By Thomas A. Stewart

Doubleday Currency, 2001

379 pages, $27.50

Fortune columnist Tom Stewart was one of the first mainstream journalists to write about intellectual capital (IC). In The Wealth of Knowledge, he identifies IC as one of the three big ideas of the past 20 years that have changed how organizations are run (total quality management and reengineering are the other two). The associated concepts of intellectual capital and knowledge management have certainly changed the rhetoric about how organizations ought to be run and may have sensitized managers to how deliberate management of "knowledge" might affect both short- and long-term performance. But whether these ideas about management have changed the way business organizations are actually run is debatable. The championing of the concept of knowledge management by corporate information-processing departments and their perennially insecure human resource functions does not give one cause for great hope.

Nevertheless, the intrinsic value of any new conceptual framework is that it does offer readers the opportunity to reorganize their own experience and learn valuable lessons from the experience of others. For instance, Mr. Stewart summarizes evidence showing that, despite its popularity with teachers, classroom training for managers is largely ineffective. People attending GE’s fabled Crotonville leadership development institute, for example, always say that the real benefits came from the people they met, not from the courses they took.

The book is divided into three sections, covering the theory, disciplines, and performance of a knowledge business. Mr. Stewart is a fine writer, but his dense style, studded with quotes and anecdotes, is better suited to columns than to a book. He is a documenter, rather than an integrator, of the current state of the field, and the chapters lack summaries. The best way to get value out of the book is to dip into the chapters one at a time, rather than reading the entire book at one sitting. The book is a mosaic of concepts, lists, rules, and injunctions derived from the work of scores of consultants and managers, all of whom are grappling with the will-o’-the-wisp that is knowledge. Some of these frameworks are clearly compatible with each other; others are not. There are some fine chapters on accounting for knowledge assets, where Mr. Stewart performs a valuable service in comparing and contrasting the many different approaches to measuring human capital, supplying thumbnail sketches of the better-known frameworks.

Not surprisingly, most of the sources that he consults work within the conventional strategic paradigm of how a large firm should be run. They view knowledge management as yet another specialized function (like risk management) to be fitted into an increasingly complex corporate structure. One feels that knowledge management will not make substantial progress until it can escape this functional straitjacket that leaves the whole issue of strategy-making unexamined. As we have seen from the debacle at the Enron Corporation, there is something seriously flawed with a philosophy that leaves the ideal of rational strategic choice inviolate, floating high and pure over the messy realities of the managerial world. Only when the management of knowledge, risk, and people is seen as the central task of general managers will we know that we are starting to get somewhere.