Introduction to SPICE courseware What is SPICE? SPICE is an acronym for: Sustainable Programme on Intellectual Capital Education Developed by Inholland University

History of Asia-Link Programme 2-year project by Inholland University 30 ECTS curriculum to prepare undergraduate students, teaching staff and executives and middle managers in industry, for the knowledge economy Introduces Intellectual Capital as a new subject field into curricula of partner institutions in Asia and Europe and its stakeholders in industry Innovate undergraduate curricula of departments in business, communication, finances, and ICT into the direction of the knowledge economy and its new business values

SPICE courseware Deploys the following instruments to achieve its goals: Key Course Texts on Intellectual Capital An online case-database with industry-based case-studies and best-practices Intellectual Capital in context (Europe and Asia) A train-the-trainer programme to facilitate future dissemination of the outcomes of the project

Focus of SPICE Describes the intangible drivers (competences, knowledge-ability, efficiency, management concepts, innovation, communities of practice and similar concepts) in their relationship to European and Asian business cultures Web-based platform creates forum for discussion and a place for publication of new knowledge about the nature of industry and organizations in the knowledge economy in Asia and Europe TEPEK to take core principles of SPICE and connect educators and business organisations around a new body of knowledge regarding the needs of the knowledge economy

Different theories on competitive advantage Past decade saw a knowledge-based view of companies Based on assumption that firm-specific knowledge now the most important source of sustainable competitive advantage Theories include: 1. Industry-based view 2. Resource-based view 3. Knowledge-based view

Industry based view Uses external (competitors, suppliers, customers) as starting point for strategy development Five-forces model can identify features that determine nature of competition in a particular industry: 1 Rivalry between established competitors 2 Bargaining power of buyers Bargaining power of suppliers Enter a market Substitute products

Resource-based view Based on assumption that firm-specific competencies have become most important source of sustainable competitive advantage Today’s competitive environment characterized by dynamic changing markets and fast changing customer demands Core competencies are those distinctive skills and capabilities which taken together represent the firm’s ability to do business better than its competitors

Knowledge-based view Increasingly,it is claimed that knowledge is the most important resource Resource-based view only implicitly refers to knowledge, whereas knowledge-based view elaborates on the nature and definition of knowledge and the way it should be managed Resource-based view + knowledge-based view = intangible-based view

Intellectual Capital Intellectual Capital: a new perspective on value creation Reasons for this: 1 Dissatisfaction with the 500 year old accounting system 2 Increasing difference between market- and book value. Huge rise of stock prices, marginalization of explanatory power of traditional balance sheet Effect of globalization and increasing need for transparency in business reporting. An attempt to build a standardized performance framework

ICT on the increase The Y2K-problem and the introduction of the Euro forced many companies to invest heavily in ICT-infrastructure Intellectual Capital and other reporting initiatives an intelligent way of exploiting the new ICT infrastructure Intellectual Capital explicitly focuses on intangible resources Focus on core competences and those resources considered most important for creating competitive advantage

Monitoring intangible resources Traditional bookkeeping system does not monitor these resources Value and performance of intangibles not defined, leading to: Poor valuation (external communication problem) Poor usage (internal management problem) Systematic and standardized reporting about intangibles will lead to better organizational performance

Defining IC Core elements of agreement: 1 IC is about intangibles 2 IC makes the difference 3 IC gives structure to organizational resources 4 IC is about human- and non-human resources “All intangible resources that are available to an organization, that give a relative advantage, and which in combination are able to produce future benefits”

The invisible balance sheet Sweiby 1997, Intangible Assets Monitor (IAM), three different kinds of intangibles: Individuals Competence - skills, education, experience and employee attitude Internal Structure - patents, concepts, models, and computer and administrative systems External Structure - relationships with customers and suppliers. Also brand names, trademarks, and the company’s reputation or image

Celemi Since 1995 Swedish consultancy Celemi has published an IAM as part of their financial report Celemi`s 'Invisible' Balance Sheet contains intangible assets classified under three main headings: Our Customers Our Organization Our People Celemi´s Invisible balance sheet is much larger than the ‘visible’ one Source: Celemi Annual Report 1995 http://www.sveiby.com/articles/CelemiMonitor.html

Comparison of intellectual capital models (Stam, 1999, 2001). Intangible Assets Monitor (Sveiby) Skandia Navigator (Edvinsson) Intellectual Capital Index (Roos) Human Resources Individual’s competences Human Capital Organizational Resources Internal Structure Process Capital Infrastructure Capital Relational External structure Customer Capital Relationship Capital

IC Models IC is the product of interaction of these three different classes of intangibles: Human resources, organizational resources and relational resources (Roos, 2003) This classification used as a starting point for reporting and communicating about IC Distinction between human capital, structural capital and relational capital

Intellectual Capital Monitor Each of the three classes of IC should be monitored from three different perspectives: Assets (present). Gives an indication of the present power of an organization. Provides an overview of the current main assets Investments (future). Gives insight into the future power of an organization Effects (past). Shows the extent to which the organization has made its intangibles productive during the past period

Intellectual Capital Monitor (Andriessen & Stam, 2004 Human capital Structural capital Relational capital Assets Investments Effects

Indicators Measuring IC is about indicators: “A reasonable trustworthy estimation of an unknown value” Not objective truths A signal for attracting attention Aid in monitoring progress and success of management initiatives Serve as input for the management decision process

IC Report A well designed IC report consists of a balanced combination of indicators Can be quantitative, but also qualitative Can be expressed in numbers, percentages or monetary value Can be presented in figures, words, colours, smileys or dashboards Should be SMART Should also be stimulating

Time investment Value of measurement increases over the years Organizations that decide to measure IC should be willing to invest at least three years Need to practice working with indicators Supplement traditional reporting methods Adapt a different perspective on value creation

Reasons for reporting on IC Three main categories: Improving internal management Improving external communication Statutory and transactional issues

Challenges Wide variety of problems related to measuring and managing intangibles means a variety of solutions Improving the management of intangible resources in itself does not justify the measurement Gap between market and book value is in itself not enough reason to start measuring intangibles If measuring is the best solution to our problem, should be aware of the problem we are trying to solve, so that can choose the appropriate method

Further reading All the SPICE courseware texts covering: The Knowledge-based economy The IC perspective Measurement Intellectual Property Creating value with IC Managing human capital Managing business processes Managing brands and networks Integration path