10 Internal Analysis 2
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Transcript of 10 Internal Analysis 2
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Internal Context
and intangible Assets
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The material is based on theFollowing Books
An Integrated Approach to strategic ManagementHills and Jones
Strategic ManagementPeter Fitzroy and James M Herbert
Strategic Management of Health Care OrganizationsLinda E. Swayne W. Jack Duncan and Peter M. Ginter
Marketing StrategyWalker Boyd Mullins Larreche
Strategic Brand ManagementKevin Lane Keller
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We Live in a Strange Economy
Larry Page Sergey Brin
Worth US$ 11,000,000,000 eachSource: Forbes.com
Age 37 Age 37
native of Moscownative of Michigan
PhD at Stanford PhD at Stanford
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Every Company Is Like a Tree
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That Is Best Viewed Upside Down
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Companies
Intellectualcapital
Financialcapital
Tangiblecapital
Human Capital Structural Capital Relational Capital
Intellectual Capital Is the Driver of Value
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Explicit
knowledge
Implicit
knowledge
MIT Has Knowledge
Companies
Intellectualcapital
Financialcapital
Tangiblecapital
Human Capital Structural Capital Relational Capital
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Implicit
knowledge Skills AttitudeExplicit
knowledge
Philips Has Intellectual Property
Companies
Intellectualcapital
Financialcapital
Tangiblecapital
Human Capital Structural Capital Relational Capital
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Explicit
knowledge
Implicit
knowledge Skills Attitude Processes
McDonalds Has Processes
Companies
Intellectualcapital
Financialcapital
Tangiblecapital
Human Capital Structural capital Relational capital
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Explicit
knowledge ProcessesImplicit
knowledge Skills Attitude Culture
GE Has Pride and Ambition
Companies
Intellectualcapital
Financialcapital
Tangiblecapital
Human Capital Structural capital Relational capital
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Explicit
knowledge Processes CultureImplicit
knowledge Skills Attitude ReputationNetworks
Nike Does Not Manufacture Shoes
Companies
Intellectualcapital
Financialcapital
Tangiblecapital
Human Capital Structural capital Relational capital
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Explicit
knowledge Processes Culture ReputationNetworks
Implicit
knowledge Skills Attitude
Customer
capital
Rabobank Has Involved Customers
Companies
Intellectualcapital
Financialcapital
Tangiblecapital
Human Capital Structural capital Relational capital
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Brand of the Year 2005
Source: Brandchannel.com
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Four Duties of Management
Intellectual
capital
Human CapitalStructural
CapitalRelational
Capital
ManageIntellectual
Capital
MakeMoney fromIntellectual
Capital
ReportIntellectual
Capital
ProtectIntellectual
Capital
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Manage Intellectual Capital
Intellectualcapital
Human Capital Structural Capital Relational Capital
Managing KnowledgeProfessionals
Knowledge ManagementIntellectual Property
Management
Brand ManagementCustomer Relationship
Management
P t t I t ll t l C it l
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Protect Intellectual Capital
Intellectual capital
Human Capital Structural capital Relational Capital
Confidentiality
agreements
Employee satisfaction
P t t I t ll t l C it l
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Protect Intellectual Capital
Human Capital Structural Capital Relational Capital
Patents
Registered Designs
Plant Varieties
Design Rights Copyright
Gravity powered shoe
air conditioner
US Patent No. 5,375,430
Intellectual capital
Protect Intellectual Capital
http://www.patents.ibm.com/details?pn=US05375430__ -
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Protect Intellectual Capital
Human Capital Structural Capital Relational Capital
Trade Marks
Domain Names
Intellectual capital
330 N P t t Fil d E h D
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330 New Patents Filed Each Day
Companies Failing to Protect IC
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Companies Failing to Protect IC
Xerox failed to patent and exploit technology inventedin its famous Palo Alto Research Centre.Among these inventions are:
The Personal Computer that generated billions ofdollars for many computer companies like Compaq
Ethernet technology made 3Com famous The laser printer has made Hewlett Packard billions of
dollars WYSIWIG has made Adobe a household name in type
font software
The GUI technology became the foundation for Applecomputers Macintosh and Microsofts Windows
Operating System
Companies Failing to Protect IC
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Companies Failing to Protect IC
Kodaklost a billion-dollar patent (instant cameras) infringementcase to Polaroid by failure to assess properly the patent landscapebefore launching a major product-development effort.
