Words

of
Value

Giving
Words to IC

A conversation with Leif Edvinsson, Skandia, and Arne Richtnr, Ericsson Business
Consulting, summarized by Gottfried Grafstrm.

Whats the purpose of this lexicon?

LEIF: Basically, I see it as a signpost, pointing to the next stage in the evolution of our work with intellectual capital and the Skandia IC-Navigator. To give a
language to, and to see the context of IC. More precisely, its meant to invite and
enervate everybody to participate in the exciting process of rethinking the root
values of their business. Its meant to monitor the words we work with, to refine
their accuracy. However, its not an attempt to claim ownership of any definitions.
Everybody will be welcome with their feedback at the web site we are currently
developing, www.ericsson.se/intellectualcapital which is not just an inventory
of terms, but also a prototype workshop and a word clinic for sharpening these
our tools and protecting them against misuse. A sort of combined watchdog
committee and launching pad for future ideas. But since web literacy is still in its
infancy, I believe its also vital to distribute a complementary paper version of that
everchanging web-lexicon i.e. this booklet.
Why is this initiative a joint venture between Skandia and Ericsson? Arent IC measures
usually specific for each organization? And therefore hard to compare?

ARNE: Thats exactly why cross-cultural corporate projects like this are so
essential! Ericsson and Skandia are both knowledge enterprises. We embrace
extended ecosystems of competence, overlapping conventional branches and
boundaries. To navigate our trades safely and successfully into the future, we had
better acquire a new taxonomy of key values. Its no longer enough to construct
networks of scale, in terms of purchasing, marketing and sales. We must also create
networks of scope, exploiting new opportunities through fusion of skills. It takes a
joint vocabulary to share the necessary information. Without that platform, our
dialogues might turn into a mess of monologues. Hence, the needs of Ericsson and
Skandia converge.
Can you describe this next phase of evolution youre entering?

LEIF: Strictly speaking, no. Evolution and innovation are by definition

unpredictable processes. But of course I can give a rough idea of some directions.
So far, we have gained perspective of the IC process and created a basic language
and a couple of tools. Its now one of our ambitions to condense whole aggregates
of indicators into an overall IC index. A sort of weather forecasting approach, to
test alternative strategies against. If you think such an indicator will be too crude
and fuzzy to work with, just remember that IQ, GNP, p/e and other measures we
gladly and frequently use are no less fuzzy. Dont you think Euclidean geometry
can be valid and useful now and then, even though there are no infinite straight
lines or perfect circles in the world?

ARNE: Obviously, IC navigation is still more an art than a science. But its no
abstract, unprofitable game. Just compare the profits of a company that uses all its
assets, to one who exploits only 20-30 % of them that is, mainly the financial
capital. Restricting our focus on cash may weaken the impact of other critical
factors. Cash is just the enabler, the start or the end of the value-creating process.
What if your ambitions start deteriorating into fashionable rhetoric, into new brands of
corporate double talk?

ARNE: Well, I doubt that those who prefer one-upmanship to honest work
will stay in business for very long. Those who prevail will be the people who are
empowered to question accustomed assumptions who think about what they are
doing, and how they are doing it. This calls for a change of perception.
LEIF: And that involves re-examination of some basic things. Traditional
management theories build on two basic assumptions. 1. That systems strive for
equilibrium through negative feedback. 2. That systems are ruled by linear relationships. Increasingly, these assumptions no longer apply. Innovative feedback tends
to make the present marketplace extremely unstable. And the dear old law of
diminishing returns is being replaced by a law of increasing returns. Which means
that any small occurrence might blow out of all proportion. Im afraid that the
competitive realities will have no mercy on those who fail to notice these trends.
ARNE: Precisely. And the global race for markets certainly makes it risky to
lose momentum. At the same time, its also a mistake to panic we are probably
embarking upon a very long voyage of discovery.
What concrete output do you expect to come from your work in the near future?

