final report ic of cities

© Wissenskapital ZFI/ECI GmbH

Investing in our common future

REPORT ON IC COACHING IN KNOWCITIES PROJECT

Mart Kivikas, Oberreichenbach, Germany November 2012



Report on IC Coaching of Cities

Background The project “Knowledge Cities in the Atlantic Arch - Know-cities”, funded by Interreg IVb Atlantic Area Programme 2007-2013, is the result of a long reflection process about agreed strategies and cooperation processes in the new world scenery of the knowledge economy1. The aim of the project is to carry out an innovative methodology for the impulse and to facilitate the access and transition to the knowledge economy, as a mean to facilitate the transnational cooperation in common matters all linked to the sustainable urban development as an attractive and urban marketing factor for the middle sized Atlantic cities.

The strategy to achieve this aim is planned through the development, the experimentation and the validation of quality models and managing methodologies of knowledge, all applied to the local and transnational fields to improve the competitiveness of the middle sized cities which excellence plans are based in the urban sustainable development.

One of these models is the Intellectual Capital Statement – Made in Europe, which has its origin from the Wissenbilanz –Made In Germany, initiated from the German Ministry of Economics in 2004.

Intellectual Capital Statement The definition of IC in this coaching process is based on the work with the European Commission (www.incas-europe.org) and the German Ministry of Economics and Technology (www.akwissensbilanz.org). The IC Statement (hereafter referred to as ICS) defines and measures organisational success factors (BS) that are complementary to the financial ones. Today the financial numbers are clearly dominating in a decision making progress because they are easier to measure, they are more tangible, whereas IC is intangible and therefore have in indirect, but not less important, impact on an organisational goals.

1 In the financial world usually called Intellecutal Capital



Human Capital (HC) is defined as “what each individual in an organisation brings into the value adding processes”.

Structural Capital (SC) is defined as “what happens between people, how people are connected within the organisation and what remains when they leave at end of the day.”

Relational Capital (RC) is defined as “the relations of the company to external stakeholders”, like customers, suppliers and universities.

The organisation is embedded in the business environment. The vision serves as general guiding principle for major decisions and strategic positioning. Depending on the business strategy, managerial decisions lead to operational measures. These measures serve to improve business processes and the utilisation of Intellectual Capital in those processes.

Business Success (BS) is the operating result, which is achieved through the employment of corporate (intangible) resources in the business processes. Business success comprises tangible (quantitative goals) and intangibles (qualitative goals).

Approach Four of the cities2 decided to take use of the IC model as a base for the IC coaching with Fomento San Sebastian taking the leading role. Each of these cities was visited for at least two days for the data gathering and to present a preliminary analysis.

Since San Sebastian was the first city being coached, it was decided to assess the strategic goals (BS) (table 1) and to decide on a set of IC factors (table 2) to be used in all four cities. With this approach, time is being saved and benchmarking is possible. However, with such a tight time schedule, there is a risk that specific organisational issues may be not analysed properly.

2 They were San Sebastian/Donostia, Letterkenny (Donegal), Seville and Dos Hermanas.



Strategic (Business) Goals (BG) Definition To drive Innovation and Economic Development in the region

Support companies with filing and protecting patents, trademarks and other intellectual property matters. Facilitating framework to connect research and development between entrepreneurs, universities, technology or innovation parks, clusters, incubators, companies and investors.

To secure Funding For companies in: Phase I - New ones, existing less than one year. Phase II – To support the building of basic structures like administration & controlling, office, business and marketing plans. Phase III – To support growth and to build a market reputation. Build relations to customers and business angels (investors). Secure funding and perspectives for founders and managers of the venture. Phase IV – Divest and make sure that part of the financial value creation stays in the region.

To find and define Innovation Drivers Not only focus on bottom-up innovation, but also connect to large international corporations, which drive global innovation. Being present at national and international fares and events to connect regional SME to global players and trends.

Table 1 – Strategic Goals (BG)

To develop an IC Statement is a process over a time period. The first step is to find a common language on strategic goals and which non-financial factors are important to reach these goals. The IC Statement - Made in Europe put emphasize on also involving the employees, as well as the management.



