MEASUREMENT FRAMEWORK FOR INTERNALLY GENERATED INNOVATION
KNOWLEDGE ACCOUNTANCY in the Intangible Economy
In order to “account” a knowledge contribution and to classify it in an accounting plan, we need to contextualize the “sender” and the “receiver” of each knowledge contribution, and each knowledge contribution will be quoted with a value proportional with the importance of his marginal business value to the total company market value.
To obtain the contextualization of the knowledge contribution we consider the company virtual business space like a platform where we execute the tangible and intangible values business transactions, we set up the company value drivers and we unroll the intangible values negotiations in order to fix the marginal business value of an intangible asset, the partners, stakeholders.
Every value-chain contributor can have their representation in this virtual business space if they are interactively exchanging value contributions with the company values centers and contribute to the company productions chains.
The intangible value flows are composed by the intangible value contributions validated like business marginal value for the all-ready intangible assets recognized by the company.
In the Value Center’s there is the Balance sheet containing all the value transactions validated by the “sender” and “receiver” and this is happened for each value center on the Platform.
The virtual business space of the company will be wired with a Nest created by meshing the communication channels between the value centers, necessary to exchange the contributions of intangible business value between the immaterial value centers of the company.
The virtual business space contained all the transactions journals between various “senders” and “receivers” with transactions and values negotiations. That helps us to check the intangible assets market prices and understand the valuations differences for the same intangible asset but used in different business combinations.
The virtual business space represents the Company Intangible Values Accounting domain.
If we unroll the net from the nest, we get a matrix.
In this matrix we represent the company productions: competitive advantage, sold production and the give-away production to partners and market.
The first dimension of the matrix is the internal competitive advantage production, the next round-the-corner dimension is the sold intangible value production, and again next-round-the-corner is the giveaway to the partner and market production, and last dimension is the total intangible production of the company.
For each kind of production there are value chains including different operations.
In the Digital Economy the Firm Knowledge can be everywhere at every moment.
The knowledge transmission support can be tangible (CD, disk, algorithm, draw, document or file), can be loaded in a digital device, machine, computer, can be instantly calculated by wire or networks.
Knowledge like business assets and values are generated by the human during his business activities.
All the company activities at the initial moment, are starting with a knowledge base, this knowledge base is necessary to execute the first company activities. We locate this knowledge asset in a value center which is like a brain neuron at the initial life. The knowledge asset contains also the best practices collected after action in other circumstances for the same actions.
All the company value centers will be connected by a network, like the brain synapses connecting neurons making possible the fast interactions between all company value centers, one by one or multiple at the same time.
This framework can integrate the tangible and intangible assets value contributions to achieve complete transparency and accountability of the intangible value generated in all the companies’ activities with complete traceability of each intangible value transaction.
Knowledge, competence, partnership are the basic intangible values, and they will compose all the rest of others intangible company values.
The best way to check the company market intangible value assets is to check how much knowledge, contributions per day, or week, or month the company validated in his virtual business space by his framework.
Start-up best first investment is buying innovative deep knowledge and entrepreneurship. The activities don’t need to be chained but is essential to be nurturing with the “Knowledge Engine”.
What is a “Knowledge Engine”? Is a knowledge mining robot with mining capabilities on multi-dimensional layers and depths surrounding the main business domain co-responding to the business goal of the company.
Example:
In my different entrepreneurial roles, I’ve been involved for 20 years in a start-up in SAP implementation activity: The Company “SAP Romania” created in 1995 after an agreement signed with SAP founder Dietmar Hopp, has the challenge to developed the Romanian version of SAP R/3, and configure the SAP R/3 the Romanian version for the biggest refinery in eastern Europe with FI, IM, CO, PM, MM, SD, modules for hundreds of users in less than 12 months.
In Romania in 1995 was no SAP consultancy. First step was to hire experts in various business areas and train them in SAP Academy in Berlin for 6 month, 12 hours per day.
