Value added
through through physical physical
effort effort
Product Product Intelligence Intelligence
Knowledge intensity in the value-chain Knowledge intensity in the value-chain
Knowledge Knowledge Intensity in the Intensity in the Production Production
knowledge
knowledge is distributed amis distributed among the eong the employees (Resmployees (Resource). ource). The last caThe last categorytegory illustrates in which form knowledge is mainly stored, so implicit or explicit.
illustrates in which form knowledge is mainly stored, so implicit or explicit.
These five categories can be modified and developed according to its application These five categories can be modified and developed according to its application purposes or the situation. With this diagram the management sees the current purposes or the situation. With this diagram the management sees the current situation of their organizations in
situation of their organizations in terms of knowledge management and can createterms of knowledge management and can create implementation plan for further improvements. It is recommended to update the implementation plan for further improvements. It is recommended to update the knowledge manageme
knowledge management profile nt profile regularly.regularly.
Table 1: Knowledge Management Profile Table 1: Knowledge Management Profile
Knowledge Acquisition Knowledge Acquisition
-- Focus Focus Internal Internal x x externalexternal -- Search Search opportunisitic opportunisitic x x focusedfocused Problem-solving
Problem-solving
-- Location Location individual individual x x teamteam -- Procedure Procedure trial trial and and error error x x heuristicheuristic -- Activity Activity experiential experiential x x abstractabstract -- Scope Scope incremental incremental x x radicalradical Dissemination
Dissemination
-- Processes Processes informal informal x x formalformal -- Breadth Breadth narrow narrow x x widewide Ownership
Ownership
-- Identity Identity personal personal x x collectivecollective -- Resource Resource specialist specialist x x generalistgeneralist Storage/Memory
Storage/Memory
-- Representation Representation tacit tacit x x explicitexplicit
Source: Lehner,F.,2008, S.195 Source: Lehner,F.,2008, S.195
The graph shows that knowledge in the organization is controlled by experts The graph shows that knowledge in the organization is controlled by experts which are not well distributed within the organization. A possible solution for this which are not well distributed within the organization. A possible solution for this might be a knowledge source map that lists all experts which helps to find the might be a knowledge source map that lists all experts which helps to find the appropriate expert for a particular problem. In addition to this, a
appropriate expert for a particular problem. In addition to this, a rewarding systemrewarding system can be implemented remunerate those who is who make the effort to document can be implemented remunerate those who is who make the effort to document problem solutions. However, knowledge managem
problem solutions. However, knowledge management profile mient profile might be interpretedght be interpreted differently and therefore other recommendations can be derived.
differently and therefore other recommendations can be derived.112112
112
112Lehner,Franz (2008): WissensmanagemenLehner,Franz (2008): Wissensmanagement-Grundlagen,Methoden und t-Grundlagen,Methoden und technischetechnische Unterstützung,S.194-195
Unterstützung,S.194-195
3.5.2
3.5.2 Numerical evaluation of intellectual capitalNumerical evaluation of intellectual capital Market-to-book-ratio
Market-to-book-ratio : The market-to-book-ratio determines the value of : The market-to-book-ratio determines the value of knowledge in a company based on the quotient between market value and book knowledge in a company based on the quotient between market value and book value.
value. Or in other words the value is Or in other words the value is determined by the determined by the difference between difference between thethe share price and
share price and the company’sthe company’s balance sheet. The assumption is that assets thatbalance sheet. The assumption is that assets that can be recognized in the balance sheet can be considered as intangible goods can be recognized in the balance sheet can be considered as intangible goods However, the share prices changes daily due to speculative expectation or However, the share prices changes daily due to speculative expectation or economica
economical influences, which do l influences, which do not necessarily mean that the not necessarily mean that the value of intangiblevalue of intangible asset changes as well. In addition, book value can be influenced by accounting asset changes as well. In addition, book value can be influenced by accounting approache
approaches. s. The other limitation of The other limitation of this valuation athis valuation approach is pproach is that it does notthat it does not provide any further hints for action taking. Therefore it is recommended to take provide any further hints for action taking. Therefore it is recommended to take quotient rather than the difference between the market value and the book value.
quotient rather than the difference between the market value and the book value.
