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Hie Evolution of Intellectual Capital


Hie E-Dimension

The advent of the Internet created a new and different set of opportunities and challenges involving the development and implementation issues of intellectual capital. Chapter 4 explores what these changes mean to organizations: from "atoms" to "bits" the new business model from "just-incase" to "just-in-time" people as the owners of intellectual capital case study: Xerox. "The future arrives at such a pace that physical capital becomes more of a liability than asset. Increasingly, value resides in informa­tion and relationships - things you can't see at all and often can't measure." Stan Davis and Christopher Myer, business writers, futurists, and consultants with Ernst & Young.


The e-dimension has brought about a whole new set of opportunities that did not exist before, as well as the chance to reframe much of the basic work of organizations. With the e-shiftfrom "atoms" to "bits" the speed of transactions became instant, location became irrelevant, and intangibles became the currency of exchange. The e-dimension makes the world far more "virtual" than at any previous time in history.

The e-dimension takes everything a step further. Tom Stewart said that the information revolution was about a number of simultaneous and related transformations: globalization, computerization, economic disintermediation, andintangiblization.1 The e-dimension wraps around all of those transformations and increases the warp speed in which things take place, as well as the options for how events take place. The change is not just technological, but also strategic, touching every aspect of day-to-day activities.

The e-dimension has accelerated the incorporation of knowledge into the design, production, distribution, and use of goods and services. For example, one of the major innovations of the pre-Internet era, the creation of the AMR's American Airlines Sabre reservation system, was an enormous advance in allowing airlines and travel agencies to access travel information and make reservations far more rapidly. In the Internet environment, that access has leapfrogged to anyone who has a computer and an Internet hook-up. The expanded power of information and choice is accessible to anyone who has Internet access anytime, 24 hours a day, 365 days of the year.

The e-dimension has radically reduced the transaction costs for everyone at every point in the production and consumption network. Costs of production decrease because of telecommunications and computer efficiencies and a new flexibility of production mushrooms. This is true both internally in organizations and externally for customers.

It is a transformation that has taken place in virtually every industry. In banking, an investor is able to move money at the push of a button, changing its form from cash to stocks, to bonds, to money markets. The bank, on the other hand, can keep track of all of its markets and determine where its most efficient and effective operations are taking place at virtually the same time.

The same access and managing opportunities are available across all industries.

Thisisenabledby the change in the make-up of what we transact. The physical nature of goods and services as well as their use has changed forever and has been dematerialized. In fact, there is a convergence of what goods and services are at this point. Companies whose major outputs were physical goods, whether it be computers (e.g. IBM) or tractors (e.g. Caterpillar) are now seeing the real value to customers as the "solution" services they provide.

The previous hard distinctions between goods and services are melting down and the next generation of terms may be coming into play. Goods are becoming "smarter" and being composed of more service capabilities, and services are coming in different forms, and in many cases, knowledge forms. Because of advanced telecommunication links it is now possible for a surgeon in a major health center in one part of the world to demonstrate, and even lead, an operation via the Internet to a field hospital in a remote rural areahalf a world away. That demonstration can be captured, archived, and recycled repeatedly. In a sense, a lifesaving service that previously was directly available in a limited in-person or video format has now become an unbounded, accessible, digitized set of opportunities. The surgeon's craft now has a global reach at a far lower cost and, potentially, a far larger effect and market. The healthcare institution has a vaster set of services it can offer, and the customers, whether they be healthcare providers or patients, can bring into play far more advanced medical skills and technology at a much faster rate. This is generation of wealth on an unprecedented scale, due to leveraging intellectual capital via the e-dimension of the Internet.

The same explosion of capacities and global access to brainpower and information is true in all areas. Whole new fields have arisen (i.e. e-learning, e-publishing, etc.) but even more importantiy, having instantaneous access to strategic and tactical information in a number of formats, plus the ability to disseminate those knowledge resources easily to people anywhere, anytime, represents a wholesale change in ways of doing business.

Not only are information and knowledge becoming available, but the ability on the part of organizations to digest and process these new inputs, and then redesign and reposition themselves, is of great strategic importance. Effectively joining together separate capabili­ties in technology and in collaboration geometrically enhances rapid learning, work deployment, and effective implementation. That fusion will be the basis for the competitive advantage of one organization or network over its challengers. It is the e-dimension that facilitates this fundamental shift.

Previously, goods and services were mostiy composed of a lot of material or labor, held together by a little bit of knowledge, and could have been considered "congealed resources." In the present equation, we are dealing in "congealed knowledge" where the intellectual or knowledge content is at a far higher proportion to the physical inputs.

The e-dimension permits knowledge to be infused far more broadly and speedily, and from more participants than ever before. Whole new dimensions of industries have emerged that are far more robust and less expensive than previous iterations. E-conferencing can bring virtual teams of people together to create, review, change, and finalize designs. The real value increasingly becomes the people who are innovating and operating the processes. The make-up of these teams can easily become much more diverse and multitalented and not just a limited group of people that couldmost convenientlybebrought together due to constraints of travel cost and time.


A major challenge that organizations face is to rethink their busi­ness model in light of their new available e-capabilities. Organizations can stay within their existing business model and primarily focus on becoming more efficient at what they do, repaving the cowpaths to concentrate on cutting costs and saving time, or they can take advan­tage of their new options to redesign their business model and become "sense and respond" organizations (Table 4.1).