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Transforming Knowledge: Transforming Knowledge: The 21 Century Wealth DriverThe 21 Century Wealth Driver

Dr. Charles M. SavageKnowledge Era Enterprises, Inc.

““Shaping our Future …”Shaping our Future …”Cable & Wireless Optus

Melbourne, October 28, 1999

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Knowledge, A Map Please?Knowledge, A Map Please?

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Historical ErasHistorical Eras

Agricultural Industrial Knowledge

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Sharing of logs

Superstition: Unlucky to go out twice with the same crew

Known split of profits from the trip

Whaling Industry … Whaling Industry … Prototype of Knowledge Intense IndustryPrototype of Knowledge Intense Industry

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Knowledge & EnergyKnowledge & Energy

AspirationsAspirations

CapabilitiesCapabilities

AspirationsAspirations

CapabilitiesCapabilities

• • •

• • •

• • •

• • •

Person A Person B

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Sources of Wealth:Sources of Wealth:

Agricultural EraAgricultural Era

LaborHands

KnowledgeHeads

Capital: Money & Machines

Land & Resources

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Sources of Wealth:Sources of Wealth:

Industrial EraIndustrial Era

LaborHands

KnowledgeHeads

Capital: Money & Machines

Land & Resources

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Sources of Wealth:Sources of Wealth:

Knowledge EraKnowledge Era

LaborHands

KnowledgeHeads

Capital: Money & Machines

Land & Resources

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Sources of Wealth:Sources of Wealth:

LaborHands

KnowledgeHeads

Capital: Money & Machines

Land & Resources

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Sources of Wealth:Sources of Wealth:

LaborHands

KnowledgeHeads

Capital: Money & Machines

Land & Resources

Economy ofScarcity

Economy ofAbundance

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New Vortex of Understanding New Vortex of Understanding about about Knowledge EraKnowledge Era

Organizational LearningOrganizational Learning& Self-Organizing& Self-Organizing

The WebThe Web

Intellectual CapitalIntellectual CapitalCore CompetenciesCore Competencies

InnovationInnovation

Knowledge ManagementKnowledge Management

Emotional IntelligenceEmotional Intelligence

DynamicStable

Com

ple

xS

imp

le

Pace of Change

Kno

wle

dge

Req

uire

men

ts

Nolan & Norton, 1988

VisionVisionStrategyStrategyCultureCultureValuesValues

Balanced Balanced ScorecardScorecard

CustomersCustomers

FinanceFinance

Learning & Learning & DevelopmentDevelopment

ProcessesProcesses

What investments in our customers bring them excellentresults?

How can we better organize our knowledge?

How do we leverage the valueof our customers’ knowledge?

How can we use ours and ourcustomers’ knowledge moreeffectively?

Innovating with our customers!

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Inventory Turns = Cost of Goods Sold for YearAverage Inventory for Year

Knowledge Turns =Ability to Build Upon other’s Capabilities*

Level of Distrust

*Other’s Capabilities = Individuals, Functions, Lines of Business (LOBs), Suppliers, Customers and Customers’ Customers

Knowledge TurnsKnowledge Turns

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0.1 0.5 1 5 10

Finding Faults Finding Strengths

Trust Distrust

==

==

=

=

=

Individuals:

Functions/Departments:

Lines ofBusiness:

=

=

Suppliers/Partners:

Customers:

Customers’Customers:

5

0.510

Knowledge Turns Knowledge Turns (2)(2)

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Knowledge Turns: ResultsKnowledge Turns: Results

012345678

Indiv

idual

Funct

ion

LO

B

Supplier

Cust

om

er

C o

f C

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Knowledge Turns: ResultsKnowledge Turns: Results

0102030405060708090

100

Indiv

idual

Funct

ion

LO

B

Supplier

Cust

om

er

C o

f C

Poss

ible

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Industrial Era: Industrial Era: Conceptual ConfinementConceptual Confinement

Help!!Help!!

I find little trust in the organization

Others are always looking for my weaknesses

My intellect & emotions are not valued

Relationships are not important

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Knowledge Era: Knowledge Era: “Production” through “Production” through DialogueDialogue

Values (trust) are key

I must discover others’ capabilities & aspira- tions to build upon

We excel in teaming our competencies to seize opportunities

Learning enhances earnings

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Tangible Assets Visible Finance

Cash

AR

PPE

External

Internal

PersonalCompetence

Short-term Debt

Loans

Stock Equity

Invisible Equity

Obligation

Karl-Erik Sveiby

Customer CapitalCustomer Capital

Structural CapitalStructural Capital

Human CapitalHuman Capital

Key Elements of Knowledge Key Elements of Knowledge CapitalCapital

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Financial Focus

ProcessFocus

CustomerFocus Human Focus

Renewal & Development Focus

IC Framework at SkandiaIC Framework at Skandia

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Skandia Navigator ModelSkandia Navigator Model

