Posts Tagged ‘stakeholder capital’

T3-1: Showing a Concrete Benefit of KM to the Knowledge Worker

September 28, 2009

A tendency when KM is introduced to an organization for the first time is that knowledge workers tend to look at KM as “extra work.” If this is how they view KM, regular work will win over any extra work, particularly if the periodic personnel evaluation system measures his/her performance only in regular work.

I use this simple slide to convey to individual knowledge workers a benefit KM can give them: they can finish their work faster. Most knowledge workers like this. This slide mentions five typical factors that affect speed of completion of work.

KM benefit for individual K worker

I use the above figure to drive home some points to clarify the meaning of intellectual capital and its three recognized components: human capital, structural capital and stakeholder capital.

  1. I include the third factor “support from boss and teammates” to show that effective action (the goal of KM) is affected not only by knowledge assets or cognitive factors, but also by motivational or affective factors. Therefore, these cannot be ignored in actual KM practice.
  2. The third factor is actually internal relationship capital, in contrast to stakeholder capital which is external relationship capital. I use this example to show that stakeholder capital – the usual third component of intellectual capital – is externally looking and miss out on an important internal factor that also affects productivity and effective action. Why do you think companies spend money on team building workshops?
  3. Notice, too, that the fourth factor “decision rules are clear” is both within the purview of quality management as well as knowledge management. I use this fourth factor to illustrate the fact that KM and QM overlap.
  4. The first, second and fourth factors are examples of structural capital while the last factor is an example of human capital.

You can use the above chart and ideas; if you do, please acknowledge me as its source. Thanks!

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Emerging Indigo Practices

May 28, 2009

From previous blogs, I tried to show that major world problems stem from our lack of knowledge in the indigo quadrant (lower left quadrant in the diagram below):

groupings-with-label1

When two long-term societal megatrends are combined, we discover (see “Q27- Combining Megatrends #1 and #2: the next societal innovations”) that the next significant societal innovations are expected in the indigo quadrant. In my contribution to the book “The Future of Innovation” (to be published by Gower in the autumn of 2009), entitled “The Future of Innovation Must Be Sought in Non-Technological Spheres” I wrote, in part:

    “Mankind has demonstrated that its ability to technologically innovate is far greater than its ability to anticipate, learn and solve the negative social consequences of those innovations…

    Innovation in the future will be driven by common threats confronting mankind. Ironically, most of those threats are man-made. Innovation will proceed in the general direction of preventing and resolving conflicts, governance at all levels, advancing human rights and human security, cross-border agreements in preventing and fighting crime and terrorism, eliminating social exclusions and other social ills that lead to poverty, generating consensus on environmental problems and solutions, and value creation.”

In the specific area of KM, this means that tools, technologies and practices for effectively managing relationship capital would be important. Below is a list of such KM tools (reproduced from a previous blog post: “Practical Hint #17: Tools for Managing Relationship Capital”):

  • Social Network Analysis (SNA), sociogram or stakeholder analysis: Maps and analyzes frequencies of communication, teammate preferences, perceived closeness of interpersonal relationships, degree of agreement/disagreement, etc. between people in a group, organization or network
  • Team building and team learning exercises
  • Setting up a cross-functional KM Team
  • Customer relations management, business development, account management, or business partnership management: Management of relationships with customers, suppliers, partners, etc.
  • Customer clubs and e-communities: strengthens a company’s communication and relationship with customers, allows customers to participate in product improvement or R&D, makes some customers feel special by receiving advanced news or product prototypes, etc.
  • “Customer ba”: Part of the task of some Japanese customer relations managers is to create an affirmative, trusting and creative “relationship space” between himself and the customer.
  • MBTI, Belvin types and other psychological profiling tests: Assessing potential for complementarity and good mix of thinking and working styles among prospective team members
  • Various tools in brand management and marketing which enhance reputation and credibility of the company
  • Various HR/OD tools to enhance employee loyalty and morale: recognitions, honors and awards; policies that allow appropriate decision-making to employees; CEOs that listen e.g. allow direct emails from employees; facilities that show the company cares e.g. day-care facilities within company premises for young children of mother-employees, etc.
  • Group exercise in mind mapping: Allows members to see and better understand the assumptions of other fellow members
  • Professional and personal profiles of staff, Expertise Directory, company White Pages: Facilitates staff in getting to know each other and each other’s skills, expertise and talents
  • Face-to-face meetings and SN functionalities among e-community or e-CoP members: Mutual trust in a virtual CoP or e-community is best nurtured through face-to-face meetings, and through appropriate social network functionalities in the website of the CoP
  • Visioning exercise: Co-creating and contributing to an organization’s vision tend to enhance buy-in and engagement of members in programs, projects and activities aimed at the vision of the organization.
  • Negotiation: collaborative/integrative negotiation training, skills development (thanks to Peter Spence), and related tools in conflict management
  • Leadership (thanks to Peter Spence): one that knows and appreciates many of the above.

