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Final report ic of cities

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This is my report on IC of cities with recommendations to the European Commission on how to proceed. Participating cities were Donostia-San Sebastian, Sevilla, Dos Hermanas and Donegal, Ireland. To much effort has been given to build tangible assets like highways and ITK. However, the intangible assets, like people and the "way-of-work" has been neglected. This should be considered in the next steps in order to achieve our Lisbon goals to become the leading region in the world when it comes to wealth and innovation.

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Final report ic of cities

  1. 1. © Wissenskapital ZFI/ECI GmbH REPORT ON IC COACHING IN KNOWCITIES PROJECTMart Kivikas, Oberreichenbach, Germany November 2012 Investing in our common future
  2. 2. © Wissenskapital ZFI/ECI GmbHReport on IC Coaching of CitiesBackgroundThe project “Knowledge Cities in the Atlantic Arch - Know-cities”, funded byInterreg IVb Atlantic Area Programme 2007-2013, is the result of a longreflection process about agreed strategies and cooperation processes in thenew world scenery of the knowledge economy1. The aim of the project is tocarry out an innovative methodology for the impulse and to facilitate theaccess and transition to the knowledge economy, as a mean to facilitate thetransnational cooperation in common matters all linked to the sustainableurban development as an attractive and urban marketing factor for the middlesized Atlantic cities.The strategy to achieve this aim is planned through the development, theexperimentation and the validation of quality models and managingmethodologies of knowledge, all applied to the local and transnational fields toimprove the competitiveness of the middle sized cities which excellence plansare based in the urban sustainable development.One of these models is the Intellectual Capital Statement – Made in Europe,which has its origin from the Wissenbilanz –Made In Germany, initiated fromthe German Ministry of Economics in 2004.Intellectual Capital StatementThe definition of IC in this coaching process is based on the work with theEuropean Commission (www.incas-europe.org) and the German Ministry ofEconomics and Technology (www.akwissensbilanz.org). The IC Statement(hereafter referred to as ICS) defines and measures organisational successfactors (BS) that are complementary to the financial ones. Today the financialnumbers are clearly dominating in a decision making progress because theyare easier to measure, they are more tangible, whereas IC is intangible andtherefore have in indirect, but not less important, impact on an organisationalgoals.1 In the financial world usually called Intellecutal Capital Investing in our common future
  3. 3. © Wissenskapital ZFI/ECI GmbHHuman Capital (HC) is defined as “what each individual in an organisationbrings into the value adding processes”.Structural Capital (SC) is defined as “what happens between people, howpeople are connected within the organisation and what remains when theyleave at end of the day.”Relational Capital (RC) is defined as “the relations of the company to externalstakeholders”, like customers, suppliers and universities.The organisation is embedded in the business environment. The vision servesas general guiding principle for major decisions and strategic positioning.Depending on the business strategy, managerial decisions lead to operationalmeasures. These measures serve to improve business processes and theutilisation of Intellectual Capital in those processes.Business Success (BS) is the operating result, which is achieved through theemployment of corporate (intangible) resources in the business processes.Business success comprises tangible (quantitative goals) and intangibles(qualitative goals).ApproachFour of the cities2 decided to take use of the IC model as a base for the ICcoaching with Fomento San Sebastian taking the leading role. Each of thesecities was visited for at least two days for the data gathering and to present apreliminary analysis.Since San Sebastian was the first city being coached, it was decided to assessthe strategic goals (BS) (table 1) and to decide on a set of IC factors (table 2) tobe used in all four cities. With this approach, time is being saved andbenchmarking is possible. However, with such a tight time schedule, there is arisk that specific organisational issues may be not analysed properly.2 They were San Sebastian/Donostia, Letterkenny (Donegal), Seville and Dos Hermanas. Investing in our common future