The leading city and organisation in this project was taken by Fomento San Sebastian. The reason was an initial interest to IC overall and its position project manager for the whole project.

In order to make any IC coaching possible, a personal relation with those responsible is necessary. IC is about people and leadership and can therefore only be analysed if trust is there between coach and customer. Electronic correspondence is efficient only after this relation has been established. Therefore it was decided, that the four participating cities should be visited at least once and to have enough time to:

1. Confirm the above mentioned goals with the management team. 2. Have a workshop with stakeholders and/or employees to find out

where the organisation stands to meet those goals. In this project, parts of the management team was involved in all cities. San Sebastian also invited some selected employees in the evaluation. Donegal and Seville invited some representatives from major technology and innovation parks to participate in the workshop.

3. To discuss a preliminary analysis made by the IC coach and to discuss management action points.

Code Name Definition HC-1 Professional competence The expertise gained within the organisation or in the

employee’ career: professional training, higher education, training courses and seminars, as well as practical work experiences gained on-the-job.

HC-2

Social competence and ability to change

The ability to get on well with people, communicate and discuss in a constructive manner, nurturing trust-enhancing behaviour in order to enable a comfortable co-operation. Furthermore the learning ability, the self-conscious handling of critique and risks as well as the creativity and flexibility of individual employees.

HC-3

Employee Motivation

The motivation to play a part within the organisation, to take on responsibility, committed to the fulfilment of tasks and the willingness for an open knowledge exchange. For example satisfaction with the working environment, identification with the organisation, sense and participation of achievement. ��

HC-4

Leadership ability

The ability to administrate and motivate people. Develop and communicate strategies and visions and their empathic implementation. Negotiation skills,



assertiveness, consequence and credibility as well as the ability to create a scope of self development.��

SC-1

Internal Co-operation and Knowledge Transfer

The manner how employees, organisational units and different hierarchy levels exchange information and co-operate together. The focused knowledge transfer among employees and between generations.��

SC-6

Corporate culture

Culture comprises all values and norms, influencing joint interaction, knowledge transfer and the working manner. Compliance to rules, good manners, "Do's and Don'ts" and the handling of failures are important aspects as well.�

RC-8

Entrepreneurs

All kinds of people who would like create new ventures. It could be students, researchers and experienced persons who want to become idependant and make a difference.

RC-9

Micro companies

Companies with less than 5 employees.��

Table 2 – The IC Factors

The participating cities in this project were visited in the time period of September to October 2012, each time for two days. The process of defining strategic goals, moderating the workshops and analysing the outcome of the workshops, were made by the IC coach. The German software “Wissensbilanz”3 was used in order to visualize the results in a proper way. For all of the IC Factors in table 2, the participants were asked of how they assess the quantity (enough to reach the future goals?), the quality (is it good enough to reach our future goals?) and is management doing enough to keep those levels? (the systematic).

After a from the IC coach prepared impact analysis, an IC Management Portfolio (sample see picture 1) is being presented.

3 A download (free and in German) is possible under www.akwissensbilanz.org.



Picture 1 – The IC Management Portfolio

In this portfolio the strength and weaknesses of an organisations’ IC is visualized. In this prototype, management action points are to be found in the upper left corner. The higher up the factor is, the more important it is to reach the strategic goals as we in this project have defined in table 1 above. In this (test) case, “leadership ability” and “internal cooperation and knowledge transfer” are important factors but not to well assessed. Therefore management intervention in this area has a likelihood to have a high pay off, compared to the other IC factors in the portfolio. How to improve these factors is the goal of point three above, to discuss this with the responsible management and to decide on further actions.



Results of the first Analysis4

Donostia – San Sebastian

The Basque region is one of the most prosperous in Spain. The reasons are many, among others:

1. A strong cultural identification to the region from the people. This culture promotes education and close and long term relation between employers and employees (HC). Because of its history, a lot of people from the region were forced to emigrate, especially to North and South America. This “diaspora” is today most useful to build international business relations (HC and RC)

2. Historically a very high industrialisation, especially in the Bilbao region. Therefore strong in the automotive industry today (SC and RC).

