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ScottA.SnellCornellUniversity393IvesHallIthaca,NY14853CompetingthroughKnowledge:TheHumanCapitalArchitectureIBM“Youcangetcapitalanderectbuildings,butittakespeopletobuildabusiness.”

ThomasJ.Watson,IBMDidIBMforget?

$168billion(TobinsQ=2.1)Hardware,software,andservicesNobelprize-winningscientists3,768patents(1993-1995)What’sHappeningToday?

IndustryChanges

GlobalizationInformationtechnologyNeedfor… OrganizationalagilitySpeedInnovationCost

Knowledge-basedstrategiesCorecompetenciesInnovationExternalpartnershipsLeadingto…NewBusinessEquationCoreCompetence……isabundleofskillsandtechnologiesthatenablesacompanytoprovideaparticularbenefittocustomers.

HamelandPrahalad,1994

SONY

Miniaturization PocketabilityFEDERALEXPRESS

Logistics On-timedeliveryHONDA Enginedesign/mfg. ReliableperformanceMOTOROLA

Wirelesstechnology Untetheredcomm.

Core BenefittoCompetence CustomerKnowledgeTechnologiesProcessesRelationshipsCRITERIAvaluableuniqueextendablelearning

BenefitsVALUE= Costs

UNIQUE=(socialcomplexity+causalambiguity)

LEARNING=(experiencexchallenge)CompetingThroughPeopleIdentify&developcoreskillsIntegratediverseactivitiesRespondwithagility&speedEmpoweractionInnovateCoreCompetence……isabundleofskillsandtechnologiesthatenablesacompanytoprovideaparticularbenefittocustomers. --HamelandPrahalad

KNOWLEDGE-customer-technology-operations-managing

PROCESSES-customersegmentation-just-in-time(hrs)-masscustomization-buildtoorder(AIM)-ROICmetrics-experimentation

TECHNOLOGY-Premierpages-softwareinstallation-TPMtriggers(parts,service)-customerpurchasingsystems

RELATIONSHIPS-customerintimacy(Boeing)-Platinumcouncils-supplierpartnerships(Sony)-employeeinvolvement-thirdpartyservicemaintainers(TPMs)-distributionagreements(UPS,Airbourne)“VirtualIntegration”Leadingto…

ValueUniquenessLearning“Alow-valueproductcanbemadebyanyoneanywhere.Whenyouhaveknowledgenooneelsehasaccessto--that’sdynamite.Weguardourintellectualassetsevenmorecarefullythanourfinancialassets.” --RoyVagelos,formerCEOMerck

KNOWLEDGE-customer-technology-operations-managing

PROCESSES-customersegmentation-just-in-time(hrs)-masscustomization-buildtoorder(AIM)-ROICmetrics-experimentation

TECHNOLOGY-Premierpages-softwareinstallation-TPMtriggers(parts,service)-customerpurchasingsystems

RELATIONSHIPS-customerintimacy(Boeing)-Platinumcouncils-supplierpartnerships(Sony)-employeeinvolvement-thirdpartyservicemaintainers(TPMs)-distributionagreements(UPS,Airbourne)“PositivelyOutrageousService”SouthwestAirlines

KNOWLEDGE-

microbiology-biochemistry-microbiology-imunodiagnostics(antibodies/conjugates)

PROCESSES-R&D/Mfg.-bioconjugation-antibodypurification-PCRamplification-DNAhybridization-TQM-commercialization

TECHNOLOGY-immunoassays-ELISA(serum/blood)-rapiddiagnostics-DNAbased

RELATIONSHIPS-CRC-DT,CDC-U.S.Army-WorldHealthOrg.-universities-distributionnetwork-employee(science/mkt)C2=“RapidLearning”Leadingto…Anorganizationatthefrontierofitsintellectualfieldismorelikelytostayatthefrontier.Itcanattractandchallengemoreandbetterintellectthanitscompetitors.Bysolvingmoreadvancedproblems,ithasmorecapacitytosolveothers.Andsoon.” JBQuinn

ValueUniquenessLearningBIOTECHINC.

