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June 2002    Feature
a free monthly briefing on the knowledge agenda
No. 62

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Managing editor:
David J. Skyrme


Meeting of the IC Minds:
Highlights from Slovenia Coast

Debra M. Amidon

She came 20 hours by car this woman from Serbia - Dr. Zorica Uzelac, professor of Mathematics for the faculty of Technical Sciences of the University of Novi Sad, Yugoslavia. She made contact with the ENTOVATION Network in May, was sent the announcement of the Slovenia conference on Intellectual Capital - And so, within 2 months, she was face-to-face with 5 of the intellectual capital pioneers and 100 representatives from nearby countries focused on harnessing the intellectual wealth of the region.

It was time for an in-depth review of the State-of-the-Art of Intellectual Capital convened by the Inštitut za intelektualni kapital from Ljubljana, the Centar za intelektualni kapital from Zagreb and the Finance newspaper of Slovenia. 5 experts in the knowledge movement were convened with an audience of knowledge practitioners from Croatia, Serbia, Austria, Germany and other nations in the region.

IC Efficiency in Croatia

Ante Pulić and his associate Karmen Jelcic - long-time representatives on the Global Knowledge Leadership Map -, organized and co-chaired the event with colleague, Matjaž Maček, director of the Institute that is part of the company Imelda. With a presentation focused on value creation as opposed to value destruction, Ante outlined a strategy for…. At the same time, he released the first report on Intellectual Capital Efficiency for the country of Croatia using the Value Creation Efficiency Analysis - VAIC(TM) - in all the cities and municipalities of the Zagreb County.

The key principle of the analysis was not whether a county’s economy was big or small, but whether is was 'good' or 'bad' - defined as to how efficiently it used its resources. The quality of business was estimated by a method that measures the efficiency of value-creation compared to invested resources: Capital Employed and Intellectual Capital. The data source utilized were the balance sheets provided by FINA the Financial Agency. Conclusions of the study indicate that raising the value-creation capability contributes to the improvement of value-creation, and thus the progress of the city, region or nation.

New Insights from The Pioneers

Leif Edvinsson, CEO of UNIC (Sweden) and Professor of Knowledge Economics at the University of Lund, released his new book on 'Corporate Longitude: Navigating the Knowledge Economy', in which he outlines how the rise of knowledge economics has highlighted a mismatch between current financial reporting and the value of intellectual capital. With the notion of navigating (rather than controlling), he defines metaphors that enable the astute managers to capitalize upon the new realities. With a chapter on Knowledge Innovation®, he suggests, "Organizations need to nurture their own Einsteins." He cites the indicators (i.e., discovering/learning, implementation, and commercialization) of Baruch Lev published previously - "Innovation," he says, "requires you to seek new perspectives on everything!"

Professor Nick Bontis, architect of the World Congress on Intellectual Capital at McMaster University (Ontario, Canada) and CKO of Knexa the world’s first knowledge exchange auction - discussed his most recent research sponsored by the Saratoga Institute, his Institute for Intellectual Capital Research and Accenture. Using an array of causal loop diagrams, he described compelling arguments for the following research implications:

  • The development of senior management leadership capabilities is the key starting ingredient for the reduction of turnover rates and the retention of key employees. Effective management leadership acts as a spark for organizational knowledge-sharing which, in turn, allows senior management to align values throughout the organization.

  • The effective management of intellectual capital assets yields higher financial results per employee. The development of human capital is positively influenced by the duration level of employees and their overall satisfaction.

  • Employee sentiment as defined by satisfaction, motivation and commitment has far-reaching impacts on intellectual capital management, knowledge management and ultimately human performance.

  • Knowledge management initiatives can decrease turnover rates and support performance if they are coupled with Human Resource policies.

  • Business performance is positively influenced by the commitment of its organizational members and their ability to generate new knowledge. This favorable performance level subsequently acts as a deterrent to turnover which, in turn, positively effects human capital management.

Case Studies show the way

Rűdiger Reinhardt, project manager and senior lecturer at the Institute for Media and Communications Management at St. Gallen University (Switzerland), provided two case study examples on inductive and the second deductive - to illustrate how the measurement of Intellectual Capital must not only deal with the performance of 'stocks', but the 'knowledge flows'. Using the model of human, organizational and customer capital, he suggests that the interaction thereof - over time - produces equity that can be recognized in the capital market and, therefore, influences the market value of the company. He traces what could be considered as innovation indicators, the goals, identification, creation, diffusion, processing, action, storage/retrieval and valuation dimensions.

The Innovation Superhighway

I provided a scope of 'The Innovation SuperHighway' - much of which is documented in my new book of the same title scheduled for released in October. I focused primarily on Chapter 4 - Knowledge Economics - and detailed some of the most recent activities on the enterprise, national economy and societal level, including the new Knowledge Assessment indicators from The World Bank and the OECD. The point is that the agenda is now actively embraces on the enterprise (micro-economic), national economy (meso-economic) and societal (macro-economic) levels all beginning to share a common language and shared intent.

I concluded with the action steps that were published in the Skyrme/Amidon Report (1987) -

  1. Draw up your own categories of intellectual capital and knowledge assets.
  2. Estimate ('guesstimate') for each their overall value. And future revenue-generating potential.
  3. Develop some form of balanced scorecard reporting.
  4. Explore, as an experiment, some of the newer methodologies, such as the Economic Value-added of M'Pherson.
  5. Create a matrix linking the assets you have identified with business impact.
  6. Initiate pilot measurement and investment appraisal systems.
  7. Develop the value proposition.
  8. Don't despair if you cannot 'prove' bottom-line business benefit. Take the leap of faith, as are others.

In summary, this conference afforded real breakthroughs on several counts. First several of the leaders were able to present to one another their most recent insights. Second, the messages were delivered in a country and region ready to implement strategies on the micro- and meso-economic levels to create value and societal wealth. Third, the integration of the intellectual capital measurement, innovation strategy and systems dynamics is profound…nothing less. Finally, we can begin to see the sound relationship between the theory and the practice of intellectual capital management.

Email: Debra M. Amidon

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