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© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
SIXTH ASIA PACIFIC KNOWLEDGE MANAGEMENT CONFERENCE
INNOVATION AND HUMAN CAPITAL:THE BASIS OF INTELLECTUAL CAPITAL
Combining Intellectual Capital with Complementary Business Assets to Create
Value
© Dr Gordon McConnachieiCMG/Scottish Intellectual Asset Managementgordon@gmcconnachie.comgmcconnachie@icmginc.comwww.gmcconnachie.comOffice: +-49-2429-908-122Cellphone +-49-151-1410-3505
Hong Kong, 18th November 2004
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
The Aims of this PresentationThe Aims of this Presentation
Describe how innovation works and Describe how innovation works and the importance of intellectual capitalthe importance of intellectual capital
Show why ICM along business lines is Show why ICM along business lines is necessarynecessary
Indicate how to value intangiblesIndicate how to value intangibles Show that ICM is vital to value Show that ICM is vital to value
creation in the global economycreation in the global economy Stimulate you to actStimulate you to act
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
InnovationInnovation
““ Innovation is the completion of Innovation is the completion of a new technical or organisational a new technical or organisational event, not simply its discovery”.event, not simply its discovery”.
Schumpeter, Economist, Austria, Schumpeter, Economist, Austria, 2020thth Century. Century.
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
When legally protected these are Intellectual PropertyWhen codified these are Intellectual Assets
Most
Tangible
Least
The Components of Intellectual Capital: A Spectrum of Knowledge Assets
Patents
Trademarks
Publishing Rights
Brand logosdesigns
Copyrights
InformationDatabases
IndustrialDesign
SoftwarePlatforms
TradeSecrets
ConfidentialInformation
Technology
Structural Capital
Know-How
Customer Capital
UnpatentedResearch
Knowledge Providing
Value
Human Capital
Culture
Source: PricewaterhouseCoopers
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
A View of Intellectual AssetsA View of Intellectual Assets
Intellectual Property
Intellectual Assets
Knowledge & Know-How
INTELLECTUALCAPITAL
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
What Is Intellectual Capital?What Is Intellectual Capital?
Intellectual Capital
HumanCapital
IntellectualAssets
Value Creation Value Extraction
IntellectualProperty
Intellectual Capital, knowledge that can be converted
into profits, has two components:
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
The Interaction of Intangible and The Interaction of Intangible and Tangible Assets to Create EarningsTangible Assets to Create Earnings
$$
Structural Capital (generic)Structural Capital (generic)
Complementary BusinessAssets (differentiated)
Intellectual Capital (unique)
Value Creation Value Extraction
Sal
es F
orce
Sal
es F
orce
Dis
trib
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n C
apab
ilitie
sD
istr
ibut
ion
Cap
abili
ties
Man
ufac
turin
g F
acili
ties
Man
ufac
turin
g F
acili
ties
HumanCapitalHumanCapital
IntellectualIntellectualAssetsAssets
IntellectualIntellectualAssetsAssets
IntellectualProperty
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Sources and Conversions of Sources and Conversions of ValueValue
Sources of Value
• Innovations• Complementary Business Assets
– Purchasing– Manufacturing– Distribution– Sales
ConversionMechanisms
• Sale• Out-license• Joint Venture• Strategic Alliance• Integrate with Current Business• Create New Business• Donate• Barter/Trade
$$
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Converting Ideas Into CashConverting Ideas Into CashIntegrate
Out-licenseor Contract
Joint Venture
StrategicAlliance
Store
Store
$
Meets MarketNeed
Adequate IP ProtectionAvailable?
Specific ComplementaryAssets Required?
Complementary AssetsAvailable?
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Competitors BetterPositioned in Marketplace?
Invention
Adapted from David Teece, 1986.
Meets MarketNeed
Use IP as sourceof funding through
Securitisation
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Aligning CapabilitiesAligning Capabilities
VisionVision VisionVision
StrategiesStrategies StrategiesStrategies
InnovationInnovationStrategiesStrategies
InnovationInnovationStrategiesStrategies
Value Creation
Value Creation
Value Extraction
Value Extraction
IP Objectives/Roles:
Strategic Framework
Cash Value
Positioning Value
Where does Intellectual Capital fit into this?