  4. 4. © Wissenskapital ZFI/ECI GmbHStrategic (Business) Goals (BG) DefinitionTo drive Innovation and Economic Support companies with filing andDevelopment in the region protecting patents, trademarks and other intellectual property matters. Facilitating framework to connect research and development between entrepreneurs, universities, technology or innovation parks, clusters, incubators, companies and investors.To secure Funding For companies in: Phase I - New ones, existing less than one year. Phase II – To support the building of basic structures like administration & controlling, office, business and marketing plans. Phase III – To support growth and to build a market reputation. Build relations to customers and business angels (investors). Secure funding and perspectives for founders and managers of the venture. Phase IV – Divest and make sure that part of the financial value creation stays in the region.To find and define Innovation Drivers Not only focus on bottom-up innovation, but also connect to large international corporations, which drive global innovation. Being present at national and international fares and events to connect regional SME to global players and trends.Table 1 – Strategic Goals (BG)To develop an IC Statement is a process over a time period. The first step is tofind a common language on strategic goals and which non-financial factors areimportant to reach these goals. The IC Statement - Made in Europe putemphasize on also involving the employees, as well as the management. Investing in our common future
  5. 5. © Wissenskapital ZFI/ECI GmbHThe leading city and organisation in this project was taken by Fomento SanSebastian. The reason was an initial interest to IC overall and its positionproject manager for the whole project.In order to make any IC coaching possible, a personal relation with thoseresponsible is necessary. IC is about people and leadership and can thereforeonly be analysed if trust is there between coach and customer. Electroniccorrespondence is efficient only after this relation has been established.Therefore it was decided, that the four participating cities should be visited atleast once and to have enough time to: 1. Confirm the above mentioned goals with the management team. 2. Have a workshop with stakeholders and/or employees to find out where the organisation stands to meet those goals. In this project, parts of the management team was involved in all cities. San Sebastian also invited some selected employees in the evaluation. Donegal and Seville invited some representatives from major technology and innovation parks to participate in the workshop. 3. To discuss a preliminary analysis made by the IC coach and to discuss management action points.Code Name DefinitionHC-1 Professional competence The expertise gained within the organisation or in the employee’ career: professional training, higher education, training courses and seminars, as well as practical work experiences gained on-the-job.HC-2 Social competence and The ability to get on well with people, communicate ability to change and discuss in a constructive manner, nurturing trust- enhancing behaviour in order to enable a comfortable co-operation. Furthermore the learning ability, the self-conscious handling of critique and risks as well as the creativity and flexibility of individual employees.HC-3 Employee Motivation The motivation to play a part within the organisation, to take on responsibility, committed to the fulfilment of tasks and the willingness for an open knowledge exchange. For example satisfaction with the working environment, identification with the organisation, sense and participation of achievement.HC-4 Leadership ability The ability to administrate and motivate people. Develop and communicate strategies and visions and their empathic implementation. Negotiation skills, Investing in our common future
  6. 6. © Wissenskapital ZFI/ECI GmbH assertiveness, consequence and credibility as well as the ability to create a scope of self development.SC-1 Internal Co-operation and The manner how employees, organisational units and Knowledge Transfer different hierarchy levels exchange information and co-operate together. The focused knowledge transfer among employees and between generations.SC-6 Corporate culture Culture comprises all values and norms, influencing joint interaction, knowledge transfer and the working manner. Compliance to rules, good manners, "Dos and Donts" and the handling of failures are important aspects as well.RC-8 Entrepreneurs All kinds of people who would like create new ventures. It could be students, researchers and experienced persons who want to become idependant and make a difference.RC-9 Micro companies Companies with less than 5 employees.Table 2 – The IC FactorsThe participating cities in this project were visited in the time period ofSeptember to October 2012, each time for two days. The process of definingstrategic goals, moderating the workshops and analysing the outcome of theworkshops, were made by the IC coach. The German software“Wissensbilanz”3 was used in order to visualize the results in a proper way.For all of the IC Factors in table 2, the participants were asked of how theyassess the quantity (enough to reach the future goals?), the quality (is it goodenough to reach our future goals?) and is management doing enough to keepthose levels? (the systematic).After a from the IC coach prepared impact analysis, an IC ManagementPortfolio (sample see picture 1) is being presented.3 A download (free and in German) is possible under www.akwissensbilanz.org. Investing in our common future