ARNE: A continuation of the IC-lexicon development, and a shared development of IC-managing/visualization tools. Further refinement of the IC-thinking into
more tangible evidence of the correlations between the use of structural capital
and improved market value. Hopefully, well also find common ways of cultivating
future creative cells throughout the globe.
LEIF: New budgetary and organizational processes. In the wake of Skandias
new competence insurance, we will launch an IC insurance for structural capital.
We are developing IC ratings, sometimes in partnership with others, e.g. Turnit.
We sell Dolphin, a computerized program for IC reporting. Not to mention UNIC,
the universal networking IC setup, serving the business community all over the world.
And so on, to increase value and wealth creation.
Finally, how do you define the word value?

LEIF: An ancient colleague, the Italian economist Ferdinando Galiani, came

up with one early definition already in 1750. He stated that value is a relation
between persons.

Adjusted shareholders equity

Benchmarking

Net asset value after deduction for deferred

A continous process of measuring and

taxes on untaxed reserves and surplus

comparing products, services and processes

values of assets.

with those that are best-in-class; leads to

Asynchronous innovation work

best practice.

Remote software-based interaction allowing

Benchlearning

people to think, experiment, create and

Method based on benchmarking and the

contribute when they are most able (James

related emerging organizational learning,

Brian Quinn).

developed by Bengt Karlf.

Balanced Scorecard (BSC)

Best option

A measurement system that balances

What generates the best outcome in the

financial value and non-financial value. A

future. Relates to valuation of opportunities

balanced scorecard is typically divided into

(future possible operations) (Timothy A.

a number, usually between three and six,

Luehrman).

of focus areas that have been identified as

Best practice

critical for the company. The focus areas

What has generated best outcome in the past.

are populated with indicators that are

Book value

measured. Suitable for communication

Accounting term. Value in the companys

around, and visualization of value creation.

financial accounts. Book value of equity or

The term is coined by Robert S. Kaplan and

of entity (total equity and debt capitalization)

David P. Norton.

or of (individual) assets and/or liabilities.

Balanced Scorecard grid

Business process

A grid used for transforming the companys

Various related activities aimed at creating

strategy into measurable objectives, indicators

value which customers perceive and are

and actions. The corporate strategy is divided

willing to pay for.

into value creating focus areas of the

Calculated intangible value

balanced scorecard. Critical Success Factors

IC assessed as the discounted present value

are identified for strategic objectives within

of the companys excess profitability in

each focus area. Indicators are assigned to

comparison with its business competitors.

critical success factors to map the extent to

Capital employed

which they are achieved. Actions that affect

Net asset value, borrowings for investments

indicators are identified.

in subsidiaries and minority interests.

Capitalization

including professional, social and

Creating financial value out of intangible

commercial ability. Knowledge intentions.

assets/intellectual capital.

Competence alliance

Chief Information Officer (CIO)

A network of individuals/units/companies

Responsible for corporate information

with various competence profiles.

technology development and effective use

Competence database

of information technology within the

A searchable database in which the

organization.

employees competence profiles are stored.

Chief Knowledge Officer (CKO)

Competence insurance

Senior management position with responsi-

A way for the company, in cooperation

bility for the monitoring of the companys

with its employees, to save for long term

knowledge development and strategy.

studies and competence shifts, and to

Cockpit Communicator TM

continuously upgrade its human capital

Ericsson Business Consultings IT-support

whilst at the same time minimizing risk.

for intellectual capital. Trademark owned

Competence Management (CM)

by Ericsson.

Management of the employees professional,

Commercial competence

social and commercial abilities.

Human ability to collaborate with customers

Competence network

and other external partners in value creating

Organized network with a common goal of

constellations.

individual competence development within

Community of interest

a certain area. Activities include sharing of

A virtual or physical gathering place where

information, ideas and experiences as well

people with a common topic of interest can

as a transfer of knowledge to members of

exchange ideas and share knowledge.

the network. The core of the network is the

Community of practice

interpersonal connections.

