Knowledge Management

KM Conference & Seminar Sharing December 23, 2003

Year End Sharing - Dec 23, 2003

Agenda Today
Knowledge Management Overview Case Study & Lessons Learned Knowledge Management for APP Discussion

Year End Sharing - Dec 23, 2003

Knowledge Management Overview

Why So Much Focus on Knowledge Today?

Serpong, December 23, 2003

Year End Sharing - Dec 23, 2003

Imagine this:
If there was a mass exodus of people from your organisation at 12:00 noon such that noone was left, and at 14:00 a completely new group of people arrived, would they have to start from scratch or would they be able to start with an infrastructure of accumulated knowledge and wisdom?

Year End Sharing - Dec 23, 2003

The Knowledge Economy

For several decades the worlds best-known forecasters of societal change have predicted the emergence of a new economy in which brain power, not machine power, is the critical resource. But the future has already turned into the present, and the era of knowledge has arrived.
The learning Organization,Economist Intelligence Unit

Year End Sharing - Dec 23, 2003

Knowledge Management

The move from an industrially-based economy to a knowledge or information-based one in the 21st Century demands a top-notch knowledge management system to secure a competitive edge and a capacity for learning.

Year End Sharing - Dec 23, 2003

Knowledge Economy

The new source of wealth is knowledge, and not labor, land, or financial capital. It is the intangible, intellectual assets that must be managed. The key challenge of the knowledge-based economy is to foster innovation.

Year End Sharing - Dec 23, 2003

What is New Economy

Old Economy / Industrial era
Input Assets: Physical Asset Financial Asset Objectives: Customer value Shareholder value

Organization

New Economy / Knowledge Economy

Input: Physical Asset Financial Asset Knowledge asset (Intellectual Asset)

Organization

Objectives: Shareholder value & Stakeholder value Customer value:

Year End Sharing - Dec 23, 2003

What is Knowledge Economy

Knowledge Based Company

Year End Sharing - Dec 23, 2003

What is Knowledge Economy

Knowledge Based Company Lotus Inc. Acquisition:
In 1995, IBM purchased Lotus Notes for US$3.5 billion, which was 14 times Lotus' book valuation of $250 million. The US$ 3.25 billion premium IBM paid represents its appraisal of Lotus' unique knowledge of Notes. The minds that invented Notes are more valuable than the software itself (Harvard Business Review, 1995). J Menzie

Goodwill vs. intellectual Assets (knowledge)

In old economy Goodwill = 3.25 billion? Knowledge economy = 3.25 billion worth of K Knowledge is the new wealth of organization

How do we manage knowledge?

Year End Sharing - Dec 23, 2003

What is Knowledge Economy

Market Value to Book Value Ratio

Source: Robert E. Hall, The Stock Market and Capital Accumulation, April 13th, 2001. Here q is understood as the ration of the value of ownership claims on the firm less the book value of inventories to the reproduction cost of plant an equiptment. Focus in non-fram, non-financial sector.
Year End Sharing - Dec 23, 2003

Increasing value of Intangible assets in Organizations

What is Knowledge Economy

75% 38% 1982 62% 1992 2002

Source: Niven, Balanced Score Card, 2003

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The Organisation as a Tree

APPLES as tangible assets ROOTS/TRUNK /BRANCHES as intangible assets

= the strength of the tree

Year End Sharing - Dec 23, 2003

What is Knowledge Economy

Knowledge Based Company

$ 6.7 Bn

T. Asset = vsb. Equity + Debt = $ 11 Bn Int. Asset = Mkt Val vsb. Equity = 190 6.7 = $ 183 Bn

Year End Sharing - Dec 23, 2003

What is Knowledge Economy

Knowledge Based Company

Asset = vsb.Equity + Debt = $ 17 Bn + 7 Bn = $ 24 Bn Int Asset = MktVal vsb.Equity = $110 Bn $ 17 Bn = $ 93 Bn Int Asset in 2003 ?

Year End Sharing - Dec 23, 2003

Examples of Intellectual Capital as a percentage of market value

Services 54% 78% 74% 85% 59% 82% 85% 60% 74% 82% 85% Barclays Coca-Cola Marks & Spencer 75% 97% 72%

Industrials ICI British Aerospace GEC GKN Vickers GE ABB Honda BP 3M National Grid

High-Tech Zeneca Intel BT Microsoft Vodafone 92% 85% 70% 97% 95%

Year End Sharing - Dec 23, 2003

INTELLECTUAL CAPITAL
Market Value (no. of shares x share value)
equal

Tangible assets (measured according accepted accounting rules)

plus

Intangible Assets (for which no measurement rules exist) Intellectual Capital

Year End Sharing - Dec 23, 2003

MARKET VALUE Drives current Drives Future

FINANCIAL CAPITAL

INTELLECTUAL CAPITAL

ledge w o n K

CUSTOMER CAPITAL

Know ledg e

STRUCTURAL CAPITAL
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Knowledge