  7. 7. © Wissenskapital ZFI/ECI GmbHPicture 1 – The IC Management PortfolioIn this portfolio the strength and weaknesses of an organisations’ IC isvisualized. In this prototype, management action points are to be found in theupper left corner. The higher up the factor is, the more important it is to reachthe strategic goals as we in this project have defined in table 1 above. In this(test) case, “leadership ability” and “internal cooperation and knowledgetransfer” are important factors but not to well assessed. Thereforemanagement intervention in this area has a likelihood to have a high pay off,compared to the other IC factors in the portfolio. How to improve these factorsis the goal of point three above, to discuss this with the responsiblemanagement and to decide on further actions. Investing in our common future
  8. 8. © Wissenskapital ZFI/ECI GmbHResults of the first Analysis4Donostia – San SebastianThe Basque region is one of the most prosperous in Spain. The reasons aremany, among others: 1. A strong cultural identification to the region from the people. This culture promotes education and close and long term relation between employers and employees (HC). Because of its history, a lot of people from the region were forced to emigrate, especially to North and South America. This “diaspora” is today most useful to build international business relations (HC and RC) 2. Historically a very high industrialisation, especially in the Bilbao region. Therefore strong in the automotive industry today (SC and RC). 3. Donostia – San Sebastian early become a trade centre and resort for upper class visitors. The film festival each year has become one of the mayor events outside the US (HC and RC). 4. Good infrastructure and a geographic closeness France and rest of Spain (SC). 5. Excellent climate for wine and food industry (SC)Although a very strong economic progress the last 20 years, some problemshave become evident in the overall turmoil in the Spanish economy since2009.The life-time-employment culture is no longer being followed from a lot ofemployers. Especially for younger talents this has led to insecurity about thefuture and the demographic trend is therefore negative. This “spirit” of eternalgrowth and job security has taken a blow, which negatively affectsinvestments and the willing to start new and own ventures.Fomento San Sebastian has seen this trend and has tried to promoteentrepreneurship and start-ups to stop this negative trend. When before 2008it was very easy to get funding and a job, this has changed dramatically the last4In order to make an IC analysis, quantitative information is necessary. The cities providedthis before the coaching was started. Very helpful was also the information provided withinthis very same project. Investing in our common future
  9. 9. © Wissenskapital ZFI/ECI GmbHyears. From being “spoiled” with credit and work, angst about the future hastaken over and the problem of finding entrepreneurs is still very high.Therefore it is understandable why Fomento San Sebastian has focusedfinding and education young professionals to start companies as well as todayhaving four clusters; audiovisual (2002), renewable energy (2002), surfingsector (2007) and assistive technologies (2004).The IC analysis shows, that the structures of Fomento San Sebastian is welladapted to regional needs and competencies. However, it has shown, thatworking on a micro company level is not enough to meet the goals ofinnovation and funding. In order to stay competitive today, much morefunding is needed for growth and to focus on building entrepreneurial skills isnot enough to start a financially successful venture. The analysis alsosupported the idea of being more project management focused, which meansthe combination of knowledge is more important than the knowledge eachdepartment has on their own. However, this acquires different internalleadership skills, away from administrating the infrastructure and knowledgeand more into adapting this into real value for the companies. More “pull”from what a good business idea needs and away from “pushing” knowledgeand people into a rather unknown business venture.The recommendations to raise IC were: 1. Promote a project management organisation. Such a change always must start from the top, which must be clearly addressed and supported before being implemented (HC). Skills must be more focused on how to find and gather information from all of the Fomento organisation and to motivate staff that may belong to other departments than you own. This initiative could also improve the linking between R&D institutions to SMEs and Micro companies and helps them being more innovative. The region is not lacking ideas. The problem is that to few of them actually get to market and use their commercial potential. 