3. Donostia – San Sebastian early become a trade centre and resort for upper class visitors. The film festival each year has become one of the mayor events outside the US (HC and RC).

4. Good infrastructure and a geographic closeness France and rest of Spain (SC).

5. Excellent climate for wine and food industry (SC)

Although a very strong economic progress the last 20 years, some problems have become evident in the overall turmoil in the Spanish economy since 2009.

The life-time-employment culture is no longer being followed from a lot of employers. Especially for younger talents this has led to insecurity about the future and the demographic trend is therefore negative. This “spirit” of eternal growth and job security has taken a blow, which negatively affects investments and the willing to start new and own ventures.

Fomento San Sebastian has seen this trend and has tried to promote entrepreneurship and start-ups to stop this negative trend. When before 2008 it was very easy to get funding and a job, this has changed dramatically the last 4 In order to make an IC analysis, quantitative information is necessary. The cities provided this before the coaching was started. Very helpful was also the information provided within this very same project.



years. From being “spoiled” with credit and work, angst about the future has taken over and the problem of finding entrepreneurs is still very high. Therefore it is understandable why Fomento San Sebastian has focused finding and education young professionals to start companies as well as today having four clusters; audiovisual (2002), renewable energy (2002), surfing sector (2007) ͒and assistive technologies (2004).

The IC analysis shows, that the structures of Fomento San Sebastian is well adapted to regional needs and competencies. However, it has shown, that working on a micro company level is not enough to meet the goals of innovation and funding. In order to stay competitive today, much more funding is needed for growth and to focus on building entrepreneurial skills is not enough to start a financially successful venture. The analysis also supported the idea of being more project management focused, which means the combination of knowledge is more important than the knowledge each department has on their own. However, this acquires different internal leadership skills, away from administrating the infrastructure and knowledge and more into adapting this into real value for the companies. More “pull” from what a good business idea needs and away from “pushing” knowledge and people into a rather unknown business venture.

The recommendations to raise IC were:

1. Promote a project management organisation. Such a change always must start from the top, which must be clearly addressed and supported before being implemented (HC). Skills must be more focused on how to find and gather information from all of the Fomento organisation and to motivate staff that may belong to other departments than you own. This initiative could also improve the linking between R&D institutions to SMEs and Micro companies and helps them being more innovative. The region is not lacking ideas. The problem is that to few of them actually get to market and use their commercial potential.

2. Find connections to Business Angels and Clusters outside the Basque region (RC). The European Investment Fund (EIF) initiative to focus on business angels directly and not funds could become very supportive to reach the goals. Not only funding may be available, but also business know how and international connections.

3. To provide a list of participating companies sorted after size and growth opportunities. This “coming stars” should then be promoted explicitly,



also with funding (SC–>RC). A matrix has been developed for the four clusters (see table 3).

Phase I Phase II Phase III Entrepreneurs Micro Companies SME Cluster I Audiovisual Name? Name Ltd.? Name Ltd.? Cluster II Renewable Name? Name Ltd.? Name Ltd.? Energy Cluster III Assistive Name? Name Ltd.? Name Ltd.? Technologies Cluster IV Surfing Name? Name Ltd.? Name Ltd.?

Table 3 – the Matrix

4. Have on overview of how the training of entrepreneurs actually meets its goals (HC->SC). Entrepreneurship and how to lead people should be integrated at an early stage also on universities and in academia. Todays graduate are really not at all prepared to what it takes to become successful in building there own business. It is difficult to change the attitude towards entrepreneurial risks when there has been no background neither from family nor education. Also the tax system should be adjusted to promote risk taking instead of waiting for governmental support to create jobs.

5. Use IC controlling as a coaching tool to help micro companies become profitable and move along their business cycle (HC->SC->RC). If only the focus is on turnover and profit, no venture will be possible because of its



ROI5 of five to seven years. 6. The linking between R&D institutions to SMEs and Micro companies for

helping them being more innovative could be improved. There is a feeling that good ideas still not really get to the market as they deserve.

