Appendix G Guidelines, Cases and Tools
Tool 4: Example structure of an IC statement:
4. Spanish: Intellectus Model ®
Description
http://www.ofenhandwerk.com/oklc/pdf_files/K-4_deCastro.pdf
The Intellectus Model ® (Modelo Intellectus®) facilitates the R+D decision making
process by bringing into focus a series of key factors that directly influence the results of an organization’s innovation. Within the different classes of IC the following aspects are highlighted:
• Human Capital:
- Watchful culture;
- Researcher’s qualifications.
• Structural Capital:
- Full time research staff; - Projects in hand; - Equipment;
- Intellectual and industrial property.
• Relational Capital:
- Scientific alliances with public centres; - Associations;
- Collaboration with companies.
In this way the decisions can be related to the value attached to each of the variables according to a series of indicators. The variable ‘R+D effort’ is not limited to only financial resources but also to people and projects.
It could be said that the model provides an abstract representation of all of the intangibles required by company management. To the extent that the indicators reflect a particular organization’s capacity to generate future income, it can provide extremely valuable information to investors and the financial markets about its real situation. The IM addresses IC by separating it into 5 classes so that it is possible to study its components separately without overlooking aspects of the interactions
which link organisational results and the creation of inter-relational dynamics, similar to the principle of cause and effect. In this sense, the knowledge base that is needed for the development of R+D is linked to the organization’s Human Capital as well as to its relations, both internal and external. In turn, the internal relations are linked to the structures and the equipment that facilitates communication, exchanges and team work, whereas the external relations involve the flows of knowledge and information resulting from networks and contacts, both with those agents directly involved in the business as well as with others that are nearer to its social environment.
Case study
Case study 8: GENETRIX www.genetrix.es
Company profile: GENETRIX is a biotechnology company in Spain employing 40 people.
Main motivation to report on IC: External communication to financiers, authorities, and society was Genetrix’s main objective in preparing an IC report. The IC statement has helped to develop Genetrix’s business case at the start of the enterprise. Thanks to its originality, clear value added and relevance, the report has facilitated the raising of 20 M !"# $ % &
favourable comments on the report’s value. The improvement of internal management processes shall be tackled in the second phase, which is already beginning to take shape in the definition of strategy and a significant change in the way in which the organisation presents itself via its web site. In fact, the structure of the web site follows very closely the structure of the IC report, thereby manifesting the close relationship between the image reflected in the ICR, the reality of the organisation and the way in which it wants to be perceived.
Model used: GENETRIX used the Intellectus Model ® (MODELO INTELLECTUS® ) Main knowledge activities undertaken to acquire, improve or monitor IC resources:
Human Capital:
Staff selection by means of very thorough criteria.
Commitment to staff development and coordination through “company meetings”.
Development of managerial capacities. Structural Capital (organizational):
Strategic and progressive growth.
Taking advantage of the managerial structure for the spin offs as they come along.
Commitment to the creation of an internal knowledge portal (KM software and intranet). Structural Capital (technological):
Permanent technological up-dating.
Acquiring the necessary equipment.
Exploiting the set of patents. Relational Capital (business):
Establishing the set of clients and suppliers.
Making manifest the set of partnerships.
Making manifest the network of experts. Relational Capital (social):
Valuation of the social responsibility.
Tracking the impact in the mass media.
Valuation of the acknowledgements and prizes.
Main results achieved:
Obtaining external funding.
A structured and strategic reflection about the intangibles as a key factor in developing strategy (development of strategic thought in a hitherto hidden area).
Identification and measurement of the intangibles that really matter to the organisation.
Reduction of the external information asymmetry and improvement of its valuation.
Improvement of the intangibles’ internal management processes.
Taking advantage of the model to achieve a reorganisation of and reflection about different departments.
Increasing the staff awareness of the importance of managing the intangibles and developing KM activities.
Key message: In the start-up phase of an enterprise, the creation of an IC statement can help structure
the business plan, create transparency to potential investors, and show the added value of the business proposition, while the originality of this way of reporting can also contribute to the ability to raise seed capital.
