Preparing
for Conversations with Karl-Erik Sveiby
Why Measure
Intangibles? To Learn or to Control?
 Introduction
We are honored to
have Karl-Erik Sveiby as guest moderator for the AOK
STAR SERIES for the month of November, 2001.
Working Life
- an Unlearning Experience
Karl-Erik Sveiby
is principal of his own consulting company, Sveiby Knowledge Associates, in Brisbane,
Australia, and professor in Knowledge Management at the Swedish
School of Economics and Business Administration in Helsinki (Hanken).
He was formerly
Executive Chairman and co-owner of Ekonomi+Teknik örlagF,
one of Scandinavia's biggest publishing companies in the trade
press and business press sector. Among the publications are Sweden's
most prestigious business weekly ärsvärldenAff and
the country's only technical weekly Ny Teknik. In 1994 he and
his partner sold the company and Karl-Erik formed his own consultancy
around the concept of The Knowledge Organization.
He has researched
management of knowledge and knowledge organizations since the
early 1980s, which makes him a veteran in the rapidly emerging
field of Knowledge Management. He has published several books
on the subject, the first in 1986. You find a list further down.
Having been a manager in a knowledge-based business himself,
his approach is practical and hands-on, rather than theoretical.
He does not believe much in lectures as a means of transferring
knowledge, so he develops tools for people to apply and experiment
with. Perhaps the STAR SERIES is like that - not a lecture, but
a place for interactive discovery.
An example of Karl-Erik's
more sophisticated tools is Tango, the world's first business
simulation of the Knowledge Organisation, that he developed with
Klas Mellander, and Celemi; and, Tangonet - the online version.
Karl-Erik says his
working life has been a journey of unlearning. "My first
job was as an auditor, unlearning what I had learnt about accounting
in the university. It took two years 1972- 1974 and I also learned
that I was not fit to be an auditor. It took me six years as
a manager in Unilever to unlearn the accountant experience."
In 1979 he joined
the ärsvärldenAff Group as Partner and member of the
management team. "It was something of a culture shock,"
Karl-Erik says, "so I needed fifteen years to unlearn my
experience at Unilever. It was during this time I 'discovered'
the Knowledge Organisation. Over the years I held various executive
positions within the Group and its subsidiaries; both managerial
and editorial."
During that period
he was co-founder and editor of Sweden's first management magazine,
Ledarskap, and Sweden's first newsletter covering the
consulting industries, ärldenKonsultv, in which he supported
Swedish managers unlearning what the American management gurus
tried to teach.
Then he and his
partners sold the company that had by then grown into 160 people
and he became a consultant to knowledge organizations and professor
in KM in Helsinki (Hanken). He continues his lifetime passion
for "unlearning."
Karl-Erik and his
wife Kati Laine-Sveiby, Doctor in Ethnology and his daughter
Karolina live in Australia. Karolina is busy in her new career
as a drama teacher in Australia and Kati and Karl-Erik now share
their time between Sweden and Australia.
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Published Books
- öretagetKunskapsf, ("The Knowhow Company"
co-auth. Anders Risling), Liber 1986. Awarded "Best Management
Book" in Sweden 1986). Available in Danish, Norwegian &
Finnish translations. The first book in the world on "knowledge
organisations". Still in print.
- Managing Knowhow, Bloomsbury 1987, w. Tom
Lloyd. Out of print. Available in Italian, German and French
translations. Managing
KnowHow
is available as 10 pages download digest in English.
- Den
Osynliga äkningenBalansr Ledarskap 1989,
w. "Konradgruppen". Outlines the first theory of measuring
Intangibles. Out of print but the Swedish original book is available
for download and also in an English translation as a PDF-file.
- Kunskapsledning (Knowledge Management"),
ärsvärldenAff 1990. World's first book on "Knowledge
Management". (Awarded "Best Management Book" in
Sweden 1990). Out of print but available as a download in Swedish.
ängligTillg åp svenska! Available in Finnish translation.
- Chef i kreativ
ömilj
(Manager in Creative Environments), Sv. Dagbladet 1991
- ödetKunskapsfl ("The Flow of Knowledge")
Sv. Dagbladet 1994). (Awarded Special Prize 1995). Available
in Estonian translation.
- The Knowledge
Organisation Introduction,
Celemi 1994
- Kreativitet
och Makt. (Creativity
and Power) Rikspolisstyrelsen 1994
- Towards a Knowledge
Perspective on Organisation. PhD
Thesis Stockholm University 1994. World's first dissertation
using epistemology to interpret a business case.
- Kunskap är
Makt (Knowledge
is Power), Stockholm University Research Series 1994.
- The
New Organizational Wealth: Managing and Measuring Knowledge-Based
Assets
Berrett-Koehler
San Francisco 1997. Available in Dutch, German, Portuguese, French,
Spanish and Korean translations. In 2001 also in Chinese and
Hungarian languages.
