The phrase isn't a fixture in management school catalogs yet, but the increasing attention being paid to "knowledge management" among both academics and corporate executives foreshadows its emergence as a rising issue in business.

The constant drive for more competitive products and services is said to be the main factor fueling the effort to measure and manage the knowledge assets of a company.

"There's a growing recognition that is leading to the creation of a field," said Robert Cole, professor of business and public policy at the University of California at Berkeley. "The relationship between knowledge and the firm is becoming a critical issue, maybe one of the critical competitive issues of the future."

The Berkeley b-school itself reflects a heightened scholarly interest. Last spring, the Haas School of Business, using a $1 million grant from Xerox and its Japanese affiliate, created a chair of knowledge and named Ikujiro Nonaka, Japanese management expert and author, the first Distinguished Professor of Knowledge. Nonaka will spend two or three months a year at Berkeley, lecturing and doing research in the field.

The similarity between the terms "knowledge management" and "information management" can blur the differences between them.

"A lot of activity going on under knowledge management often is focused on information technology because that's the easy thing we know how to do." Cole said.

Those in high tech information businesses often are the first to see the potential advantages of knowledge management, Cole noted, because they are more alert to the role that technology can play in managing non-financial assets. He noted that IBM is using its own technology, networking and groupware to facilitate a knowledge management activity it calls "competency networks."

"You can use technology itself to figure out how to use technology to facilitate knowledge management," Cole said, "but it by no means is limited to high tech companies. In Nonaka's own research on knowledge management, for example, he uses a consumer electronics company, Matsushita, and Honda Motor Company."

Dorothy Leonard, the William Abernathy Professor of Business Administration at Harvard Business School, says that the field might be looked at as an extension of information management by people who work in information technology or artificial intelligence.

"From that perspective," she said, "knowledge management could be incorporated into the curriculum in the sense that one would set up more sophisticated systems to get a certain amount of information from information technology repositories."

But Leonard believes that knowledge management deals much more with the unspoken knowledge people have in their heads. Trying to capture that as a corporate resource has been a natural progression.

"In the early '80s when U.S. industry was getting pretty severely beaten up in international competition, particularly in autos, but also in things like copy machines and cameras, we began to value tacit knowledge, although we didn't call it that," Leonard said.

"We began paying attention to hiring people for their brains and valuing the brains of people even on factory floors, where we had only recognized their brawn before," she said.

Companies realized they were building on the intelligence of their employees and that including people in the process of creating new products and services made the whole process move faster and better. This became clear in the quality movement and the use of cross-functional teams.

"We've had people talking about knowledge workers and the knowledge society for some time," Leonard said. "All of a sudden, people are waking up and, like the Moliere character who discovered he'd been speaking prose all of his life, we discovered that what we've been dealing with is knowledge. But we don't know how to deal with it very well and the coming paradigm will be to understand knowledge management as we do cash flow and financial management."

John Seely Brown, chief scientist and chief learning officer of the Xerox Corporation, also distinguishes knowledge and information in talking about managing knowledge assets.

"Clearly, this new game of knowledge management is really quite different from the stuff that MIS directors ever worried about," Brown said. Both he and the other senior executives of Xerox, he said, are interested in new ideas of knowledge and learning for the organization.

Brown said that most references to knowledge management have to do with managing the explicit knowledge assets of the firm. These assets vary from company to company, depending on what the company produces:

The human assets are the people of the company who have knowledge.

The intellectual assets can be patent portfolios, intellectual property rights, trade secrets, documents that record processes and methods, or the core competencies needed for success.

Customer assets, or customer capital, has to do with the relationships with customers - what the company is learning from them about such things as brand recognition, consumer perceptions, brand loyalty.

In addition, the ability to share knowledge across an organization is itself a critical knowledge asset, says Berkeley's Cole.

"How to move knowledge throughout the firm and share it in a way that many people have access to it, when it has been developed in another part of the firm, is one of the themes of knowledge management. We've been notoriously not very good at that," Cole said.

Several of the people who are working in the field of knowledge management emphasize that its focus is not individual learning.

