Recognizing

A Firms
Intellectual
Assets:
Moving
Beyond a
Firms
Tangible
Resources
chapter 4
Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill

Education .
 The Central Role of
4-2
Knowledge

Consider
A companys value is not derived solely
from its physical assets. Rather it is based
on knowledge, know-how, and
intellectual assets all embedded in
people.
 The Central Role of
4-3
Knowledge

In the knowledge economy, wealth is

increasingly created by effective
management of knowledge workers
instead of by the efficient control of
physical & financial assets.
 Ratio of Market Value to Book
4-4
Value

Exhibit 4.1 Ratio of Market Value to Book Value for Selected

Companies
Source: www.finance.yahoo.com
Note: The data on market valuations are as of January 4, 2013. All other financial data are based on the most
recently available balance sheets and income statements.
 The Central Role of
4-5
Knowledge
Intellectual capital is a measure of the
value of a firms intangible assets the
difference between a firms market value
& book value. It includes these assets:
Reputation
Employee loyalty & commitment
Customer relationships
Company values
Brand names
Experience & skills of employees
 The Central Role of
4-6
Knowledge
Human capital includes the individual
capabilities, knowledge, skills, and
experience of the companys employees
and managers.
Social capital includes the network of
relationships that individuals have
throughout the organization.
 The Central Role of
4-7
Knowledge
Knowledge management is critical to
organizational success. Knowledge
includes:
Explicit knowledge codified,
documented, easily reproduced, and widely
distributed.
Tacit knowledge in the minds of
employees, based on their experiences and
backgrounds.
 Codifying Knowledge For
4-8
Competitive Advantage
Tacit knowledge Explicit (codified)
Embedded in knowledge
personal Can be documented
experience Can be widely

Shared only with distributed

the consent and Can be easily

participation of replicated
the individual Can be reused
many times at very
low cost
 Question?
4-9

Mary Stinson was required to take over a project

after the entire team left the company. She was
able to reconstruct what the team had
accomplished through reading e-mails exchanged
by the previous teams members. This is an
example of
A. using explicit knowledge.

B. inefficient use of information management.

C. using tacit knowledge.
D. all of the above.
 Human Capital
4-10

Exhibit 4.2 Human Capital: Three Interdependent Activities

 Attracting Human Capital
4-11

Hire for attitude, train for skill

Emphasis on:
General knowledge & experience
Social skills
Values
Beliefs
Attitudes
 Attracting Human Capital
4-12

Sound recruiting approaches to attract

human capital:
Building a pool of qualified candidates
The challenge becomes having the right job
candidates, not the greatest number of them
Networking
Current employees may be the best source
of new ones
Provide incentives for referrals
 Example: Creative Hiring
Practices
4-13

Only about one out of 100 applicants

passes a hiring process that is
weighted 50 percent on job skills
and 50 percent on the potential to
mesh with Zappos culture.
 Developing Human Capital
4-14

Training and development must take

place at all levels of the organization
Requires the active involvement of
leaders at all levels
Includes mentoring & sponsoring lower-
level employees
Monitoring progress & tracking
development
Evaluating human capital
 Developing Human Capital
4-15

360-degree evaluation and feedback

systems address the limitations of the
traditional approach to performance
evaluation.
Superiors, direct reports, colleagues, and
even internal and external customers rate
a persons performance.
360-degree feedback systems complement
teamwork, employee involvement, and
organizational flattening.
 Developing Human Capital
4-16

Exhibit 4.3 An Excerpt from General Electrics 360-Degree

Leadership Assessment Chart
Source: Adapted from Slater, R. 1994. Get Better or Get Beaten: 152-155. Burr Ridge, IL: Irwin Professional
Publishing
Note: This evaluation system consists of 10 characteristics - Vision, Customer/Quality Focus, Integrity, and so on. Each of these
characteristics has four performance criteria. For illustrative purposes, the four performance criteria of Vision are included.
 Retaining Human Capital
4-17

Retention mechanisms must prevent

the transfer of valuable and sensitive
information outside the organization:
Help employees identify with an
organizations mission and values
Provide challenging work and a stimulating
environment
Offer financial and nonfinancial rewards &
incentives
Money is not the most important reason why
people take or leave jobs
 Social Capital
4-18

Social capital the friendships and

working relationships among talented
individuals helps tie knowledge workers
to a given firm.
Interaction, sharing, and collaboration will
help develop firm-specific ties, with a
higher probability of retaining key
knowledge workers.
 How Social Capital Helps
4-19
Attract and Retain Talent
Hiring via personal (social) networks:
Some job candidates may bring other talent
with them the Pied Piper effect
Social networks can provide a mechanism
for obtaining resources and information
from outside the organization
 Social Networks
4-20

Social network analysis depicts the

pattern of interactions among individuals
and helps to diagnose effective and
ineffective patterns
Who links to whom within the network or
cluster?
Who communicates to whom and how
effective is this communication?
 Social Network Analysis
4-21

Exhibit 4.4 A Simplified Social Network

 Social Network Analysis
4-22

Closure Bridging
Relationships Relationships
The degree to which Relationships in a
all members of the social network
social network have that connect
relationships with
otherwise
other group
members (Bill, disconnected
Frank, Susan and people (Mary)
George)
 Overcoming Barriers to
4-23
Collaboration

Effective collaboration requires

overcoming barriers:
The hoarding barrier (people arent willing
to provide help)
The search barrier (people are unable to
find what theyre looking for)
The transfer barrier (people are unable to
work with people they dont know well)
 Overcoming Barriers to
4-24
Collaboration
To encourage collaboration, leaders can
choose a mix of three levers:
Unification levers create compelling
common goals & articulate a strong value of
cross- company teamwork
People levers get the right people to
collaborate on the right projects through T-
shaped management (right skills and
right relationships)
Network levers build lively interpersonal
networks across the company
 Social Networks: Implications
4-25
for Career Success
Effective social networks provide
advantages for the firm AND for an
individuals career advancement:
Access to private information communicated
in the context of personal relationships
Access to public information from sources
such as the Internet
Access to diverse skill sets trading information
or skills with people whose experiences differ
from your own
Access to power by being a network broker
 Social Capital: Limitations
4-26

Social capital does have some potential

downsides:
Conforming to Groupthink
Dysfunctional human resource practices
Continuingto hire and reward like minded
people, eroding innovation
Expensive socialization processes
(orientation, training)
 Using Technology to Leverage
4-27
Human Capital and Knowledge
Sharing knowledge and information
throughout the organization
Technology can leverage human capital
& knowledge
Within the organization
With customers
With suppliers
 Using Technology to Leverage
4-28
Human Capital and Knowledge
Using networks to share information
and develop products and services
Through e-mail
Through an intra-company news feed
Through electronic teams or e-teams
Advantages: few geographic constraints;
access to multiple social contacts
Challenges: failure to identify team members
with the most appropriate knowledge and
resources; low cohesion, low trust, lack of
shared understanding creates process loss
 Protecting Intellectual
4-29
Assets
Intellectual property rights are more
difficult to define and protect than
property rights for physical assets.
Unlike physical assets, intellectual
property can be stolen.
If intellectual property rights are not
reliably protected by the state, there will
be no incentive to develop new products
and services.
 Example: Dippin Dots
4-30
Patent Challenge
Dippin' Dots are tiny beads of
ice cream, yoghurt, sherbet and
flavored ice, created by
microbiologist and founder Curt
Jones
10 years after its founding,
Dippin Dots lost the patent for
its product, allowing its
competition to copy the process
Three years later, Dippin Dots
filed for bankruptcy