Benefits= CostsCombinationofpeopleandsystemsleadsto...HumanCapitalSocialCapitalOrganizationalCapitalBioTech,Inc.:IntellectualcapitalPeopleSystems

KNOWLEDGE-microbiology-biochemistry-bioconjugation-imunodiagnostics

PROCESSES-R&D/Mfg.-bioconjugation-antibodypurification-PCRamplification-DNAhybridization-TQM-commercialization

TECHNOLOGIES-immunoassays-ELISA(serum/blood)-rapiddiagnostics-DNAbaseddetection

RELATIONSHIPS-CRC-DT,CDC-U.S.Army-WorldHealthOrg.-universities-distributionnetwork-employee(science/mkt)C2=“RapidLearning”PEOPLESYSTEMSCoreCompetence

Howdoeshumancapital

contributetothecorecompetence?ValueUniqueResourcesneedtobe:

BenefitsVALUE= CostsDrivesinnovationRespondstocustomerdemandsProvidesexcellentcustomerserviceAchieveshighestqualityInstrumentalinprocessimprovementsDevelopsnewbusinessopportunitiesDirectlyaffectsefficiencyandproductivityMinimizescostsofproduction,service,deliveryNotwidelyavailableinthemarketCannotbeboughtorappropriatedDifficulttoimitateorduplicateSpecializedKSAsDifficulttoreplaceCustomizedtoourfirmDevelopedthroughon-the-jobexperiencesDistinguishesusfromourcompetitorsR&DManufacturing/OperationsDistributionSalesSalesTMTCustServHRR&DRapidsFinCustomerServiceMfgR&DR&DPartnersCoreKnowledgeLowVALUEhighLowUNIQUEhighBIOTECH,INC:MappingHumanCapitalKEYFinanceHRTMTMISMfg/OperationsMarket/SalesR&DQualityBiologicalsCust.ServiceRapidDiag.Legal/Reg.DistributionRapidsScottA.Snell,CornellUniversityC2=RapidLearningHRLegalMISBiologicalsFinQualityTMTCompulsoryKnowledgeIdiosyncraticKnowledgeAncillaryKnowledgeHighValueLowValueGenericCoreIdiosyncraticAncillaryCompulsoryUniqueHumanCapitalArchitectureHumanCapitaluniquevalueHRMSystemEmployModeCoreHumanCapitalHighValue:DirectlinktocorecompetenceHighUniqueness:Firm-specificknowledgeandskillsEmploymentMode:knowledgeworkEmploymentRelationship:organization-focusedExamples:softwaredevelopers(Microsoft)drugresearchers(Merck)fundmanagers(Fidelity)“gold-collar”workersHighValueHighValueLowValueLowValueUniqueGenericGenericIdiosyncraticIdiosyncraticAncillaryAncillaryCompulsoryCompulsoryHumanCapitalArchitectureCoreHighValueHighValueLowValueLowValueUniqueGenericGenericCoreCoreIdiosyncraticIdiosyncraticAncillaryAncillaryHumanCapitalArchitectureHumanCapitalArchitectureCompulsoryEmploymentMode:traditionaljobEmploymentRelationship:job-focusedExamples:staffaccountants(Andersen)salespeople(Sears)truckdrivers(UPS)HighValue:DirectlinktostrategyHighUniqueness:GenericknowledgeandskillsCompulsoryHumanCapitalHighValue:DirectlinktocorecompetenceLowUniqueness:GenericknowledgeandskillsEmploymentMode:contractworkEmploymentRelationship:transactionalExamples:assemblers(Nike)clericalworkers(Halliburton)payroll(Continental)catering(ARAMARK)HighValueHighValueLowValueLowValueUniqueGenericGenericCoreCoreIdiosyncraticIdiosyncraticCompulsoryCompulsoryHumanCapitalArchitectureHumanCapitalArchitectureAncillaryAncillaryAncillaryHumanCapitalLowStrategicValue:OperationalroleLowUniqueness:GenericknowledgeandskillsEmploymentMode:partnershipEmploymentRelationship:collaborativeExamples:“wildducks”(IBM)designengineers(w/Boeing)trainers(Merck/Forum)authors(McGraw-Hill)HighValueHighValueLowValueLowValueUniqueGenericGenericCoreCoreIdiosyncraticIdiosyncraticAncillaryAncillaryCompulsoryCompulsoryHumanCapitalArchitectureHumanCapitalArchitectureIdiosyncraticHumanCapitalLowStrategicValue:IntermittentlinktocompetenceHighUniqueness:SpecializedknowledgeandskillsTRADITIONALJOB-BASEDEMPLOYMENTALLIANCE/PARTNERCONTRACTWORKKNOWLEDGEWORKS-specificjobT&D-short-termT&D-currentjobT&D-external$-internalequityS-immediateperform$-groupJob-narrow/simple$-short-termPA-qualityJob-customized$-bonus$-performance$-industryexperienceS-strategycontribute$-salaryJob-rotationS-solveproblemsS-bestJob-security$-highJob-empowerPA-strategycontributeT&D-investmentPA-workw/othersT&D-OJTT&D-teamT&D-continuousS-potentialS-promotew/inPA-developJob-dynamicJob-standardized$-hourlyKEYJobdesignStaffingTrainingAppraisalCompensationLowVALUEhighLowUNIQUEhighPlottingHRPracticesSTUDY:152multi-productfirms>200employeesCEO,VPHR,lineexecsLepak&Snell,2001RewardsAppraisalDevelopmentStaffingJobDesignenriched&empoweredcustomizedaptitude(abletolearn)promotefromwithincontinuouson-the-jobfirm-specificfocusonstrategiccontributiondevelopmentalexternalequity(highwages)payforknowledge,experience,seniorityownershipandperksCOMMITMENT-BASEDHRMSYSTEMHighValueHighValueLowValueLowValueUniqueGenericGenericIdiosyncraticIdiosyncraticAncillaryAncillaryCompulsoryCompulsoryHumanCapitalArchitectureCoreCoreHumanCapitalEmploymentMode:knowledgeworkEmploymentRelationship:organization-focusedRewardsAppraisalDevelopmentStaffingJobDesignclearlydefinedmoderatelyempoweredexternalrecruitmentachievementlimitedtofirm-specificshort-termfocusdevelopmentalfocusonperformanceexternalequity(marketrate)payforperformanceHighValueHighValueLowValueLowValueUniqueGenericGenericCoreCoreIdiosyncraticIdiosyncraticAncillaryAncillaryHumanCapitalArchitectureHumanCapitalArchitectureCompulsoryPRODUCTIVTY-BASEDHRMSYSTEMEmploymentMode:traditionaljobEmploymentRelationship:jobfocusedCompulsoryHumanCapitalRewardsAppraisalDevelopmentStaffingJobDesignwell-definedlimitedscopeoutsourced(perhaps)contractforaspecifictasklimitedtorules&proceduresadministrativehourlyorcontract-contingentHighValueHighValueLowValueLowValueUniqueGenericGenericCoreCoreIdiosyncraticIdiosyncraticCompulsoryCompulsoryHumanCapitalArchitectureHumanCapitalArchitectureAncillaryAncillaryCOMPLIANCE-BASEDHRMSYSTEMEmploymentMode:contractworkEmploymentRelationship:transactionalAncillaryHumanCapitalRewardsAppraisalDevelopmentStaffingJobDesignteam-basedenriched&autonomousabilitytocollaborateachievementcontinuouson-the-jobfirm-specificteam-orientedgoalaccomplishmentgroup-basedincentivescontract,salary,pay-for-knowledgeHighValueHighValueLowValueLowValueUniqueGenericGenericCoreCoreIdiosyncraticIdiosyncraticAncillaryAncillaryCompulsoryCompulsoryHumanCapitalArchitectureHumanCapitalArchitectureCOLLABORATIVEHRMSYSTEMEmploymentMode:partnershipEmploymentRelationship:collaborativeIdiosyncraticHumanCapitalHumanCapitalArchitecturelowUniquenesshighlowStrategicValuehighHumanCapitaluniquevalueHRMSystemEmployModeRelationalExchangeTransactionalInternalizationExternalizationIdiosyncraticHCMode:PartnershipHR:Collaborative-selectonpastexperience-developtherelationship-evolvingscope-rewardsforideasCoreHCMode:KnowledgeworkHR:Commitment-based-staffbasedonpotential-develop(firm-specific)-extensivepay&benefits-autonomy/self-direction-mistakesareimportantCompulsoryHCMode:TraditionaljobHR:Productivity-based-staffbasedoncurrentskill-lessdevelopment-marketwage-focusonSTperformance-mistakesabovethewaterlineAncillaryHCMode:ContractworkHR:Compliance-based-standardize/simple(outsource)-focusonrules&procedures-narrowscope-erroravoiding-hourlypayOneflawinknowledgemanagementisthatitoftenneglectstoaskwhatknowledgetomanageandtowardwhatend.Knowledgeshouldbemanagedwithinthecontextwherevalueiscreated.--TomStewart…LinkBackToCoreCompetence.LowVALUEhighLowUNIQUEhighBIOTECHINC:MappingSocialCapitalTMTRapids&Ext.PartnerR&D&GovernmentQualityTeamProduction&TMTMarketing&SalesFOCUSON:GovernanceTMTCultureValueChainTaskEnvironmentStakeholdersRemoteEnvironmentProduction&RawMatSupR&D&SuppliersR&D&ProductionTechSupport&CustomerR&D&CustomerR&D&QualityTMT/R&D&Cust.Service&CustomerCulture(TMT)TMT&U.S.R&D*TMT&U.S.R&D*TMT/R&D&U.S.Mfg.TMT&U.S.R&DTMT&CustomerR&D&ExternalR&DGovernanceMarketing&CustomerR&DTeamProduction&SalesMIS&R&DProductionTeamProduction&QualityR&D&SalesSales/TMT&DistributorsScottA.Snell,CornellUniversityPATTERNS:ExplicitTacitTransactionalRelationalEffectivenessEfficiencyLowVALUEhighLowUNIQUEhighMapping

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