Strategic knowledge benchmarking system (SKBS): a knowledge ...

Strategic knowledge benchmarking system (SKBS): a knowledge-based strategic management information system for ®rms JoseÂ MarõÂa Viedma Marti

JoseÂ MarõÂa Viedma Marti is a Doctor of Industrial Engineering, a Graduate in Economics and Professor of Business Administration, Polytechnic University of Catalonia, Barcelona, Spain ([email protected]).

Abstract In accordance with the resource-based view and the activity-based view, sustainable competitive advantages are mainly due to core knowledge that, together with tangible and (especially) intangible resources, develops competitive products and services through the appropriate activities and processes of the value chain. Strategic knowledge benchmarking system (SKBS) is a knowledge-based strategic management information system framework that has been built drawing direct inspiration from both the above-mentioned perspectives and tries to re®ne the classic strategic SWOT analysis. This paper carefully describes OSKBS, one of the two versions of SKBS, and shows the main bene®ts to be obtained from the systematic use of OSKBS. The SKBS system has been successfully piloted in more than 40 small and medium size European enterprises. Keywords Strategic management, Information Competences, Intellectual capital, Benchmarking

systems,

Knowledge

management,

Introduction Recent strategic management literature strongly supports the resource-based view (Barney, 1991, 1999; Grant, 1991, 1998; Teece et al., 1997). This perspective stresses that, in turbulent times and in times of rapid change in technology and in customer and industry needs, sustainable competitive advantages are mainly due to company resources and capabilities. More speci®cally, such advantages are related to core capabilities that, in practice, are equivalent to core competences or to core knowledge. But the resource-based view, in isolation, does not completely explain how to deploy scarce resources to create superior value because it focuses only on what the ®rm has. The activity-based view (Porter, 1980, 1985, 1996) is therefore required as a complementary perspective because it focuses on what the ®rm does. In summary, in the knowledge economy competitive advantages are mainly due to core knowledge that, together with tangible and intangible resources (especially the latter), develops competitive products and services through appropriate activities and processes in the value chain. The strategic knowledge benchmarking system (SKBS) is a knowledge-based strategic management information system framework inspired and based upon a combination of the above-mentioned perspectives. Deploying scarce resources to create superior value when dealing with the innovation process is a very different task from that involved when dealing with the operations process. To create

DOI 10.1108/13673270410567611

VOL. 8 NO. 6 2004, pp. 31-49, ã Emerald Group Publishing Limited, ISSN 1367-3270

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value the two processes require different resources and different core knowledge. For this reason, SKBS has a speci®c information system framework for each of the processes. The ®rst is the innovation strategic knowledge benchmarking system (ISKBS) which is mainly focused on the value chain activities of the innovation process. The second is the operations strategic knowledge benchmarking system (OSKBS) which is mainly focused on the value chain activities of the operations process. The two systems have the same basic structure and work in similar ways. Both are theoretically based on the principles and assumptions of the resource-based view and the activity-based view. The present paper describes only the OSKBS, although it establishes the way in which to move from the OSKBS to the ISKBS. The SKBS has been tested and successfully implemented in more than 30 European enterprises.

Theoretical background Recent strategy theorists have suggested that intangible resources, particularly core competences and relationships, are the most important critical drivers of sustainable competitive advantages. Nevertheless, in strategy management, two relevant perspectives still coexist in understanding how ®rms deploy scarce resources to create superior value (Haanes, 2000). These two perspectives are the resource-based view and the activity-based view (Porter, 1980, 1985, 1996). The two are complementary. The resource-based view focuses on what the ®rm has, whereas the activity-based view focuses on what the ®rm does. The ®rst part of this theoretical discussion considers the resource-based view and focuses on the crucial role of internal core competences and core capabilities, along with the role of relationships in providing access to the core competences, resources, and capabilities of other companies and organizations. The second part of this discussion refers to the activity-based view. This perspective has traditionally perceived ®rms as value chains that transform inputs into more valuable outputs. More recently, this perspective has been extended to other more complex ways of creating value, such as value networks and value constellations. The resource based view Strategy, as a unifying theme that gives coherence and direction to the actions and decisions of an individual or organization, has a fundamental role in success. In accordance with Grant (1998, pp. 4-12), a key common ingredient in all business success stories is the presence of a soundly formulated and effectively implemented strategy. Grant (1998, p. 107) has stated that the starting point for the formulation of strategy must be some statement of the ®rm's identity and purpose. This generally takes the form of a mission statement that answers the question: ``What is our business?.'' Traditionally, ®rms have de®ned their business in terms of the market they serve by asking: ``Who are our customers?'' and ``Which of their needs are we seeking to serve?'' Nevertheless, in a volatile world in which the identity of customers, their preferences, and the technologies for serving them are all changing, a market-focused strategy might not provide the stability and constancy of direction required as a foundation for long-term strategy. When the external environment is in state of ¯ux, the ®rm itself, in terms of its bundle of resources and capabilities, might be a much more stable basis upon which to de®ne a sense of identity. Hence, a de®nition of the ®rm in terms of what it is capable of doing might offer a more durable strategic basis than a de®nition based upon the needs that the business seeks to satisfy (Quinn, 1992a). The above discussion points to the fundamental role of resources and capabilities in strategy formulation for entrepreneurial success in an environment of rapid change in technology and in the needs of customers and industry. Resources can be tangible or intangible (Itami and Roehl, 1987). Tangible resources are concrete, tractable, and easy to identify and evaluate. They include the ®nancial and physical assets that are identi®ed and valued in a ®rm's ®nancial statements, such as capital, factories, machines, raw materials, and land. Intangible resources are generally more dif®cult to measure, evaluate, and transfer. They include skills, knowledge, relationships, motivation, culture, technology, and competences. Resources are not usually productive in isolation. They become productive in collaboration in the context of a team dedicated too a speci®c purpose.