A basis for collaboration in the execution

Contactivity

of real work, based on a common sense of

A meeting that goes beyond connectivity

purpose and a real need to know what

and creates both contact and meeting of

each other knows. Developed by the

minds leading to activity (Leif Edvinsson).

Institute of Learning.

Core competence

Competence

Competence that is of strategic importance

Encompasses knowledge, will and skill,

for the companys business logic.

Core process

Customer perspective

Value creating processes of strategic impor-

See customer focus.

tance for the companys business logic.

Customer potential

Core structural capital

Relationships with new customers in

Critical structural capital for strategic

established and new markets.

innovation and sustainability.

Customer relationship

Corporate (organizational) memory

Current and potential business relationships

The organizations ability to transform and

with previous and present customers.

add experiences to the structural capital. The

Customer value

ability to recall, remembering what is needed

For the company, value of customer

when it is needed; Animated memory that

relationships; for customers, value of

supports the business processes without

relationships with the company.

stifling the innovation (Bob Johansen).

Customers lost

Critical Success Factor (CSF)

The number of contracts lost during the

See key success factor.

year in relation to the total number of

Culture

assignments on record.

The combined sum of the individual

Dolphin

opinions, shared mindsets, values and

A PC-based information and business

norms (Hubert Saint-Onge). A component

control software system developed by

of organizational capital.

Skandia AFS based on the IC Navigator.

Customer base

Users have the option to choose the focus

Relationships with existing customers in

with which they want to view an operation.

existing markets.

Dolphin also offers simulation

Customer capital

opportunities.

The value of customer base, customer

Economic Value Added (EVA) TM

relationships and customer potential.

Value added that an operation generates

Component of structural capital.

during a certain period after deducting all

Customer focus

costs, including capital costs for all invested

The markets and customers perspectives

or borrowed capital. Trademark owned by

on the business. A group of indicators and

Stern Stewart & Company.

ratios describing the customer base and

Employee perspective

relationships.

See human focus.

Entovation

Flow indicator

Enterprise innovation, a term coined by

An indicator that targets the flow from one

Debra M. Amidon, founder of Entovation

stock value to another.

International, a global, multi-facet, net-

Flows

working community of communities of

Transformation of intellectual capital into

innovation practice.

financial capital and vice versa, and the

Experience database

internal flows of intellectual capital (Intel-

A searchable database in which experiences

lectual Capital Services Ltd).

from projects, assignments, customer

Future earnings capability

contacts, etc. are stored.

Ability to create and capitalize on intellectual

Explicit knowledge

capital.

Explicit knowledge is formal and systematic

Futurizing

and can be easily communicated and shared,

Creating and capitalizing on the future.

in product specifications, scientific formu-

Generating behaviour within 14 seconds by

las or computer programs (Ikujiro Nonaka).

rapid prototyping (Leif Edvinsson).

Explicit knowledge is articulated knowledge

Group ware

the words we speak, the books we read,

Computer applications/software that works

the reports we write, the data we compile

in a group context.

(Hubert Saint-Onge).

Hard asset

Financial capital

See tangible asset.

The value that is shown in the balance sheet.

Hidden asset

See adjusted shareholders equity.

See intangible asset.

Financial focus

Hidden value

A group of indicators and ratios describing

Value that is not shown in the balance

the present financial situation of the company.

sheet but still contributes to the organiza-

Financial perspective

tions value creation, for example knowledge.

See financial focus.

Equivalent to IC. Value not included in

Fishnet organization

market capitalization but inherent in the

Made up of individuals organized in small

companys intellectual assets; Intellectual

temporary, cross-organizational, time-

(capital) potential (Leif Edvinsson).

focused, task-driven groups, usually called

Human capital base value

teams (Bob Johansen).