A lot of the "organizational learning" became about the numbers of people trained in a particular skill, and how many more people could be trained, Cole said. "That really is not the point at all," he said. "Not that you shouldn't be training people, but how do you convert that to organizational knowledge and competitive advantage?"

Obtaining a grasp of the knowledge that exists in a corporate culture so that it can be assessed, profitably deployed and systematically increased is not something that many, so far, know how to do.

Bonnie Stivers, professor of accounting at Kennesaw State University, has done extensive research in the areas of intellectual capital and knowledgement management.

Along with Theresa Covin, chair of the department of management and entrepreneurship at Kennesaw State, Stivers surveyed top companies in Canada and the United States to learn how they were using non-financial performance measures to improve profitability.

"It's not a simple term and it's not easily defined," said Stivers, of knowledge management. "I guess it could have been called something else. Tom Stewart's article [Fortune, Oct. 3, 1994] referred to 'intellectual capital,' but that is the thing, and knowledge management is the practice. It is how you identify the capital and then how you manage your business so that it is not depleted, so that it grows and provides added value to the company."

In their survey, based on responses from the top executives of 151 of Canada's Financial Post 300 firms and 102 of the Fortune 500, Stivers and Covin found that for most companies the management of knowledge and other intangibles still is new ground. Yet, the results showed that businesses expect their success to depend increasingly upon technology that can capture and share the collective knowledge of their organizations.

"I believe it is a new way of doing business that spills over to how you interact with your employees, how you interact with your customers, suppliers, all of the stakeholders," Stivers said.

The earliest concepts of knowledge management seeped into some companies and b-schools via accounting.

"In the '60s there was a movement called human resource accounting," Stivers said, "in which companies were trying to record on their balance sheets some value for the intellectual capital of their employees. But it never caught on.

"Accountants have been trying to get their hands around this idea of intangible assets and how far we can go on putting them on the balance sheet," she said. "To call something an 'asset,' you have to be able to identify very clearly its future benefits. Well, not only does the company not own knowledge, but who knows what 'future benefits' are? We are a long, long way from getting it on the balance sheet. But somebody in the company does need to have ownership of whatever this knowledge management is, and I don't know if that is the accountants or not."

Having a way to measure the impact of organizational knowledge could significantly alter the look of the bottom line, Stivers said.

"The payoff from intellectual capital might not be seen in one year, so profitability doesn't necessarily tell you whether or not you're doing the right things as far as knowledge is concerned."

"That's what is so crazy about corporate downsizing," Stivers said. "Intellectual capital could be walking out the door, yet the income statement may tell you that you've done the right things because profit in the short term goes up as the result of decreased payroll. But if you talk about the impact on R&D or the impact on innovation or the loss of key customers, how do you measure it?"

Xerox's Brown said he thinks an essential element of managing corporate knowledge assets is the creation of knowledge.

"Knowledge creation gets much more to the very core of what makes a firm a firm," he said. "We're saying that firms produce knowledge, that they could produce a heck of a lot more of it, and that knowledge is where their competitive edge comes from."

Brown and others have suggested that what a company knows lies in the practices that are adopted by various communities within a company. It is these "communities of practice," rather than individuals, that take experiences and refine them into social knowledge, or knowledge that is believed in the group.

In a knowledge economy, the company that can increase the speed with which it turns the knowledge of individuals into practices that are engaged in by the whole group will have the competitive edge.

In an experiment he conducted within Xerox, Brown used the Internet to form what he calls a distributed community of practice among thousands of Xerox technical reps all over the world. The tech reps, mostly high school graduates, were trained by Xerox for their jobs of fixing problems with customers' equipment.

The object of Brown's experiment was to find a way to take their local experience and detach it from the local circumstances and turn it into a procedure that the whole community of tech reps could use to better troubleshoot a Xerox copier.

"They are creating a set of hints, which before they can be posted into the community board, have to go through a review process of their own peers, chosen by them," Brown said. If the peers can't agree on a proposed suggestion, it goes through a referee process to determine if the hint becomes a warranted piece of knowledge for the whole community.

"It is a trivial idea," Brown said, "but the catch has been to design, or enable the tech reps to design, the social processes along with the technical processes."

