Pilot project I (2004)

Project titel: “Intellectual Capital Statement – Made in Germany” phase I
Project status:  concluded
Project partner: Federal Ministry of Economics and Technology, 14 Small and Medium-sized Entities (SME)
Projekt duration: October 2003 – September 2004

Starting situation

Knowledge and innovation advantages as well as efficient handling of knowledge are the decisive competitive advantages today. In addition, the systematic presentation of company-specific core competencies and work structures to clients and investors has become a decisive success factor. Conventional balance sheets and controlling instruments are not sufficient for this purpose, since intellectual capital, such as special know-how and good business relationships, are usually not taken into account. The intellectual capital statement is an opportunity to make these intangible resources transparent and thus to evaluate and manage the “soft” success factors.

This was the starting point for the German Federal Ministry of Economics and Labour (BMWA) to take up the topic of intellectual capital reporting and commission the “Arbeitskreis Wissensbilanz” to initiate a nationwide pilot project. The aim of the project was to make the existing international experience applicable for German SMEs. For it is precisely Germany as a business location that relies on the efficient use of its intellectual capital and the exploitation of its innovation potential in order to strengthen its competitiveness in the long term. This gave birth to the project’s title: “Intellectual Capital Statement – Made in Germany”.

Implementation

Small and medium-sized enterprises (SMEs) should be empowered to quickly and cost-effectively identify, define and communicate their specific intangible assets to key decision-makers. This should support the acquisition of customers, partners and new employees and facilitate the procurement of equity and debt capital. With these concrete objectives in mind, “Arbeitskreis Wissensbilanz” launched the call for participation in the first German intellectual capital statement project for SMEs.

Based on the practical experience of the participating international expert group, an adapted procedure for intellectual capital reporting in German SMEs was developed. This essentially consisted of three workshops with a representative internal project team moderated by external experts and interim surveys of relevant key figures of the company. In 14 pilot companies from a wide variety of industries, the “Arbeitskreis Wissensbilanz” systematically implemented this procedure and continuously analysed the findings obtained in this process from a methodological point of view in order to optimize the benefits of the instrument for business practice.

All project results were presented at a final conference at the BMWA headquarters and discussed with journalists and experts. Rezzo Schlauch, the spokesman for small and medium-sized enterprises in charge of the BMWA, emphasized the forward-looking function of the intellectual capital statement and the ever-increasing importance of the soft success factors for German SMEs.

Findings

With the method of intellectual capital reporting developed in the pilot project, it is now possible to record and evaluate intangible assets and present them in a way that is appropriate to the target group. This enabled the participating companies to uncover potential for improvement in the use of knowledge and to present the management of soft success factors to important stakeholders, such as customers and banks, and to prove them with “hard” facts. In addition to the external presentation of performance and innovation capability, the intellectual capital statement shows potential for improvement and provides a basis for decision-making for targeted change measures.

Thus, the intellectual capital statement is a strategic management tool that can be used to plan and monitor internal organizational development and can also be used as a marketing tool in the external company presentation.

In order to make the experiences of this first phase of “Intellectual Capital Report – Made in Germany” available to the entire German SME sector, “Arbeitskreis Wissensbilanz” developed an intellectual capital statement guideline that summarizes the tried and tested procedure in a compact form. Interested companies are thus provided with a practical tool that supports them in quickly drawing up their specific intellectual capital statement and is provided free of charge by the BMWA.

Representing the entire intellectual capital statement project, one of the participating pilot companies received the award “Knowledge Manager of the Year 2005”, which was evaluated as proof of the sustained benefit of this instrument and at the same time as an incentive to continue to promote the dissemination and further development of the intellectual capital statement method in the future.