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All of the above-mentioned tangible and intangible resources represent a basis for the creation of economic value, but competences, in particular, have received attention in the recent strategy literature as being potential sources of sustained competitive advantage. Competences are the means by which a ®rm deploys resources in a characteristic manner in order to compete (Haanes, 2000). Thus, professional competences integrate professional skills and knowledge, and organizational competences include a ®rm's knowledge, routines, and culture. Some authors, especially Prahalad and Hamel (1990), have distinguished particular competences, which they call ``core competences,'' as being fundamental to a ®rm's performance and strategy. ``Core competences,'' according to these authors, are those that make a disproportionate contribution to ultimate customer value, or to the ef®ciency with which that value is delivered. Core competences thus provide a basis for entering new markets (Prahalad and Hamel, 1992). Adopting a slightly different perspective, the present paper uses the term ``core competences'' to refer to a unique bundle of intangible assets that are the basis of de®nite, sustainable, competitive advantages (Andriessen, 2001). In adopting this perspective, the present study uses the terms ``core competences'' and ``core capabilities'' interchangeably, and also considers the term `ìntellectual capital'' to be an equivalent expression. This approach is in agreement with Sullivan (2000) who de®ned intellectual capital as knowledge that can be converted into pro®ts or knowledge that produces value. Figure 1 summarizes the above discussion on resources and capabilities, and Figure 2 shows the major intangible assets within a core competence (Andriessen, 2001). In practice, in the context of the modern knowledge economy, organizations do not rely on their own internal core competences in building sustainable competitive advantages. Rather, they make use of the core competences of other companies, organizations, and institutions, especially those included in the same cluster (Porter, 1990), microcluster, or territory. The pioneering scienti®c effort of Quinn (1992b), presented in his in¯uential book Intelligent Enterprise, established the maxims for long-term dominance through core competences. Some of the key concepts proposed by Quinn included the following: J Intellectual and service activities now occupy the critical spots in most companies value chains, regardless of whether the company is in the services or the manufacturing sector.

Figure 1 Resources and capabilities of a ®rm Sustainable Competitive advantage

Best in class “competitors” core competencies

Strategy

Core competencies = core capabilities = intellectual capital

Resources Tangible - Financial - Physical

Intangible Organizational - Technology - Knowledge - Reputation - Culture

Human - Knowledge - Skills - Motivation - Communication abilities

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Relationships - Customer - Suppliers - Stakeholders - Competitors - Other partners


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Figure 2 A core competence as a unique bundle of intangible assets (Andriessen, 2001)

Endowments - Installed base of customers - Brand & image - Network of suppliers - Network of talent - Ownership of standards Skills & Tacit Knowledge - Know-how - Talent - Competencies

Processes - Leadership & Control - Communication - Management Information

Unique bundle of intangible assets (=core competence)

Collective Values & Norms - e.g. Client focus, Reliability, Quality

Technology & Explicit Knowledge - Patents - Manuals - Procedures

J If one is not ``best in world'' at a critical activity, the company is sacri®cing competitive advantage by performing that activity internally or with its existing technique. This dictates that managers consider each activity in their value chain on a ``make or buy'' basis. J Each company should focus its strategy investments and management attention on those core competences ± usually intellectual or service activities ± where it can achieve and maintain ``best in world'' status, i.e. a signi®cant long-term competitive advantage. J The scale, specialized capabilities, and ef®ciency of outside service entities have so changed industry boundaries and supplier capabilities that they have substantially diminished the desirability of much vertical integration. In seeking sustainable competitive advantages, intelligent enterprise, presented as a new paradigm for a new era, concentrates on building and exploring core activities and core competences, while relying on the capabilities of external suppliers for non-strategic and noncore activities. But at the same time, when building internal core competences, an intelligent enterprise needs the cooperative utilization of the resources and capabilities of other companies, organizations, and institutions, as shown in Figure 1. Increasingly, ®rms must turn to partnering ± often with their rivals ± to meld the appropriate resources and capabilities required for the pursuit of new opportunities. Even though few managers are accustomed to working in an area with unde®ned boundaries between collaboration and competition, the need to take advantage of the unfamiliar skills and capabilities that come from interdependent networks, alliances, and cooperative agreements is a sine qua non for building proprietary core capabilities that can lead to sustainable competitive advantages (Doz and Hamel, 1998). Figure 3 illustrates the intelligent enterprise network described in the above discussion. The activity-based view As noted above, the activity-based perspective has mainly been concerned with seeing ®rms as value chains that create value by transforming a set of inputs into more re®ned output (Porter,

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Figure 3 Intelligent enterprise network Intelligent Enterprise Strategy