HUMAN CAPITAL

Definition of Intellectual Capital

The factors not shown in the traditional balance sheet, but which are of critical importance to a companys future success

Source: Intellectual Capital Sweden

Year End Sharing - Dec 23, 2003

IC RatingTM Platform
Intellectual Capital Operation of company

Business Recipe

Organizational Structural Capital

Human Capital

Relational Structural Capital

Business idea Strategies Position

Intellectual Properties

Process

Management

Employees

Network

Brand

Customers

Year End Sharing - Dec 23, 2003

IC RatingTM three focuses

1. Efficiency

2. Risk

3. Renewal and Development

Present day Accounting

Efficiency: Present value of IC efficiency in creating future financial value Risk: Threat against present efficiency and probability of threat coming true Renewal & Development: Efforts to review and develop present efficiency

Year End Sharing - Dec 23, 2003

IC RatingTM Scales
Efficiency AAA AA A BBB BB B CCC CC C D Risk R RR RRR Renewal & Development AAA AA A BBB BB B CCC CC C D

Year End Sharing - Dec 23, 2003

IC RatingTM Efficiency
BB

Intellectual Capital

CC A

BB

BBB

Business Recipe

Organizational

Human

Relational

CC

BB

BB

BBB

Intellectual Properties

Process

Management

Employees

Network

Brand

Customers

Year End Sharing - Dec 23, 2003

IC RatingTM Renewal & Development

BBB

Intellectual Capital

BB

BB

BBB

Business Recipe

Organizational

Human

Relational

BBB

BB

BB

CCC

Intellectual Properties

Process

Management

Employees

Network

Brand

Customers

Year End Sharing - Dec 23, 2003

IC RatingTM Risk
RR

Intellectual Capital

RR

RR

RRR

Business Recipe

Organizational

Human

Relational

RR

R RRR

Intellectual Properties

Process

Management

Employees

Network

Brand

Customers

Year End Sharing - Dec 23, 2003

MARKET VALUE
FINANCIAL CAPITAL INTELLECTUAL CAPITAL

CUSTOMER CAPITAL

STRUCTURAL CAPITAL

HUMAN CAPITAL
(adapted from Skandia)

Year End Sharing - Dec 23, 2003

THE VALUE-CREATING CHAIN

Stakeholder Value Return on Intangible assets Growth of Intangible Assets Growth of Knowledge, Wisdom and Capability Process, Technology,Culture
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Year End Sharing - Dec 23, 2003

Ikujiro Nonaka

Year End Sharing - Dec 23, 2003

L What the organization knows L How it uses what it knows L How fast it can know something new

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Sir Francis Bacon, 1597

Year End Sharing - Dec 23, 2003

2002 Global MAKE Award

Most Admired Knowledge Enterprises)
Accenture BP Buckman Laboratories Clarica Life Insurance Ernst & Young General Electric Hewlett-Packard International Business Machines KPMG McKinsey & Company Microsoft Nokia Royal Dutch/Shell Schlumberger Siemens Skandia Toyota Unilever US Government World Bank Xerox (www.knowledgebusiness.com)
Year End Sharing - Dec 23, 2003

The Global MAKE Finalists are measured against each of the eight knowledge performance dimensions which are the visible drivers of competitive advantage:
1. 2. 3. 4. 5. 6. 7. 8. Creating a corporate knowledge culture Developing knowledge leaders Delivering knowledge-based products/services/solutions Maximizing enterprise intellectual capital Creating an environment for collaborative knowledge sharing Creating a learning organization Focusing on customer knowledge Transforming knowledge into shareholder value

Japan MAKE 2002

Japan MAKE 2002 Winners Toyota Motor vehicles Honda Motor vehicles Sony Kao products Asahi Brewery IBM Japan IT solutions Ricoh Fuji Xerox Canon
2002 MAKE Winners Strengths
Toyota organizational learning; enterprise knowledge culture and knowledge leadership. Honda developing knowledge-based goods/services; organizational learning; managing customer knowledge. Sony developing knowledge-based goods/services; knowledge leaders; enterprise knowledge culture. Kao developing knowledge-based goods/services; knowledge leaders; managing customer knowledge. IBM Japan managing customer knowledge; knowledge leaders; collaborative enterprise knowledge sharing. Ricoh developing knowledge-based goods/services; maximizing the enterprises intellectual capital; knowledge leaders. Asahi Brewery knowledge leaders; enterprise knowledge culture; collaborative enterprise knowledge sharing. Fuji Xerox knowledge leaders; enterprise knowledge culture; collaborative enterprise knowledge sharing. Canon knowledge leaders; organizational learning; developing knowledge-based goods/services.

(www.knowledgebusiness.com)

Year End Sharing - Dec 23, 2003