Knowledge Management: From Brain to Business (PDF 5.5 - Asian ...

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Knowledge Sharing Session
Day 2
Resource Persons:
Mr. Rory Chase
Mr. Dirk Ramhorst
Mr. Chaovalit Ekabut
Moderator:
Ms. Porntip Kanjananiyot
Question: How do you measure value added, and how do you get the value?
Rory Chase: There are actually many organizations which measure this very statistic both for
clients and for the general public. One can actually look up for oneself much of this
information from the public domain. For example, the UK Department of the Trade and
Industry has for a number of years compiled value added statistics of the top 800 UK
companies as well as the top 800 European companies.
Very simply, to get value added, take the annual sales of the company, subtract all of the
input costs such as labor costs, equipment costs and research and development costs, and
the result is a net value. In some cases there is a positive value and in some cases a
negative value. That is the value added to the business. It is different from the market
capitalization because that value is based upon the stock value. Value added is actually the
wealth created or destroyed by the business, as measured in any given currency.
Besides the value added there is something that is called the value added efficiency
number that shows whether the company has been creating or destroying value. As part of
the MAKE program, we monitor the increase or decrease in the value added. We found a
strong correlation between increasing the value of the business and improvements in
rankings in the MAKE study, such as in the cases of Siemens and Nokia.
With regard to brand value, Interbrand of the United States uses a special formula which
basically asks, if they were to sell a brand name such as Coca-Cola, Siemens, Nokia or Sony,
what its worth would be in the open market. It considers all the patents, all the trademarks
and the proprietary rights of a company. One can then track those companies from year to
year, and see which are increasing brand values and which are decreasing.
In 1998, at the time of the Asian financial crisis, many companies suffered including
Samsung and Sony. At that time, the Samsung Group said that they wanted to increase their
brand values so that they would have a greater brand value than Sony. That was their goal.
In 2001, Sony’s brand ranking was 20, while Samsung’s ranking was 43. In the subsequent
five-year period, Sony dropped to number 26 while Samsung rose to number 20. This was
achieved through strong advertising. Almost every large airport has a Samsung
advertisement. Most sporting events have a Samsung logo, including the Olympics. They
have actually created a business strategy to build their brand value so that it can be easily
recognized, much like Siemens. One knows exactly how Siemens works, and that is the most
wonderful thing about international brand values. The sales people and the marketing people
do not have to knock on doors and explain what the company does. People know the
company is respected, is a good company making good products, and that gives the
marketing people an easier job.