Discounted present value of employee costs

at market value.
Human capital

The accumulated value of investments in

employee training, competence, and future.
The term focuses on the value of what the
individual can produce; human capital
thus encompasses individual value in an
economic sense (Gary S. Becker). Can be
described as the employees competence,
relationship ability and values. Work on
human capital often focuses on transfor-

10

ming individual into collective competence

nicating this information to interested parties.

and more enduring organizational capital.

It involves measuring the costs incurred by

Human capital index

business firms and other organizations to

An index that indicates employees attitudes

recruit, select, hire, train and develop

regarding competence, motivation, respon-

human assets. It also involves measuring

sibility and authority, cooperation and

the economic value of people to organi-

organizational efficiency.

zations (American Accounting Association).

Human capital potential value

Hyper text organization

Based on value added per employee in

A networked organization that is divided

the unit that is best-in-class internally or

into three layers: 1) knowledge-base layer,

externally on a global basis.

2) business-system layer, and 3) project team

Human capital productivity

layer (as defined by Hirotaka Takeuchi).

Productivity measured only in relation to

IC agility

direct human capital, often expressed as

IC agility is related to both human and

added value in fixed prices per hour worked.

structural capital. For human capital, IC

Shows how much of change in production

agility can e.g. indicate the companys

volume that depends on factors other than

ability to quickly obtain new competencies

the amount of working hours.

in order to meet new market situations. For

Human capital relationship value

structural capital, IC agility can e.g. indicate

Value created in combination with structural

how flexible a certain database is.

capital; the companys total value added;

IC hedging

value added per employee.

An intellectual capital risk strategy to mini-

Human capital value

mize IC volatility. A first step in hedging

Can be expressed as base value, relationship

intellectual capital is to visualize it.

value and potential value.

IC Index TM

Human focus

A trademark owned by Intellectual Capital

The employee perspective. A group of

Services Ltd. A model for showing the

indicators and ratios describing individual

indexed development of each area of

and collective competence and capabilities.

focus/perspective and its consolidation for

Human resource accounting

intellectual capital development purposes.

The process of identifying and measuring

IC indicator

data about human resources and commu-

Indicators expressed as quantitative ratios,

IC Navigator process model

A process in which key success factors, indicators and IC-ratios based on each units
business concept, business position and
aspirations are identified, managed and
developed.
IC phases

Six phases can be identified in IC development and implementation:

1. Missionary, 2. Measurement, 3. Leadership, 4. Technology, 5. Capitalizing, and
tracking the position, direction and velocity

6. Futurizing. (Leif Edvinsson).

of the key success factors of each particular

IC risk

unit of measurement.

The alternative cost of not leveraging and

IC leadership

retaining IC components. The fluctuations

The bridge between human capital, organi-

(volatility) of IC due to either market value

zational capital and customer capital. Creates

(of equity) fluctuations, or loss of inherent

congruence and multiplicative effects between

intellectual capital potential.

strategies, structures, systems and cultures in

IC value scheme

the business, market and operating envi-

A model which illustrates building blocks

ronment in which an organization works.

that together form the foundation of the

Can be described using a leadership index.

companys intellectual capital and its

IC management

relation to market value. Intellectual capital

Management of the companys intellectual

is broken down into human and structural

capital. Often described as managing the

capital, which is further broken down into

effective transformation between human

customer and organizational capital. This is

and structural capital. Can also be seen as

then subdivided into process and innova-

management of intangible value flows

tion capital (Leif Edvinsson).

within the company. The sum of processes

IC volatility

required within an organization to refine

Fluctuations in the (marked-based) value of

and leverage marketable intellectual assets.

intellectual capital.

IC Navigator

Idea group

The Navigator management and reporting

A special group who continuously compiles

model aims to provide a balanced, overall

ideas from the staff.

management perspective of the companys

Imaginary organization

financial as well as its intellectual capital.

