Introduction to SPICE courseware

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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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 competencesand those resources considered most important for creating competitive advantage

11. 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

12. 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”

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

14. 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

15. Comparison of intellectual capital models (Stam, 1999, 2001).

16. 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

17. 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

18. Intellectual Capital Monitor (Andriessen & Stam, 2004

19. 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

20. 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

21. 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

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

23. Challenges • Wide variety of problems related to measuring and managing intangibles means a variety of solutions • Improving the management of intangible resources in itselfdoes 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

24. 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