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Developing an ICM CapabilityDeveloping an ICM Capability
1.1. Accept there is a need and a sponsorAccept there is a need and a sponsor2.2. Create inventoryCreate inventory3.3. Evaluate present contributionEvaluate present contribution4.4. Set IC tacticsSet IC tactics5.5. Check systems and management supportCheck systems and management support6.6. Create IC packages in strategy contextCreate IC packages in strategy context7.7. Determine value release routeDetermine value release route8.8. Execute the planExecute the plan9.9. Report success to stakeholdersReport success to stakeholders
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
ICM ToolboxICM Toolbox Business strategy and planBusiness strategy and plan Technology auditTechnology audit IC and R&D processesIC and R&D processes Information miningInformation mining Tactical decision makingTactical decision making Valuation in contextValuation in context Brand strategy evaluationBrand strategy evaluation Data systems integrationData systems integration Coaching in Coaching in
communications and communications and managing the changemanaging the change
IC Tactics to met planIC Tactics to met plan Portfolio ManagementPortfolio Management Identifying and packaging Identifying and packaging
deal elementsdeal elements Negotiating business dealsNegotiating business deals Audit technology licensesAudit technology licenses Effective scenario planningEffective scenario planning Dynamic cash flow analysisDynamic cash flow analysis Measurement of success of Measurement of success of
ICM activityICM activity Value reporting to Value reporting to
stakeholdersstakeholders
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Value-in-UseValue-in-Use
The value of any combination of The value of any combination of tangible and intangible assets is tangible and intangible assets is specific for a given context and time specific for a given context and time frame … it is a “value in use” and not frame … it is a “value in use” and not a “fair market value”. This a “fair market value”. This mustmust be be taken into account when valuing taken into account when valuing anythinganything
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Valuing a Combination of Tangible and Intangible Assets
1.1. Value in use Value in use
2.2. Business modelBusiness model
3.3. Probability Probability adjusted valuationadjusted valuation
1.1. QualitativeQualitative
2.2. Net Present ValueNet Present Value
3.3. Probability Probability adjusted NPVadjusted NPV
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
ICM and GLOBALISATIONICM and GLOBALISATION
Globalisation of world markets Globalisation of world markets creates a more level playing field and creates a more level playing field and makes ICM more essential in order to makes ICM more essential in order to squeeze out the very last drops of squeeze out the very last drops of competitive advantage, academic competitive advantage, academic advantage or national culture advantage or national culture
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Five Phases1 Portfolio2 Strategy 3 Business Intelligence & Technology Assessment 4 Valuation 5 Investment
DOW INTELLECTUAL ASSET PORTFOLIO
R&DINTELLECTUAL
ASSET GENERATION
ALTERNATIVEVALUE
GENERATION
TECHNOLOGYPROCUREMENT
BUSINESS VALUE
ASSESSMENT
INTELLECTUALASSET
STRATEGY/TACTICS
TECHNOLOGYINVESTMENT PLANS
BUSINESS INTELLIGENCE
& TECHNOLOGY ASSESSMENT
BUSINESSSTRATEGY
Source: Dow Chemical
Case Study: Dow ChemicalCase Study: Dow Chemical
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
An Effective Licensing Program An Effective Licensing Program - IBM- IBM
““ IBM earns more from an Apple Powerbook - IBM earns more from an Apple Powerbook - equipped with a disk, display screen and equipped with a disk, display screen and PowerPC chip from IBM - than Apple earns from PowerPC chip from IBM - than Apple earns from the same product.”the same product.”
““The whole ideal is to put IBM’s technology into The whole ideal is to put IBM’s technology into the marketplace as soon as we can.”the marketplace as soon as we can.”
““Behind the technology supply deals is IBM’s Behind the technology supply deals is IBM’s continuing investment in research. The continuing investment in research. The technologies that other companies are buying technologies that other companies are buying today were nurtured in IBM’s labs for years.”today were nurtured in IBM’s labs for years.”
Source: NY Times 6/10/99
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
CASE STUDY: NXT CASE STUDY: NXT DOMINATING A NEW MARKETDOMINATING A NEW MARKET
Technology licensed from UK Defence Technology licensed from UK Defence for flat audio speakersfor flat audio speakers
Plans to dominate the market by Plans to dominate the market by licensing rights to global speaker licensing rights to global speaker manufacturersmanufacturers
Has sold hundreds of licences Has sold hundreds of licences worldwide and licensees now have worldwide and licensees now have product in the market place.product in the market place.