2. Find connections to Business Angels and Clusters outside the Basque region (RC). The European Investment Fund (EIF) initiative to focus on business angels directly and not funds could become very supportive to reach the goals. Not only funding may be available, but also business know how and international connections. 3. To provide a list of participating companies sorted after size and growth opportunities. This “coming stars” should then be promoted explicitly, Investing in our common future
  10. 10. © Wissenskapital ZFI/ECI GmbH also with funding (SC–>RC). A matrix has been developed for the four clusters (see table 3). Phase I Phase II Phase III Entrepreneurs Micro Companies SMECluster I Audiovisual Name? Name Ltd.? Name Ltd.?Cluster II Renewable Name? Name Ltd.? Name Ltd.? EnergyCluster III Assistive Name? Name Ltd.? Name Ltd.? TechnologiesCluster IV Surfing Name? Name Ltd.? Name Ltd.? Table 3 – the Matrix 4. Have on overview of how the training of entrepreneurs actually meets its goals (HC->SC). Entrepreneurship and how to lead people should be integrated at an early stage also on universities and in academia. Todays graduate are really not at all prepared to what it takes to become successful in building there own business. It is difficult to change the attitude towards entrepreneurial risks when there has been no background neither from family nor education. Also the tax system should be adjusted to promote risk taking instead of waiting for governmental support to create jobs. 5. Use IC controlling as a coaching tool to help micro companies become profitable and move along their business cycle (HC->SC->RC). If only the focus is on turnover and profit, no venture will be possible because of its Investing in our common future
  11. 11. © Wissenskapital ZFI/ECI GmbH ROI5 of five to seven years. 6. The linking between R&D institutions to SMEs and Micro companies for helping them being more innovative could be improved. There is a feeling that good ideas still not really get to the market as they deserve.Letterkenny – DonegalDonegal is a county on NW Ireland with Letterkenny being its commercial andadministrative centre. The Donegal County Enterprise Board, DCEB, is arelatively small company with five employees with the aim to promote growthand innovation in the region.The region could show adequate economic figures the last decades due tomajor foreign investments in IT, textiles and of course the gigantic buildingand construction boom since the beginning of this century. Competitiveadvantages are language skills and lower cost of labour (HC) compared toother parts of Ireland and Europe. However, Letterkenny also shows what mayhappen to a region too much dependant on foreign investors and with debt-financed building. The IC of Donegal may not have been very high compared tourban areas, but since the cost of living were lower, the area have become anattractive region to live and work in.Due to the total stop of building and construction, the unemployment rate hasraised sharply the last couple of years and has become the major politicalissue. Attempts have been made to stimulate growth with micro funding forvery small companies, attract more students and investments in localuniversities and technology parks and also a closer connection toneighbouring Northern Ireland. However, these measures are focusing toomuch on input (push) but miss the point of supporting growth outside thesmall region as well a clear customer value (pull).The recommendations to raise IC were: 1. To work more closely with the micro companies. DCEB could manage administrative routines like payroll, taxes and CRM6 (HC->SC).5 Return on Investment6 Customer Relations Management Investing in our common future