The challenge to implement SAP R/3 with a Romanian version in a completely different business financial and logistic business environment, (old communist accounting& financial system), was very ambitious, because the SAP R/3 German version wasn’t helpful.
We signed with the customer 12-month time frame, for all the six modules implementation of the SAP Romanian version that will be developed by us in the same 12-month time frame.
The challenge was considerable.
We develop our multi-value platform like the company virtual business space, and we had to develop very fast the SAP knowledge from scratch.
We split the SAP implementation process in 258 knowledge hubs around the 258 groups of activities, we create a value center for each knowledge hub. We assigned the management of each knowledge hub to a team of trained SAP consultants, their task was to collect, analyze and validate the different value contributions linked to the specific knowledge.
We create a continuum knowledge flow around the 258 knowledge hubs, and we convert the knowledge in execution procedures and configuration guides, also testing procedures. For each configuration activity we develop a document after-action, this configuration guide was updated operantly and started to be the base for the SAP implementation activity.
Each knowledge value center developed a training guide and transferred it in a Competence Value Center with different consultants in charge with the training of the new SAP consultants, and we multiplied by five the number of consultants on SAP projects in 3 years.
We set-up a Knowledge Drill Engine that helps us to phagocyte the thousands of documentations related to the SAP implementations and return on projects.
The business goal was to formulate a business process model containing the implementation process: rules, actions, procedures, work break-down, test-scenarios.
This implementation methodology, evolved through the next years and at the end was a perfect tool to achieve Romanian market leadership in SAP implementation projects with a very competitive implementation price.
Using the same innovation methodological framework, we have set up a continuous knowledge production chain capable of rapidly producing new knowledge resulting from the evolution of technology and business rules.
Project take-aways:
In order to develop FAST from SCRACH knowledge, first we must fix the business virtual space around the knowledge business purpose with the different knowledge production types like a matrix wire raping all the company value centers: knowledge, competence, partnership.
The goal of the “Knowledge Framework” is to find Knowledge missing to achieve the Business goal or Knowledge related to the mission business goal and not identified initially.
The condition to accept the new discovered knowledge contribution is his value contribution to the business goal fixed to the knowledge framework and further to the Company Marginal Value responding to the improving the business purpose for products and services through better Financial Marginal Value.
The depth and the size of the mining surface for the zone is conditioned by the business value contribution of the knowledge found.
The knowledge expansion is direct related to the knowledge depth exploration, for each profusion level, will exist a knowledge expansion surface collecting the knowledge corelated with the mining level. The Knowledge Engine can be a robot, but his algorithm driven activity must be monitories by Human to filter the findings and make algorithm corrections.
The knowledge depth mining and surface exploration from the Knowledge Engine will be correlated based on the business performance algorithms or the derivate ones from the company main business purpose.
Marginal analysis is an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. Companies use marginal analysis as a decision-making tool to help them maximize their potential profits.
The marginal intangible knowledge value of the enterprise contains the measurement of the intangible marginal contribution of knowledge as an impact on the intangible asset of the enterprise. The knowledge contribution transmitted to the Company VC (Value Center) is a source of intangible business value for the Company and the Total Intangible Values Contributions (TIVC) constitute a KPI (Key performance indicator) to measure the impact on the business added value created in the company.
The Human assisted by computers and machineries, robots, focusing on the activity business goal will mine and drill through many knowledge levels to extract the deep knowledge, but also to expand the knowledge level surface. The primary knowledge will be the dedicated to the Company business Purpose, but immediately after, the branches from the main root will be deep mined and expand the knowledge levels, so others knowledge objects which will be linked to the primary root will be discovered.
Concentration means accelerating reasoning cycles, multiple interconnections and new perspectives.
Example:
MIT researchers have developed a type of neural network that learns on the job, not just during its training phase. These flexible algorithms, dubbed “liquid” networks, change their underlying equations to continuously adapt to new data inputs. The advance could aid decision making based on data streams that change over time (“Liquid” machine-learning system adapts to changing conditions | MIT News | Massachusetts Institute of Technology)
All this Neuronal Network composed by the value centers is the most important company structure and is treat like the intangible asset with the most business impact for the company resilience and market value potential.