Core competencies Resources Tangible Organizational

Intangible Human

Relationships Other companies organizations and institutions

Suppliers 1…n

Organizations 1…n

Institutions 1…n

Core capabilities

Core capabilities

Core capabilities

Resources

Resources

Resources

1980, 1985). Nevertheless, to be more speci®c, we need to consider how value is created in the internal business process value chain. The business process value chain can be divided into major processes: the innovation process; and the operations process. The innovation process is made up of product design and product development, whereas the operations process is made up of manufacturing, marketing, and post-sale service. Figure 4 illustrates the business process value chain. The traditional perspective has focused on the operations process. According to this short-term view, value creation begins with the receipt of an order from an existing customer for an existing product or service, and ends with the delivery of the product to the customer (Kaplan and Norton, 1996). In this case, value is created through operations core competences. However, viewed from the perspective of the innovation process, value creation is a long-term process which, for many companies, is a more powerful driver of future ®nancial performance

Figure 4 Business process value chain (adapted from Kaplan and Norton, 1996)

innovation

operations

Customer need

Customer Design

Develop

Make

Identified

Market Service

need Satisfied

Adapted

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than the short-term operations process. This view requires an organization to create entirely new products and services that will meet the emerging needs of current and future customers. For many companies, their ability to manage successfully a multi-year product-development process, or to develop a capability to reach entirely new categories of customers, can be more critical for future economic success than managing existing operations ef®ciently, consistently, and responsively. Value is thus created through innovation core capabilities. This approach has recently been extended to explain other ways of creating value ± such as value networks, value constellations, and value shops (Haanes, 2000). J Value networks create value by making different products and services available to customers. The value is derived from the network giving buyers access to sellers of what they want, and by putting suppliers in contact with customers who want their products. Examples of companies creating value through networks include commercial banks, airlines, postal agencies, insurers, brokers, and stock exchanges. J Value constellations can be considered to be linked sets of different value networks. J Value shops create value by solving unique problems for customers by using relevant competences. Examples of companies that create value as ``shops'' include accountants, academics, physicians, designers, lawyers, investment bankers, business consultants, and consulting engineers. In summary, building core competences is not done in a vacuum, but is done in the business process value chain in which resources are deployed in a characteristic manner in order to compete. The resource-based view and the activity-based view are therefore complementary. Taken together, they explain the process of creating value and securing a sustainable competitive advantage.

Building a knowledge-based strategic management information system In all success stories there is always a soundly formulated and effectively implemented strategy, and the framework of strengths, weaknesses, opportunities, and threats (SWOT) remains the most common approach to analyzing business strategy. One of the main challenges for the knowledge and information economy of today is how to use SWOT analysis ef®ciently and effectively in the present context. The framework considers strategy to be a link between the ®rm and its industry environment, and distinguishes between two features of a ®rm's internal environment (its strengths and weaknesses) and two features of its external environment (opportunities and threats). However, does this correspond to current reality? A modern ®rm can be said to embody three sets of key characteristics (its goals and values; its resources and capabilities; and its organizational structure and systems), and the external environment can be said to be comprised of its relationships with three groups (its customers; its competitors; and its suppliers). This paper seeks to use SWOT analysis in an ef®cient and effective way to achieve success in the new context in which the main features are: the importance of knowledge as the main source of sustainable competitive advantage; and world-wide hyper-competition. The challenge is to move SWOT analysis away from the generalities of ``strengths,'' ``weaknesses,'' `òpportunities,'' and ``threats'' to more concrete factors and characteristics appropriate to the new reality. As previously noted, in today's knowledge economy the resource-based view and the activitybased view are the fundamental cornerstones that determine company competitiveness. The resource-based view (Barney, 1991, 1999; Grant, 1991, 1998; Teece et al., 1997) stresses that, in turbulent times and in times of rapid change in technology and in customer and industry needs, sustainable competitive advantages are mainly due to the intangible resources of a company or, more speci®cally, to core competences (which are, in practice, equivalent to core knowledge). But resources per se do not create value, and because the resource-based view focuses only on what the ®rm has, this view does not, in isolation, adequately explain how to deploy scarce resources to create superior value. To that end, the activity-based view (Porter, 1980, 1985, 1996) is a necessary complementary perspective which focuses on what the ®rm