"This is a social-technical system, in which, by having the tech rep's name associated with the hint, that tech rep, just like in science, is becoming a more central member of this community of practice. In fact, the tech rep's identity is being created and shaped by this process, as he or she becomes a more central member of this community."

Each member of a community often has partial knowledge, Brown said. The object in creating new knowledge is to take bits of partial knowledge and weave them into a coherent structure. Taking partial knowledge from the community and integrating those together into something that is believed by the whole community is knowledge creation.

"Each person plays a role in this kind of co-construction," Brown said.

Brown's trivial idea turned out to be not trivial. The knowledge of the tech reps is saving Xerox tens of millions of dollars, he said. In addition, it has transformed tech reps into a knowledge- creating group and transfers some of their tacit understanding, through a peer review process, into something that can be removed from a specific locale, made explicit and passed around the world. It now is being implemented worldwide throughout Xerox.

A main difference between this and collecting a bunch of tips that people use to do their jobs is the refining process that an idea must go through before it is taken into the community, Brown said.

"This is just the beginning of how to look at the firm in terms of this constellation of communities and how the community, through its shared practice, creates a kind of framework for piecing together the knowledge that each member has into something more coherent," he said.

The sales force in Xerox already is using this knowledge. The next step, Brown said, is to have the tech reps' ideas be distilled into something that the Xerox designers can incorporate into their work.

Learning how departments and groups can interact with each other is another facet of knowledge management.

Al Vicere, director of executive education at Penn State's business school, said, "It's a rethinking of the core elements of business strategy, marketing and finance. Suddenly, companies in a global marketplace realize we've got to put the things we do all together in a management process."

One of the ways more companies seem to be working toward this is by having a learning officer for the company. Vicere said he is hearing and seeing the title chief learning officer or chief knowledge officer more and more, including at such companies as Coca Cola, GE and Monsanto.

"If it's not an official title, it's starting to be referred to as that," he said. "Even if companies are not using that designation, there tends to be someone in the organization working closely with the CEO and senior management on the whole idea of 'How do we ingrain in this organization an ability to learn, to leverage the experiences across the various business units to speed up the process of change?'"

Where knowledge management and creation is expected to be manifested most clearly in companies is in new products and services that spur profitability.

"If you want to say how well a company is doing in knowledge creation, you almost inevitably and quickly turn to the issue of how rapidly are they developing new and better products and services," Cole said. "New product development and short product cycle time are sort of a key measure of how well somebody is doing in the knowledge creation field."

Managerial accountants are looking for the non-financial measures to use to help a company understand if its intellectual capital is increasing or not, said Stivers of Kennesaw State. Some measures to use might be employee training, or employee motivation or satisfaction, or customer satisfaction, or some measure of R&D, or the number of new products developed in a certain period of time.

"A lot of measures would give you some indication of whether or not a company is being innovative," Stivers said. "And if it is being innovative, then it is doing something right with knowledge management."

A company engaged in trying to measure non-financial assets would be looking at a current measure to see if something is being done effectively right now, she said. Waiting till the end of a quarter or end of a year and trying to determine it from looking at financial measures would mean that a lot of other aspects of the company have been included that don't deal with intellectual capital.

"Managers need something today that answers the question, 'Am I doing something right?'," Stivers said. "You can't wait until you get the financial statement at year's end to see that you've got increased profit. Even if you do have, it doesn't tell you what you did right."

She sees some interest in knowledge management growing among financial groups now. Financial people realize that how stock is actually valued is not just a matter of a company's quarterly or annual reports.

At a conference in Houston two years ago, Stivers said, about 500 people gathered from all over the world. "They were talking about knowledge management as just hooking a bunch of PCs together and getting people to share data."

Last September, at the same conference, she said, there was a 180-degree switch. "They were saying 'This is really about people and this is about innovation. You need the technology to gather the stuff and to make it easier, but we're still talking about people and how you motivate people. How do you create innovation and how do you get people to think this way?' It means new management and new culture, new ways of rewarding people, new ways of evaluating people. It is not just collecting data and sharing it or even getting people to share it. It's tapping into what is in people's heads and leveraging that.

