I3 UPDATE / ENTOVATION International News
No. 33: October 1999
The Sound of Alpbach - Austria Defining its Future - Debra M. Amidon
MVA and VAIC(tm) Analysis - Ante Pulic
- German Version of The Ken Awakening - Now Available
- Just Published - Knowledge Networking
- Banff Executive Leadership Program - Now Booking
- Intangibles: Four Questions
Welcome to this edition of I3 UPDATE / ENTOVATION International News. The main feature in this edition is a review of the Alpbach European Forum. Also from Austria is a report on the work of the Austrian Intellectual Capital Research Centre. The rest of the edition is a series of updates.
I3 UPDATE is also available by email. See the administrative information page.
David J. Skyrme
Debra M. Amidon
It is designed as a Davos-like meeting of the minds, but for the leaders of Austria. This annual meeting co-sponsored the Austria Research Centers, the Federation of Austria Industry and the Austrian Broadcasting Corporation dedicated several days in August for their week long activity "Knowledge as a Production Factor." Hundreds were in attendance, with sessions ranging from Nobel Laureates to children (ages 8-18) whom participated in Junior Alpbach..
In addition to several notable faculty and business leaders from Austria, there were also presentations from the OECD, Singapore, UK, Brazil, Belgium, Slovenia, Germany, Sweden, Finland, France, Switzerland and the United States. Upon invitation of Dr. Ursula Schneider (email@example.com), Head of Institute of International Management Karl-Franzens-Universitaet Graz, Debra M. Amidon presented a 'Decade of Perspective' (see http://www.entovation.com/info/decade.htm) as a way to illustrate the evolution of the knowledge movement and specific case examples of leadership in practice. She even described the case of knowledge (mis) management in Digital Equipment Corporation in contrast with the management of strategic conversations exhibited by Analog Devices.
In the opening address, Caspar Einem, Federal Minister of Science and Transport, described the need "to create an environment decentralized to allow for cooperation across borders enabling innovation, confidence and trust. It is not about the volume of land as much as how we use knowledge the static versus the dynamic approach." He continued, "No longer are we dependent upon financial or land ownership that yields competitive advantage; it is knowledge and innovation!"
Nobel Laureate for Physics, Charles Townes provided a thought-provoking assessment of the interrelationship of science, religion, the scientific method and scientific faith an interesting combination of disciplines, methodologies and what might be described as attributes of a knowledge economy unusual laws, consistent, reliable, worthwhile, the value of truth, including objectivity. "As we explore what constitutes knowledge of the 21st century, our understanding will change and we will witness a reunion of science and philosophy." Interestingly enough, this is quite similar to the insights of international author John Naisbitt at the conference ‘Re-thinking Knowledge’ managed by the students of the University of Cologne, Germany (see I3 UPDATE/ ENTOVATION News no. 28). Townes concluded with a memorable advice: "Follow stars and scrutinize with a microscope at the same time!"
Perhaps one of the most telling presentations was delivered by Albert Hochleitner, Director General, Siemens Österrich, Vienna, and President of the Board, Austrian Research Centers. He suggested that the world barriers are transparent. Achievements of the past are losing value. Today, we buy, sell and use knowledge. Knowledge and how to deal with it is critical to surviving nations. There is a doubling of knowledge every 5 years. Size alone is no longer the yardstick for achievement. Along with suppliers, markets have grown customers used to rely upon resource-based production; today, they can pick from many things. The focus on knowledge and the knowledge society is beyond the level of talk. Companies only use 40 per cent of the knowledge of their staff. This is reason for alarm. Therefore, knowledge as a production factor has not been understood.
Examples of why knowledge has not pervaded our society:
1. Time: There is little time allotted to deal with strategic planning. Less that 2% is spent on the future perspective. Some companies are even lower than 1%! Although the urgent business of everyday life is important, it is not as important as the future.
2. Language: When we deal with knowledge, there are few common terms and a lack of common instruments when it comes to implementation. Standard accounting is based upon double-entry bookkeeping principles that remain unchanged. We cannot manage what we cannot measure; what we cannot count counts!
3. Process and Innovation: There is a plethora of terms and terminology. Product innovation ignores process and social innovation. Innovation is often mixed up with Invention! One can only be creative when you have 'know-how'. Gurus in the tower are obsolete…as well as being wrong. There needs to be a visionary force as well as sober work and an adequate mindset that appreciates curiosity and an opportunity to shape the world. Therefore, it is not the facts, but our attitude toward innovation. We must not underestimate.