  12. 12. © Wissenskapital ZFI/ECI GmbH 2. Find connections to Business Angels and Clusters outside the region and Ireland (RC). The European Investment Fund (EIF) initiative to focus on business angels directly and not funds could become very supportive to reach the goals. Not only funding may be available, but also business know how and international connections. 3. To provide a list of participating companies sorted after size and growth opportunities. This “coming stars” should then be promoted explicitly, also with funding (SC–>RC) (see table 3 above, but with no division into clusters necessary). 4. Continue the initiative to attract “sons- and daughters” of Donegal back to region. Not only as tourists, but as high skilled labour with know how from foreign, especially US, countries (HC & RC).Seville - AndalusiaSeville has been one of the success cases of good EU economic policy sinceSpain joined the EU in 1986. This means top infrastructure, many universities7and R&D parks and the settlement of an aerospace cluster including EADSdefence arm. However, there has been no real development of mid-sizedcompanies and therefore the region has become very dependant upon EUfunding and industrial policy. Since the almost collapse of the local municipalbudgets in Spain as a consequence of the liquidity squeeze, it was decided tointegrate all activities to promote innovation and regional growth (includingthe partner in this project, Seville Global) under the realm of the city. At themoment of the visit to make the IC coaching, the future of most the employeeswere not clear because no organisational decision had been made. Thisdecision is still pending.The coaching activities on how to make better use of the IC within thecompanies as well as in the region came to the following conclusions: 1. It was decided to prove the possibility to change the overall strategic goals to above (see picture one). With these new goals it is more likely to meet the overall goals of more employment and a higher value creation in the regional industry (BG).7 University of Seville with more than 60.000 students among others. Investing in our common future
  13. 13. © Wissenskapital ZFI/ECI GmbH 2. Good connections to EU funding and innovation programs, and to European business angels should be intensified in order to find direct funding to SME and industrial know how and experience (RC). The EIF initiative should be considered (see above). 3. Seville Global should coordinate its activities with all other actors in the Andalusia region RC->SC). In this case a clear responsibility is needed with acceptance from the regional partners. Looking at size and capacity, this role should be overtaken from Seville Global in its new form integrated into the city council of Seville. 4. Make a matrix (see table 3 above) as on overview of SME in the region, clustered into four business sectors. Tourism, retail and wholesale are not included in this phase due to its relatively low value adding and due to the decision to focus on key areas in which Andalusia has an historical strong track record (HC->SC->RC). The focus should be on aerospace, engineering, high value tourism and entertainment and educational services8. 5. There is a need to strengthen the professional competencies in financial and funding issues, provided to the customers of Seville Global. The focus on companies with more than ten employees requires some different skills than coaching start-ups (HC).Dos Hermanas - AndalusiaDos Hermanas is the biggest satellite city of the metropolis region of Sevillewith about 100.000 inhabitants. It has very successfully found a niche of goodquality of living, especially for families, not too far away from the regionalcentre of Andalusia, Seville. Due to good infrastructure, it only takes about 15minutes by train to Seville and less than an hour to the airport. The DosHermanas Economic Development Office team is very small and flexible, beinga part of the city municipal. The city will have one of the most modernTechnology park, build in a recreation area at the very centre of the city.Interviews and preparations were made with the whole team and it was clear,that the close cooperation with Seville Global had been successful and bothorganisations should continue keep a strategic dialogue.8This is a recommendation only. In the case of San Sebastian and Donegal, the matrix wasconfirmed by the participants. Investing in our common future
  14. 14. © Wissenskapital ZFI/ECI GmbHWith this background, following decision were made: 1. To adjust the goals under table 1 (BG). 2. Good connections to EU funding and innovation programs, and to European business angels should be intensified in order to find direct funding to SME and industrial know how (RC). The EIF initiative should be considered (see above). 3. Dos Hermanas Economic Development Office should coordinate its activities with Seville Global and other actors in the Andalusia region to optimize the mix of local, regional and national economic action (SC & RC). 4. Make a matrix as on overview of SME in the region, clustered into four business sectors, olive oil, ecological agriculture, engineering and aerospace. Tourism, retail and wholesale were not included in this phase due to its relatively low Value Adding. Due to historical reasons, it was decided to take a special focus on olive oil and how to refurbish this raw material more in the region and to curb cooperation, especially by purchasing, between the many rather small local actors (HC->SC). 