Lec-3 - Knowledge economy intellectual capital.ppt

Lec-3 - Knowledge economy intellectual capital.ppt

1. HRM IN THE KNOWLEDGE ECONOMYHRM IN THE KNOWLEDGE ECONOMY
Essential concepts of knowledge economy,
intangible assets, knowledge worker, intellectual
capital, knowledge management

2. WHAT IS THE KNOWLEDGE ECONOMY ?
The Knowledge Economy encompasses all jobs, companies
and industries in which the knowledge and capabilities of
people, rather than the capabilities of machines or
technologies, determine competitive advantage
Source: M. & C. Lengnick-Hall “Human Resource Management in the Knowledge Economy”, 2002

3. TANGIBLE vs. INTANGIBLE ASSETS
The tangible assets of the firm are visible and quantified, form an integral
part of the balance sheet, can be easily duplicated, depreciate with use
Es: manufacturing plant, equipment, buildings and other physical
infrastructure
The intangible assets are invisible, difficult to quantify, not tracked
through accounting, must be developed over time, appreciate with
purposeful use
Es: technological know-how, customer loyalty, branding, business
processes
It is the intangible assets that will make the difference
in which firms succeed and which fail

4. 11 CHARACTERISTICS OF THE KNOWLEDGE ECONOMY
1. Symbolic goods/
digitization
2.
Demassification
3. Boundaryless
enterprise/ globalization
4. Virtualization
7. Convergence
8. Personalization/
Mass
customization
/Prosumption 9. Dynamic
pricing
10. Immediacy
11. Customer
communities
Source: Tapscott (1996); Burton-Jones (1999); Baird & Henderson (2001)
5. Connectedness/partnering
Integration-internetworking
6. Disintermediation

5. Quentin METSYS (Flemish Northern Renaissance Painter)
(1465/66 - 1530)
“The Moneylender and His Wife“, 1514 (Louvre Museum, PARIS)
Antonello DA MESSINA (Italian Renaissance Painter) (1430 - 1479)
“St Jerome in his study“, 1460-75 (National Gallery, LONDON)

6.  Machineries
 Equipments
 Technological tools
 Products
PEOPLE AS VALUE GENERATORS
INTERNAL
PEOPLE
EXTERNAL
Tangible
generate value
TangibleIntangible
 Know - how
 Innovation
 Company culture
 Image
 Customer relationship
 Brand awareness
Intangible

7. PEOPLE TO BE
DEVELOPED
RESOURCES
TO BE MANAGED
WORK
FORCE
HUMAN
BEINGS
KEY BUSINESS
ASSET
FROM:
TO:
100 YEARS
EVOLUTION OF
THE ROLE OF
PEOPLE IN
WORK
ENVIRONMENTS:
Function Function
Usually Usually
Known asKnown as::
PRIMARY FOCUSPRIMARY FOCUS TALENT BACKGROUNDTALENT BACKGROUND
Hiring and firing at best
costs
Negotiating with unions;
negotiating talent for least
costs
Administering employee
issues and employee
relations; tends to have a
strong enphasis on control
In many cases, represents
primarily a name change
Managing organization
and employee
performance for the
business success
Purchasing
Labor
relations
Personnel
Human
resources
(hr)
Strategic HR
Contract negotiations;
little human sensitivity
Legal and negotiating
background
Administrative
background
Administrative and
employee relations
background
Business strategy,
people, systems
and organization

8. THE PRINCIPLES OF THE KNOWLEDGE ORGANIZATION
ITEMSITEMS
Primary form of
revenues
KNOWLEDGE PARADIGMKNOWLEDGE PARADIGMINDUSTRIAL PARADIGMINDUSTRIAL PARADIGM

Knowledge
People
Production
Production
bottlenecks
Main task of
management
Tangible (money)
A tool or resource among others
Cost generators or resources
Financial capital and
human skills
Supervising subordinates
Intangible (learning, new ideas,
new clients, innovation)
The focus of business
Revenues generators
Knowledge workers converting
knowledge into intangible assets
Time and knowledge
Supporting colleagues
Source: K.E. Sveiby “The new organizational wealth”, 1997
Physical laborers processing
physical resources to create
tangible products