When we are filled with fear in the new Millennium, knowledge will not be disseminated automatically. It must be managed mined, managed and sold. He had several recommendations:
- Knowledge has to be identified. What knowledge is needed to be successful and how best might it be disseminated? We do not know what we don't know! There is an overabundance of information. The Internet makes it difficult to create order out of chaos. We must find what is useful, communicate and disseminate.
- Knowledge must be distributed. This should be among key members of the workforce and available when needed. People need training. The obsolescence of knowledge requires constant updating. It is not about face-to-face training; we must take advantage of using computers for learning. Computer-Based Training (CBT) now combines video, sound and image. We've had a quantum leap with Intranets and Internet. With SITOS, we can impart knowledge where needed and at a cost reduction of 30%.
- New knowledge must be acquired. There is a fragmentation among disciplines. The old feels threatened by the new. Knowledge used to reside in R and D companies. As boundaries dissolve, its difficult to have new knowledge reside in R and D. This brings us to the complementing tasks of Knowledge Management combining, coordinating and managing all members. This prepares the groundwork for new insight. People need elbow space for creating. We need to drop traditional hierarchical structures with workers assuming more responsibility.
Doubt may grow with the new knowledge economy; only those will survive who have an awareness of the enormous potential and harnessing it. It is not enough to know, we must apply knowledge we must do!
Another compelling Siemens presentation delivered by Dirk Ramhorst (firstname.lastname@example.org), Siemens Business Services, provided a description of their knowledge consulting practice that includes a mission Enabling new business and fostering innovation by linking people to people and people to knowledge across the borders of business units and countries.
Ramhorst also provided in-depth picture of the "Xenia, the City of Knowledge". The concept was originally conceived by Dr. Helmut Valkmaan as a program for change, innovation and reforms for enterprises profit and not-for-profit where experts can come as strangers and leave as friends. It is a collaborative multi-cultural meeting place with kiosks, glass rooms, leadership hubs, a business district for resources and suburbs of 'future fairs'. What knowledge management means for one unit differs unit-to-unit. With different functional communities (e.g., Finance, IT, HR), perhaps they can meet in the middle. "Every time you think about knowledge management," says Ramhorst, "you expand your horizon." This location is intended to make sense out of the Tower of Babble and with clever visuals, such as a hot air balloon, generate a discussion about what knowledge is needed a vision toward the future.
Although the first day included presentations presented all by Austrians, the recurrent themes provided a solid context for the 60-plus presentations the following day in working groups. Topics included: Knowledge Production, Know-How Management, Production Know-How, Technology Cluster, Research Cluster, Know-How Marketing, New-Age Banking, Innovative Forms of Financing, Knowledge Production, Technology Policy in a Knowledge-based Economy, Know-How of Generations, and more.
Some of the findings reported at the conclusion of the conference included:
- Knowledge has changed its role as a driving force in job creation a 'factor of production' equal to money as a resource to be managed.
- There is a strong knowledge revolution in economy and society equivalent to the industrial revolution 100 years ago.
- We are witnessing redistribution in the stock exchange value.
- The major change for companies is the need to create clear, corporate visions and strategies for learning and continuous innovation.
- Governments will have a new role from one of regulation to facilitation.
- We will create a society where the success of people will be based upon their competencies.
- There is a strong role for Science & Technology Policy for the entire chain (Note: ENTOVATION would say 'innovation system') from knowledge creation through dissemination, instead of traditional R and D.
- Industrial clustering will become an important feature concentrate on strengths of each, foster commitment from all participant actors and create the innovation infrastructure.
- Regulatory groups must modify, adjust current IPR policies and practice.
- There is a need for eCommerce intellectual property rights.
- Money is important. We need to manage venture capital investments and tax incentives for innovation.
- Government should fund the publication of success stories based upon technologies that were successful.
(Note: Please remember that these are insights on behalf of Austria's future national strategy)
The half-life of knowledge is becoming shorter and shorter. Knowledge ages faster that we do. We realize we must discover new things with technological know-how to keep pace with the speed of the changes.
- International globalization requires us to compete on the basis of knowledge.