5. Dos Hermanas Economic Development Office needs a Director (face-to- face regarding customers and investors) to represent outside as well as within the city council of Dos Hermanas (SC & RC).Overall CommentsIt seems that all four had the same objectives at the time of starting theiractivities around ten years ago - to promote entrepreneurship and theestablishment of micro companies. The outcome has not been as expected. Allfour name the lack of finding suitable individuals in their regions to able tostart a venture. Different reasons were mentioned such as: • Used to life time employment • No social acceptance to start a new venture • Wrong state financial incitements to start a new venture • Few chances to become successful • Lack of „best cases“ • No funding after the „micro“ level has been achievedAlthough the problems are alike in the cities, they are all on different levels. A Investing in our common future
  15. 15. © Wissenskapital ZFI/ECI GmbHshare of knowledge could give immediate areas of improvement in: • How do our programs for entrepreneurs look like? How do we measure the success of this? • What kind of funding is available and in what criteria? • Do we have any success stories to share? • What does our due diligence look like before we decide to step in? • What impact do different taxing systems have on entrepreneurs and micro companies? What impact on SME and Business Angels? • How do we integrate policy makers and local politicians? • How do we in a structured way improve the communication between R&D institutions to SMEs and Micro companies? With these questions and the following discussion between the cities, immediate steps of improvement can be made with low costs. There is no city being best in all areas, so this is a clear win-win situation for all participants.Best Practices on how to curb IC.Case 1 – Focusing on regional competencies and know-how:In Germany, the most profitable companies are the ones who have found aniche, where barriers of entries are high and not attractive enough for theinternational players. This in combination with regionally developed know-how, it could be forestry in the Black-forest or automotive in Bavaria with itshighways and free speed, combines two dimensions which are difficult tocopy.In the case of Fomento San Sebastian, the focus on audiovisual (and surfing)has clearly been a success story and have contributed to the excellentreputation the city has in these very specific areas. It will be very difficult forother cities to catch up on this and since those areas are niches, they also havehigh barriers of introduce.Learning’s: Focus on niches where you and your people can perform betterthan other regions. These niches could be historically achieved (olive oil in DosHermanas), through good economic policy (aerospace in Seville) or climate Investing in our common future
  16. 16. © Wissenskapital ZFI/ECI GmbH(surfing in Donostia - San Sebastian).Case 2 – Close cooperation with Stakeholders:In Letterkenny Donegal, there are very short ways between politicians,universities, experts, SME and Mr. Tunney at DCEB. Therefore an upcomingproblem can sooner be recognized and an implementation of new policy canbe faster implemented.Learning’s: Entrepreneurs and Business Angels/Investors want to work withpeople with clear responsibilities and not with anonymous organisations andbureaucracy. They recognize the time it takes to become a decision from theregion and its political bodies. A business opportunity usually does not exist tolong on a competitive market, therefore speed and flexibility are prerequisitesfor successful regional innovations. Politics makes the difference today and istherefore obliged to send the right signals to entrepreneurs and futureinvestors9. Uncertainty in this field is devastating.Case 3 – Coordination of different Technology- and Innovation parks:Clearly in all cases this coordination is excellent. Important is not only to focuson the own city, but to check neighbouring regions to avoid investments withsame focus10. Cases are San Sebastian with Bilbao and Letterkenny withLondonderry. The close cooperation with Dos Hermanas and Seville Global hasalso raised the efficiency and both complement one another.Learning’s: The cities must look also on the development outside their directresponsibility. An understanding of real innovation drivers is therefore veryimportant and cannot be delegated to SME due to their lack of resources andfocus on operations.Case 4 – Company MatrixThe objective of all participating regional development entities is to helpcompanies getting started and therefore creating employment in the region orcity. Business success is very difficult to explain academically. Testing, luckand time-to-market are usually the most important factors. Therefore youneed to find companies how may be at the right market with the right idea.9 Especially regarding business angels who invest their „own“ money.10 Called „crowding out“ in theory Investing in our common future