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does, and takes into account that value creation results from the activities to which the resources are applied. If core knowledge is the key strategic asset, improving existing core knowledge and building new core knowledge are fundamental tasks. Building and improving core knowledge requires organizational learning capabilities, including the appropriate learning structures and information systems. World-wide industry hyper-competition has ensured that strategic competitive benchmarking has become an essential learning tool. This valuable knowledge can be obtained only from systematic and frequent comparison with the world-class processes and core competences of competitors in the same business segments. In fact, companies and organizations are now competing on the basis of core knowledge and core competences. Opportunities and threats come mainly from competitors who offer the best in the same industry segment. Following, we introduce a brief review of business process benchmarking. Since Camp (1989), a Xerox logistics expert and engineer, wrote ``Benchmarking: the search for industry best practices that lead to superior performance,'' in which he describes in detail his seven years of benchmarking activities within Xerox, companies have been investing more and more time and money in benchmarking, a trend which looks set to continue. In his book Camp stated that benchmarking was: ``the continuous process of measuring product, services and practices against the toughest competitors, or those companies recognized as industry leaders.'' Although benchmarking is a measuring process and results in comparative performance measures, it also describes how exceptional performance is attained and the practices that lead to exceptional performance, that are called enablers. According to Spendolini (1992) competitive benchmarking involves identi®cation of the products, services and work processes of your organization's direct competitors. The objective of competitive benchmarking is to identify speci®c information about your competitor's products, processes and business results and then make comparisons with those of your own organization. Competitive benchmarking is also useful in positioning your organization's products, services and processes relative to the marketplace. In many cases, the business practices of your competitors do not represent best-in-class performance or best practices. However, this information is valuable because your competitors' practices affect the perceptions of your customers, suppliers, shareholders, potential customers, and `ìndustry watchers'' ± all of whom have a direct effect on your eventual business success. There is also another advantage to competitive benchmarking. In many cases, the lessons learned from competitors can be applied to your organization without a lot of translation. When we move from competitive benchmarking, to strategic competitive benchmarking (Watson, 1993) we mainly focus on core activities, core competences and especially core knowledge. As a result of the above discussion, the SWOT analysis framework moves from that shown in Figure 5 to that shown in Figure 6. In effect, there is a change from simple SWOT analysis to an extended SWOT analysis. The extended SWOT analysis gives us the main factors to consider when seeking strategies that lead to entrepreneurial excellence. The main factors of the extended SWOT analysis also determines the information system required to measure and manage those factors. In

Figure 5 SWOT analysis The Industry Environment

The Firm 1. Goals and Values 2. Resources and Capabilities

• Competitors

Strategy

3. Structure and Systems

• Customers • Suppliers

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Figure 6 Extended SWOT analysis The world class industry segment competitors

The Firm Benchmarking

1. Goals and Values 2. Resources and capabilities • Core activities • Core competencies • Core knowledge 3. Structure and systems • Strategic Benchmarking and competitive intelligence structure and systems

1. Goals and Values Benchmarking

Strategy

Benchmarking

2. Resources and capabilities • Core activities • Core competencies • Core knowledge 3. Structure and systems

other words, the main factors produce the strategic knowledge benchmarking system (SKBS) that we have de®ned as a knowledge-based strategic management information system framework. Nevertheless, as previously noted, strategy formulation in dynamic environments, even those mainly based on core capabilities, has different features when dealing with the innovation process than when dealing with the operations process. Core capabilities can be very different in the two processes. The innovation process points to new products and services through the innovation value chain in which innovation capabilities are basic and fundamental. SKBS has a speci®c system for the innovation process ± the innovation strategic knowledge benchmarking system (ISKBS). The operations process, which produces ordinary products and services through the systematic and repetitive operations value chain, also requires core competences and core capabilities to be competitive. However, these competences and capabilities will probably be of a different nature from the ones mentioned above in the discussion of the innovation process. SKBS also has a speci®c process for the operations value ± the operations strategic knowledge benchmarking system (OSKBS). Figure 7 illustrates the business process broken down into its two constituent parts, and the speci®c methodologies and information systems that correspond to each of the constituent parts. In summary, the general model of the SKBS can be divided into two partial models. The ®rst, the ISKBS, refers to innovation core activities and core knowledge, whereas the second, the OSKBS, refers to operations core activities and core knowledge. The two models have a similar structure and they work in a similar way, but there is a fundamental difference. The ISKBS model refers to the core activities and core knowledge of the different projects that make up the innovation process. In contrast, the OSKBS model refers to the core activities and core knowledge of the different business units that make up the operations process.

business process value chain can be divided into `` The major processes: the innovation process; and the operations process. ''

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Figure 7 Business process value chain

Customer need

INNOVATION

Design

Develop

OPERATIONS

Make

Customer need

Market Service

identified

satisfied Core activities

Core activities

Core competencies

Core competencies

Innovation core knowledge

Operations core knowledge

ISKBS

OSKBS

Innovation Strategic Knowledge Benchmarking System

Operations Strategic Knowledge Benchmarking System

This paper describes only the OSKBS. However, the structure and function of the ISKBS can be easily deduced, because the systems are very similar and work in an analogous fashion, but before the detailed description of the OSKBS we introduce a section that puts SKBS model in context with other established business excellence and intellectual capital models. Why the SKBS model? SKBS model versus other established business excellence and intellectual capital models. In this section we will try to establish the position of the SKBS model with regard to other business excellence and intellectual capital models. In other words we will try to justify that SKBS compares favorably with the other models. Relevant business excellence models mainly include the US Malcom Baldrige and the European EFQM (European Foundation for Quality Management). Both are models for total quality management and both are linked with quality awards. Hereafter we will consider both models as substantially equivalent and for practical reasons we will only use the denomination EFQM excellence model. Next we establish a high level comparison of the main different approaches or different models (Table I). We select as representatives of the main different approaches the following: EFQM excellence model, balanced scorecard, intangible assets monitor (Sveiby, 1997) and SKBS[1]. The conclusions that arise from Table I are: J The EFQM excellence model and its associated self assessment processes seeks to assess best practice at the process level. In order to offer fair comparison and a system of benchmarking to companies, it must be applied consistently in its structure, criteria, approach and content. An organization's sector or speci®c competitive context is a consideration which has no signi®cant impact on the usefulness and application of the model. The EFQM model also adopts the view of today and gives a through assessment of a company's current strengths and areas of improvement and as a result provides a steer as to where the organization might choose to focus some of its effort in he future. The steer provided however is independent of strategic priority. J The balanced scorecard is designed to communicate and assess strategic performance. The primary purpose of the balanced scorecard is not to assess the quality of the processes but to ensure that the strategy gets implemented and to enable an organization to continuously learn from its performance and adapt its strategy accordingly. The balanced scorecard is a high level guiding framework that needs to be tailored every time to the