- We need glimpses into the future scenarios so we are prepared for what might happen. Knowledge societies require future-oriented thinking.
In short, we must create the conditions for knowledge creation, diffusion and utilization all sectors working together providing opportunities. The main challenge is to how best provide resources in the coming knowledge-based economy. This is the question for Austria and every other nation seeking to be a leader in the 21st century.
Closing Comments (Selection)
"It isn't the biggest, not the fastest; those who communicate effectively. We need vision and values to create a future for all those involved. Those who focus on knowledge management must look beyond their narrow horizon the interdisciplinary nature of potential interactions. They must look beyond the region of Alpbach. We need to break the rules of traditional behavior. Early warning is not enough; we need action!" Eckart Minx, Head of the Department on Research, Society and Technics, DamierChrysler AG.
"Successful collaboration is not a matter of technology, but a matter of people. For cross-cultural fertilization, we need to provide the interfaces. We must learn together academe, industry, government and media on the topic of innovation. In a knowledge society, it is important that knowledge not be concentrated on the few. In a knowledge-intensive society, government must invest substantial resources to make use of and disseminate knowledge." Kerstin Eliason, Head of the Department of Research, Policy, Ministry of Education, Stockholm, Sweden.
"Good ideas come from many places. Innovations are a product of the individual heart and mind not the research laboratory. You don't make a discovery for yourself. A discovery is a gift to mankind." Kathryn List, Director of Junior Alpbach.
Next Stop: Managing the Future
It's less than a year way and already they have the theme selected 'Future'. This is a nation dedicated to knowledge economy positioning a nation that has exhibited significant rigor in their analysis of the knowledge economy and Austria's role. More important, they've included the next generation I their deliberations. As the final speaker suggested, "If only ALPBACH knows…"
Ante Pulic, Austrian IC Research Center
I have focused my efforts on the measurement and evaluation of intellectual capital performance, which has proved to be a decisive factor of business success for modern companies.
The VAICTM method (described in more detail at http://www.measuring-ip.at) has been designed to leverage company's financial and intellectual potential and focuses primarily on current business performance. The business result, VA, is related to all resources: capital employed, human capital and structural capital in order to receive their value creation efficiency. The VAICTM coefficient indicates corporate value creation efficiency.
Due to the strategic importance of IC it seemed vital to prove a connection between IC efficiency and market value. Meaning that improvement of IC efficiency, which has a major share in the VAICTM coefficient, should result in a higher MVA.
In order to test this assumption we conducted an analysis on macro level, the Vienna stock market, and on company level, the Henkel corporation.
Since Price Waterhouse Coopers had been conducting a MVA analysis of the 70 companies noted on the Austrian stock market since 1994 (financial institutions not included), they provided MVA information. A VAICTM analysis of the same companies was done and the received indicators were compared with the results of the MVA analysis. On this macro level a high correlation of average MVA and VAICTM values is obvious.
The next step was the VAICTM analysis on company level. As a case study we analyzed the MVA and efficiency of resources for the German chemical corporation Henkel.
A graph was plotted to visualize the trends of both indicators in the analyzed period (1987 - 1997). the resulting parallel lines indicated that the MVA of Henkel is closely linked to the value creation efficiency of the resources (human capital, structural capital and capital employed).
As empirical research has shown that efficiency of IC and capital employed and MVA are closely linked we would like to draw the following conclusions:
- Companies which measure and improve the value creation of all resources - not only financial but also intellectual - in current business highly influence their market value.
- Companies which are not on the stock market get a possibility to establish a link to their market value via IC efficiency, indicated by VAICTM.
For more information on the results of this project please contact me
Two Austrians who have provided the new translation of the book - Innovation Strategy for the Knowledge Economy: The Ken Awakening - which will be premiered October 13-18 at the International Book Fair - Buchmesse - in Frankfurt, Germany. Copies are available at www.amazon.de. At the ALPBACH conference, they circulated copies of the German cover as well as order details. As you may already have seen, the German version of "Global Momentum of Knowledge Strategy" has been produced by Stefan Fazekas, one of the translators, and the "Business Literacy 2000 Study Guide" in German has been made available by the other German translator, Manfred Bornmann. Now the book may be read in groups - chapter-by chapter. Both gentlemen are from Austria.