This neuronal network must be “liquid” that makes them flexible to change and adapt instantly.
This first collecting and extracting knowledge phase will be followed by the consolidation and evaluation phase.
Each collected information will be evaluated by regard with the firm business purpose, and valuated proportional with the generated marginal business financial value. In order to make this possible the knowledge assets must be consolidated in significant knowledge aggregate covering the definition of the intangible assets.
Intangible Asset Consolidation means to integrate different assets by regard on their nature: knowledge, competence, partnership, under the primary business root.
The reason for a Consolidation is to complement the business utility of the asset for a better financial valuation of the aggregate asset, improving drilling depth and expansion area of knowledge applicability domain.
The third knowledge management phase is the valuation and distribution of the knowledge assets.
Valuation of the knowledge asset means the existence of a value measurement unit common to the same kind of assets and mainly the same business purpose. The value range of the measurement unit is depending on the exactness and accuracy of the evaluation of the different knowledge contributions by regard to their impact on the business purpose.
The measurement unit can be monetary if we can estimate the marginal business value direct in money or can be in an intermediate measurement unit like number of units whatsoever or time processing connected to the production.
The different measurement units used for the different intangible assets will be contained in the Knowledge Framework. The value in business is dependent on the business environment and intangible asset has a double -materiality sometimes so a composite scale.
The knowledge contribution value depends on the context in which it will serve, therefore the valuation must be on a direct trading market where the vendors and purchaser are usually trading the same kind of intangible assets.
The direct view on the intangible value assets transactions is mandatory to have the fair value knowledge, the value centers owners are direct traders in the intangible assets market, so the intangible assets values are obtained like any kind of asset valuation in an active market.
The intangible assets market is the way to value a huge number of very different and sometimes very similar products with unlimited uses with very different purchasers and many producers.
The intangible assets market is a big help to defend the counterfeit and to mark the limits of intellectual property in the joint innovation projects, or collaborative projects, to understand each one contribution, the authorship proof will be entirely documented by the frame.
Intangible assets market is the battlefield for the financial analyst, without disclosure, audit and all types off managers wishing to find the knowledge flows and the productive communities generating this knowledge.
The tremendous quality of the intangible asset is that its value is unlimited, so we don’t need to exchange it to its maximum value one’s but many to any kind of value. The total value for an asset is the sum of all traded values and it can be big if we distribute it in many places in the company.
The spread of knowledge value is an important KPI for the knowledge quality and value and can be used to judge the company capacity to adapt and develop business, or to be resilient.
And finally, knowledge must be converted into competence to create the coherent basis for bringing all knowledge into production at its marginal financial value.
The conversion of knowledge into competence will be done in the competence value center (VC) as in our time the universities fulfill this task, they convert research from any source and even their own research center into course program for students, transforming knowledge into National Financial Wealth.
The conversion from knowledge to competence must be fast if not we lose the the financial marginal value of knowledge, so the circulation from many knowledge value center to very many competence value center must be done on the platform, as the biggest digital companies are already doing today.
Is this simple? NO, it takes many years or decades to build -in- platform the thousands of procedures, business rules able to: detect the right information, to extract it and to consolidate it in comprehensive knowledge assets.
The Competence Value Center is like Knowledge Value Center a conversion Engine where Robots have little place to day AI technology, but later the controls and corrections can be AI based on RPA (Robotic Process Automation).
The actual Stade of technology in the new working at-distance machine interface will achieve rapid transfer Knowledge-RPA-Competence progress and loading much competence in the machine: driving, installing, cooking, sailing, medical tests. The machine will be able to judge alone (to arbitrate) and predict better (intuition).
The Companies must start building the new knowledge management system based on the close relation between the Human and the Machine if not they will lose business and is not the old ERP system that can save them.