9. Information flow
Manager’s power
base
THE PRINCIPLES (cont.)
KNOWLEDGE PARADIGMKNOWLEDGE PARADIGMINDUSTRIAL PARADIGMINDUSTRIAL PARADIGM
Information
Customer relations
Purpose of learning
Stock market
values
Power strugglePhysical laborers vs capitalists
Control instruments
One way via market
Application of new tools
Driven by tangible assets
Knowledge workers vs managers
Tool for communication,
resource
Interactive via personal networks
Creation of new assets
Driven by intangibles
Via collegial networks
Source: K.E. Sveiby “The new organizational wealth”,1997
Relative level in hierarchyRelative level in knowledge
Manifestation
of production
Via organizational hierarchy
Tangible products (hardware)Intangible structures (software)

10. MANAGEMENT’S NEW PARADIGMS: DRUCKER (1998)

Even if employed full time, fewer and fewer people
are subordinates, even in fairly low-level jobs.
Increasingly they are knowledge workers.
Knowledge workers cannot be managed as subordi-
nates; they are associates.
They are seniors or juniors but not superiors and
subordinates.

11. WHAT IS A KNOWELDGE WORKER ?
“Knowledge workers have high degrees of expertise, education or
experience and the primary purpose of their jobs involves the
creation, distribution of application of knowledge.”
(Source: Davenport, 2005)
They are critical to the success of almost any organization, but they
present unique challenges to conventional management wisdom and
organizational principles:
•they are mobile and dispersed across the organization and the globe
•their work is interdependent and complex, often uninstructed, it needs
to be constantly updated

12. SOME RELEVANT CONTRIBUTIONS

K.E. SVEIBY ” The new organizational wealth” BK Publishers, 1997
S.DAVIS - C. MEYER “Blur” Little, Brown & co., 1998
T.A.STEWART ”Intellectual capital, the new wealth of Organizations”
Currency Dubleday, 1999
J. RIFKIN “The age of access, the new culture of hypercapitalism”
Putnam/Tarcher, 2000
B.J. PINE II - J.H. GILMORE “The experience economy” HBS Press, 1999
S. DAVIS - C. MEYER “Future wealth” Harward Business School press,
2000
T.H. DAVENPORT - J.C. BECK “The attention economy” Harward
Business School press, 2001
M.L and C. A. LENGNICK – HALL “Human Resources Management in
the Knowledge Economy” Berret– Koheler, 2002
T.H. DAVENPORT “Thinking for a living: how to get better performance
and results from knowledge workers” HBS Press, 2006

13. ASSESSMENT OF INTELLECTUAL CAPITAL
No manager leaves cash unused.
No more than 20-30% of intellectual capital is used.
FOR J.K. GALBRAITH (WHO COINED THE TERM IN ‘69) IT IS:
FOR C.H. HANDY:
The intellectual capital in a company is usually 3-4 times what
appears in financial statements
Invisible or potential capital - the value of brands, networks,
ideas, skills - makes the difference between visible capital - book
value - and the real market value

14. ASSESSMENT OF INTELLECTUAL CAPITAL
Market value Sales Assets
Microsoft 331,5 25,3 59,3
Intel 207,6 26,5 44,4
Cisco Systems 122,6 22,3 35,2
Market value Sales Assets
General Electric 401,5 125,9 495,0
IBM 183,3 85,9 88,3
Nippon Steel 144,3 47,7 44,0
Source: “Fortune”, April 22, 2002
Knowledge-intensive Companies (bl.$)
Non Knowledge-intensive Companies (bl.$)