Drawing together the three themes of Knowledge, the Internet, and Virtualization, this 300 page book by David Skyrme offers key insights into these developments, gives examples of successful organizational strategies and provides practical guidance on how to thrive in a dynamically changing world. The book is divided into four parts:
- Setting the Context - An Interdependent World
- Identifying Unbounded Opportunities - Knowledge: The strategic imperative; Technology: the knowledge enhancer; Virtualization: networking knowledge globally
- Toolkits for Tommorrow - practical focuses checklists and toolkits for knowledge networkers, virtual knowledge teams, knowledge-based enterprise and interprise (virtual corporation)
- Pathways to Prosperity - the public policy agenda, future scenarios.
Some reviews of this book:
"One of the best examples of knowledge management practice available in one place"
"What really stand stands out in this excellent book, is that it successfully draws upon contemporary research and real business experience to distill practical lessons - comprehensive, accessible and thoughtful"
"A very good book - describes the networked knowledge economy, and how organizations need to adapt to thrive in it".
Published by Butterworth-Heinemann, the book will shortly be accompanied by the Knowledge Networking web site at http://www.skyrme.com
The 1999-2000 Program based in The Banff Centre in Calgary, Canada, has been announced with the following 3 modules:
I. Guiding People and Organizational Change
II. Creating and Implementing Innovation and Knowledge Management Systems
III. Working with Government More Effectively
ENTOVATION colleagues are involved specifically with Module II, such as Hubert Saint Onge (The Mutual Group), Mary Baetz (author of Planning for People in the Electronic Office) and Debra M. Amidon (author of Innovation Strategy for the Knowledge Economy. Module II will be delivered March 19-24, 2000. Course topics include: "Assessing the Knowledge and Innovation Capital of Your Organization," "The Knowledge Value Proposition," "Storytelling as a Basis for Understanding Culture, Values, Attitudes Toward Innovation," "A New Role for Senior Leaders in the Knowledge Age," Integrating Creativity and Innovation in Operations," "Customer Innovation," "Measuring Innovation Performance," "Key Issues and Challenges," and "Presentation of Resident Case Studies." Check out a magnificent corner of the world and an intensive program guaranteed to adjust your vision of the future.
For further information, contact: 1-800-590-9799. E-mail: email@example.com.
ENTOVATION colleague John E.C. Prior of J.P. Consultancy Inc. publishes an interesting newsletter 'Intangibles'. The Fall 1999 issue poses four questions. John writes:
"Four questions loom large when thinking about intangibles. How are they created? How should they be protected? How can they be made more productive? How are they to be valued? The first is to do with innovation (knowledge creation) and the building of relationships and perceptions. The second is a matter of risk management. The third is the age-old issue of doing more with less. The fourth deals with worth."
He then continues by expanding and explaining these ideas in more detail. with some interesting observations. For example, on innovation:
"It is not the management of knowledge that leads to innovation. In a prize-winning paper presented to The Third World Conference on the Management of Intellectual Capital at McMaster University in January 1999, John Waters, a PhD candidate at the University of Western Sydney in Australia, concluded:
"The management of innovation is much more to do with managing commitment than it is to do with the management of knowledge."
If you are interesting in receiving this newsletter, please contact John direct:
Editor's Note - we don't have ordinary conferences any more but 'summits' - what next 'stratospheric symposia'?
31 Oct - 4 November 1999. Knowledge: Creation, Organization and Use. ASIS 1999 Annual Conference, Washington DC.
3-5 November. Intranets for Knowledge Management USA '99, San Francisco. First Conferences. Contact Vicky Smith
23-25 November. Knowledge Summit '99. The Fourth Annual European Event, London. David Skyrme is Speaking on K-Commerce. The 4th in a series of highly respected events. Business Intelligence.
6-8 December. Enterprise Intelligence International. KMCI’s Annual World Summit, Orlando, Florida. An impressive line up of quality speakers as well as exhibits and award ceremony.
7-9 December 1999. Online 99. An extravaganza aimed at information professionals. London. Learned Information.
© Copyright, 1999. David Skyrme Associates Limited and Authors - All rights reserved.
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I3 UPDATE / ENTOVATION International News is a joint publication of David Skyrme Associates Limited and ENTOVATION International Limited - providers of trends analysis, strategic advice and workshops on knowledge management
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