Accordingly, I have decided that the next blog series will be on “Indigo Learning Practices.” We will call it the L Series.

Cheers!

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From Corporate Disregard to Corporate Embrace of Stakeholder Capital to Socially-Embedded Corporations

April 11, 2009

I flew to Singapore to read an invited paper on Monday April 13, 2009 for the Fifth International Research Workshop on Asian Business sponsored by the Singapore Management University. My paper is entitled “Corporate Social Responsibility and Emergent Models in Management of Stakeholder Capital in Philippine Conglomerates.” That’s a mouthful, so let me share with you the gist in bullet points:

  • The 10 richest Filipinos are mostly Chinese-Filipinos with their own conglomerates and corporate social responsibility (CSR) programs.
  • They are politically and economically influential; and the paper examines indications whether and how they are developmentally influential.
  • Philippine corporations’ attitudes to stakeholder capital (the external component of relationship capital) have been evolving, from disregard in the 1970s to being committed in 2000s.
  • Corporate attention to their stakeholders was basically government-driven in the earlier periods, but the growing CSR practice in the Philippines has been internally-driven; now, corporations better recognize stakeholder capital and its contribution to their value creation.
  • One of the Chinese-Filipino patriarchs, John Gokongwei Jr. recently announced he will donate half of his personal wealth to various charities.
  • CSR is a “retrofit” which leaves the fundamental corporate structure untouched.
  • New models seem to be emerging which may be harbingers of new corporate models driven by socially-responsible goals.
  • The new corporate characteristics are: more networking and partnerships with civil society, bridging leaderships, more innovative and socially-responsible investment (SRI), greater community engagement and reinvention of global supply chains towards “triple bottom line.” Corporations are less and less the enclaves they were.
  • I call this emergent model the socially-embedded corporation.

I end my paper with a teaser question.

If, as many observe, (a) the global economic crisis is a “wake up call” to flaws in the US economic model, and (b) the global economic center of gravity has been moving towards East Asia, then the question is: what, if any, are the emergent economic models in East Asia, and in China in particular?

Click here to get: a copy of my paper (pre-publication draft) and a copy of my PowerPoint presentation.

Cheers!

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Q22- $8.3 Trillion: Cost to Americans of Disinvestment in Trust?

April 1, 2009

My last two blog posts were about the importance of trust. Let me use financial data to further illustrate this.

Below is a graphical way of disaggregating the market value of a corporation.

market-value1

The average market-to-book ratio has hovered around 5 since 2000 (I use Yahoo Finance data across more than 200 industry groups). This means that book value contributes only about 20% of market value. Or, intangibles (the pink area in the diagram) — which are mostly the scope of knowledge management — account for about 80% of market value. In other words, intangibles (what accountants almost always do not measure) contribute more than tangibles (what accountants measure) to value creation! This fact is one of the powerful arguments for KM. I have stressed this in my previous blogs (for example, check out “F2- Intangibles: More Essential for Value Creation”)

As of yesterday, March 30, 2009, according to Yahoo Finance, the average market-to-book ratio went down to about 2. Contribution of intangibles to market values went down from 80% to about 50%.

What was lost during the last few months of the global financial crisis? Book value or the tangible assets were basically the same. The skills of employees were basically the same. The processes and structures, the vision and strategy, and the leadership in the corporation hardly change in a few months.

What changed was the trust of the public, and specifically of the buyers and sellers of stocks. Their expections of a corporation’s future income had decreased. What was lost was how stockholders and stock buyers perceive a corporation: its reputation, brand, trust (the text in red in the diagram). They have ceased to trust the corporation. In KM language, the corporation lost stakeholder capital.

According to some estimates, Americans and others who own stocks lost $8.3 trillion as a result of the Wall Street meltdown. Its repercussions around the world resulted to total global losses of at least $50 trillion, according to the Asian Development Bank.

And all because people withdrew their trust!

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Metacapital

March 6, 2009

Have you heard of the term “positive psychological capital”? There is a discourse among a group of researchers and practitioners who find a need to use this term. My Indonesian counterpart, Prof. Dr. Jann Hidajat Tjakraatmadja uses this term. He also uses the term “integrity capital.”