  17. 17. © Wissenskapital ZFI/ECI GmbHThe matrix as presented in table 3 is one step to have these on the map at all.The most interesting issue and a base for sharing between the cities is to learnhow an entrepreneur went from phase I into phase II and how a microcompany went from phase II to phase III. This sharing is mostly veryappreciated between companies and this should be initiated and moderatedfrom the regional development agencies. The likelihood of companies fromdifferent regions sharing thoughts and experiences has actually shown to behigher than “to open up your books” to your neighbours.Reflections on how to curb economic growth and innovationbased on Intellectual Capital (IC).In 2000 the Lisbon agenda 11 agreed on various initiatives to stimulateeconomic growth within the European Union member states. The goals werein 2010 to have a higher GDP per capita than the US and to become „the mostinnovating“ region in the world. Various programs were founded to helpSME12 to get funding for growth and innovation as well as supportingprograms for start-ups and entrepreneurship.As being involved in various governmental initiatives since 2003 in Germanyand the European Commission as an expert on Intellectual Capital13, I think itis time to draw a balance on what we have reached so far and to provideguidance on how we can further proceed:11 European Commission 201012 SME – Small and Midsized companies. Usually defined as companies having up to 250employees (EU). In Germany up to 400 employees.13 As founder of the German Wissensbilanz, www.akwissensbilanz.org, and IntellectualCapital – Made in Europe, www.incas-europe.org. Expert in RICARDIS, ReportingIntellectual Capital to augment Research, Development and Innovation in SMEs, report tothe Commission of the High Level Expert Group and the project “Knowledge Cities in theAtlantic Arch - Know-cities”, funded by Interreg IVb Atlantic Area Programme 2007-2013. Investing in our common future
  18. 18. © Wissenskapital ZFI/ECI GmbHOn Intellectual Capital Reporting (or Intangible Assets basedManagement)Around 1.000 SME have made a Wissensbilanz14 in Germany15. With theFraunhofer Academy in Munich, moderators or consultants are being educatedfor a fee and some of them are today successfully working as coaches inchange management. The model Fraunhofer is running for dissemination isclose to the EFQM16 model. With the “Intellectual Capital – Made in Europe”project, the German „Wissensbilanz“ was implemented in five other Europeancountries17 with the major success being the development of a „quick-test onIC“ sponsored by the Warsaw Stock Exchange in 2008.These results may look all right at a glance, but still have not changed thebehaviour on the financial markets. Quantitative factors still play anoverwhelming role when it comes to analysing companies or even states.Today even more focus is placed on short-term gains and there is reluctancefor longer investment horizons. In times of uncertainty, the financial actors arenot prepared to take more risks and there seems to be a fixed concentrationon existing players18, following the (contra to IC) philosophy of shareholdervalue. This means that local competence in Europe is not considered as acompetitive advantage since most of the investments go into high-tech orinternet ventures copying, rather than inventing yourself, ideas from the USrather than inventing self-made innovation. Also the funding by the EuropeanCommission has been more on copying ideas from outside Europe rather thaninvesting in regional core competencies.The possibilities offered by the IC Statement to visualize different localcompetencies and to make customer value out of it has still not been reallyexhausted. It seems that European initiatives to create sustainable value still14 German for Intellcctual Capital Statement (or report)15 Fraunhofer study 201016 European Federation on Quality Management, Brussels.17 Poland, Spain, France, Slovenia and Germany.18 Lead by US Private Equity and US Venture Capital Investing in our common future
