on its way. It's going to be a lot of hard work, but I think the payoff will be there.

Copeland: I think this involves fundamental, not incremental change, so we must believe that there's fundamental benefit to be had; otherwise we wouldn't go through it. I don't think we kid ourselves about the difficulty of achieving what we want to achieve here.

I honestly believe that knowledge management--sharing intellectual capital, leveraging intellectual capital, however you want to describe this process--can produce another amazing round of productivity improvement. If you look at what happened to the U.S. over the last 15 years--the quality circles and then the real focus on re-engineering businesses in order to make them more competitive, and then we came up with enterprise-wide software products that had best practices baked into them. And all of a sudden you saw those enormous productivity gains--not at the margins, but fundamental productivity and value-creation gains that were made. The good news is that this area offers the same kind of opportunity.

Kovacevich: We are different people here today, with different backgrounds, and from different industries, but we all seem to think this is an important subject that has tremendous leverage. If we all agree that something is important and we're all focused on how we do it better, my guess is that over time we will find some silver bullets.

This gives me confidence that it's worth working on and will get better over time.

Who's WHO 

* James E. Copeland, Jr., is chief executive of New York City-based Deloitte Touche Tohmatsu, an $11.2 billion professional services company.

* Jack J. Davis is president and chief executive of City of Industry, CA-based Ventura Foods, a $900 million manufacturer of edible oil-related products.

* Aart J. de Geus is chairman and chief executive of Mountain View, CA-based Synopsys, a $784 million electronic design automation software company.

* Joseph E. Griesedieck is chief executive of San Francisco-based Spencer Stuart, a $365 million executive recruiting firm.

* John Harker is chairman, president, and chief executive of Wilsonville, OR-based InFocus Corp., a $390 million maker of data and video projectors.

* Edward Kahn is president of EKMS, an intellectual property management firm based in Cambridge, MA.

* Dennis J. Keller is chairman and chief executive of Oakbrook Terrace, IL-based DeVry, a $505 million technical and business education company.

* Louise Kirkbride is chief executive/founder of Broad Daylight, a software manufacturer based in Santa Clara, CA.

* Richard A. Kleinert is global practice leader of the human resources strategies group specializing in human capital advisory services at Deloitte & Touche LLP.

* Edward M. Kopko is chairman, chief executive, and president of Butler International, a $450 million provider of technical and technology services.

* Richard M. Kovacevich is president and chief executive of San Francisco-based Wells Fargo, a $21 billion consumer and banking services company.

* Allen J. Lauer is president and chief executive of Palo Alto, CA-based Varian, a $704 million manufacturer of scientific instruments and equipment.

* Robert W. Lear is chairman of the Chief Executive Magazine Advisory Board.

* Norm Shockley, Jr., is chief executive of Acclaim Technology, an e-business and technology solutions provider based in San Jose, CA.

* Theresa Stephens is chief executive of Invision Group LLC, a consulting company based in Marina del Rey, CA.

* Dr. Johannes Ziegler is president and chief executive of Synesis, a management consulting firm based in Mountain View, CA.

The Elements Of INTELLIGENCE

"The concept of organizational I.Q. is comparable to I.Q. in a human being to some degree," Johannes Ziegler of Synesis told the Chief Executive knowledge management roundtable participants. "A human being with a high I.Q. is able to gather information and make better decisions more quickly than others, in the case of an organization, it's very similar. The organization gets information from the customer and the market, but the challenge is to really get that information to the decision-maker and make quick and effective decisions."

Ziegler offers a list of five principles for assessing and building organizational I.Q.

* External information awareness. Information about the environment is really the driver for decisions about new products and new strategies.

* Internal knowledge dissemination. Are processes in place to share information--from both a technology standpoint and, most notably, from a human interaction standpoint--between key knowledge-bearers in the organization?

* Decision architecture. Are those people who have the best perspective on the relevant information the ones making the decisions?

"As we all know, traditionally the decision-making power is assigned based on criteria other than that," said Ziegler. "But the closer it is to this, the better."

* Organizational focus and alignment. This is essentially the ability to enable individuals and organizations to know what they want to achieve and have them moving in one direction, rather than canceling each other out in their actions.

* Continuous innovation. This focuses on breaking out of the current system--which needs to be done, otherwise the competition will catch up.