Other discourses revolve around other concepts such as spiritual capital, emotional capital, cultural capital, social network capital, political capital, and so on. I have written about social capital in this blog. There is a wider discourse and broader usage of the term social capital, and much wider on human capital.

The meanings of these terms are still evolving, but the common theme across these concepts is that these forms of “X capital” are creators of value. For example, Claridge spent three years examining the meanings of the term “social capital” in more than 500 peer-reviewed articles. He concluded that the common theme across them is “social relations that have productive benefits.”

To complicate the picture, researchers and practitioners from the life sciences are beginning to use terms such as biological capital, natural capital, ecological capital, biodiversity capital, environmental capital, etc. Ecologists clearly distinguish between “natural capital” and the annual stream of “natural income” that the former produces. A mango tree is natural capital, and the mango fruits it produces yearly constitute natural income. Again, the common theme across these concepts is that these forms of capital are such because they are creators of value. They produce annual income streams, just like the more traditional factors of production, namely, land, labor and capital.

Knowledge management researchers and practitioners added more terms: intellectual capital, structural capital (or process capital), relationship capital (or stakeholder capital or customer capital). The consistent underlying meaning among KM researchers and practitioners is that these “things” are all creators of value. They produce wealth. Customer capital contributes to a corporation’s annual income stream just as much as a mango tree produces an annual income stream for the farmer-owner.

It is becoming clear that the factors of production is not just land, labor and capital. There are many more factors that can create wealth other than the traditional ones taught in Economics 101. Psychologists, biologists, ecologists, sociologists, etc. are showing us these many other forms of capital.

Last March 2008, at the conference on “Knowledge Architectures for Development” sponsored by the Singapore Management University, we proposed the cross-disciplinal term “metacapital” to encompass all the various forms of capital. Here is a slide in my PowerPoint presentation:

metacapital

What do you think?

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Q17- Losses in Community Assets: the Mother is Suckling(?) from the Baby!

March 4, 2009

In Q16 I quoted Gregory Bateson,

    “The major problems in the world are the result of the difference between the way nature works and the way man thinks.”

Accordingly, the next six blog posts Q17 to Q22 will apply the expanded KM framework to several major world problems:

    — Underdevelopment of communities and countries
    — Corruption
    — Threat of nuclear war
    — Sustainable development in local communities
    — Israel versus Hamas and Hezbollah
    — Global financial crisis.

Before we address our first problem of underdevelopment of communities and countries, let us apply the expanded KM framework to communities:

Assets of Communities

Assets of Communities

At the conference on “Knowledge Architectures for Development” sponsored by the Singapore Management University last March 2008, we presented a paper on “Knowledge for Poverty Alleviation” or KPA framework. This framework uses the expanded KM framework. We showed that successful anti-poverty projects can be explained better using this framework. We also showed how the KPA framework can be used in looking at the flow of assets to/from a typical rural town in the Philippines:

  • The brightest secondary school graduates, their valedictorians and salutatorians, migrate to Manila (loss of human capital);
  • Mineral and timber resources are harvested mostly by Manila-based or companies based in developed countries (loss of natural capital) but little of the economic proceeds return back to the community. The Regalian Doctrine (state ownership of public natural resources) continues to support and perpetuate this sucking of natural resources from small rural towns to Manila or to developed countries abroad;
  • A small fraction of taxes collected by the national government returns back to the community in terms of public services and infrastructures (drain in fiscal resources);
  • Local branches of Manila-based banks are more deposit-takers than business lenders (net flow of private savings to Manila);
  • Scientists and researchers from outside come in to study the geological, biological, sociological, cultural and other assets of the community, and publish the results outside or bring the geological, biological and cultural specimens for personal or commercial uses outside the community often without the knowledge and permission of local people (biopiracy, siphoning of sociological knowledge, stealing cultural artifacts, geological exploration without FPIC or “free, prior and informed consent”).
  • Manila residents who are more knowledgeable of government procedures obtain titles/patents to local land ahead of unwitting local people who had been in traditional possession of land for decades (“land grabbing”).

All these are happening all the time and in most rural Philippine communities, yet most people hardly notice it! (because they do not have the mental model, the expanded KM framework, which enables seeing). How fantastic and unbelievable that so many people cannot see!

Galtung is right. Manila is draining assets from rural Philippine communities! The mother is suckling from the baby!

