This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
To explain the principles governing To explain the principles governing
the management of knowledge as the management of knowledge as
an intangible asset an intangible asset
The approach taken by Karl Erik The approach taken by Karl Erik
Sveiby will be used.Sveiby will be used.
ObjectivesObjectives
Define knowledge management in Define knowledge management in
terms of market valueterms of market value
Link intangible assets to market valueLink intangible assets to market value
Introduce accounting procedures for Introduce accounting procedures for
knowledge assetsknowledge assets
Philosophical backgroundPhilosophical background
Trust is the bandwidth of communication.Trust is the bandwidth of communication. The difference beteen a company’s market The difference beteen a company’s market
value and book value can be directly value and book value can be directly attributed to its attributed to its intangible assetsintangible assets..
Knowledge grows when shared and used; Knowledge grows when shared and used; unused knowledge deteriorates.unused knowledge deteriorates.
Tapping into customer and employee Tapping into customer and employee knowledge is one of the steps to building a knowledge is one of the steps to building a more successful organisation. more successful organisation.
KE SveibyKE Sveiby
GlossaryGlossary
Individual competenceIndividual competence• capacity to act in a wide variety of situationscapacity to act in a wide variety of situations
External structureExternal structure• customer and supplier relationships and the customer and supplier relationships and the
organisation’s imageorganisation’s image
Intangible assetsIntangible assets• equivalent to intellectual capital and includes equivalent to intellectual capital and includes
assets not (yet) entered into the balance sheetassets not (yet) entered into the balance sheet
Glossary 2Glossary 2 Intellectual capitalIntellectual capital
• knowledge that can be converted to valueknowledge that can be converted to value
• art of creating value by leveraging art of creating value by leveraging intangible assetsintangible assets
Tacit knowledgeTacit knowledge• informal knowledge that is not made explicitinformal knowledge that is not made explicit• we know more than we can tellwe know more than we can tell
Glossary 4Glossary 4
KnowledgeKnowledge• process-of-knowingprocess-of-knowing• capacity to actcapacity to act• human facultyhuman faculty
Tangible assetsTangible assets• accounting term - able to “touch” assetaccounting term - able to “touch” asset
ValuesValues• knowledge era value created from intelligence knowledge era value created from intelligence
& competence of people & customer relations& competence of people & customer relations
CORE COMPETENCE
&ABILITIES
CREATE
PRODUCTS AND
SERVICES
WHICH THE MARKET BUYS AND PAYS FOR
SELECTIVEFLOW
TECHNOLOGY:SKILL, KNOWLEDGE
(KNOW-HOW)
SELECTIVE FLOW INNOVATION
WHAT DRIVESTHE PROCESS?
= $
CORE COMPETENCE
&ABILITIES
CREATE
PRODUCTS AND
SERVICES
WHICH THE MARKET BUYS AND PAYS FOR
SELECTIVEFLOW
TECHNOLOGY:SKILL, KNOWLEDGE
(KNOW-HOW)
SELECTIVE FLOW INNOVATION
KNOWLEDGE& INTANGIBLES
= $
The New Wealth - intangible The New Wealth - intangible assetsassets
Share values above book valueShare values above book value
How is the price premium above the How is the price premium above the
net book value explained?net book value explained?
Value of intangible assets exceed the Value of intangible assets exceed the
value of tangible assets in many value of tangible assets in many
casescases
Assets Finance
CashCurrent AssetsEquipment
DebtEquity Visible
Equity
Assets Finance
CashCurrent AssetsEquipment
DebtEquity Visible
Equity
Customer CapitalExternal Structure
Structural CapitalInternal structure
Human CapitalIndividualCompetence
Inte
llect
ual C
apita
l
Mar
ket
Val
ue
Assets Finance
CashCurrent AssetsEquipment
DebtEquity Visible
Equity
Customer CapitalExternal Structure
Structural CapitalInternal structure
Human CapitalIndividual Competence
InvisibleEquity
Inte
llect
ual C
apita
l
Mar
ket
Val
ue
Invisible AssetsInvisible Assets
Individuals create external and internal Individuals create external and internal structures to express themselvesstructures to express themselves
ExternalExternal• customer and supplier relationships & imagecustomer and supplier relationships & image
• skill skill not not used will deteriorate used will deteriorate
Intangibles become a Intangibles become a Determining FactorDetermining Factor
If companies consist of more If companies consist of more
intangibles than tangibles, then the intangibles than tangibles, then the
intangibles will be the determining intangibles will be the determining
factorfactor
Intangible assets Intangible assets
Intangible Assets
ExternalStructure
InternalStructure
Competenceof
People
ImageRelationships
PatentsBrand names
SystemsProcesses
CultureManagement
EducationSkills
ExperienceAttitudeEnergy
Intangible assets in more Intangible assets in more detaildetail
External structureExternal structure• assets like image, relationships with assets like image, relationships with
customers, vendors, and also competitors customers, vendors, and also competitors
and other associations.and other associations.