15. ASSESSMENT (cont.)
The sum of everything everybody in a company knows, that gives it a
competitive edge
All of intellectual material - information, knowledge, intellectual
property, experience, attitudes and behaviours - that can be used to
create wealth
FOR T.A. STEWART AND G. SHULTZ INTELLECTUAL CAPITALINTELLECTUAL CAPITAL IS:
Intelligence becomes an asset when some useful orders is created out
of free-floating brainpower that is when it is given a coherent form;
when it is captured in a way that allows it to be described, shared and
exploited; and when it can be deployed to do something that otherwise
could not be done

16. ASSESSMENTS (cont.)
““PACKAGED USEFUL KNOWLEDGE”PACKAGED USEFUL KNOWLEDGE”
TOOLS TO UPDATE, IMPROVE, TOOLS TO UPDATE, IMPROVE,
EXPLOIT KNOWLEDGEEXPLOIT KNOWLEDGE
+
INTELLECTUAL CAPITAL is :INTELLECTUAL CAPITAL is :
Source : T.A. Stewart “Intellectual Capital”, 1997

17. MARKET VALUE IN SKANDIA
Financial
Capital
Market
Value
Intellectual
Capital
Human
Capital
Structural
Capital
Customer
Capital
Organizational
Capital
Innovation
Capital
Process
Capital

18. INTELLECTUAL CAPITAL AT CIBC( Canadian
Imperial Bank of Commerce)
The members of the The members of the
organisation:organisation: source of all
innovation, renewal, offer of
solutions to customers
Company structures and Company structures and
systems:systems: organisational
capacity to satisfy market
demands
value of relations with the
people who buy products
and services
Company customers:Company customers:
HUMAN HUMAN
CAPITALCAPITAL
STRUCTURAL STRUCTURAL
CAPITALCAPITAL
CUSTOMER CUSTOMER
CAPITALCAPITAL

19. “OWNERSHIP” OF HUMAN CAPITAL
PEOPLE CAN BE “HIRED” NOT “OWNED”
“The disposal(The power to use something or someone ) of
‘ownership’ of human capital to a company must be voluntary”
“Knowledge workers give their mind, soul and body more and more to
their work (not to their employer), but they are also increasingly able to
take their talent elsewhere”
THE WEAKENING OF THE BONDS OF JOB SECURITY
AND COMPANY LOYALTY…
…INCREASES THE DEPENDENCY OF COMPANIES
ON THEIR HUMAN CAPITAL
PARADOXPARADOX

20. “DEVELOPMENT” OF HUMAN CAPITAL
TO CREATE BONDS OF “INTERTWINED( connect or link (two or more things)
closely.) OWNERSHIP” BETWEEN THE COMPANY AND KNOWLEDGE
WORKERS :
create a “community of behaviour” in which to
exchange, share and develop knowledge and innovation:
- recognising status and stimulating motivation
- making resources available
- developing horizontal communication systems
- encouraging occasions for mobility/exchanges
empower and “involve” employees in a shared
investment in intellectual capital through targeted,
advanced development and pay systems

21. TRADITIONAL AND NEW PRIORITIES IN MANAGING
KNOWLEDGE WORKERS
FROM: TO:
Overseeing work… … doing it too
Organizing hierarchies… … organizing communities
Hiring and firing workers… … recruiting and retaining them
Building manual skills… … building knowledge skills
Evaluating visible job preference… … assessing invisible job achievements
Ignoring knowledge culture… … building a knowledge friendly culture
Supporting the bureaucracy… …fending it off(push away)
Rely on internal personnel… … considering a variety of sources

22. STRUCTURAL CAPITAL(customer
+ organizational capital)
THE STRUCTURAL CAPITAL BELONGS TO THE SHAREHOLDERS AND
THE ORGANISATION AS A WHOLE
“it includes intellectual properties (patents, trademarks, industrial
designs, confidential information/trade secrets and copyrights),
technologies, inventions and scientific knowledge, product/process
standards, …
… but, also, culture and values, strategies, processes, organisational
practice and procedures, networks, management best practices... ”
ONLY THE ORGANISATION CAN TRANSFORM THE SPECIALIST
UNDERSTANDING OF KNOWLEDGE WORKERS INTO RESULTS
“a mechanism that assembles, packages, promotes and distributes
just in time the results of the thoughts of knowledge workers, also
codifying ‘sets of transferable knowledge’ to keep ‘recipes’ for
success that would otherwise be lost”