An organization which size, via networking

The ratios and indicators of intellectual

and contacts, exceeds what is shown in the

capital are arranged in the Navigator accord-

organizational chart. An organization,

ing to five areas of focus: Financial Focus,

where one company (leader/core com-

Customer Focus, Human Focus, Process

pany) is relying upon and tries to

Focus, and Renewal & Development Focus.

influence development of resources and

Has been developed by Skandia and Leif

capabilities in other companies (allies/net-

Edvinsson.

work partners) (Bo Hedberg).

11

12

Indicator

Innovation assessment

A measurement that visualizes a certain

Valuation of innovation from a current

aspect of the organization that has been

value system.

identified having an impact as a key

Innovation capital

success factor. Indicators are not to be mixed

Renewal strength of a company, expressed

up with objectives, since indicators have the

as intellectual property, i.e., protected

purpose of indicating a certain development

commercial rights, and other intangible

and not to describe a target value.

assets and values, such as knowledge

Information

recipes and business secrets.

Some thirty scientific disciplines use this

Innovation perspective

term, each with own definitions. Information

See renewal and development focus.

can be described as something that either

Intangible asset

reduces the receivers uncertainty or in-

An asset that is not visible in the traditional

creases his or her knowledge. Gaining

balance sheet but still adds value to the

information is a more difficult process in

company. The intellectual capital contains

the second sense than in the first. Here are

intangible assets.

some more specific definitions:

Intellectual ability

1. Technology: Data that have been or can be

A term that represents a unified picture

compiled, processed and presented in a

of physical and human capital potential.

form comprehensive to human beings.

Expressed in the Value Added Intellectual

2. Information theory: A measure of the

Coefficient, VAIC, which indicates the

uncertainty removed by a message.

efficiency of the employed potential of a

3. Marketing communications: The contents

company, financially as well as intellectually.

of a message (Office Productivity).

Developed by Ante Pulic and the Austrian

Information Management (IM)

Team for IC Research.

The process of synthesizing, structuring

Intellectual asset

and making information accessible.

Intangible asset more closely related to

Innovation

brain power.

The capacity to create a new idea or way.

Intellectual Capital (IC)

There are two sorts of innovation: one in

The consolidation of structural capital and

the form of improving already existing

human capital, indicating future earnings

products or services and the other in the

capability. A concept developed by Leif

form of creating totally new products and

Edvinsson.

services. Innovation often includes three

Intellectual Capital Director

stages: invention, translation and commer-

Senior management position with respon-

cialization.

sibility for the companys utilization and

development of intellectual capital. Leif

transformation, and values bases (James

Edvinsson at Skandia was the first appointed

Brian Quinn, Leif Edvinsson).

Intellectual Capital Director.

Intra community

Intellectual capital distinction

Community of interest on the intranet,

Defines the intellectual capital components

where membership is defined and different

that form the basis for the companys future

topics are discussed.

earnings capabilities. The generic compo-

Invention

nents include human capital and structural

Power of inventing or being invented.

capital that can be broken down into

Ingenuity or creativity. Something originating

further detailed distinctions in line with the

in an experiment.

business logic.

IT asset

Intellectual Capital Management (ICM)

The value of hardware, software and net-

Intellectual capital management links knowl-

works.

edge strategy to measurements within an

Key Performance Indicator (KPI)

organization. The organizations underlying

A particular ratio or characteristic used to

intellectual capital classifications and

measure output or outcome.

knowledge flows between human and

Key Success Factor (KSF)

structural capital form the basis for ICM.

Factors that are essential in order to achieve

Intellectual property

the strategic objectives/vision statements.

Intellectual assets that qualify for legal or

Critical value drivers.

commercial protection i.e. patents, trade-

Knowledge

marks, copyrights, and trade secrets.

Information that has value in the inter-

Intellectual property rights

action with human capital. The ability

Protection of intellectual assets such as

people have to use information to solve

patents and trademarks.

complex problems and adapt to change.

Intellectual value added

The individual ability to master the un-

Value added less cost of capital employed

known. The ability to act (Karl-Erik Sveiby).

(Leif Edvinsson).

