THE BUSINESS STRATEGY FORMANAGING INTELLECTUAL

CAPITAL IN THE NEW BUSINESS ENVIRONMENT

AUDREY L. CHIN05 JULY 2012

Introduction : Knowledge Economy

"The basic economic resource - the means of production - is no longer capital, nor natural resources, nor labor. It is and will be knowledge".

PROBLEM at Strategic Level

• What is the first step toward survival in a new business environment, one ruled by intellectual capital?

Strategic Problem Details

Very few individuals understand intellectual capital, and almost no one has been able, formally at least, to put a value on it .

This is very difficult because “Knowledge” is somehow intangible, so how can an organization maximize the returns on investment in knowledge?

Strategic Solution : Knowledge Management

That’s why KNOWLEDGE MANAGEMENT (KM)–how an organization makes use of its intellectual

capital–is one of the greatest challenges facing senior managers today.

Challenges CEO

• CEOs are responsible for justifying the value of knowledge constantly being developed in their organizations : from the capture, codification and dissemination of information, to the acquisition of new competencies through training and development, to the re-engineering of business processes.

Managing Intangible Assets ?

• Present and future success will be more on the strategic management of knowledge assets.

• This means that the capacity to manage knowledge is a critical skill, and perhaps the critical skill of this era.

REALISTIC STATISTICS ON KNOWLEDGE MANAGEMENT

Actual Strategic Problem in new business environment

• IDC, an international research organization, has reported that Fortune 500 companies wasted $12 billion by duplicating knowledge work in 2000, e.g., simultaneous search costs, parallel research projects.

Why KM is crucial in the new business environment

• Recent studies conducted at the Institute for Intellectual Capital Research in Dundas, Ontario provide strong evidence that knowledge management programs incl. KM staff are not only becoming more prevalent but are resulting in tremendous cost savings.

Financial Benefits Knowledge Management Programs

25 per cent of Fortune 500 companies currently have CKOs;80 per cent of Fortune 500 companies currently have KM staff;

From 1997-2000

The Ford Motor Company saved $914 million, mainly due to effective knowledge management programs; Chevron has saved $650 million since 1991, while Texas Instruments has saved $1 billion since it launched KM programs in the mid-1990s.

in 2001 The Canadian Centre for Management Development launched a formal cross-country KM training program for senior federal government officials

in 2001 Health Canada administered a KM diagnostic to identify its knowledge bottlenecks

2001 95 per cent of CEOs polled at the 2001 World Economic Forum in Davos, Switzerland, said that KM was critical to organizational success;

2001 91 per cent of Canadian business leaders polled by Ipsos- Reid believed that KM practices have a direct impact on organizational effectiveness, and one-third of Canadian organizations that have not undertaken a KM initiative expect to do so in the next 12 months

The emerging role of the chief knowledge officer (CKO)

• A chief knowledge officer (CKO) is an organizational leader, responsible for ensuring that the organization maximizes the value it achieves through "knowledge".

• CKOs can help an organization maximize the returns on investment in knowledge (people, processes and intellectual capital), exploit their intangible assets (know-how, patents, customer relationships), repeat successes, share best practices, improve innovation, and avoid knowledge loss after organizational restructuring.

Future value–and job security–of the CKO placement/position

Why the CKO will become a mainstay in the boardroom

Over half-a-million knowledge-intensive, high-tech jobs currently remain unfilled in America;

42 per cent of Fortune 500 companies anticipate appointing a CKO within the next three years

33 per cent of Fortune 1000 companies report that knowledge management activities are already under way.

Forty five per cent of 53 executive search firms in Canada and the United States were indeed familiar with the position of CKO.

72 per cent of the respondents expected CKO searches to increase significantly in the future.

Forty-seven per cent of the headhunters predicted that CKOs would have working experience in IT and be placed primarily in high-tech industries where most of the work is knowledge-intensive.

RESPONSIBILITIES OF THE CKO1. Collecting relevant data that is useful for the

organization as knowledge (extensive business experience needed to be able to determine which info is worth sharing )

2. Developing an overall framework that guides knowledge management

3. Actively promoting the knowledge agenda within and beyond the company

4. Overseeing the development of the knowledge infrastructure

5. Facilitating connections, coordination and communications.

Requirements for a succesful CKO

The CKOs claimed that in order to succeed in the future, they would need

1) more slack time for dreaming, thinking and talking, 2) more high-level support from CEOs and board

members.

CKO Characteristics

• Highly educated• Already a seasoned organizational performer and chosen for the

knowledge management position based on their proven performance

• A “researcher” … seeks new knowledge, likes to learn• Attracted to “being at the forefront of something new and

exciting”• Motivated more by a challenge than by formal power • Receives intrinsic rewards from helping others … some altruism

and/or evangelism• A risk-taker … sometimes a maverick• Sees knowledge management as a way to “make a mark within

the organization”.

KM PROJECT #1 WITHIN THE INDUSTRY: APPLYING KNOWLEDGE MANAGEMENT

AS BUSINESS STRATEGY FOR DEVELOPING THE RELIABILITY CENTERED

MAINTENANCE (RCM) IN SURINAME

Targetgroup : Academics

• Working Environment : Bureaucratic & Academic• Role : Researcher (Interdisciplinairy)

• Conference Presentation of Research Proposal :“The Reliability Centered Maintenance Approach in Suriname” by Audrey L. Chin at the ADEKUS Research days

• Business Strategy : A first step to a knowledge transfer system in technology and innovation for the academic community for commercializing their “academic research”

Targetgroup: Practitioners• Working Environment : Creative & Professional• Role : Change Manager in RCM• Change Managers must help build new practices and

communities to bring about changes that will make a constructive difference : The (learning) Community of Practice in Reliability Centered Maintenance (RCM) consisting of RCM academics & practitioners

• Business Strategy : The Community of practice as a first step for structuring & improving organizational learning in RCM

In Summary

• Question :What is the first step toward survival in a new business environment, one ruled by intellectual capital?

• Answer : Communities of Practices structures the organizational learning in RCM

• If well developed, Communities of Practices becomes organizational assets – (intangible) knowledge assets which then can be managed

• Only then can the CEO maximize the ROI in knowledge – KNOWLEDGE MANAGEMENT

Next : Implementing the Community of Practice in RCM in an organization