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A benchmark and relative assessment of the strategic objectives (business recipe) through the eight-factor framework

J A set of logically linked strategic objectives with lead and lag indicators/targets across four perspectives but considering the indicators/targets not only in the stock but also in the ¯ow dimension

J J A set of logically linked strategic objectives with lead and lag indicators/targets across four perspectives

J A benchmark and relative assessment of the quality of an organization's processes and results by assessing/scoring against the nine criteria of the model

Deliverables

Strategy driven, workshop based, iterative, hypothesis driven, management team involvement, macro view, future working Set of objectives and measurements are unique to every organization Step change in performance

J Strategy driven, workshop based, iterative, hypothesis driven, management team involvement, macro view, future working Set of objectives and measurements are unique to every organization Step change in performance

J

J Strategy driven, workshop based, iterative, hypothesis driven, management team involvement, macro view, future working J Set of objectives and measurement are unique to every organization J Step change in performance

J Process driven, self-assessment, fact gathering, data collection, scoring based, detail oriented, present focused J Set of criteria and measurement areas are the same for all organizations J Continuous improvement

Development approach

Performance improvement To translate a company's strategy into focused, operational and measurable terms Enabling strategic performance

J J Performance improvement To translate a company's strategy into focused, operational and measurable terms Enabling strategic performance

J J

J Performance improvement J To translate a company's strategy into focused, operational and measurable terms J Enabling strategic performance

J Performance improvement J To identify the strengths and areas for improvement across an organization's processes to encourage best management practice J Enabling best management practice

Aspirations and bene®ts sought

Context dependent: tailored every time Prescriptive and focused Hypothesis driven and subjective but considering information on the best in class competitors Aspirational. To-be view of the company Explicit cause and effect model External variables systematically addressed through the benchmarking process with the best in class competitors

J

Context dependent: tailored every time Prescriptive and focused Hypothesis driven and subjective Aspirational. To-be view of the company Explicit cause and effect model External variables unsystematically addressed

J

J Context dependent: tailored every time J Prescriptive and focused J Hypothesis driven and subjective J Aspirational. To-be view of the company J Explicit cause and effect model J External variables unsystematically addressed

J Context independent: set of predescribed criteria J Descriptive and comprehensive J Fact based and objective J Current. As-is view of the company J Implicit cause and effect model J External variables systematically addressed

Characteristics

Redesigning the knowledge focused business recipe in order to beat the best in class world competitors

J

Redesigning the strategy to be more ``knowledge focused''

J

J Communicate and assess strategic performance

J Encouraging the adoption of good practice across all management activities

Main purpose

Activity based view and knowledge based view strategic management Strategic and competitive benchmarking