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Clients
ABB, Switzerland/Sweden;
Arthur Andersen, USA; BHP Australia; Celemi, Sweden; Cap Gemini,
Sweden; China Light and Power HongKong; CSIRO Research, Australia;
Cultor, Finland; Deloitte, Touche & Tohmatsu; Ericsson, Sweden;
Ernst & Young, Sweden; F-secure, Finland; Fuji Xerox, Japan;
Gadens Lawyers, Australia; Hewlett Packard USA; IBM Europe; Infosys,
India; Intel, USA; LendLease Australia; Minter Ellison Lawyers,
Australia; Multimedia Development Corp Malaysia; Morgan &
Banks Australia; Motorola USA; Mobile Telephone Network (MTN),
South Africa; National Air & Space Agency NASA, USA; National
Air Intelligence Command USA; National Australia Bank; National
Mutual Australia; Oracle, USA; PricewaterhouseCoopers; Siemens
Germany; Skandia Insurance Sweden; Steelcase USA; Volvo AB.
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Background information
on discussion topics
To help us prepare
for his two-week visit as guest moderator of the AOK STAR SERIES,
in which he intends to explore the question "Why Measure
Intangibles; To Learn or to Control?," Karl-Erik Sveiby
has directed us to three articles.
The first was written
in February, 1998. In it he remembers his childhood in Sweden
where a natural spring furnished drinking water for his family.
The wellspring was a limitless resource that continues to produce
a valuable family asset to this day.
Karl-Erik uses this
metaphor to describe the unlimited resource of knowledge. "The
visible surface is the explicit knowledge, the deep dark dynamic
constantly renewing pool beneath is the tacit. The visible surface
of the water, explicit knowledge, is a very small proportion
of the total - maybe one percent . . . ."
He goes on to consider
how the water engineer would measure this resource - how much
water there is in the pond and how it develops over a year. The
economist would measure the commercial value of the wellspring.
Karl-Erik would measure its long-term potential.
Which measure makes
sense for KM? See what Karl-Erik Sveiby decides.
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- Methods
for Measuring Intangible Assets
This article was
first published in January 2001 and updated in April. This paper
provides a brief overview of 21 approaches of proposed methods
and theories for measuring Intangible Assets which have been
advanced over the last few years.
The approaches fall
into at least four categories of measurement:
Direct Intellectual
Capital Methods (DIC).
Estimate the $-value of intangible assets by identifying its
various components. Once these components are identified, they
can be directly evaluated, either individually or as an aggregated
coefficient.
Market Capitalization
Methods (MCM).
Calculate the difference between a company's market capitalization
and its stockholders' equity as the value of its intellectual
capital or intangible assets.
Return on Assets
Methods (ROA). Average
pre-tax earnings of a company for a period of time are divided
by the average tangible assets of the company. The result is
a company ROA that is then compared with its industry average.
The difference is multiplied by the company's average tangible
assets to calculate an average annual earning from the Intangibles.
Dividing the above average earnings by the company's average
cost of capital or an interest rate, one can derive an estimate
of the value of its intangible assets or intellectual capital.
Scorecard Methods
(SC). The
various components of intangible assets or intellectual capital
are identified and indicators and indices are generated and reported
in scorecards or as graphs. SC methods are similar to DIS methods,
expect that no estimate is made of the $-value of the Intangible
assets. A composite index may or may not be produced.
Karl-Erik
goes on to analyze each approach.
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- Measuring
Intangibles and Intellectual Capital An Emerging First
Standard
In this analysis,
written in August, 1998, Karl-Erik looks at stock prices as one
of the indications of an emerging new Knowledge Economy.
The parallel development
of theories and practice in Sweden and in the US have now laid
the ground for a first standard for accounting in the Knowledge
Economy, featuring three categories of Intangible Assets plus
a fourth category, financial assets. The Swedish concepts have
been tested in practice in some cases by up ten years. The practical
results suggest that it is useful to measure Intangible assets
and that it is possible for managers to create shareholder value,
without relying primarily on the traditional financial indicators.
Here is the index
from this paper:
- Have we entered
a "New Economy" with "invisible" values?
- The Commercial
Value of Knowledge
- Make the Invisible
Visible
- Investment in Intangible
Assets
- Why Non-Financial
Measures?
- The Intangible
Assets Monitor Framework
- WM-data: Monitoring
Intangible Assets for Financial Success
- An Emerging Standard
- A Possible Standard
Approach to Measuring and Presenting Intangible Assets
- Wanted - New Systems
for A New Economy
- References
The lesson from this article is goes beyond measuring
to how to make the invisible visible.
Please enjoy these
articles and let them stimulate your thoughts and questions in
preparation for the Conversations with Karl-Erik Sveiby. You
will be learning from one of the foremost scholars on the measurement
of intangible assets, but his knowledge reaches into every aspect
of intellectual asset management.
The series runs
from November 19 to 30, 2001.
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