Has built a patent wall around the Has built a patent wall around the technology and protected its franchise technology and protected its franchise with the trade marks SurfaceSound®, with the trade marks SurfaceSound®, SoundVu® and 2020Speech®.SoundVu® and 2020Speech®.
The market has expectations of The market has expectations of peformance.peformance.
Website: www.nxt.co.ukWebsite: www.nxt.co.uk
© NXT plc, UK
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Neste Technology AuditNeste Technology AuditSource: Fortum Oy and iCMGSource: Fortum Oy and iCMG
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
TOYOTATOYOTAIntellectual Capital OptimisedIntellectual Capital Optimised
Technological prowessTechnological prowess InventivenessInventiveness Customer focusCustomer focus ReliabilityReliability FI presenceFI presence Manufacturing best-in-classManufacturing best-in-class A success storyA success story
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
©Intellectual Assets Centre 2004
Intellectual Assets Centre
“to assist Scottish businesses to maximise the
economic potential of their intellectual assets”
• A new Scottish organisation
• Independent, impartial, a facilitator
• Funded by the Scottish Executive
• First of its kind in Europe
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
©Intellectual Assets Centre 2004
The IA Centre’s aims
• “To increase awareness and understanding of IA issues among Scottish businesses and other organisations, enterprise agencies and private sector intermediaries”
• “To enable Scottish businesses to manage and exploit the untapped potential of their IA for competitive advantage”
• “To encourage the development of a strong, private sector-led supply of IA management services to support Scottish businesses”
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
©Intellectual Assets Centre 2004
What will the IA Centre offer?
• Awareness raising activities
• Assistance to help companies diagnose their IA issues
• Tools for companies to learn more about IA management processes
• Signposting to IA management providers
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
©Intellectual Assets Centre 2004
Other roles for the IA Centre
• Briefing the Scottish Enterprise Network, private sector intermediaries and Scottish Executive in IAM
• Encouraging the development of a strong private sector-led supply
• Developing Scotland's international profile as a leading exponent of IA management and exploitation
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Scottish Intellectual Asset Scottish Intellectual Asset Management LimitedManagement Limited
What will the IA Centre do?Raise awareness and understandingDemonstrate how IA impacts upon businessHow will the IA Centre deliver?Educate-IA events, training, seminars and informationProvide tools to answer questions about IAWhat are its aims?Guide, direct and signpost Scottish companies to suppliersEncourage the development of a strong private sector-led supply of IA management products and servicesDevelop Scotland’s international profile as a leading exponent of IA management and exploitation
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Case Study: Dyson – Entrepreneur Case Study: Dyson – Entrepreneur Leveraging Technology and IPLeveraging Technology and IP
An example of what you can do when it all goes wrong!An example of what you can do when it all goes wrong!
James Dyson’s vacuum cleaner wars are legendary.James Dyson’s vacuum cleaner wars are legendary. Dyson invented the revolutionary vortex vacuum cleaner Dyson invented the revolutionary vortex vacuum cleaner
and, having tried unsuccessfully to market the idea in the and, having tried unsuccessfully to market the idea in the UK industry, protected his technology with a battery of UK industry, protected his technology with a battery of patents.patents.
Dyson has applied his technology to build a business and a Dyson has applied his technology to build a business and a market leadership position.market leadership position.
January 2001 Dyson prevailed in court over Hoover, January 2001 Dyson prevailed in court over Hoover, stopping their triple Vortex sales but was not successful in stopping their triple Vortex sales but was not successful in stopping Hoover using the trade mark Vortex®.stopping Hoover using the trade mark Vortex®.
Dyson products went on sale in the USA on 29Dyson products went on sale in the USA on 29thth August August 2002.2002.
James Dyson has now designed a revolutionary washing James Dyson has now designed a revolutionary washing machine.machine.
www.dyson.co.ukwww.dyson.co.uk
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
A THOUGHT TO TAKE AWAY!A THOUGHT TO TAKE AWAY!Systematically managing your intellectual capital……….
……………………..in a business driven manner, is……..
A Hidden Asset
Increasing in Value
Increasing in Importance
What Are You Doing About It? What Are Your Competitors Doing About It?
© Gordon McConnachie iCMG 2004 © Gordon McConnachie iCMG 2004 Sixth Asia Pacific KM Conference
Hong Kong 18 November 2004
Thank you!Thank you!
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