23. WHAT IS THE KNOWLEDGE MANAGEMENT ?
“The identification, optimization, and active management of
intellectual assets, either in the form of explicit (knowing of
things that you can explain i.e. through writing)knowledge held in
artifacts or as tacit (knowing of knowledge but don’t know how
you know i.e. also which is not written)knowledge possessed by
individuals”
(Source: Snowden, 1998)
“Knowledge Management means attending to processes for
creating, sustaining, applying, sharing and renewing knowledge to
enhance organizational performance and create value”
(Source: Buckman, 1997)

24. TOPOLOGY OF KNOWLEDGE
TACIT KNOWLEDGETACIT KNOWLEDGE
(a knowledge that I
don’t know I have)
KNOWN GAPSKNOWN GAPS
(knowledge that I know I
don’t have)
UNKNOWN GAPSUNKNOWN GAPS
(knowledge that I don’t
know that I don’t have)
KNOW
EXPLICIT KNOWLEDGEEXPLICIT KNOWLEDGE
(knowledge that I know
I have)
DON’T KNOW
KNOW
DON’T
KNOW
Training
Raise
awareness
Bring to light and
absorb

25. SOURCES OF KNOWLEDGE
Top
Management
Sales &
Purchasing
Staff &
Historians
R&D and
Operations
Integrators
Boundaries of the
Organization
CUSTOMERS
DISTRIBUTORS
OUTSIDE ANALYSTS
COMPETITORS
SUPPLIERS
PARTNERS
Source: M. Watkins “The first 90 days”, 2003

26. “LESSONS LEARNED”…
COMPETITORS “INTELLIGENCE”
CORPORATE “YELLOW PAGES”
KNOWLEDGE MANAGEMENT
WHAT KNOWLEDGE TO STOCK:
INFORMATION ON SUPPLIERS,
DISTRIBUTORS, CUSTOMERS …

27. Knowledge management is a priority for IBM. Intellectual
capital reuse is supported by tools, culture and policies

28. Communities, top down and bottom up, are engines
for knowledge sharing

29. About You and Others:
Expertise Location, Collaboration and Community
1 – Are you looking for a
“Creative Director”
inside IBM?
Just a second:
2 – Found 22…
Let’s see their
face and where
they are:
3 – Is he online?
Ok, I’ll contact
now my
messenger:
4 – Last check:
expertise and
availability…
5 – Let’s
call his
manager…
6 – Let’s work
together

30. HUMAN RESOURCE MANAGEMENT AND THE KNOWLEDGE
MANAGEMENT PROCESSES
Organizations obtain the knowledge they
need by buying, renting or developing it
Make local and often tacit knowledge
explicit and available for wide distribution
Make Knowledge available to those who
need it and can use it
Knowledge is applied to solving problems
and creating new ideas
Knowledge
Management Stage
Creation and
Acquisition
Codification
Distribution
Use
Definition HR Actions
•Identify sources of knowledge
•Serve as intermediary in acquiring
knowledge
•Serve as facilitator in developing
knowledge
•Identify relevant knowledge to capture
•Use multiple means (videotape, docu-
mentation, and so on) to capture the
knowledge
•Design people-sensitive systems for
knowledge distribution
•Train users how to access information
•Make information access points user-
friendly
•Reward users
Source: M. & C. Lengnick-Hall “Human Resource Management in the Knowledge Economy”, 2002