This way allows on the one hand a better comparison with the competitors from This way allows on the one hand a better comparison with the competitors from the same sector and on the other hand in terms of long term changes in the the same sector and on the other hand in terms of long term changes in the quotient a conclusion regarding the development can be made easily..
quotient a conclusion regarding the development can be made easily..113113 Tobin’s Q
Tobin’s Q: Developed by James Tobin this ratio is the quotient of the market: Developed by James Tobin this ratio is the quotient of the market value and the replacement cost of a good or company. If the quotient is below 1 value and the replacement cost of a good or company. If the quotient is below 1 means the market value is lower than replacement cost. A quotient above 1 researcher with a low salary and integrate him in a successful research team. The researcher with a low salary and integrate him in a successful research team. The value of the technological solutions developed by the team exceeds the market value of the technological solutions developed by the team exceeds the market value of all team members.
value of all team members.114114 3.5.3
3.5.3 Tools for Tools for controlling knowledge managemecontrolling knowledge managementnt Balanced Scorecard
Balanced Scorecard : Balanced Scorecard is an instrument to manage long term: Balanced Scorecard is an instrument to manage long term strategies and to direct short term changes. Business performance is determined strategies and to direct short term changes. Business performance is determined by factors of finance, customers, business processes and employee development.
by factors of finance, customers, business processes and employee development.
Those indicators are listed for each perspective on a table, which is the scorecard.
Those indicators are listed for each perspective on a table, which is the scorecard.
All four perspectives contribute to the balance of an organization (balanced). The All four perspectives contribute to the balance of an organization (balanced). The basic idea of this concept is to break down the corporate vision into concrete basic idea of this concept is to break down the corporate vision into concrete defined indicators. Those indicators should be measureable for comparison and defined indicators. Those indicators should be measureable for comparison and controlling purpose
controlling purposes. s. Thus, the Balanced ScThus, the Balanced Scorecard enables to formulate concreorecard enables to formulate concretete actions deriving from the company’s vision and strategies.
actions deriving from the company’s vision and strategies. For each of the fourFor each of the four
113
113Vgl. Lehner,F. (2008): S.203-204Vgl. Lehner,F. (2008): S.203-204
114
114Vgl. Mittelmann, A. (2005): Wissensmanagement Methoden/WerkzeugeVgl. Mittelmann, A. (2005): Wissensmanagement Methoden/Werkzeuge
perspective objectives, measures, targets and initiatives are created with the perspective objectives, measures, targets and initiatives are created with the respective indicators. An example for this it
respective indicators. An example for this it can be for customer perspective:can be for customer perspective:
Finance PerspectiveFinance Perspective: The financial perspective plays a leading role for the: The financial perspective plays a leading role for the other three perspectives. All activities should be reflected positively on the other three perspectives. All activities should be reflected positively on the financial indicators.
financial indicators.
Customer perspectiveCustomer perspective: The customer perspective includes defining goals: The customer perspective includes defining goals related to the customer and the market. Core indicators are market shares related to the customer and the market. Core indicators are market shares and c
and customer acustomer acquisition, cquisition, customer loyustomer loyalty. alty. Performance Performance indicators areindicators are more company specific and are connected with product and service more company specific and are connected with product and service attributes such as quality, price and time. Furthermore, indicators for the attributes such as quality, price and time. Furthermore, indicators for the degree of customer relationship, the image and reputation of an core process are illustrated. Respective resources need to be directed core process are illustrated. Respective resources need to be directed which leads to an impact on financial result and which helps to achieve which leads to an impact on financial result and which helps to achieve customer related goals. This perspective concerns the identification of customer related goals. This perspective concerns the identification of customer needs and encourages product development and cost and time customer needs and encourages product development and cost and time reduced production or service delivery.
reduced production or service delivery.
Learning and growth perspective Learning and growth perspective: This perspective demonstrates which: This perspective demonstrates which skills and capabilities of employees and information system need to be skills and capabilities of employees and information system need to be developed for achieving the strategy. The emphasis relies on qualification developed for achieving the strategy. The emphasis relies on qualification and motivation of employees and a reliable information system. The and motivation of employees and a reliable information system. The indicators here might
indicators here might be loyalty, employee’s satisfac be loyalty, employee’s satisfaction, and othertion, and other indicators related to learning, training, motivation, flexibility, and indicators related to learning, training, motivation, flexibility, and teamwork.
teamwork.
Example:
Example:
Strategic goal: improvement of cost performance ratioStrategic goal: improvement of cost performance ratio
Indicator: evaluation of the customerIndicator: evaluation of the customer
Concrete goal: 60 percent of customer should perceive the company asConcrete goal: 60 percent of customer should perceive the company as number one.
number one.