J

J

J

J J

J J J

J

J

J

J J

J

J J

J

J J

Knowledge based view strategic management

J

J Resource based view strategic management

J Total quality management principles and theory J Functional benchmarking

Theoretical foundation

J

Performance measurement value creation Intangible assets value creation

J

Performance measurement value creation Intangible assets value creation

J

J Performance measurement value creation

J Total quality management

Origins

SKBS

Intangible assets monitor

Balanced scorecard

EFQM excellence model

Comparison concept

Table I High level comparison of the main different approaches

organization's circumstances. It is also prescriptive and focused on the key few drivers of success that are determined by the insights, expertise and knowledge of the management team. Finally the balanced scorecard is future looking and built around a vision for what an organization wants to achieve 2-5 years in the future. J The intangible assets monitor. There are many similarities between the balanced scorecard and the intangible assets monitor models and underlying theories. Both theories suggest that non-®nancial measures must complement the ®nancial indicators. Both models categorize the non ®nancial ± `ìntangible'' ± areas into three. Both also argue that the non-®nancial indicators must be lifted from the operational to the strategic level of the ®rm and that the strategy must be the driver of the metrics designed. Both theories advocate that change is the most important aspect to measure. Both also agree that this approach to measuring should be used not as a new control instrument but as for improving learning and dialogue. There are also some important differences that we will try to indicate as follows: (1) The intangible assets monitor theory assumes that knowledge or people's competences are the only sources of pro®t generation or wealth creation. Balanced scorecard does not make this assumption. (2) The intangible assets monitor theory is a stock-¯ow theory that perceives intangible assets as real assets and tries to ®nd metrics indicating changes in the assets, such as the growth, renewal, ef®ciency and stability. Balanced scorecard is not a stock-¯ow theory. (3) The intangible assets monitor is based on the notion of a ``knowledge perspective'' of the ®rm, whereas the balanced scorecard regards the notion of the ®rm as given by its strategy. To sum up both, the balanced scorecard and the intangible assets monitor, have a strategic focus and are strategy driven, but the latter has in addition a knowledge perspective that poses people at the heart of wealth creation. J The SKBS is a knowledge-based strategic management information system for ®rms, that integrates the two main streams of modern strategic thought ± the resource based-view and the activity-based view. The model, through the eight-factor framework, facilitates the assessment and systematic management of the knowledge embedded in products, services, processes, ®rm's core competences and professionals' core competences. The SKBS has a more comprehensive knowledge perspective than the intangible assets monitor and in addition it benchmarks the eight factors and criteria against the homologous factors and criteria of the best world competitors. More information on comparison of the main different models can be seen at `Àn emerging new intellectual capital paradigm'' (Viedma, 2003). Operations strategic management benchmarking system (OSKBS) Using the metaphor of a tree, we can consider the company that performs current operations activities as a tree in which the visible part (the trunk, branches and fruits) corresponds to the tangible assets of the company (see Figure 8). The invisible part of the tree (the roots of the tree below ground) corresponds to the intangible assets of the company. The two parts ± tangible and intangible ± are inseparable. The roots of the tree send the sap through the trunk and the branches to the fruits. In a similar way, knowledge and its aggregates ± competences, capabilities and intellectual capital ± make up the business sap that ¯ows from the roots to the processes, and thus to the products and services. Continuing with the tree metaphor, each company business unit can be assimilated to a speci®c tree, and the whole company has as many trees as it has business units. Each of these trees is fed with the knowledge of its roots. Furthermore the company has at its disposal a common intangible operations infrastructure that is shared by all the business units. This infrastructure corresponds to the fertile soil in which all the company trees are planted. This fertile soil nourishes the roots (core knowledge) of each individual company tree (see Figure 9). The OSKBS methodology draws inspiration from the tree metaphor. The ¯owchart in Figure 10 is a summary representation of the OSKBS working scheme. The ¯owchart shows that within each company tree (business unit), an analysis can be made, successively, on the fruits (products and services), the branches (processes), and the roots (core competences and professional core competences). For this purpose ad hoc personalized questionnaires can be used. In addition, the overall soil fertility (operations infrastructure) can be analyzed.

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Figure 8 Operations tree Ser vice B

Ser vice C

Pr oduct A” Pr oduct B’

Ser vice A’ ce ss B Pr o

Pr ocess A

Pr oduct A

Process B

Pr oduct C’

Pr

ess oc

C

Ser vice C”

ess C Pr oc

Process A TANGI BLE RESOURCES

Pr ocess C

PRESENT ( Value Ext r act ion)

I NTANGI BLE RESOURCES COMPETENCI ES KNOWLEDGE

I NTELLECTUAL CAPI TAL

CAPABI LI TI ES HUMAN CAPI TAL

KNOWLEDGE

KNOWLEDGE

STRUCTURAL CAPI TAL

KNOWLEDGE

RELATI ONAL CAPI TAL

KNOWLEDGE

KNOWLEDGE © Intellectual Capital Management Systems

Figure 9 Company operations infrastructure

In analyzing each particular tree (that is, each individual business unit), we use the value chain as an analysis tool (see Figure 11). All of the above-mentioned analyses have the ultimate purpose of discovering, in each of the ¯owchart steps or phases, the core knowledge and core technologies that are the prime reason for sustainable competitive advantages.

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Figure 10 Operations strategic management benchmarking system

Company A

B.U. Objectives

Products and Services

Processes

Core Competencies

Customer needs

Company B

Benchmarking

B.U. Objectives (h)

GAP

Benchmarking

Products and Services (h)

GAP

Benchmarking

Processes (h)

GAP

Benchmarking

Core Competencies(h)

GAP

Benchmarking Professionals core competencies

Operations infrastructure

Professionals core competencies (h)

GAP

Benchmarking GAP

Operations Infrastructure(h)

(h) = Homologous B.U. = Business Unit

Figure 11 Value chain as an analysis tool

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In the same way the methodology makes it possible to compare each speci®c tree (business unit) with the homologous tree of the best of the competition, thus facilitating the benchmarking of fruits (products and services), branches (processes), roots (core competences and professional core competences), and soil fertility (operations infrastructure). The benchmarking process is shown in Figures 10 and 12. In both ®gures the benchmarking gap gives the necessary information for taking appropriate corrective action and for learning from past errors. Apart from using the tree metaphor, there is an alternative explanation of the OSKBS methodology and framework. The OSKBS framework can also be articulated in terms of the following eight competitiveness factors (see Figure 13): (1) Customer needs. Customer segment needs that the company expects to cover through the business unit activities. (2) Business unit objectives. Business unit activities lead to products and services through the corresponding processes using company and professional core capabilities and company operations infrastructure. The ultimate objectives of the business unit are the expected ®nancial results through the satisfaction of customer needs. (3) Products and services. Products and services with their attributes, characteristics, functions, and embedded knowledge and technologies. (4) Processes. Operations value chain activities that produce current products and services. These activities are made up of core business activities, outsourcing activities, and strategic alliances and cooperation agreement activities. Competitive advantages will be generated mainly in the different value chain core business activities. Core competences are mainly embodied in the core business activities of the value chain.