FinancialCapital

HumanCapital

CustomerCapital

InnovationCapital

ProcessCapital

OrganizationCapital

StructuralCapital

IntellectualCapital

Market Value

Industrial EraIndustrial Era

Agricultural EraAgricultural Era

Adam SmithAdam SmithJames WattJames Watt

Henri FayolHenri FayolFrederick W. TaylorFrederick W. Taylor

Industrial EraIndustrial Era

Agricultural EraAgricultural Era

Industrial EraIndustrial Era

Agricultural EraAgricultural Era

A

B C Culture of MistrustCulture of Devaluing

Industrial EraIndustrial Era

Knowledge EraKnowledge Era

Agricultural EraAgricultural Era

Master Servant RelationshipMaster Servant Relationship

With One AnotherWith One Another

Employer-EmployeeEmployer-EmployeeConceptConcept ““+/—”+/—”

““X”X”

Industrial EraIndustrial Era

Knowledge EraKnowledge Era

Agricultural EraAgricultural Era

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Supply ChainSupply Chain

Supplier Company Customer

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Supply Chain - extendedSupply Chain - extended

Customers’Customers

Supplier Company Customers

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Customers’ Needs and Customers’ Needs and AspirationsAspirations

Problems & Needs

Aspirations & Opportunities

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Supply Chain: Needs & Supply Chain: Needs & AspirationsAspirations

Supplier Company CustomersCustomers’Customers

Needs Aspirations

Transactions Opportunities

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Valuing Cluster: Interactive Valuing Cluster: Interactive ViewView

Supplier Company CustomersCustomers’Customers

Company Customers

Suppliers/Partners

Customers’ Customers

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Skandia AFS Skandia AFS

Working the Whole SystemWorking the Whole System

Skandia

End Users

Funds Managers

BrokersWholesaleAnnuities

ManageFunds

SellAnnuities

Invest inFuture

Select Events

UncertainFuture

Study

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84

Skandia AFS Skandia AFS

Working the Whole SystemWorking the Whole System

Skandia

End Users

Funds Managers

Brokers2400 85,000

1.5 Million

AspirationsAspirations

CapabilitiesCapabilities

Customers’Customers’

CustomersCustomers

CustomeCustomersrs

CompanyCompany

Knowledge Era Knowledge Era Enterprising and Enterprising and Dynamic TeamingDynamic Teaming

AspirationsAspirations

AspirationsAspirations

AspirationsAspirations

CapabilitiesCapabilities

CapabilitiesCapabilities

CapabilitiesCapabilities Suppliers/Suppliers/PartnersPartners

“x”

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Transactions

Product Solutions

Business SolutionsMass Customization

PartneringDynamic Teaming,

Virtual Enterprising &Knowledge Networking

StructuralCapital

Human Capital

Customer/SupplierCapital

Evolving Business ModelEvolving Business Model

DynamicStable

Com

ple

xS

imp

le

Pace of Change

Kno

wle

dge

Req

uire

men

ts

Nolan & Norton, 1988

Your Company in 2001?

+ / —

“ X “

Processes

Finance

Learning

Customers

Imaginative

Systemic(Context Giving)

Operational

InterpersonalInter-Organiza-tional

Values Subtracting Value 7

Industrial Era

Division &

Subdivsion

of Labor

Distrust &

Devaluing

Follow

Instructions

SWOT

Processes

Finance

Learning

Customers

Imaginative

Systemic(Context Giving)

Values Multiplying Value

Knowledge Era

Operational

InterpersonalInter-Organiza-tional

Benchmarking

& Benchbreaking

Dialoguing &

Innovating with

Customers

Teaming &

Alliancing

Redefing Rules &

Seizing Opportunities

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Competitive Power of Competitive Power of Intellectual CapitalIntellectual Capital Intelligence and knowledge with unique

insights your competitor can’t envision Innovative products with superlative value

your competitor can’t create Innovative processes with extraordinary

speed and efficiency your competitor can’t match

High integrity relationships with superior collaboration and loyalty your competitor can’t achieve

Global Creativity

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Summary: 5 Keys for Summary: 5 Keys for Knowledge Era EnterprisingKnowledge Era Enterprising

1. Build upon energy & strengths through a culture of trust (Clear Values and Guiding Principles)

2. Seize opportunities through strategic dialogue with suppliers & customers (Dynamic Teaming)

3. Team capabilities and aspirations to grow revenue (Create Self-Teaming Knowledge Era Enterprising Culture)

4. Supported by dynamic “Communities of Leaders”5. And leverage the power of the Web

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Enabling Knowledge Era Enabling Knowledge Era EnterprisingEnterprising

The Key:

The Culture of Values & Valuing makes Dynamic Teaming Possible

Web: kee-inc.com