Further actions could include improving employee qualification which leads to Further actions could include improving employee qualification which leads to shortened production process. The effect can be in an increased customer shortened production process. The effect can be in an increased customer satisfaction. Higher prices can be therefore realized and the company faces satisfaction. Higher prices can be therefore realized and the company faces improved turnover numbers. The combination of indicators result the logical improved turnover numbers. The combination of indicators result the logical conjunctions among the 4
conjunctions among the 4 perspectiveperspective::
1)
1) Finance Perspective: Increase in turnoverFinance Perspective: Increase in turnover 2)
2) Customer Perspective: Increase the number of satisfied customerCustomer Perspective: Increase the number of satisfied customer
3)
3) Process Perspective: Ensure call backs within a hourProcess Perspective: Ensure call backs within a hour 4)
4) Learn and growth Perspective: Offer training for employees for a betterLearn and growth Perspective: Offer training for employees for a better telephone support.
telephone support.115115
Illustration 3: Balanced Scorecard Illustration 3: Balanced Scorecard
Source:
Source:
http://www.balancedscorecard.org/Portals/0/images/balancedscorecard.jpg http://www.balancedscorecard.org/Portals/0/images/balancedscorecard.jpg The concept of Balanced Scorecard can be also applied to control knowledge The concept of Balanced Scorecard can be also applied to control knowledge management activities. The creation of Balanced Scorecard involves knowledge management activities. The creation of Balanced Scorecard involves knowledge identification, share and knowledge generation. This process should be based on identification, share and knowledge generation. This process should be based on the business objectives.
the business objectives.116116
Skandia Navigator:
Skandia Navigator: The Swedish financial service provider Skandia recognizedThe Swedish financial service provider Skandia recognized the huge difference between its market value a
the huge difference between its market value and the book value. Thus Skandia’snd the book value. Thus Skandia’s share price was much higher than the numbers from the balance sheet. This share price was much higher than the numbers from the balance sheet. This difference represents the intellectual capital that has a significant impact on a difference represents the intellectual capital that has a significant impact on a company. For understanding and controlling this capital Skandia created a company. For understanding and controlling this capital Skandia created a knowledge valuation conce
knowledge valuation concept that builds pt that builds up on 5 dimensions of up on 5 dimensions of indicators.indicators.117117
115
115Vgl. Herbst, D. (2000): S.145-150Vgl. Herbst, D. (2000): S.145-150
116
116Vgl. Lehner, F.,(2008):S.209-210Vgl. Lehner, F.,(2008):S.209-210
117
117Vgl. Probst, G., Raub, S.,Romhardt, K. (2003), S.219Vgl. Probst, G., Raub, S.,Romhardt, K. (2003), S.219
1)
1) The financial focus analyzes the financial results of activities. Long-termThe financial focus analyzes the financial results of activities. Long-term goals and main part of conditions of the other four conditions are highly goals and main part of conditions of the other four conditions are highly related to this focus.
related to this focus.
2)
2) The customer focus specifies how far an organization align its activitesThe customer focus specifies how far an organization align its activites towards customers
towards customers 3)
3) The process focus involves the consideration of process for The process focus involves the consideration of process for creating goodscreating goods and services. It looks at the efficiency and quality of processing like and services. It looks at the efficiency and quality of processing like customer service or work efficiency.
customer service or work efficiency.
4)
4) The renewal & development focus concentrates on activities that ensureThe renewal & development focus concentrates on activities that ensure development and sustainability.
development and sustainability.
5)
5) The human focus includes activities that contribute in employeeThe human focus includes activities that contribute in employee motivation and satisfaction which in turn reflect in improved results.
motivation and satisfaction which in turn reflect in improved results.118118
Illustration 4: Skandia Navigator Illustration 4: Skandia Navigator
Source:
Source:
http://www.valuebasedmanagement.net/images/figure_skandianavigator.gif http://www.valuebasedmanagement.net/images/figure_skandianavigator.gif
3.5.4
3.5.4 Tools for a broader evaluation of intellectual capitalTools for a broader evaluation of intellectual capital Intellectual Capital Navigator
Intellectual Capital Navigator : Intellectual Capital Navigator is another method to: Intellectual Capital Navigator is another method to evaluate the intangible assets in an organization. Intangible goods are divided in evaluate the intangible assets in an organization. Intangible goods are divided in three groups including human capital, structural capital, and customer capital. The three groups including human capital, structural capital, and customer capital. The market-to-book-ratio is also included as
market-to-book-ratio is also included as a evaluation yardstick. Each category cana evaluation yardstick. Each category can be evaluated by three indicators. Those indicators however need to be selected be evaluated by three indicators. Those indicators however need to be selected
118
118Vgl. Value Based Management.net (2011) : Intangibles Valuation. Vgl. Value Based Management.net (2011) : Intangibles Valuation. Skandia NavigatorSkandia Navigator
according to their contribution to realize the business strategy. This tool gives a according to their contribution to realize the business strategy. This tool gives a snapshot of the current situation in terms of the use of intangible assets and where snapshot of the current situation in terms of the use of intangible assets and where actions need to be taken.