Letterkenny – Donegal Donegal is a county on NW Ireland with Letterkenny being its commercial and administrative centre. The Donegal County Enterprise Board, DCEB, is a relatively small company with five employees with the aim to promote growth and innovation in the region. The region could show adequate economic figures the last decades due to major foreign investments in IT, textiles and of course the gigantic building and construction boom since the beginning of this century. Competitive advantages are language skills and lower cost of labour (HC) compared to other parts of Ireland and Europe. However, Letterkenny also shows what may happen to a region too much dependant on foreign investors and with debt- financed building. The IC of Donegal may not have been very high compared to urban areas, but since the cost of living were lower, the area have become an attractive region to live and work in. Due to the total stop of building and construction, the unemployment rate has raised sharply the last couple of years and has become the major political issue. Attempts have been made to stimulate growth with micro funding for very small companies, attract more students and investments in local universities and technology parks and also a closer connection to neighbouring Northern Ireland. However, these measures are focusing too much on input (push) but miss the point of supporting growth outside the small region as well a clear customer value (pull). The recommendations to raise IC were:

1. To work more closely with the micro companies. DCEB could manage administrative routines like payroll, taxes and CRM6 (HC->SC).

5 Return on Investment 6 Customer Relations Management



2. Find connections to Business Angels and Clusters outside the region and Ireland (RC). The European Investment Fund (EIF) initiative to focus on business angels directly and not funds could become very supportive to reach the goals. Not only funding may be available, but also business know how and international connections.

3. To provide a list of participating companies sorted after size and growth opportunities. This “coming stars” should then be promoted explicitly, also with funding (SC–>RC) (see table 3 above, but with no division into clusters necessary).

4. Continue the initiative to attract “sons- and daughters” of Donegal back to region. Not only as tourists, but as high skilled labour with know how from foreign, especially US, countries (HC & RC).

Seville - Andalusia

Seville has been one of the success cases of good EU economic policy since Spain joined the EU in 1986. This means top infrastructure, many universities7 and R&D parks and the settlement of an aerospace cluster including EADS defence arm. However, there has been no real development of mid-sized companies and therefore the region has become very dependant upon EU funding and industrial policy. Since the almost collapse of the local municipal budgets in Spain as a consequence of the liquidity squeeze, it was decided to integrate all activities to promote innovation and regional growth (including the partner in this project, Seville Global) under the realm of the city. At the moment of the visit to make the IC coaching, the future of most the employees were not clear because no organisational decision had been made. This decision is still pending.

The coaching activities on how to make better use of the IC within the companies as well as in the region came to the following conclusions:

1. It was decided to prove the possibility to change the overall strategic goals to above (see picture one). With these new goals it is more likely to meet the overall goals of more employment and a higher value creation in the regional industry (BG).

7 University of Seville with more than 60.000 students among others.



2. Good connections to EU funding and innovation programs, and to European business angels should be intensified in order to find direct funding to SME and industrial know how and experience (RC). The EIF initiative should be considered (see above).

3. Seville Global should coordinate its activities with all other actors in the Andalusia region RC->SC). In this case a clear responsibility is needed with acceptance from the regional partners. Looking at size and capacity, this role should be overtaken from Seville Global in its new form integrated into the city council of Seville.

4. Make a matrix (see table 3 above) as on overview of SME in the region, clustered into four business sectors. Tourism, retail and wholesale are not included in this phase due to its relatively low value adding and due to the decision to focus on key areas in which Andalusia has an historical strong track record (HC->SC->RC). The focus should be on aerospace, engineering, high value tourism and entertainment and educational services8.

5. There is a need to strengthen the professional competencies in financial and funding issues, provided to the customers of Seville Global. The focus on companies with more than ten employees requires some different skills than coaching start-ups (HC).

