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Projects & Why they Matter:

Capturing Intangible Value Lea Symonds June 2007

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Fundamental Message What applies at the

macro level

also applies at the

micro level

The Intangibles Challenge NEW YORK ; Jan 29, 2004 According to Accenture global survey “Half of senior executives believe that managing intangible assets is one of the top three management issues facing their companies today.”

Fundamental question

What is an intangible?

What are Intangibles ?

Anything in an organisation that generates value that you cannot drop on your foot!” The Economist

Name the Intangibles

About Intangibles

     Aren’t articulated in numbers (but make up what is behind them) Are ambiguous Easy to miss the opportunity they offer Long to build/quick to lose Need gifted and insightful leadership to realise the benefits on behalf of the business

Fundamental question

What measures are currently being used?

Balanced Scorecard   Kaplin & Norton’s balanced scorecard is a useful performance measurement framework well known to business.

4 Dimensions are: -Financial -Customer -Internal -Innovation & Learning

Balanced Scorecard

 Financial – return on capital, return on sales, sales growth, return on assets etc ( desired outcome )  Customer Perspective – satisfaction, growth of customer base, service delivery ( project driver )  Internal Process Perspective – order taking, fulfilment & delivery, client information ( project driver )  Innovation & Learning – performance mgt, career development, knowledge capture ( intangible )

The invisible balance sheet     Karl- Erik Sveiby talks of an invisible balance sheet for measuring intangible assets Internal structure belongs here too.

: patents concepts, models, computer & admin systems. Created by employees and “owned” by the organisation. Culture or esprit d’corps External structure : relationships, stakeholder/ customer satisfaction, strategic partnerships, brand names, trademarks, reputation, image. Individual competence : skills, education experience, values, leadership and social skills.

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Question: Did Nokia really “lose” US $86 billion worth of intangible assets (or intellectual capital) in a year?

Answer: Share price is a

perception about future

– will fluctuate with general economy

Fundamental Message “I don’t believe any numbers I haven’t already massaged myself!” Gerhard Cerny CIO of Siemens Business Services

Intangible Assets acknowledgement Karl-Erik Sveiby External Structure Indicators Indicators of Growth

Organic Growth.

Internal Structure Indicators Indicators of Growth

Investment in IT Investments in Internal Structure

Competence Indicators Indicators of Growth

Competence Index Number of Years in the Profession.

Level of Education.

Competence Turnover.

Indicators of Renewal/Innovation

Image Enhancing Customers Sales to new customers

Indicators of Efficiency/Utilisation

Profitability per Customer. Sales per Customer.

Win/Loss Index.

Indicators of Risk/Stability

Satisfied Customers Index.

Proportion of Big Customers.

Age Structure.

Devoted Customers Ratio.

Frequency of Repeat Orders.

Indicators of Renewal/Innovation

Organisation Enhancing Customers. Proportion of new products/services New processes implemented

Indicators of Efficiency/Utilisation

Proportion of Support Staff

Indicators of Risk/Stability

Values/Attitudes Index Age of the organization.

Support Staff Turnover.

Rookie Ratio.

Seniority.

Indicators of Renewal/Innovation

Competence-Enhancing Customers.

Training and Education Costs.

Diversity

Indicators of Efficiency/Utilisation

Proportion of Professionals.

Leverage Effect.

Value Added per Employee.

Value Added per Professional.

Profit per Employee.

Profit per Professional.

Indicators of Risk/Stability

Professionals Turnover.

Relative Pay.

Seniority

Fundamental Message In a knowledge economy the tangibles & the “intangibles” are all about people as the organisation’s sole profit generators…  peoples’ actions as revenue creators  peoples’ knowledge & competence as wealth creators  people who create & maintain value

How is this relevant to projects ?

Fundamental Questions  What is this project’s value to the business?

 How should we measure value….

and what should we know about “intangibles” ?

Fundamental Message Value is defined by receiver more than the giver

Projects & organisational value Project deliverables (tangibles)are only a start. What intangibles projects offer?

do

Where to find intangibles in the project space.

Name the Intangibles  Build Organisational Capability competence ) ( innovation, new ways to do business, more complex projects extend  Competitiveness change ) ( speed to market,speed to   Support Brand & Reputation Goodwill ( customer/stakeholder )  Investor Confidence ( flagship projects )  Support Strategic Intent  Strategic Alliances/Partnerships

What other intangibles?

At your table group identify 2 more.

Name the Intangibles    Talent ( incubator, extender, attractor ) Knowledge Management ( transfer knowledge from experienced to the inexperienced ) Career Building ( talent spotters, networks )    Employee Development & Extension building, mentoring, coaching ) ( skills Leader Development Translate Organisation Values into Practice  Change Agents ( experience in facilitating change )

Name the Intangibles     Workforce Recruitment & Retention Incentives, Rewards & Recognition Diversity ( Generational mix) Culture ( Organisation & Team )   Collaborative Cross Business Synergies Intellectual Capital  Relationship Building & Networks (External & Internal)

Warning Dysfunctional projects will fail to capture the value of the intangibles!

How can you use this?

The elevator speech …

The elevator speech…

Our project is on track to deliver identified tangible benefits. You might also be interested to know how else it is supporting strategic intent and building organisational capability in areas such as talent management, career planning and brand enhancement……. Yeah!!!

Business Realities - People       Skills shortages Mobile workforce – recruiting & retaining – meeting career needs Diversity in workforce – Gen X Y & BB Markets – Global vs traditional Where work is done – alternate locations/ virtual work sites Labour Cost - “cheap” labour source options

Useful quotes

Quote

Many firms have intangible assets – knowledge, relationships, reputations and people. However, only some firms succeed in converting these assets into intangible capital. Intangible assets only create value when captured as intellectual property, networks, brand, and talent .

These four intangibles are the scarce resources of the intangible economy. The Intangible Economy and Australia By John Daley Australian Journal of Management, Vol. 26, Special Issue, August 2001, © The Australian Graduate School of Management

Intangibles “The effectiveness of your intangible assets (knowledge, relationships, motivation and speed), determines organisational performance, retention, returns, loyalty, service and satisfaction.

Underperforming organisations have underperforming intangible assets.

” Dr Ken Standfield, Chairman International Intangible Management Standards Institute.

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References

 Karl-Erik Sveiby: The Invisible Balance Sheet  Murphy & Simon: The Intangible benefits valuation in ERP Projects, Florida International University

A Final Word…

You know

….

That absenteeism, sick leave, accidents, all reduce productivity, revenue, and earnings as well as result in cost wastage - but what is the financial value? That when people do not share their knowledge or have low-quality knowledge, that productivity, revenue, and earnings are lost as well as costs being wasted - but what is the financial value?

That ineffective collaboration results in lost productivity, revenue, and earnings as well as wasted costs - but what is the financial value?

That knowledge is valuable, but what is the contribution of knowledge to revenue, costs, and earnings?

That collaboration is valuable, but what is the contribution of collaboration to revenue, costs, and earnings?

That organizational culture is valuable, but what is the contribution of culture to revenue, costs, and earnings?

Its hard to put a financial value on staff engagement or disengagement.

Its hard to determine the costs and benefits associated with strategic execution the project related operational activities that either create or prevent strategic success.