The Two Families of Organizational Assets in a Knowledge-Era Organization
June 16, 2010 by Mary Adams
As we begin to broaden our discussion of intangibles, there is a distinction we want to make about the organization of businesses. It is inspired by the Value Chain graphic created by Michael Porter back in 1985.
This simple graphic is a great illustration of the generic business model for the industrial era. Most of us still carry this vision around in our heads even though the average organization no longer looks like this. Porter’s graphic reflects the fact that most organizations in the industrial era created a product, usually in a pretty linear fashion. This was the value creation process of the business. To facilitate the value creation side of its business, every organization also had (and still has) a series of support services. Porter’s original set included including firm infrastructure, human resource management, technology development, and procurement. We have modified these somewhat to focus on human resource management, information technology, finance and accounting.
The simple linearity of the value creation process in Porter’s graphic was in a way a representation of the production line in a factory. You will need a different vision of the value creation process that is more appropriate to the knowledge era such as the Lego model below (explained in this post on the knowledge factory):
But it still helps to make the distinction between the two basic functions: value creation and support services. When talking about intangible capital, it is definitely helpful to make this distinction just to be clear. Some may question the classification of information technology (IT) as a support layer since it is so closely intertwined with the rise of the knowledge era. Yet, IT is relatively mature as a business function that supports the work of the company, its value creation process. That aspect of your IT function can and should be seen as a support service to the rest of the organization.
Tomorrow, I’ll start digging in on the components of intangible capital.
Adapted from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization
[...] explained in a past post, the knowledge factory is an updated version of the Value Chain diagram developed by Michael Porter. When it came time to organize the kind of business depicted in [...]
[...] explained in a past post, the knowledge factory is an updated version of the Value Chain diagram developed by Michael Porter. When it came time to organize the kind of business depicted in [...]