Knowledge is getting faster and more complex. Differences in the ability of market participants to capitalise on emergent knowledge are increasing the performance gap between the best and worst companies.
The impact of this change is most pronounced in knowledge intensive industries where the knowledge base is vibrant. In this environment, knowledge is continually changing and evolving which creates opportunities. It is those organisations who take advantage of these opportunities and have the organisation and people in place that will be the competitive victors in the market.
Global Asset Management is a good example of a dynamic knowledge intensive industry. Ranking firms by average EBITDA per employee reveals a performance gap difference of 15.2 times between the top and bottom performers.
Knowledge intensive industries have a characteristically high variability of EBITDA per employee, and as the speed and complexity of knowledge continues to increase we predict this performance gap to widen.
In our opinion, average EBITDA per employee is a critical measure that allows comparison of business performance across private sector companies without regard to differences in Capital Structure. This measure also factors into account the common cross-strategy and cross-organisational elements of human capital and knowledge capital.
In knowledge intensive areas there is a high average level of knowledge and decision making among all employees, at all levels of the hierarchy. It is important to recognise these roles are Knowledge Workers – people for whom collaboration, complex problem solving, and knowledge sharing form a significant part of their daily work, and who have blurred the confines of traditionally delineated job roles within the enterprise.
As enterprises are in essence networks of these Knowledge Workers, it is the sum of their knowledge that forms the unique knowledge profile of an enterprise. Where they are siloed there is a high cost of coordination. For these siloed organisations there is an increasing gap between ‘sense’ and ‘respond’ placing increasing stress on performance and inherent systemic weaknesses in governance, risk, and compliance.
The competitive and innovative shift is about closing the time gap between sensing changes in demand and responding with innovation and value creation. An effective way to establish this is to use our Sense-and-Respond Maturity and Measurement Model™.
This model provides a blueprint and roadmap to establishing inimitable and enduring differentiation from the living knowledge elements of Enterprise Value Management.
Authors: Freddie McMahon, head of innovation & strategy, Alasdair Kinloch, head of investment management, Andrew McKay-Lomatschinsky, Consultant