In short, external structure refers to In short, external structure refers to
assets that depend on relationships assets that depend on relationships
outside the organisation.outside the organisation.
Intangible assets in more Intangible assets in more detaildetail
Internal structureInternal structure• that is the organisationthat is the organisation
• assets like patents and brand names, assets like patents and brand names, manuals, systems, processes, culturemanuals, systems, processes, culture
Managers may be regarded as part of Managers may be regarded as part of internal structure because it is their internal structure because it is their task to maintain and keep it viable.task to maintain and keep it viable.
Intangible assets in more Intangible assets in more detaildetail
CompetenceCompetence• education, skills, experience, energy and education, skills, experience, energy and
attitudesattitudes
Competence may make or break the Competence may make or break the relationships with the customers and relationships with the customers and the products or services provided.the products or services provided.
Knowledge ManagementKnowledge Management
The art of creating value by The art of creating value by leveraging intangible assets.leveraging intangible assets.
Need for a different paradigm to Need for a different paradigm to that of the industrial era:that of the industrial era:• one must be able to visualise the one must be able to visualise the
organisation as consisting of nothing organisation as consisting of nothing but knowledge and knowledge flows.but knowledge and knowledge flows.
Value: Industrial vs. Value: Industrial vs. KnowledgeKnowledge
Industrial era factory created value from Industrial era factory created value from
physical goods, moving them from physical goods, moving them from
supplier into the factory and out to supplier into the factory and out to
customers.customers.
Value is created by Value is created by adding resourcesadding resources like like
labour, energy to inputs.labour, energy to inputs.
Value: Industrial vs. Value: Industrial vs. KnowledgeKnowledge
Knowledge era companies add Knowledge era companies add
value not from the physical value not from the physical
resources, but from the resources, but from the
intelligence and competenceintelligence and competence of of
people producing outputs, as well people producing outputs, as well
as their relationships with their as their relationships with their
2. Capture data about 2. Capture data about customerscustomers
Invest in IT systems for capturing Invest in IT systems for capturing customer data or competitive customer data or competitive intelligence and building new networksintelligence and building new networks
• market information databasemarket information database
• FAQ databasesFAQ databases
• customer profilescustomer profiles
• sales support systemssales support systems
3. Leverage R&D into 3. Leverage R&D into several applicationsseveral applications
Find more than one application for Find more than one application for
the R&D knowledge, skills & the R&D knowledge, skills &
competencecompetence
• 3M example - R&D projects serve 3M example - R&D projects serve
different applications different applications
4. Create more value 4. Create more value from existing intellectual from existing intellectual assetsassets
Create more value out of existing Create more value out of existing
patentspatents
Sell processes to other companiesSell processes to other companies
Create value from internal structuresCreate value from internal structures
• Skandia sells back-office systemsSkandia sells back-office systems
5. Create strategy focused 5. Create strategy focused on individuals’ innovation & on individuals’ innovation & knowledgeknowledge
Adopt a strategy that focuses on an Adopt a strategy that focuses on an individual’s innovation & knowledge individual’s innovation & knowledge creationcreation
• professional services partnershipsprofessional services partnerships
# This aspect will later be addressed as # This aspect will later be addressed as “Unconventional Wisdom”“Unconventional Wisdom”
6. Commit to a “Knowledge 6. Commit to a “Knowledge Focused Strategy”Focused Strategy”
Leverage all intangible assetsLeverage all intangible assets
• customer (external)customer (external)
• processes (internal)processes (internal)
• individual capabilityindividual capability
What is missing?What is missing?
What about our customers?What about our customers?
Two areas not addressed:Two areas not addressed:1. Our customers1. Our customers
2. What our customers can do for us2. What our customers can do for us
To what extent can flow from customers To what extent can flow from customers to our people or internal structure be to our people or internal structure be used?used?
What is missing?What is missing?
““Intangible revenues”Intangible revenues” must be must be used.used.
Knowledge Focused StrategyMcKinsey & Co
ExternalStructure
Individual’s Competencies
InternalStructureIndustry data leveraged
to many clients
* Develop own concepts* Information on all projects collected & shared* Internal job rotation
* Collaborative culture “one firm”* Partner ownership* Cultural indoctrination
Knowledge Focused StrategyMcKinsey & Co
ExternalStructure
Individual’s Competencies
InternalStructure
* Focus on high image clients* Close relations with selected clients* Nurture relationships with universities
* Former employees alumni* Publicise concepts* Big assignments by teams
Knowledge Focused StrategyMcKinsey & Co
ExternalStructure
Individual’s Competencies
InternalStructure
* Give founded advice to clients based on own concepts* “Clients 1st, Firm 2nd”
* Recruit bright young highly educated people* “Up or Out” Career* Juniors in teams with seniors