Sixth Asia Pacific KM Conference Hong Kong 18 November 2004 © Gordon McConnachie iCMG 2004 SIXTH...

© 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 [email protected]@icmginc.comwww.gmcconnachie.comOffice: +-49-2429-908-122Cellphone +-49-151-1410-3505

Hong Kong, 18th 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



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.



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



A View of Intellectual AssetsA View of Intellectual Assets

Intellectual Property

Intellectual Assets

Knowledge & Know-How

INTELLECTUALCAPITAL



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:



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

utio

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



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

$$



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



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?



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



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



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



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



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



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



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



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



Neste Technology AuditNeste Technology AuditSource: Fortum Oy and iCMGSource: Fortum Oy and iCMG



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



©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




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”




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




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



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



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



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?



Thank you!Thank you!

Sixth Asia Pacific KM Conference Hong Kong 18 November 2004 © Gordon McConnachie iCMG 2004 SIXTH...

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Transcript of Sixth Asia Pacific KM Conference Hong Kong 18 November 2004 © Gordon McConnachie iCMG 2004 SIXTH...