Knowledge Economy Index to gauge intellectual capital

A Canadian IT organization is confident it can prove to the federal government that investment in a company’s human capital leads to increased productivity.

The Toronto-based e-Content Institute is setting out, under

the direction of Industry Canada, to create the world’s first national productivity index focused on the value of the knowledge economy. The initiative, still in very early stages, was submitted by e-Content Institute as its contribution to minister Alan Rock’s Innovation Strategy, says institute director David Shinwell.

Industry Canada is sponsoring the so-called Knowledge Economy Index’s feasibility. Its main hope for this first step is to identify existing areas of research to build on, as well as pinpointing spaces where no prior research has been done, says Industry Canada Strategic Planning and Policy manager of research and statistics Bev Mahony.

Mahony says the benefit of a study like this one — which will engage both Canadian and international knowledge management experts — is a clarification of what terms like knowledge management or intellectual capital actually mean.

“”We’ve dealt internationally at the OECD with benchmarking for years,”” Mahony says. “”These are tough areas (to define) and you need to define them to be able to share common statistical data. It took us a while to get an agreement on e-commerce. Now we have new themes coming up.””

Shinwell says that although the knowledge economy may seem too esoteric to quantify, it has been measured before, albeit on a smaller scale.

“”There has been a lot of work that’s been done in Canada and around the world on this, either at the company level or industry level,”” he says. “”But everybody is looking at it from their own, narrow perspective and nobody is looking at it from the point of creating a model of the knowledge economy. “”

The pioneers of intellectual capital measurement hail from Sweden, says IDC Canada’s IT Value, Metrics and Measurement Solutions group manager Margaret Tanaszi. She says Skandia AFS, a Stockholm- based multinational insurance and financial services company, was the first company to use the value of internally-created knowledge as part of its 1991 company performance report.

David Brett, CEO of Vancouver, BC-based KM software developer Knexa Inc., says proving the value of intellectual capital could make it easier for individuals to get re-certified or further trained in their field. It should also make it easier for the government to figure out where research and development funds should be directed.

“”There’s a school of thought that says you can’t manage what you can’t measure,”” he says. “”If you look at the educational expenditures made by the government, how do they decide where to allocate funds? We don’t really know the ROI we’re getting on our investment in education.””

Mahony says it’s too soon to talk about how the index could influence public policy, pointing out that so far the ministry has only committed itself to sponsoring the feasibility study.

“”Until we have the study, this first phase, we won’t really know how far we can push it, she says. “”That’ll be a decision point then, when they see what’s possible.””

Tanaszi, although seeing the index as a promising initiative, says that the scope of the project may prove challenging to the team working on it.

“”It’s a big thing to get a framework around,”” she says.

The e-Content Institute may also have a hard time establishing the credibility of the index, Brett says. The public — most of whom may not understand the science behind the index’s findings — might not take it seriously.

Brett likens the problem of knowledge to the challenges the British Columbia government quest to figure out the size of its fish stocks.

“”Recently the salmon run in BC was perceived by the fishermen to be of one size and by the ministry as being a lesser size,”” he says. “”Because the salmon are under water, any attempts to measure the number of fish is going to be subject to criticism and possible inaccuracy. How can you really prove the number of fish that are down there?

“”The average person is not going to understand how (we’re) coming up with this index,”” Brett says.

Creating the index is going to be a lengthy process; the complete project should take about five years. Brett says it should be helped along tremendously by the fact that a large number of the world’s knowledge management experts are Canadian.

“”If we’re successful, there will be a lot of Canadians who will now have an exportable product, because they’ll be able to do this modelling for other countries,”” he says.

Comment: info@itbusiness.ca

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