LP - 4

7 Oct 13

Ch 4

Recognizing a Firms Intellectual Assets

Learning Objectives
Why Management of Knowledge professionals and knowledge itself are critical in todays Org

How leveraging human capital is critical to strategy formulation

Hiring for attitude, training for skill Key role of social capital in leveraging Human capital

Vital role of technology in leveraging knowledge and human

capital
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Basic Concepts
Knowledge is the primary means of wealth generation in todays economy

Human capital - being a resource is the foundation of

intellectual capital. Therefore, while attracting human capital, issues such as hiring for attitude, training for skills must be

addressed.
Social Capital networks relationships among a firms members play a pivotal role in achieving value.

Technology is dominant in leveraging human capital

Finally, Leveraging human capital is vital to formulation of
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strategy

Leveraging Human Capital Strong human capital often leads to useful relationships among others, within the firm, promoting a social infrastructure that is often vital for gaining consensus on major decisions, integrating multiple administrative levels,

promoting cooperation, and sharing information

across departmental boundaries.

XEROX is not such a company. Why?
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XEROX Human Leveraging at the lowest

In 1990, Paul Allaire becomes CEO with a mission --- To ensure XEROX to be major Technology Player. In 1997, Rick Thoman joins ex IBM as COO. By 1999, the stocks soared to all-time high - $64. The BOD appointed Paul Allaire Chairman and Thoman the CEO. Together they launched millennium goals. However, the plan failed due poor management of human and social capital inherent in XEROXs executive ranks. In 1999, The CFO (Barry Romeril) faired badly causing huge losses to XEROX. There was plethora of law suits, penalties by S & E Commission for falsification of profits, and loan write offs etc. However, CFO could not be fired being a close friend of Chairman. Thomas Dolan, president of global sales and her sister a director prevailed upon Chairman not to restructure XEROX despite stiff competition by Japanese firms. The move adversely affected morale of sales force.
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XEROX Human Leveraging at the lowest

The Uncertainty prevailed throughout the firm resulting into loss of Sales Reps and with that:
Loss of product knowledge and Valuable social relationship with the clients

In May 2001, inevitable happened:

Thoman (CEO) was fired Dolans (President Global Sales) sister (Business Director) made COO Romeril (CFO) retained the job

By 2003, XEROX was facing bankruptcy and:

Experienced problems leveraging its talent and technologies into successful products and services Human and social capital eroded due dysfunctional organizational politics at the top
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Example Pakistani companies

THE ROLE OF KNOWLEDGE IN TODAYS ECONOMY

Until yesterday, most Managers directed maximum

efforts towards 2 traditional factors of production, -Labor and Capital and were duly interested in: Tangible resources Land, Machinery, Finance and Intangible resources Brand names, Image of the firm, and Customer loyalty etc

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Slide 1/2

THE ROLE OF KNOWLEDGE IN TODAYS ECONOMY -

Times

have

changed

and

with

that

the

emphasis:
50% of GDP in developed economies is due to Knowledge based economy --- Intellectual assets as well as intangible peoples skills. In USA, 76% of GDP is from the services. R & D

plays a pivotal role in Manufacturing sector

A comparison of machine v/s knowledge based
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economies is on the next slide: Slide-2/2

COMPARISON OF MACHINE V/S KNOWLEDGE BASED ECONOMIES Machine age Physical world It consisted of things Companies made and distributed things (Products) Management allocated things (capital budgets) Management invested in things (Plant and equipment) Peoples ancillary and 11/28/2013 things central.

Knowledge / Information age Things are ancillary Knowledge is central Companys values derive from knowledge, knowhow, intellectual assets, and competencies ---- all imbedded in people. Wealth is created through the management of knowledge workers
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HOW TO CREATE VALUE IN KNOWLEDGE INTENSIVE ECONOMIES

1. Consider Human Capital --- individual capabilities, knowledge, skills, and experiences of employees and managers 2. Social capital is critical in sharing and leveraging knowledge and in acquiring resources 3. The Concept of knowledge --1. 2. Explicit --- codified, documented, easily reproduced and widely distributed (Drawings, software etc) Tacit --- That rests in the minds of employees and is based on experience and backgrounds shared only through consent

4. The new knowledge is constantly being created through a mix of Explicit and Tacit knowledge .
5.
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Knowledge management is being stressed upon by Org

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Human Capital Foundation for Intellectual Capital The knowledge worker (KW) has risen to prominence in recent times. It is a source of CA and is changing the

balance of power in todays org.

The KW places professional development and personal enrichment above company loyalty. Attracting, recruiting and hiring the best and the brightest is a critical first step in the process of building

intellectual capital. The other two equally critical steps

are Developing and Retaining human capital.
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ATTRACTING HUMAN CAPITAL Hiring for Attitude, Training for Skills ---- Due
emphasis on general knowledge, experience, social skills, values, beliefs and attitude of employees

Sound recruiting approaches and Networking -- Best and the brightest out of thousands of applications.

The other best practice could be recruiting the one proposed by a current employee

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DEVELOPING HUMAN CAPITAL

A $ spent on training is worth $30 in terms of productivity gains. The Org must not lose in terms of morale, values turnover and productivity. Therefore: Ensure adequate Training to maintain High growth and high quality of product Encourage widespread involvement of leaders at all levels of the Org Monitor progress and track development Evaluate Human Capital

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RETAINING HUMAN CAPITAL

Employees must identify with the Org Mission and Values ---- Your Satisfaction is our pride or duty before

self
Provide challenging work and Stimulating

Environment --- Create internal market for employees by lowering barriers to mobility Ensure timely availability of due financial and

nonfinancial rewards --- criterion must be known and well

publicized
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THE SOCIAL CAPITAL VITAL ROLE

Social capital is defined as friendships, and working relationships among talented individuals

Notwithstanding the critical roles of recruiting, developing

and retaining Human Capital, the development of social capital has gained importance, because it ties KW to a given firm. An indulgent, mutually acceptable, and tolerant attitude

helps in retainer ship of employees

The downside of Social capital is equally dangerous and
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need to be curtailed

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TECHNOLOGY AND LEVERAGING HUMAN CAPITAL AND KNOWLEDGE Modern Tech is helping dissemination of information within and outside the Org in the most speedier and effective way The Tech has given rise to Virtual World and Virtual Teams In order to make gains and ensure CA, the knowledge has been codified an expensive preposition It is becoming exceedingly difficult to retain knowledge once the employee leaves the org. The reverse is also true in cases where the information is available on net. Wikileaks -------- Snowdon the whistleblower ?
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LEVERAGING HUMAN CAPITAL AND STRATEGY FORMULATION Business-Level Strategy --- Managers must integrate the primary and support activities in their firms value chain.
(External Analysis)

Corporate Level Strategy --- Managers must determine what important relationships (products, markets, technologies) exist across businesses and how they can be leveraged. International - Level Strategy --- How to achieve economies of scale and how to adopt to local market demands Internet Strategies --- Internet based technologies create CA by relaying information, enhancing speed of decision making and resolution of ideas.
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Thank You, any question----?

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