actions need to be taken.119119
Illustration 5: Intellectual Capital Navigator Illustration 5: Intellectual Capital Navigator
Source:
Source:
http://3.bp.blogspot.com/_0dzajJz8DJ8/SA9eSps7cvI/AAAAAAAAADE/tTNrfve8IA4/s400 http://3.bp.blogspot.com/_0dzajJz8DJ8/SA9eSps7cvI/AAAAAAAAADE/tTNrfve8IA4/s400 /Intelectual+Capital+Navigator.jpg
/Intelectual+Capital+Navigator.jpg
Knowledge Capital Index
Knowledge Capital Index: The value of the intellectual capital is reflected in the: The value of the intellectual capital is reflected in the market value of company. In the knowledge capital index the market value market value of company. In the knowledge capital index the market value consists of two components, the financial capital and knowledge capital, whereas consists of two components, the financial capital and knowledge capital, whereas the knowledge capital is subdivided into human capital and structural capital that the knowledge capital is subdivided into human capital and structural capital that are further divided in sub categories. These sub categories are evaluated by are further divided in sub categories. These sub categories are evaluated by indicators. The sub division
indicators. The sub division for human capital includes for human capital includes competenciecompetencies, willingness,s, willingness, learning aptitude and flexibility. The components for structural capital are learning aptitude and flexibility. The components for structural capital are relationship, organization and inno
relationship, organization and innovation. The component “willingness”vation. The component “willingness” can becan be further split up into the following categories motivation, behavior and values. For further split up into the following categories motivation, behavior and values. For example a possible indicator for the sub component willingness might be the example a possible indicator for the sub component willingness might be the amount of hours for passing information
amount of hours for passing information within a project group.within a project group.
119
119Vgl. Lehner,F. Vgl. Lehner,F. (2008): (2008): S.206-208S.206-208
However, the knowledge capital index cannot be
However, the knowledge capital index cannot be compared with other companiescompared with other companies ’’
indices as they might take other indicators and indices for evaluating the indices as they might take other indicators and indices for evaluating the knowledge. Only final assessment of the competitors regarding their company knowledge. Only final assessment of the competitors regarding their company ’s’s knowledge might help to compare. The knowledge balance index covers three knowledge might help to compare. The knowledge balance index covers three areas: 1) the knowledge evaluation 2) the development of knowledge and 3) areas: 1) the knowledge evaluation 2) the development of knowledge and 3) application of knowledge. There are only few literal resources in terms of application of knowledge. There are only few literal resources in terms of practical application of the
practical application of the knowledge balance.knowledge balance.120120 Knowledge Balance
Knowledge Balance: This approach makes business goals measurable related to: This approach makes business goals measurable related to the organizational knowledge base. The knowledge balance has four classes of the organizational knowledge base. The knowledge balance has four classes of indicators to evaluate for certain purposes as shown in the table. This prevents indicators to evaluate for certain purposes as shown in the table. This prevents mixing up the indicators which allows recognizing the cause and effect mixing up the indicators which allows recognizing the cause and effect correlation. The knowledge balance is divided in three categories including correlation. The knowledge balance is divided in three categories including employees, internal and external structure. The initial step involves the evaluation employees, internal and external structure. The initial step involves the evaluation
Knowledge Balance: This approach makes business goals measurable related to: This approach makes business goals measurable related to the organizational knowledge base. The knowledge balance has four classes of the organizational knowledge base. The knowledge balance has four classes of indicators to evaluate for certain purposes as shown in the table. This prevents indicators to evaluate for certain purposes as shown in the table. This prevents mixing up the indicators which allows recognizing the cause and effect mixing up the indicators which allows recognizing the cause and effect correlation. The knowledge balance is divided in three categories including correlation. The knowledge balance is divided in three categories including employees, internal and external structure. The initial step involves the evaluation employees, internal and external structure. The initial step involves the evaluation