Figure 12 The process of benchmarking in OSKBS

Our Company

Best in class

Results Core capabilities

Results Customer needs

Competitive segment environment

Core competencies

Figure 13 The eight-factor framework

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Customer needs

Core capabilities

Core competencies

(5) Company core competences. Essential knowledge or core competences that make it possible and will give way to competitive advantages, unique processes, and competitive products and services within the business unit. (6) Professional competences. Professionals, managers, and support staff competences and capabilities that will generate and perfect core competences. (7) Financial results. Expected economic and ®nancial results from the business unit. (8) Company operations infrastructure. Operations infrastructure (mainly intangible assets) that the company has for the use of the different business units. The company operations infrastructure covers the following issues: knowledge management; information and telecommunications technology; company culture; information systems; organizational structure; human capital management; and leadership. Figure 14 complements and completes Figures 10, 11, 12 and 13, and gives a full overview of the main elements that make up the OSKBS framework.

Figure 14 General OSKBS framework

COMPANY A

COMPANY B Customer needs Benchmarking

BU Objetives

• • • •

BU (h) Objetives

GAP

Products and services Attributes Functions Knowledge Technologies

• • • •

Benchmarking GAP

Processes Core business activities Outsourcing activities Alliances activities Competitive advantages core business activities • Knowledge • Technologies. • • • •

Products and services (h) Attributes Functions Knowledge Technologies

Processes (h) Core business activities Outsourcing activities Alliances activities Competitive advantages core business activities • Knowledge • Technologies. • • • •

Benchmarking

GAP

Core Competencies (h)

Core Competencies

Core Competencies GAP

Professional core competencies

Professional core competencies (h)

Professional core competencies GAP

COMPANY A

CMPANY B

Operations infrastructure 1) Knowledge Management 2) Information and telecomunications technology 3) Company culture 4) Information systems 5) Organizational structure 6) Human capital management 7) Lidership

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Operations infrastructure 1) Knowledge Management 2) Information and telecomunications technology 3) Company culture 4) Information systems 5) Organizational structure 6) Human capital management 7) Lidership

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The OSKBS general framework that we have already described is a general framework that can be used to generate a speci®c OSKBS framework suitable to a speci®c business context. We customize the OSKBS general framework to a speci®c business context through criteria and questionnaires, and by those criteria that best suit the speci®cations of a given business design. At the same time we give appropriate weight to the criteria and questionnaires. Figure 15 illustrates the process described above. As noted above, the OSKBS is a strategic information system built around the framework of eight factors (criteria) in the questionnaires, and ful®ls the requirements of an extended SWOT analysis. OSKBS is thus also a strategic information system that allows companies to benchmark against world-class competitors, in terms not only of core competences but also of the processes, products, and services produced by the operations of the company's business units. In addition, it also benchmarks the operations infrastructure. Finally the processing of questionnaires corresponding to each of the company competitiveness factors provides us with the results of operations competences and balance sheets. These results and balance sheets can be obtained for the company as a whole or for each competitiveness factor. Some examples of balances and results are given in Figures 16 and 17. The system has been tested and successfully implemented in more than 30 small and medium size European enterprises. Innovation strategic knowledge benchmarking system (ISKBS) Using the same tree metaphor as in the OSKBS, we can establish characteristics of the ISKBS framework similar to those we have established in discussing the OSKBS framework. The frameworks and information systems are similar and we can move from OSKBS to ISKBS considering the equivalent concepts and terms as shown in Table II. The main differences between the two methodologies have already been discussed above in dealing with the differences between the operations process and the innovation process. The system has been tested and successfully implemented in more than ten small and medium size European enterprises.

Implications for manager's Senior managers effectively integrate the SKBS into the overall business strategy in a similar way they integrate other strategy-focused models, such as the balanced scorecard (Kaplan and Norton, 2000) and the intangible assets monitor (Sveiby, 1997). Nevertheless, in the particular case of the SKBS, two new functions have to be performed for ad-hoc teams made up of junior and senior managers. These two functions are competitive benchmarking and competitive intelligence. The bene®ts obtained from the systematic and continued use of SKBS methodology and the strategic information system are summarized below. J learning from one's betters to surpass one's own competitive position;

Figure 15 Speci®c OSKBS framework

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Figure 16 Operations intellectual capital benchmarking sheet OPERATIONS INTELLECTUAL CAPITAL BALANCE SHEET IC B S B.U.1

COGEN S.L.

KNIT

*8,7$5(

A or

ASSETS

LIABILITIES 1,0 2,0 1,7 0,7

1.- PRODUCTS/SERVICES 1.2 Price/Quality relationship 1,3 Embodied services 1,4 Conformance

2.-PROCESSES 2,1 Design 2,2 Prototipes and models 2,8 Suppliers 2,13 After sale service

-1,0 -0,7

2.- PROCESSES 2,3 Dyeing thread 2,4 Finishing 2,5 Dress making 2,6 Ironing 2,7 Packaging and labeling 2,9 Selling system 2,10 Order entry system 2,11 ERP 2,12 ISO 9000