Knowledge can be classified as explicit or

Intelligent enterprising

tacit (Ikujiro Nonaka).

Characterized by, among other things, a

Knowledge audit

global business perspective and strategic

An assessment of intangible assets perfor-

learning, and encouraging culture to take

mance (Karl-Erik Sveiby).

the step and lift a business to the next

Knowledge caf

development curve. Navigation systems

A metaphor alluding to the fact that knowl-

that complement the financial accounting,

edge workers might not work at the office

knowledge recipes for innovative value

but in an open inviting environment, like a

13

caf. A knowledge recipe for the work-

via interpersonal contacts.

place of tomorrow for knowledge workers.

Knowledge recipe

Knowledge community

Codified and explicit thought-ware, which

An area, for example a network or a forum,

together with hardware and brainware is

where knowledge is easily accessed and

a core factor in a knowledging/network

transferred.

economy; The blueprint in a knowledge

Knowledge economy

society (Paul Romer).

An economy in which knowledge is the

Knowledge sharing

most important input factor. The new

Sharing of information via formal and

economic theory for the knowledge

informal meetings, exchanging documents,

economy is in contrast to the

web-based discussion papers, etc. leads to

conventional economic theory

developed in and for the
knowledge era. It is especially
characterized by the law of
increasing returns (W. Brian
Arthur and Paul Romer).
Knowledge exchange

The new arena on internet for

exchange of knowledge assets.
Knowledge flows

A companys internal and

external flows of knowledge.
Knowledge innovation

14

SM

knowledge growth according to the law of

increasing returns. Exchange of informa-

Creation, evolution, exchange and applica-

tion leading to transfer of knowledge.

tion of new ideas into marketable goods and

Knowledge strategy

services, leading to success of an enterprise,

The organizations strategy for optimizing

the vitality of a nations economy and the

the internal and external knowledge stock

advancement of society (service mark

as well as flows in order to grow

owned by Debra M. Amidon, Entovation

intellectual capital.

International).

Lagging indicator

Knowledge Management (KM)

A measurement that indicates an effect; i.e.

Knowledge management includes

reactive indicator.

managing information (explicit/recorded

Law of increasing returns (marginal utility)

knowledge); managing processes

Intellectual capital is governed most closely

(embedded knowledge); managing people

by the law of increasing returns (marginal

(tacit knowledge); managing innovation

utility), researched by W. Brian Arthur and

(knowledge conversion); and managing

Paul Romer. Intellectual capital value

assets (intellectual capital) (David Skyrme,

increases exponentially the more it is

Nick Willard).

applied and shared.

Knowledge network

Leading indicator

Organized network with the purpose to

Early warning proactive indicators. In a

find information and turn it into knowledge

cause/effect relationship, leading indicators

cause an effect on the lagging indicators. An

Multiplicative effect

indicator can be leading in its nature in one

Leveraging that takes effect in the interaction

situation, but lagging in another.

between human capital and structural capital,

Learning organization

often nourished by IC leadership.

A learning organization is one that enables

Navigation intelligence

frequent knowledge interaction and capi-

The capability to navigate intellectual as

talizes on new knowledge created in these

well as financial capital based on an external

interactions. A learning organization is more

perspective. The focused capability to solve

than an organization that learns. Building

emerging issues that an enterprise has a

a learning organization means changing the

mandate over (Lorentz Lyttkens).

companys culture, structure, processes,

Net asset value

Shareholders equity as per the

balance sheet, deferred tax
liability, surplus value of unit
linked business in force after
deducting tax and unrealized
changes in the value of fixed
income securities.
Net Present Value (NPV)

The sum of all future cash

flows that the investment is
expected to generate disleadership and forms of cooperation. The

counted at an appropriate cost of capital,

term is coined by Peter M. Senge.

net of the initial outlay.