5. Swedish: IC-Rating™
Description
www.intellectualcapital.se
IC-Rating™ is an initiative of Intellectual Capital Sweden, a private company specialized in measure and describe non-financial assets that are not reported or described in traditional financial statements. IC-Rating™ is based on three focus areas:
• Efficiency - Present value of IC efficiency in creating future value
• Risk - Threat against present efficiency; probability of threat coming true • Renewal and Development - Efforts to renew and develop present
efficiency
The IC-Rating™ looks at the three pillars of IC: the Human, Structural and Relational Capitals.
The rating was inspired by the IC Value scheme from Leif Edvinsson and work from Karl-Erik Sveiby, and distinguishes between Human, Organisational and Relational Capital. All these dimensions are then measured in relation to how well they are functioning in relation to the strategic goals of the company (the Business Recipe). Each dimension receives a rating grade for 1) Current efficiency: how well is the dimension functioning today? 2) Risk: what is the risk that the current efficiency will decline? 3) Renewal/Development: to what extent do current activities contribute to improving the current efficiency?
IC RatingTM is a standardized methodology for rating Intellectual Capital. The
methodology has been developed since 1997, and has been tested empirically in more than 250 cases. The primary source in the information gathering process is in- depth interviews with stakeholders, internally (management and employees) as well as externally (clients, partners, distributors, suppliers etc). An IC RatingTM measures
some 230 IC related parameters. Each parameter has been converted into a question. Each respondent in the in-depth interview is asked some 80-100 questions, and is asked to rate each question on an eight-graded scale. These grades are then aggregated to the rating grades shown in the appendix. In addition to the rating grades, all relevant quotes and comments are recorded during the in-depth interviews, and later summarized in an anonymous document that allows the organisation to understand the rating grades at more depth.
Case study
Case study 9: Compomeasure (not their real name)
Company profile: Compomeasure is a niche-player in the telecom sector, headquartered in a North
European country. It develops state-of-the-art equipment for testing and measuring components, primarily used in broadband fibre networks.It has 30 employees.
Case study background and objective: Compomeasure was founded in the 1980’s and decided to
attract external investors in the late 1990’s in order to be able to become a global player in this very R&D intensive environment. When additional capital was required in the 2000’s, they decided to use the IC RatingTM tool in order to report their IC assets to potential investors.The IC statement based on IC RatingTM was primarily used to communicate the current state of the organization’s IC to a limited
number of potential investors. This was done as an addendum to the investment memorandum. The outcome also served as a basis for current shareholders to determine whether to continue supporting the company in future investing rounds and to help them prioritise their Board discussions.
Main motivations to measure and/or report on IC:
To expose in a transparent manner the current efficiency and future risk of the organization’s IC to potential investors;
To help current shareholder’s determine whether they should invest more money in future rounds;
To help the Board and management get a unified view of current and future challenges;
To help the management prioritize future investments of time and money;
To communicate current and future challenges to all personnel.
Model used: IC-Rating™ 17
Main results: The results were more or less typical for a small R&D intensive company. In particular, there were very high risks both in the business recipe and in the customer base. This is not surprising as Compomeasure depends heavily on a small number of large customers. The rating also indicated a very high risk in the Intellectual Properties, however, the new funding was primarily being sought to alleviate this threat. For management, there were many key takeaways. For example, the employees have a very high degree of efficiency, but they are not renewing their competence sufficiently. Now that they have ventured on a growth strategy they also need to pay more attention to their processes. All in all, the rating in itself was not entirely positive. Despite this, Compomeasure had no problems in securing additional financing and the new investors partly attributed their positive decision to the unparalleled level of transparency in the company as a result of the IC Report. They knew what their money would be used for, and they could see why additional funding was needed. “For the first time I actually know what I am getting myself into”, commented one investor.
The IC RatingTM was the foundation for most Board discussions over the following year. It was also used as the foundation for the organization’s own strategic discussions, involving all personnel. This company has moved on to become very successful and has attracted more than 20 million Euros in additional funding. The majority of this funding has been tagged for R&D investments.
Key message: This case shows that even when an IC statement is not entirely positive about a
company, the transparency it creates can help to attract funding for R&D.