$925 million in damages to Polaroid $1.5 billion because of shutting down manufacturing plant
700 plant workers to be laid off $500 million to buy back the 16 million instant cameras soldbetween 1976-1985
$100 million dollar to be paid in legal fees during the 14-year longbattle
$? To be written off at a total loss of R&D Effort and Investment
Companies That Made Money From IC
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Companies That Made Money From IC
At IBM
an IP management effort boosted annual patent licensing
royalties from $300 million in 1990 to more than $1 billion
today.
This was accomplished by aggressively licensing
technology and exploiting IP beyond core business
operations, as well as licensing potential competitors in the
PC hardware, semiconductors storage and software
business.
Companies That Made Money From IC
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Companies That Made Money From IC
TexasInstruments began its patent licensing efforts in the
mid-1980s when it faced bankruptcy. Since that time, it has
earned $4 billion in patent royalties and its current licensing
revenues are estimated to be in the neighbourhood of $800
million a year.
Companies That Made Mone From IC
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Companies That Made Money From IC
Coca-Cola
generates approximately $500 million annually from
its trademark-licensing program, at a profit margin
about 80%.Coke has licensed its trademark for use in clothes
and other personal items like playing cards. There
are stores that specialize in selling Coke
trademarked items.
Should IC be on the Balance sheet?
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Should IC be on the Balance sheet?
The system of double-entrybookkeeping is more than 500 years old.It was popularised by the Italian monkLuca Pacioli, and is based ontransactions with 3rdparties.
A transaction, like the sale of a
product, results in changes in the incomestatement and the balance sheet: salesrevenue and cost of goods sold expensewill rise, the inventory decreases andcash and owners equity increases.
IC only appears on the balance sheetwhen it is acquired (goodwill)
Three reasons NOT to put IC on balance sheet:
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Three reasons NOT to put IC on balance sheet:
Not allowed
Only acquired IC can be put on balance sheet
Not possible
Intangible resources are no rival assets
The value of intangibles can increase or decrease without any transaction taking
place
Intangible assets are impossible to count and keep a tally of
No need
Intention of Balance Sheet is NOT to represent the value of the company but to
match costs and revenues
External stakeholders not only use balance sheet to assess companies Current treatment of investments in IC as expenses leads to distortion in income
statement. However, distortion is often small compared with other distortions (e.g.
depreciation methods)
IC Monitor
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Human Capital Structural Capital Relational Capital
HCI SCI RCI
HCA SCA RCA
HCE SCE RCA
Investments
Assets
Effects
Our Intellectual Capital Monitor is based on anemerging standard
IC Monitor
Human Capital
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Public expenditure on education as a percentage of GDP (2001)
3.57
3.85
3.91
4.35
4.41
4.57
4.69
4.98
4.99
5.08
5.09
5.73
5.79
5.9
6.12
6.247.31
8.5
0 1 2 3 4 5 6 7 8 9
JP
LU
EL
IE
ES
DE
UK
IT
NL
USA
EURO-15
FR
AT
PT
BE
FISE
DK
Source: Eurostat Structural Indicators
Human Capital
Structural Capital
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Source: Eurostat, Structural indicators
Gross domestic expenditure on R&D as a percentage of GDP (2001)
0.64
0.850.95
1.11
1.17
1.71
1.89
1.89
1.91.98
2.17
2.23
2.4
2.51
2.72
3.073.41
4.27
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
EL
PTES
IT
IE
LU (2000)
NL
UK
ATEURO-15
BE
FR
DK
DE
USA
JPFI
SE
Structural Capital
IC Investments
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0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00
USA
JPEURO-15
EL
ES
IT
LU
PT
IE
UK
AT
NL
FR
DE
BE
FI
SE
DK
HCI SCI
IC Investments
IC Assets
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0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80
USA
JP
EURO-15
IT
EL
PT
ES
LU
FR
DE
BE
NL
AT
IE
UK
FI
DK
SE
HCA SCA RCA
IC Assets
IC Effects
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0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70
USA
JPEURO-15
PT
EL
ES
IT
AT
BE
FI
IE
FR
SE
DK
NL
UK
LU
DE
HCE SCE RCE
IC Effects
Conclusions
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1. Investments in IC pay off
We found a strong correlation between HCI and HCA (0.470) and between
SCI and SCA (0.686)
2. HC and SC go together
HC and SC are interdependent and mutual enhancing factors
3. High value of IC assets is no guarantee for high productivityLow value of IC assets do seem to be a guarantee for low intellectual
productivity
4. Europa, compared to USA and Japan, has a long way to go
But is catching up.
Thank You!
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Dr. Daniel Andriessen
Professor of IntellectualCapital
INHOLLAND Universityof Professional Education
Amsterdam/ Diemen The
Netherlands+31-204951719