1. The Management of Knowledge Creation and Innovation Through an Intellectual Capital Lens
Prof. Göran Roos

2. Context
Interest in innovation and R&D performance has been rising on the back of a wide range of successful products and services

3. Remember Innovation is not only based on natural sciences

4. What do companies think about innovation?

5. What is the real situation?
Booz Allen Hamilton Global Innovation 1,000 Study 2006:
Innovation can lead to higher performance, but the process isn’t automatic and it does not necessarily require above average levels of investment. The most successful companies combine an integrated process and a supportive culture to create a sustainable competitive advantage
Money simply cannot buy effective innovation.
Patents generally don’t drive profits
Less than 10% of companies are High-Leverage Innovators and distinguish themselves not by the money they spend, but in having a very good innovation management system
Innovation Network Survey, fall 2004 [same result from 2005], new innovation leaders in medium to large companies:
71% said they had no metrics for their position
60% of them have innovation as part of their mission/job objectives
67% are allowed to work on “new” concepts for their company (“new” is not defined)
68% have no well defined innovation process within their company
54% have no working definition of innovation

6. Research vs Innovation – What is the relationship?

7. EXPANDING THE INNOVATION HORIZON
Innovation can be ignited by business and technology integration.
Technology can enable and drive innovation. But to truly capitalize on technology’s potential and unleash an organization’s creative energy, technology know-how must be combined with its business and marketing insights. CEOs view consistent business and technology integration as crucial to innovation
Source: Dr.V.S.R.Krishnaiah, Sr.Technical Director, NIC

8. Business Model Innovation is key
A Value Proposition is an overall view of a company's bundle of products and services that are of value to the customer.
The Target Customer is a segment of customers a company wants to offer value to.
A Distribution Channel is a means of getting in touch with the customer.
The Relationship describes the kind of link a company establishes between itself and the customer.
The Value Configuration describes the arrangement of activities and resources that are necessary to create value for the customer. Nornally these are expressed in IC-Navigator form and using the (Stabell and Fjeldstad 1998) Value Logics
The identified Resources that can be deployed by the firm to create value including those that form the basis for a competitive advantage
A Partnership is a voluntarily initiated cooperative agreement between two or more companies in order to create value for the customer
The Cost Structure is the representation in money of all the means employed in the business model.
The Revenue Model describes the way a company makes money through a variety of revenue flows.

9. Source: IBM Institute for Business Value analysis
Value Proposition
Truly understand your customers and your customer’s customers [consumers]
Target Customer
Customers are trading both up and down within categories, demanding differentiated value from businesses
Historical Demand
Seeking “good enough” quality at rock-bottom prices when they perceive no differentiated value
Willing to pay large premiums for “new luxury” brands when they deliver differentiated value
Growth
Emerging Demand
Price Positioning
Source: IBM Institute for Business Value analysis

10. What drives the B2B relationship?
Value Proposition
What drives the B2B relationship?
Target Customer
Situational Importance of Different Perceived Value Driver Categories
Perceived Knowledge of Buyer
Importance to Buyer
< Seller
High
Low
≥ Seller
Distinctness 
Mental Proximity
Functionality
Price

11. Value and knowledge distance
Value Proposition
Value and knowledge distance
Target Customer - +
Potential Value
to be extracted
from the relationship
by the supplier
Knowledge
distance
Known by
nobody
everybody
Known by the
Supplier
Known by the
Customer

12. Value Chain Support Activities Primary Inbound logistics Service
Value Configuration
Value Chain
Inbound
logistics
Service
Marketing
&
Sales
Outbound
Operations
Infrastructure
Human Resource Management
Technology development
Procurement
Margin
Support
Activities
Primary
Source: Porter, M.E. 1985: Competitive Advantage; Creating and Sustaining Superior Performance, The Free Press

13. Support Activities Primary Activities Value Shop Infrastructure
Value Configuration
Value Shop
Infrastructure
Support
Activities
Human Resource Management
Technology development
Procurement
Find someone with a problem
Control/Evaluation
Execute
Develop alternative solutions
Acquire the right to address the problem
Co-select with client one solution
Primary
Activities
Source: Stabel, . B., Fjeldstad,Ø. D.: Configuring Value for Competitive Advantage: On chains, shops, and networks, SMJ, Vol 19, No 5, 1998

14. Support Activities Primary Activities Value Network Infrastructure
Value Configuration
Value Network
Support
Activities
Infrastructure
Human Resource Management
Technology development
Procurement
Promote Network
Manage Member Contracts
Service Provisioning
Infrastructure Operation
& Maintenance
Primary
Activities
Source: Stabel, . B., Fjeldstad,Ø. D.: Configuring Value for Competitive Advantage: On chains, shops, and networks, SMJ, Vol 19, No 5, 1998

15. The presence of resources with different behaviour
Owned or Controlled
By the Firm
Owned or Controlled
By the Firm
Owned or Controlled
by the Other Party
Owned or Controlled
By the Firm
Owned or Controlled
By the Employee
Additive
Additive 13 9 3

16. The utilisation of resources with different behaviour
Industrial
Economics
Network
Economics
Knowledge
Economics 13 9 3

17. Examples of Resource Transformations
Resources
Examples of Resource Transformations
HUMAN
ORGANISATIONAL
RELATIONAL
PHYSICAL
MONETARY
ORG.
REL.
Investment
in assets
in building
links
in brands,
image and
systems
Recruitment
training,
conditions
Facilities to
train with
Possible
new products
& know-how
Facilities
build
relationships
Sales of
products
Chance to
build skills in
relationship
handling
Importing IP,
processes,
association
with brands
Use of other
company’s
assets
Relationship
selling,
preferential
deals
Developing
competence
through use
Market
intelligence
Produce By
numbers
Sales of IP,
processes &
knowledge
Knowledge
codification,
new IP
Building &
developing
prototypes
man-hours
In financial
instruments
Systems
generate IP
Networking
Equipment generates products
Training

18. Revenue Logics Effort-based pricing Value-based pricing Profit Sharing
Revenue Model
Revenue Logics
Effort-based pricing
A cost-based (or effort-driven) pricing model
Value-based pricing
A value-based (or perception-driven) pricing model
Profit Sharing
Revenue-sharing contract with primary customers
Licensing
Charging on copyright (the right to use the IP)
Loss Leader-pricing
Creating customer base (for later revenue) or supporting sales of other parts of the product/service offering
Hybrid/Media model
Vendor sells/leases ad space or information [space] based on customer relationship
Channel charging
Vendor charges for carrying information relating to other goods in/on its primary product/offering
Membership fee
Vendor charges for the right to take part in an activity
Negative Working capital
Vendor generates financial returns on the capital held as a consequence of getting paid by its customers before paying its suppliers

19. Innovation does not happen by itself
It is the result of hard work, well planned and executed and is no happening
Innovation is work rather than genius,…and very much a matter of discipline (Peter F Drucker, 1985)

20. Summary Innovation does make a difference at the bottom line
Few companies do it well
There is a difference between research and innovation and especially in their management
Innovation is more than technology
Innovation Management is Key and is facilitated by applying the IC lens
We know how good innovation management looks
It will become even more important in the future