Librarian

Networking Intellectual Community (NIC)

A function that has become necessary in

A global, virtual community gathered around

many knowledge intensive companies with

the exchange of knowledge for increased

vast structural capital. The librarians task is

innovative power (Douglas Englebart).

to collect, synthesize and structure informa-

Organizational capital

tion, and make sure that it is easily accessible.

Systematized and packaged knowledge,

Market Value (MV)

plus systems for leveraging the companys

An approximation of the fair market value

innovative strength and value-creating

of a companys entire debt and equity

organizational capability.

capitalization (Stern Stewart). Most often

Performance management

the market value of equity capital in a

The use of information to help set agreed-

(publicly traded) company.

upon performance goals and objectives,

Market Value Added (MVA)

allocate resources, prioritize projects and

The difference between market value and

activities, align functional projects/activities

invested capital. Sometimes measured as

with strategic goals and business objectives.

market capitalization less adjusted share-

Performance measurement

holders equity. Also corresponds to static

The ongoing process of assessing progress

intellectual capital, excluding expectation

toward achieving predetermined goals and

value.

objectives.

15

16

Process

Real time management

A carefully considered, precisely controlled

Management for real time business.

and constantly improved sequence of steps

Characterized by minimizing response time

or operations leading to a predetermined

to new circumstances and customer

result (Office Productivity).

expectations.

Process capital

Recipe

The combined value of value creating and

See knowledge recipe.

non-value creating processes.

Reengineering

Process focus

A radical redesign of business processes to

The internal excellence perspective. A

achieve improved results. Leeds to best

group of indicators and ratios describing

practice.

productivity and efficiency/effectiveness.

Relationship value

Process management

Human capital assessed according to the

A philosophy and a way to lead and

value it might create in combination with

organize a company. The companys

structural capital.

operations are looked upon as a set of

Renewal and development focus

processes whose purpose is to produce

A group of indicators and ratios describing

goods or services that satisfy customers.

the change and renewal capability to turn

Process perspective

the future into an asset.

See process focus.

Replacement costs

Process-driven organization

Based on a net present value analysis, the

An organization structured so that pro-

cost for replacing an asset by making a

cesses will work effectively. This kind of

new investment.

organization has processes as its backbone

Skandia Future Center (SFC)

and is not built up around functions (Office

Arena for organizational prototyping.

Productivity).

The focus is on continuous strategic renewal

Professional competence

and development for shaping the future. The

The human ability to utilize structural

work process is about competencies,

capital provided by the organization, inter-

networking and collaboration internally as

nally and externally.

well as externally.

Real Time Business (RTB)

Social competence

RTB is about having exceptional respon-

The human ability to work together with

siveness and structural capital that enables

other people.

the company to minimize internal and

Soft asset

external lead-times.

See intangible asset.

Stock

waiting) that exists in every individual, a

The static value of a capital form.

companys employees and a societys

Stock indicator

citizens, to create value for him/herself, the

Indicators that measure the stock value.

company, or society.

Strategic objective

Tangible asset

Strategic goals that are in line with the

A physical or monetary asset. Often

mission. Strategic objectives are high level

associated with the financial focus area.

goals that are divided into different focus

Team

areas in the balanced scorecard grid.

A group of people working together with a

Structural capital

shared vision.

Customer capital and organizational capital.

Team building

What is left in the company, when the

Visualizing benefits from working in a team

human capital, the employees, have gone

context and thereby stimulating teamwork.

home. The result/value of past IC transfor-

Three generations team (3 G-teams)

mation efficency/performance.

Team consisting of cross-border members

The potential for future IC and financial

from different generations, professional

value creation. The tool(s)/vehicles for

backgrounds, functions and cultures.

human capital relationship value creation:

Time To Customer (TTC)

Consists of value-creating and non value-

The time it takes from customer order to

creating (value-consuming) components.

delivery. Includes order handling and

The sum of intangible assets and intangible

distribution.

liabilities (Leif Edvinsson).