Dos Hermanas - Andalusia

Dos Hermanas is the biggest satellite city of the metropolis region of Seville with about 100.000 inhabitants. It has very successfully found a niche of good quality of living, especially for families, not too far away from the regional centre of Andalusia, Seville. Due to good infrastructure, it only takes about 15 minutes by train to Seville and less than an hour to the airport. The Dos Hermanas Economic Development Office team is very small and flexible, being a part of the city municipal. The city will have one of the most modern Technology park, build in a recreation area at the very centre of the city.

Interviews and preparations were made with the whole team and it was clear, that the close cooperation with Seville Global had been successful and both organisations should continue keep a strategic dialogue. 8 This is a recommendation only. In the case of San Sebastian and Donegal, the matrix was confirmed by the participants.



With this background, following decision were made:

1. To adjust the goals under table 1 (BG). 2. Good connections to EU funding and innovation programs, and to

European business angels should be intensified in order to find direct funding to SME and industrial know how (RC). The EIF initiative should be considered (see above).

3. Dos Hermanas Economic Development Office should coordinate its activities with Seville Global and other actors in the Andalusia region to optimize the mix of local, regional and national economic action (SC & RC).

4. Make a matrix as on overview of SME in the region, clustered into four business sectors, olive oil, ecological agriculture, engineering and aerospace. Tourism, retail and wholesale were not included in this phase due to its relatively low Value Adding. Due to historical reasons, it was decided to take a special focus on olive oil and how to refurbish this raw material more in the region and to curb cooperation, especially by purchasing, between the many rather small local actors (HC->SC).

5. Dos Hermanas Economic Development Office needs a Director (face-to-face regarding customers and investors) to represent outside as well as within the city council of Dos Hermanas (SC & RC).

Overall Comments

It seems that all four had the same objectives at the time of starting their activities around ten years ago - to promote entrepreneurship and the establishment of micro companies. The outcome has not been as expected. All four name the lack of finding suitable individuals in their regions to able to start a venture. Different reasons were mentioned such as:

• Used to life time employment • No social acceptance to start a new venture • Wrong state financial incitements to start a new venture • Few chances to become successful • Lack of „best cases“ • No funding after the „micro“ level has been achieved

Although the problems are alike in the cities, they are all on different levels. A



share of knowledge could give immediate areas of improvement in:

• How do our programs for entrepreneurs look like? How do we measure the success of this?

• What kind of funding is available and in what criteria? • Do we have any success stories to share? • What does our due diligence look like before we decide to step in? • What impact do different taxing systems have on entrepreneurs and

micro companies? What impact on SME and Business Angels? • How do we integrate policy makers and local politicians? • How do we in a structured way improve the communication between

R&D institutions to SMEs and Micro companies?

With these questions and the following discussion between the cities, immediate steps of improvement can be made with low costs. There is no city being best in all areas, so this is a clear win-win situation for all participants.

Best Practices on how to curb IC.

Case 1 – Focusing on regional competencies and know-how:

In Germany, the most profitable companies are the ones who have found a niche, where barriers of entries are high and not attractive enough for the international players. This in combination with regionally developed know-how, it could be forestry in the Black-forest or automotive in Bavaria with its highways and free speed, combines two dimensions which are difficult to copy.

In the case of Fomento San Sebastian, the focus on audiovisual (and surfing) has clearly been a success story and have contributed to the excellent reputation the city has in these very specific areas. It will be very difficult for other cities to catch up on this and since those areas are niches, they also have high barriers of introduce.

Learning’s: Focus on niches where you and your people can perform better than other regions. These niches could be historically achieved (olive oil in Dos Hermanas), through good economic policy (aerospace in Seville) or climate



(surfing in Donostia - San Sebastian).

Case 2 – Close cooperation with Stakeholders:

In Letterkenny Donegal, there are very short ways between politicians, universities, experts, SME and Mr. Tunney at DCEB. Therefore an upcoming problem can sooner be recognized and an implementation of new policy can be faster implemented.

Learning’s: Entrepreneurs and Business Angels/Investors want to work with people with clear responsibilities and not with anonymous organisations and bureaucracy. They recognize the time it takes to become a decision from the region and its political bodies. A business opportunity usually does not exist to long on a competitive market, therefore speed and flexibility are prerequisites for successful regional innovations. Politics makes the difference today and is therefore obliged to send the right signals to entrepreneurs and future investors9. Uncertainty in this field is devastating.