"I think a lot of people are thinking that intellectual capital is the puzzle piece that's not in the financials but still is driving performance," Stivers said.

Interest in the topic of knowledge management has been higher in Canada than the United States. The government of Canada got interested in the idea of performance measures several years ago, Stivers said, when it saw that Canada's future growth was dependent on the notion of innovation and service. They started looking at new measures of performance.

McMaster University in Hamilton, Canada, has sponsored a conference on intellectual capital for several years. The conference is put on by business students and the Innovation Research Center, whose director is a teacher of innovation research in the b-school, said David Conrath, dean. The conference is half academic, half business.

Within the university itself, Conrath said, the concept of intellectual capital is beginning to enter the coursework as something businesses must manage and value. "And obviously, universities themselves now are getting very conscious of getting a return on the intellectual capital created both from students and faculty. So both of these are becoming common," he said.

In the United States, Nonake's appointment at Berkeley appears to be the most significant school-wide recognition, so far, of knowledge management in the curriculum. One of his first activities was working to create a two-day conference on "Knowledge and the Firm" this fall, bringing to Berkeley academics in the field from around the world.

About 30 to 40 multidisciplinary scholars were scheduled to participate in a discussion on knowledge management the first day. Economists, sociologists and organizational theorists were to discuss the common ground and what different fields contribute to knowledge management issues.

"The focus is on looking at this from a competitive point of view and understanding the competitive implications of managing knowledge so that it is practical in lots of ways," Cole said.

The second day was to bring corporate leaders who have worked on the topic to talk about their vision and the vision of what industry should be doing. It will be an annual event to move the field of knowledge management forward.

"It is going to become pervasive," predicts Harvard's Leonard. "In the same sense that you could not contain information technology to a single curriculum and a single set of courses, you will not be able to confine knowledge management either.

"If I'm teaching about finance, I'll have to teach about how you value intellectual property. If I'm teaching marketing, I'll have to recognize that much of it will not go through physical space, but through electrons. And if I'm teaching strategy, I'm going to have to realize that there will be virtual companies, perhaps based totally on their knowledge management," she said. "It's going to permeate what we teach. I don't see it as a separate topic any more than information technology."

Mary Nichols, professor and associate dean at the Carlson School of Management at the University of Minnesota, agrees. "It truly requires a multidisciplinary perspective from the standpoint of both practitioners and academics," she said. "I think there's a good bit that we can do to draw from some of our underlying theoretical base to bring to bear on this area."

Nichols believes the topic of knowledge management has and will affect b-schools' curriculum and research. "Fundamentally, given that it is an important issue to our constituents in the business community, we must be responsive," she said.

The Strategic Management Research Center in the Carlson School has begun a multi-company study on the topic, which it termed "confidence management." Six companies in the Twin Cities area are on a steering committee for the study and 11 projects have been undertaken, Nichols said.

There apparently is skepticism, however, among those who have not been engaged in discussions of knowledge management in business. When the appointment of Nonaka was announced, a New York Times article quoted some non-business university professors, including one at Berkeley, as having misgivings about such a position.

R. D. Nair, senior associate dean for academic affairs in the business school at the University of Wisconsin-Madison, said he questions somewhat Berkeley's attention on knowledge management as a specific topic.

"In a broad sense, this is what management has always been about," Nair said, "drawing on the best of your employees, making sure their talents are well organized. You can see it explicitly in things like total quality management or teaching about teams."

Nair pointed out that specific courses like innovation and technology management bring out the themes of knowledge management, knowledge transfer and knowledge creation. "These are and always have been part and parcel of any management curriculum," he said.

"I don't see why there is so much fuss about it right now," Nair said. "It's what we are all about. It's the purpose that universities historically have had. In that sense there's nothing new here, that's what we're all about - creating knowledge, transferring that to our students."

Cole acknowledged that the school may have invited the skepticism by choosing the title "knowledge professor." Still, he said, "I don't think anyone would question that the issue of the relationship between knowledge and firm is a critical one that deserves serious investigation."

It seems certain that some corporate and academic thinkers will continue to investigate this relatively new arena of management, regardless of whether they soon come to a unanimous decision about its proper name.