Time To Market (TTM)

Subject Matter Expert (SME)

The time it takes from when a company has

A subject matter expert is a person who

defined a customer need to when it can

has expertise within a strategic competence

begin meeting it with a new product or

area. The subject matter expert is essentially

service or a new generation of an existing

the person who should facilitate the commu-

product or service.

nity of interest.

Time to market share

Tacit knowledge

The time it takes from when a new product

Tacit knowledge is highly personal and hard

or service is available to customers to when

to formalize and communicate. Tacit knowl-

the company has captured optimal market

edge consists of knowhow and mental mod-

share.

els, beliefs and perspectives (Ikujiro Nonaka).

Time With Customer (TWC)

Talent pool

An indicator that can be used for measuring

The knowledge potential (human capital in

the level of customer interaction in the

17

company. Time with customer can be

relationships in co-creating value systems

defined as average number of days spent

between different economic actors.

with customers per employee per month.

Value creation

Tobins q

Refinement and transformation of human

A relation/ratio developed by the Nobel

capital, customer capital and organizational

laureate James Tobin, comparing the market

capital through mutual collaboration, into

value of an asset with its replacement costs.

financial as well as nonfinancial value. A

For a whole company q is the ratio

direct result of how people generate and

between the market value of the company

apply knowledge.

and the replacement cost of its fixed assets.

Value driver

A high ratio can be said to indicate high IC

An aspect of the organization that has been

potential, i.e., an expectation value.

identified as providing significant future

Transformation efficiency

value; it indicates the organizations compe-

The actual and/or potential efficiency of an

titive advantage.

organization in transforming intellectual

Value flows

capital to financial value; financial capital

The value transformations within the

into IC, and the building of structural and

company. The value flows between human,

human capital value by mutual interaction

structural and financial capital (Intellectual

(Intellectual Capital Services Ltd.).

Capital Services Ltd.).

Valuation

Value networks

The process of assessing company value

A social fabric for the fair exange of

theoretically defined as the present value

tangibles and intangibles (Verna Allee).

of all future cash flows discounted at the

Value potential

appropriate cost of capital.

Capital in waiting. A reserve for future,

Value

possible value creation.

A measure of peoples appreciation of some

Value scheme

phenomenon. The value of goods and ser-

See IC value scheme.

vices can either be measured by the amount

Values

of money or other goods or services for

Conceptions, explicit or implicit, distinctive

which they can be exchanged. Value is what

of an individual or characteristic of a

someone wants and is willing to pay to get it.

group, of the desirable which influences

Value added

the selection from available modes, means

Operating result after depreciation, plus

and ends of actions.

wage costs, payroll overheads and business

Virtual value chain

development costs.

The value adding process for information

Value chain

and knowledge; from raw data to packaged

A generic model to analyze activities and

knowledge.

costs in a company as well as in entities

further up and down the chain. The model
originates from work by Michael E. Porter.
Value constellation

A concept developed by Richard Norman

and Rafael Ramirez to illustrate the

18

PROJECT TEAM FREDRIK LVINGSSON, TOMAS PERSSON, ERICSSON BUSINESS CONSULTING. JONAS KJELLSTRAND, SKANDIA.
BRITT-LOUISE ANDERSSON, RESEARCHER INITIATORS LEIF EDVINSSON, SKANDIA. ARNE RICHTNR, ERICSSON BUSINESS CONSULTING
REVIEW AND VALUABLE INPUT HANS MATTSSON, STOCKHOLM CONSULTING GROUP. GRAN ROOS, ANNA RYLANDER, INTELLECTUAL CAPITAL
SERVICES. ELISABET GEMZELL MIKKELSEN, SKANDIA AFS. MARILYN ATKINS, ERICSSON BUSINESS CONSULTING DESIGN BLEU ROUGE
INTERVIEW GOTTFRIED GRAFSTRM PHOTO ISABELLE ROZENBAUM, LARS LIE, CLAIRE HAYDEN/TONY STONE PRINTING JERNSTRM OFFSET

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