What do you think?

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Practical Exercise #15: Ingredients of Effective Group Action

February 28, 2009

Let us go through an exercise of constructing a mental model. To ensure that we follow the wisdom of Gregory Bateson (see previous blog post by clicking here: Q16), we will proceed in this manner: start with data from personal experiences -> discern pattern from the data -> construct mental model including concepts. This scientific methodology is called “grounded theory” because you don’t start at “Cloud 9” but you instead start from the “ground” of experience in the real world.

From your own experiences, what are the ingredients of effective group action? (the question comes from the definition of “knowledge”; click here to see blog post F5)

Get a paper and pencil and please add to my list below:

    physical energy
    access to needed information
    support from outside
    teamwork
    financial resources
    tools
    empowering policies
    innovativeness
    mental model
    trust on one another
    technology
    information
    shared concepts
    skills
    common goal
    mutual support
    good procedure
    equipment
    cash and incentives
    good system
    willingness
    conducive workplace

    (Please add to the list from your experiences.)

Next, let us cluster them together. Do you agree with this grouping? Are the members in each group similar enough to warrant the grouping? Do the groups make sense to you?

groupings6

Then, we place labels on the clusters or groups:

groupings-with-label1

VOILA! We now have CCLFI’s expanded KM framework! The entries in green are motivational factors that cut across the tangible and the three intangible forms (see blog post D11):

expanded-km-model

Recall:

  • In F5 we learned that “knowledge” is capacity for effective action (I had written on this in the Overview chapter of a KM book published by the Asian Productivity Organization; click HERE).
  • We saw that “know-what” (=knowledge) is not enough; it must be combined with “willing-to” (=motivation); I reported this in a KM conference last year at Kuala Lumpur (click HERE).
  • In F1 we saw that the expanded KM framework overlaps with the intellectual capital framework (Click here to download paper to be published by EADI/IKM).
  • We learned that intellectual capital has three (mostly intangible) components: human, structural and stakeholder capital, but we also saw that “stakeholder capital” and “customer capital” are too narrow, and must be broadened to “relationship capital” that also includes relationships within the organization (reported in our Singapore paper and also in my Overview chapter of the APO book).

A mental model is double-edged: a good one enables you to see the world better, but a bad one is like a blindfold or blinder that allows you to see only a distorted slice of the world.

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Q11- Social Capital: Peace Creation = Value Creation?

January 27, 2009

You have probably read or heard of these terms (the first two are KM terms): stakeholder capital, customer capital, brand, old boy network, goodwill, corruption network, business development officer, social capital, customer relations management, etc. The same concept underlies these words. Speaking technically, these terms revolve around the common fact that relationships can and do create value. Speaking bluntly, one can make money out of relationships. We know from our own experiences that relationship is a form of asset. The generic term underlying all these is Relationship Capital.

Below is how we can break down the concept of Relationship Capital (this is a refinement of the earlier breakdown I introduced in a previous blog post, “D12- Relationship Capital versus Stakeholder Capital versus Customer Capital”)

branches-of-relationship-capital

The red text are negatives or opposites: when these are present, then they can and do destroy value. Another way of saying this is: trust in a relationship can create value, but mistrust can destroy value. Stephen M. R. Covey in his book “The Speed of Trust: The One Thing That Changes Everything” is saying that when trust is high, speed of work performance and transactions goes up, and business costs go down. Francis Fukuyama discovered that wealthy countries are also societies characterized by high social trust (see his book “Trust: The Social Virtues and The Creation of Prosperity”).

Trust and goodwill are among the most important intangible assets for good business. The same thing is true for world peace: building trust creates peace and opportunities for value creation. Losing trust can lead to conflict, war and value destruction.

It is a simple equation: building trust and peace = creating value.

Don’t you think so?

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D12- Relationship Capital versus Stakeholder Capital versus Customer Capital

December 16, 2008

Why do corporations spend money on team building exercises year after year? Why is teamwork part of the values adopted by many corporations? The answer, using KM language, is that they want to build internal social capital which they know enhances productivity. Silo thinking and worse, factionalism, impair organizational performance.

Therefore, the third category of intellectual capital, commonly refered to as stakeholder capital (or what Sveiby calls “external structure” in his Intangible Assets Monitor and what Edvinsson calls “customer capital” in his Scandia Framework), must be expanded to include internal relationships within the organization.

The expanded third category is called “Relationship Capital”. Customer capital is only a part of stakeholder capital which is a part of relationship capital:

branches-of-relationship-capital

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