-2,0 -2,1 -3,1 -0,5 -0,5 -1,0 Consolidated Reliability -2,0 Index -1,5 -3,0 -3,0

3.- CORE COMPETENCIES

-1,0

2,1 1,2

3.3 Fashion creativity 3.4 Knitwear design 3.5 CAM computer aid manufacturing 3,6 Market research

-2,0 -2,0 -3,0 -3,0

4.- OPERATIONS INFRASTRUCTURE

-3,0

1,0 1,5

4.1 Knowledge management 2,0 4,2 Information and telecommunications technology 4,0 4,4 Information systems 4,2 4.5 Human capital management 3,2

4.- OPERATIONS INFRASTRUCTURE 4,3 Company culture 4,6 Lidership

1.1 Design 1,5 Fabric quality

1,0 1,3 2,0 1,2

3.- CORE COMPETENCIES 3.1 Suppliers value chain 3,2 Computer aid design

1.- PRODUCTS/SEVICES

37%

Figure 17 Operations intellectual capital benchmarking sheet (detail) IC B S

OPERATIONS INTELLECTUAL CAPITAL BALANCE SHEET B.U.1

COGEN S.L.

KNIT

GUITARE

A or

ASSETS 1.- PRODUCTS/SERVICES 1.2 Price/Quality relationship 1,3 Embodied services 1,4 Conformance

LIABILITIES 1,0 2,0 1,7 0,7

2.-PROCESSES 2,1 Design 2,2 Prototipes and models 2,8 Suppliers 2,13 After sale service

1.1 Design 1,5 Fabric quality

-1,0 -0,7

2.- PROCESSES 1,0 1,3 2,0 1,2

2,3 Dyeing thread 2,4 Finishing 2,5 Dress making 2,6 Ironing 2,7 Packaging and labeling 2,9 Selling system 2,10 Order entry system 2,11 ERP 2,12 ISO 9000

-2,0 -2,1 -3,1 -0,5 -0,5 Consolidated -1,0 Reliability -2,0 Index -1,5 -3,0 -3,0

3.- CORE COMPETENCIES

-1,0

2,1 1,2

3.3 FASHION CREATIVITY 3.4 Knitwear design 3.5 CAM computer aid manufacturing 3,6 Market research

-2,0 -2,0 -3,0 -3,0

3.- CORE COMPETENCIES 3.1 Suppliers value chain 3,2 Computer aid design

1.- PRODUCTS/SEVICES

37%

3,3 Fashion Creativity -2,0 4.- OPERATIONS INFRASTRUCTURE OPERATIONS INFRASTRUCTURE -3,0 - Knowledge on4.-fabrics -0,5 1,0 4,3 Company culture Knowledge 2,0 - Knowledge on4.1printing and management dyeing -1,0 4,6 Lidership 1,5 Information and telecommunications technology 4,0 - Knowledge on4,2design -2,0 4,4 Information systems 4,2 - Knowledge on prototipes and models -0,5 4.5 Human capital management 3,2 - Knowledge on manufacturing -1,0 -Knowledge on fashion trends -3,0 - Knowledge on exhibitions -3,0 - Knowledge on best designers -3,0

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Table II OSKBS and ISKBS equivalent concepts and terms OSKBS

ISKBS

Business unit Products and services Processes Intangible resources Operations infrastructure Core competences Professional core competences Customer needs Operations value chain Results Operations ®gure

Project unit New products and services New processes New intangible resources Innovation infrastructure New core competences New professional core competences New customer needs Innovation value chain Future results Innovation ®gures

J identifying the speci®c competitiveness factors and criteria which are relevant in a given business activity; J through the competitiveness factors framework, enabling the identi®cation, auditing, and benchmarking of the core competences or core knowledge that are the main sources of sustainable competitive advantages; J when using SKBS in an orderly, systematic, and repetitive way we obtain competences statements and balance sheets that complement and complete ®nancial balance sheets, and lead companies to leverage core knowledge; J selecting in a systematic and organized way the necessary information for evaluating relevant factors, core knowledge, core competences, and key intellectual capital; J identifying the key areas in which in-depth benchmarking can be carried out in the future; J promoting organizational learning through assessment teams, benchmarking teams, and strategic teams; J introducing a common language for company managers when dealing with intangible and intellectual assets; J measuring the reliability of the relevant information and the process of acquiring this information; J facilitating the work of the benchmarking and competitive intelligence teams; and J giving to the managers of small and medium enterprises (SMEs) access to knowledge and intellectual capital management in a systematic and organized way.

Conclusions In the knowledge economy, soundly formulated and effectively implemented strategies are still the main drivers of company success, and SWOT analysis is still the most common approach for analyzing business strategy. However, in the new context, classical SWOT analysis does not provide suitable guidance for building an effective strategic management information system. An extended SWOT analysis which takes into consideration the two main streams of modern strategic thought ± the resource-based view and the activity-based view ± is a more reliable foundation. SKBS draws inspiration from the extended SWOT analysis and builds a strategic management information system in which core knowledge is the key issue.

Note 1. The sources of information which have been used in the high level comparison are the following: www.balancedscorecard.org/bscard/bsckm.html; www.sveiby.com/articles/BSCandIAM.html; and www.balancedscorecardview.it/c2003/c0307.htm. Lamotte, G. and Carter, G. (2000), `Àre the balanced scorecard and the EFQM excellence model mutually exclusive or do they work together to bring added value to a company?'', version 2 prepared for the EFQM Common Interest Day, March 17.

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