Week 5 - Case Study: Intellectual Capital at Skandia AFS

Question 1

Skandia in their bid to make intellectual capital (IC) tangible treated IC systematically

through they highlighted two broad category of these assets, firstly the competence base

(employee’s professional insights, their applied experience and organizational learning),

then a well-managed performance procedure (customer management, the operations,

processes, information technology, business development and logistics) which eventually

add to the total value of the company.

Skandia’s IC classification

The below classification of IC is accepted by various researchers which is a convergence

on various categories based on Sveiby (1997), MERITUM (2002), and Bontis (2002).

Human: employee’s professional insights, applied experience and organizational learning

Relational: customer management, 12,000 brokers, 500,000 customers

Structural: operations, processes, information technology, business development and

logistics

Question 2

For AFS, IC is important because it increases the company’s value and makes their

business operations more efficient, promoting strategic organizational learning and

teaching, and a balanced management focus on hidden values which encourages

organizational survival.
a. The expenditures in IC increased the company value and makes business operations

more efficient, consistent and productive. It also energized and charged both the national

and transnational operations,

b. Having a reduced startup time for a new office by one third or more results to a savings

that could have gone into cost. Secondly reduction travelling and training expenditure in

the area of competence development, from investment in computer-based training and

network. The savings each year are projected to be several times the cost of developing

the systems. Others benefit include increased speed of strategic learning, systematic

focusing of leadership, and increases in valuation of the company over the book value.

Question 3

IC is measure and managed in AFS through a method in which each of the operating

units of Skandia located in different region identify the five most relevant and critical

intellectual capital items for itself, and from these sets, a set of three major intellectual

capital categories is derived. Which were customer capital ratios, human capital ratios,

and structural capital ratios. Within each of these dimensions, several intellectual capital

ratios can be defined. Each intellectual capital item is then discussed with management

and accounting division to establish a baseline ratio. The ratio is now used to measure

how well the business is doing in terms of that intellectual capital item. IC is managed

through investment in training and development of its employees, placing value on their

applied experience and competence, and seeks cross-fertilization within the organization.

Question 4
a. The Director of Intellectual Capital at Skandia AFS is charged with enhancing and

systematically developing the intellectual capital of the division, with the mission to identify

and improve the visibility of intangible and non-material items, to capture and package

these items for transfer to users, to cultivate and develop these items through training

and knowledge networking, and to capitalize and economize on these items through rapid

recycling of knowledge and increased commercialization.

b. What led Skandia AFS to the concept of intellectual capital and development of the

position is the concern with speed of learning, recycling of applied experience, and

international transfer of skill. IC was not assigned any value in the organization despite it

been the essential backbone. This they did by consciously making sure that the transfer

of skills, learning, and experience takes place through the procedures it puts in place.

Reference
Bontis, N. (2002), World Congress on Intellectual Capital Reading, Butterworth-

Heinemann, Boston, MA.

MERITUM (2002), MERITUM Guidelines for Managing and Reporting on Intangibles,

Measuring Intangibles to Understand and Improve Innovation Management – MERITUM,

Madrid.