31. HOW HRM CAN FACILITATE KNOWLEDGE MANAGEMENT
1.HRM can help the organization articulate(to communicate) the purpose of
the knowledge management system
2.HRM can ensure alignment among an organization’s mission, statement of
ethics, and policies
3.HRM can help create the “ultimate employee experience”; that is, by
transforming tacit knowledge into explicit knowledge through education
4.HRM can integrate effective knowledge sharing and usage into daily life
5.HRM must relax controls and allow (even encourage) behaviors that, in the
clockwork world of industrial efficiency, never would have been tolerated
6.HRM can take a strategic approach to helping firms manage e-Technology
(emails, instant Messenger, Internet surfing and similar tools)
7.HRM can champion low-tech solutions to knowledge management

32. CUSTOMER CAPITAL
THE VALUE OF RELATIONS BEGUN BY THE COMPANY WITH
PEOPLE AND ORGANISATIONS WITH WHICH IT DOES
BUSINESS
“This includes the concepts of penetration, coverage, “loyalty”
of the network and customers, brand image... ”
THIS CAN BE EXTENDED TO INCLUDE THE VALUE OF
RELATIONS WITH SUPPLIERS
RELATIONAL CAPITAL

33. TO INVEST ON CUSTOMER CAPITAL
INNOVATE WITH CUSTOMERS
EMPOWER YOUR CUSTOMERS
FOCUS ON CUSTOMERS AS INDIVIDUALS
LEARN ABOUT YOUR CUSTOMER BUSINESS
AND TEACH HIM YOURS
BECOME INDISPENSABLE(essential)
SHARE THE WINNINGS WITH YOUR CUSTOMERS
Customer Capital is a lot like Human Capital: you can NOT
OWN customers any more than you can own people

34. S
T
R
U
C
T
U
R
A
L

C
A
P
I
T
A
L
HUMAN CAPITAL
CUSTOMER CAPITAL
Transactions
Product Solutions
Business Solutions
BUYER - SUPPLIER RELATIONSHIP
Partnering
Source: H. Saint-Onge of Canadian Imperial Bank of Commerce

35. EMPLOYEEEMPLOYEE
NEEDSNEEDS
Enterprise
Employee
Customer
Enterprise
Employee
Customer
Enterprise
Employee
Customer
CUSTOMERCUSTOMER
SATISFACTIONSATISFACTION
ENTERPRISEENTERPRISE
GOALSGOALS
Customer
Enterprise
Employee
Source: GartnerGroup
CRMCRM
CUSTOMER SATISFACTION & PEOPLE SATISFACTION
Through the next decade, leading enterprise that compensate
employees on a direct or indirect measure of customer
satisfaction will increase customer retention

36. Organize by Customer
Segments and Key
Processes
Customers?
Industrial Age Organizational Hierarchies -
Departments and/Products -
But Do Customers Care?
Customer
Segments
Divisions
Products
Source: GartnerGroup
ORGANIZE FOR CUSTOMERS, NOT PRODUCTS

37. Customers
Tele-
Marketing
B to C
e-CRM
Distribution
and Logistics
Manufacturing
R&D
Human
Resources
Finance
Integration
With Back-Office
Functions
Marketing
Information
Systems
Database
Marketing
Field
Sales
Retail
Sales
B to B
e-CRM
Integration
Among
“Front-Office”
Functions
Customer
Service
Field
Service
Tele-
sales
Partner
Relationship
Management
Customer
Satisfying Behaviors
Customer-Centric Processes
Suppliers
Customer
Insight and
Understanding
Greater
Customer Access
E-Business
Enterprise
Organized
Around
Customer
More Effective
Customer Interactions
Source: GartnerGroup
CRM REDEFINED

38. INTEGRATING “CAPITALS”
IT IS NOT ENOUGH TO INVEST SEPARATELY IN PERSONNEL,
SYSTEMS AND CUSTOMERS
HUMAN CAPITAL, STRUCTURAL CAPITAL AND CUSTOMER
CAPITAL WORK TOGETHER
THE GOAL IS TO OVERSEE(supervise) THE MONITORING AND
DEVELOPMENT OF INTELLECTUAL CAPITAL AND TO
COMMUNICATE THIS TO MARKET