Case 3 – Coordination of different Technology- and Innovation parks:

Clearly in all cases this coordination is excellent. Important is not only to focus on the own city, but to check neighbouring regions to avoid investments with same focus10. Cases are San Sebastian with Bilbao and Letterkenny with Londonderry. The close cooperation with Dos Hermanas and Seville Global has also raised the efficiency and both complement one another.

Learning’s: The cities must look also on the development outside their direct responsibility. An understanding of real innovation drivers is therefore very important and cannot be delegated to SME due to their lack of resources and focus on operations.

Case 4 – Company Matrix

The objective of all participating regional development entities is to help companies getting started and therefore creating employment in the region or city. Business success is very difficult to explain academically. Testing, luck and time-to-market are usually the most important factors. Therefore you need to find companies how may be at the right market with the right idea. 9 Especially regarding business angels who invest their „own“ money. 10 Called „crowding out“ in theory



The matrix as presented in table 3 is one step to have these on the map at all. The most interesting issue and a base for sharing between the cities is to learn how an entrepreneur went from phase I into phase II and how a micro company went from phase II to phase III. This sharing is mostly very appreciated between companies and this should be initiated and moderated from the regional development agencies. The likelihood of companies from different regions sharing thoughts and experiences has actually shown to be higher than “to open up your books” to your neighbours.

Reflections on how to curb economic growth and innovation based on Intellectual Capital (IC). In 2000 the Lisbon agenda11 agreed on various initiatives to stimulate economic growth within the European Union member states. The goals were in 2010 to have a higher GDP per capita than the US and to become „the most innovating“ region in the world. Various programs were founded to help SME12 to get funding for growth and innovation as well as supporting programs for start-ups and entrepreneurship. As being involved in various governmental initiatives since 2003 in Germany and the European Commission as an expert on Intellectual Capital13, I think it is time to draw a balance on what we have reached so far and to provide guidance on how we can further proceed:

11 European Commission 2010 12 SME – Small and Midsized companies. Usually defined as companies having up to 250 employees (EU). In Germany up to 400 employees. 13 As founder of the German Wissensbilanz, www.akwissensbilanz.org, and Intellectual Capital – Made in Europe, www.incas-europe.org. Expert in RICARDIS, Reporting Intellectual Capital to augment Research, Development and Innovation in SMEs, report to the Commission of the High Level Expert Group and the project “Knowledge Cities in the Atlantic Arch - Know-cities”, funded by Interreg IVb Atlantic Area Programme 2007-2013.



On Intellectual Capital Reporting (or Intangible Assets based Management) Around 1.000 SME have made a Wissensbilanz14 in Germany15. With the Fraunhofer Academy in Munich, moderators or consultants are being educated for a fee and some of them are today successfully working as coaches in change management. The model Fraunhofer is running for dissemination is close to the EFQM16 model. With the “Intellectual Capital – Made in Europe” project, the German „Wissensbilanz“ was implemented in five other European countries17 with the major success being the development of a „quick-test on IC“ sponsored by the Warsaw Stock Exchange in 2008. These results may look all right at a glance, but still have not changed the behaviour on the financial markets. Quantitative factors still play an overwhelming role when it comes to analysing companies or even states. Today even more focus is placed on short-term gains and there is reluctance for longer investment horizons. In times of uncertainty, the financial actors are not prepared to take more risks and there seems to be a fixed concentration on existing players18, following the (contra to IC) philosophy of shareholder value. This means that local competence in Europe is not considered as a competitive advantage since most of the investments go into high-tech or internet ventures copying, rather than inventing yourself, ideas from the US rather than inventing self-made innovation. Also the funding by the European Commission has been more on copying ideas from outside Europe rather than investing in regional core competencies. The possibilities offered by the IC Statement to visualize different local competencies and to make customer value out of it has still not been really exhausted. It seems that European initiatives to create sustainable value still

14 German for Intellcctual Capital Statement (or report) 15 Fraunhofer study 2010 16 European Federation on Quality Management, Brussels. 17 Poland, Spain, France, Slovenia and Germany. 18 Lead by US Private Equity and US Venture Capital



lack enough confidence in performing something different from mainstream ideas.