  19. 19. © Wissenskapital ZFI/ECI GmbHlack enough confidence in performing something different from mainstreamideas.On IC Statement and Management ReportingIn 2009 the German Federal Ministry of Economics started a project tointegrate the „Wissensbilanz“ into the Management Report.19 As a useful toolfor auditors they made SME aware of operational risks covered by the„Wissensbilanz“. The SME in Germany are sceptical about making this a legalrequest for external reporting. They see IC as the basis for reaching theirstrategic goals and do not want to report this to their competitors. However,as a report to improve internal efficiency and to improve communication toexternal stakeholder (on a voluntary basis), we can confirm the same positiveresponse as mentioned under „Wissensbilanz“ in general.These checklists help to improve the communication and understandingbetween the auditors, companies and stakeholders. It may be a base forfinancial rating more adapted to European and German needs.On Intellectual Property RightsAlthough heavily promoted by different countries or EU bodies, the EuropeanSME do not really see the necessity to protect their outcome through patentsor the like. The reason for this is the character of IP rights. In Germany, SMEfocus has been to deliver high quality products to German internationalplayers20. As long as this has been successful, there has been no need toprotect any intangibles. However, as the globalization has become dominant,they have become aware of the risks of not protecting their products or19Wissensbilanz als Element der Lageberichterstattung „Transferprojekt zur Umsetzungfür KMUs“. The project consists of expert on international accounting standards, IC andleading auditing firms. Deliveries end of 2012 will be a checklist for SME and auditorsfocusing on financial risks and how IC can reduce this uncertainty. The „Lagebericht“ wasintroduced 1931 in Germany in the Weimarer Republik on order to show the public howstate money was invested in firms in the realm of the great depression.20After the WW II all German patents were taken over from the Americans, so the GermanSME had to focus on having a direct relation to the customers, not really seeing anystrategic relevance of protecting their IC. Major players are BASF, Siemens, BMW etc. Investing in our common future
  20. 20. © Wissenskapital ZFI/ECI GmbHservices. Very few SME in Germany are aware of the fact, that, their IP isstrategically very important.On IC of CitiesMost communities in Europe are heavily indebted and perspectives beinggloomy due to negative demographic trends and the economic outlook.Therefore it is important to define how the triple helix should work. Neithercommunities, academia or „Wirtschaft“ can work alone. They are alldependant on one another and this work should be managed and coordinated.Work has been done on this in Germany21 and within the realm of the Atlanticprogram22 and it appears that the communities must assume the responsibilityto coordinate this strategic issue. The reason is that academia in Europe hastthe reputation of being too far away from SME needs and have „a life of theirown“. The companies are struggling with an economy in downturn and globalacting ones are no longer in the hands of local families or investors but usuallybelong to international funds or investors with few connections to the region.On Economic PolicyThe goals of the European Commission in 2000 have not been reached.Europe’s competitors have shown how important the role of state policy is tocurb industry and employment. The US still attracts the „brains“ and is leadingin financial services and trade, giving them a dominant position in investmentallocation and funding. China dominates production and has a clear strategy tocurb domestic industry and consumer demand. Together with Russia, it isclear that the US and China have a clear political and industrial agenda on howto support their industry to gain market shares and therefore creating jobsand tax income. These nations very well understand the necessity to combineresearch (with a political IP protection agenda), „Wirtschaft“ and politics toachieve a strong position on the global markets. For Europe, no such astrategy23 exists, although it is necessary if Europe wants to maintain its highliving standard.21 Stadt Kempten and the project under note five.22 See note five23 Or even contrary, regarding the open up of EU market to foreign investors, withoutreciprocity from China, Russia or the US. Investing in our common future
  21. 21. © Wissenskapital ZFI/ECI GmbHConclusionSustainable welfare is created by companies bringing value to customers whoare prepared to pay the expenses. A company can only achieve this if the rightintellectual capital factors (or intangible assets) are provided and promoted bythe society. Financial capital does not make the difference, because it is globaland not unique. With the Wissensbilanz/ICS (IAbM) we have the facts and dataneeded to make good decisions based on what is realistic, on a regional,national basis. The question is who has the competencies and ability to earnthis leadership?Oberreichenbach November 2012/mk Investing in our common future

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