On IC Statement and Management Reporting In 2009 the German Federal Ministry of Economics started a project to integrate the „Wissensbilanz“ into the Management Report.19 As a useful tool for auditors they made SME aware of operational risks covered by the „Wissensbilanz“. The SME in Germany are sceptical about making this a legal request for external reporting. They see IC as the basis for reaching their strategic goals and do not want to report this to their competitors. However, as a report to improve internal efficiency and to improve communication to external stakeholder (on a voluntary basis), we can confirm the same positive response as mentioned under „Wissensbilanz“ in general. These checklists help to improve the communication and understanding between the auditors, companies and stakeholders. It may be a base for financial rating more adapted to European and German needs.

On Intellectual Property Rights Although heavily promoted by different countries or EU bodies, the European SME do not really see the necessity to protect their outcome through patents or the like. The reason for this is the character of IP rights. In Germany, SME focus has been to deliver high quality products to German international players20. As long as this has been successful, there has been no need to protect any intangibles. However, as the globalization has become dominant, they have become aware of the risks of not protecting their products or 19 Wissensbilanz als Element der Lageberichterstattung „Transferprojekt zur Umsetzung für KMUs“. The project consists of expert on international accounting standards, IC and leading auditing firms. Deliveries end of 2012 will be a checklist for SME and auditors focusing on financial risks and how IC can reduce this uncertainty. The „Lagebericht“ was introduced 1931 in Germany in the Weimarer Republik on order to show the public how state money was invested in firms in the realm of the great depression. 20 After the WW II all German patents were taken over from the Americans, so the German SME had to focus on having a direct relation to the customers, not really seeing any strategic relevance of protecting their IC. Major players are BASF, Siemens, BMW etc.



services. Very few SME in Germany are aware of the fact, that, their IP is strategically very important.

On IC of Cities Most communities in Europe are heavily indebted and perspectives being gloomy due to negative demographic trends and the economic outlook. Therefore it is important to define how the triple helix should work. Neither communities, academia or „Wirtschaft“ can work alone. They are all dependant on one another and this work should be managed and coordinated. Work has been done on this in Germany21 and within the realm of the Atlantic program22 and it appears that the communities must assume the responsibility to coordinate this strategic issue. The reason is that academia in Europe hast the reputation of being too far away from SME needs and have „a life of their own“. The companies are struggling with an economy in downturn and global acting ones are no longer in the hands of local families or investors but usually belong to international funds or investors with few connections to the region.

On Economic Policy The goals of the European Commission in 2000 have not been reached. Europe’s competitors have shown how important the role of state policy is to curb industry and employment. The US still attracts the „brains“ and is leading in financial services and trade, giving them a dominant position in investment allocation and funding. China dominates production and has a clear strategy to curb domestic industry and consumer demand. Together with Russia, it is clear that the US and China have a clear political and industrial agenda on how to support their industry to gain market shares and therefore creating jobs and tax income. These nations very well understand the necessity to combine research (with a political IP protection agenda), „Wirtschaft“ and politics to achieve a strong position on the global markets. For Europe, no such a strategy23 exists, although it is necessary if Europe wants to maintain its high living standard. 21 Stadt Kempten and the project under note five. 22 See note five 23 Or even contrary, regarding the open up of EU market to foreign investors, without reciprocity from China, Russia or the US.



Conclusion Sustainable welfare is created by companies bringing value to customers who are prepared to pay the expenses. A company can only achieve this if the right intellectual capital factors (or intangible assets) are provided and promoted by the society. Financial capital does not make the difference, because it is global and not unique. With the Wissensbilanz/ICS (IAbM) we have the facts and data needed to make good decisions based on what is realistic, on a regional, national basis. The question is who has the competencies and ability to earn this leadership?

Oberreichenbach November 2012/mk

final report ic of cities

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