Which of the following is an intangible resource?

Survival considerations for intellectual capital in libraries

Survival considerations for intangible resources do not depend solely upon one factor or one parameter. A particular intellectual capital resource may fail to satisfy a set of predetermined requirements, probably due to a number of underlying reasons and mechanisms. These may be different from and independent of each other, although they all contribute to the overall library reliability performance. For example, a library’s repository may be reliable while other information services, for example, access to the Internet, may not be. Life analysis is based on the availability of life data and an understanding of the random processes that generate them. The data provide information that involves assumptions on the mechanisms that cause failures. Reliability (or life) data consist of time measurements up to a specific event of interest (usually referred to as “failure”), defined for an intangible asset as the inability to carry out a specific task or to produce specific results, etc. When making a life analysis, researchers define failure according to the needs of each specific study. For example, if one is going to study user behavior over time in relation to a specific subscription service, then failure may be defined as the user’s refusal to renew their subscription. In many cases, the conditions that may lead to the deterioration or even to a failure of a specific intellectual capital resource do not depend on the way a library operates and may include (Reilly and Schweihs, 1998):

physical risks due to accidents, disasters, deterioration, physical wear and tear;

functional risks due to inadequacy, obsolescence, interrelated resources, evolution technology;

operational risks due to management, accounting and regulatory policies;

economic risks due to lack of demand, interest rates, inflation, financing, inadequacy of return on investment.

Moreover, survival data frequently contains incomplete observations, which consist of truncated times to failure; this is usually referred to as censoring. In the previous example, censoring may come as a result of a user’s unexplained withdrawal from the subscribed service without actually refusing to renew the subscription. When life data consist of failure times intermixed with random censoring times, we talk about multiply censored reliability of survival data.

Another important motivation factor for a life analysis study is the estimation of the remaining useful life of the intellectual capital resource. This can be estimated either informally (based on expert opinions or other judgments) or may result from formal survival analysis methods, which will be presented later in this chapter. Such estimations for the remaining useful life of an intangible resource are, for example, involved in the valuation methods examined in Chapter 5, namely the cost, market, and income approaches. In the cost approach, the remaining useful life is involved in the calculation of value depreciation or obsolescence as the ratio of the effective life over the total expected life of an intangible asset. Hence, the longer the expected remaining life of an intangible, the higher its value, provided that all other factors remain unchanged. In the market approach, life analysis and the estimation of the remaining life of an intellectual capital resource are important when comparing similar resources or guiding intangible asset sales or licensing transactional data (Reilly and Schweihs, 1998). An extremely short estimation of an intangible’s remaining life (say less than six months) might actually indicate small value, that is, a significantly lower value as compared to the intangibles used for comparison. A shorter remaining useful life reduces the asset’s significance in the market approach. On the other hand, an extremely long estimated remaining useful life as compared to the comparative intangible indicates high value of the intangible under examination. In the income approach, the remaining useful life estimation is a prerequisite for the valuation process in order to predict intangible duration or the amount of income flows. In this approach, the variations of the estimated remaining useful life of an intangible become less important as the estimated remaining useful life increases. Extremely short or long useful remaining values raise questions about the underlying reasons (external or internal to the library) for their existence. For instance, some organizational intellectual capital resources such as “user lists” may exhibit a short remaining useful life, while other intangibles such as copyrights have longer remaining useful lives. As Reilly and Schweihs (1998) indicate, from a life analysis perspective, no intangible resource can be assumed as being similar to another without a formal examination; this means that no “user list” is exactly the same as any other “user list,” etc.

Metrics for library intellectual capital measurement

As we have seen, although a significant amount of effort has been devoted to the development of intellectual capital measurement methods, very little research has taken place as regards the measurement of intellectual capital in libraries. In this section, we present two well-established methods for libraries that are suitable for non-profit organizations. These methods are simple to use and due to their wide recognition, they can be used for purposes internal or external to the library. When employed internally, measurement focuses on deducing the most appropriate management actions for achieving the library’s aims, while external use should address stakeholder perceptions on the library’s contribution. These are the Balanced Scorecards developed by Kaplan and Norton (1992) and the Skandia Navigator by Edvinsson and Malone (1997). These two measurement systems belong to the scorecard family of approaches, while the first has been used extensively in the library area.

Another issue that needs to be addressed regards the identification of intangible resource metrics or indicators that can be used for measuring the different activities, contributions, impact or resources. However, as noted before (and presented in Figure 4.1), in order to conduct intellectual capital measurements, regardless of the method used, a group of metrics or indices is required so as to express the quantity or the quality of the library’s intellectual capital resources. In other words, metrics are required for measuring the intangibles presented in Tables 3.1 (page 63), 3.2 (page 65), and 3.3 (page 69) in Chapter 3. The Danish Ministry of Science, Technology and Innovation issued a revised version of guidelines for intellectual capital statements (DMSTI, 2003) consisting of four parts.

Part 1 provides introductory information on the intellectual capital statement as a knowledge management tool.

Part 2 describes in detail how to prepare intellectual capital statements.

Part 3 provides directions on how to write and publish external intellectual capital statements.

Part 4 provides suggestions as to how an intellectual capital statement attempt can be organized.

Figure 4.3 presents a method for interrelating library management actions to specific intellectual capital indicators, based on the second part of the Danish intellectual capital statement model. As stated in the guidelines, “Indicators allow management challenges and initiatives to be defined and formalised.”

According to Figure 4.3, the four interrelated management library elements represent an analysis of the library’s intellectual capital philosophy, expressed for a particular setting/service/co-opetition situation, etc., interrelated to specific library management aims, actions, and therefore indicators. Some indicators are directly related to specific library actions such as “training days” or “amounts invested in social networking services,” while others are related only indirectly to specific actions such as “number of musical librarians” or “newly appointed user subscriptions,” etc. Hence through the measurement it is possible to determine whether or not a specific action has been started and to examine its results (DMSTI, 2003). The second part of the guidelines includes some very useful information on the comprehension of the relation between intellectual capital, management actions, indicators, and the role of measurement. Intellectual capital indicators serve three purposes: to specify, assess, and report management activities. Moreover, indicators are generally linked to three different but interrelated types of figures.

Measure effects in quality, efficiency, effectiveness, productivity, satisfaction, and quality.

Measure the level of intellectual capital resources.

Measure the intellectual capital resource mix.

High-quality estimated figures are very significant. According to DMSTI (2003), the quality of the figures is judged based on relevance, credibility, and reliability, while the following questions test the quality of intellectual capital indicators:

Do the figures relate to the management actions and can this interrelation be analyzed?

Do the figures provide a fair picture of the library’s intellectual capital management?

Are there both positive and negative figures?

Are the figures relevant in a way that the necessary information is highlighted and unnecessary data is excluded?

Are the figures reliable?

Are the basic data coherent?

Are the figures accessible by the library (or will they be)?

Are they calculable?

Can the figures be reported over time?

The stakeholder relationships, for example,1 can be expressed through the number and the content of library partnering agreements, the number and the quality of information distribution agreements, the number and the quality of licensing agreements, user surveys, market share, length of user relationships with the library, customer subscription retention, etc. Human resources indicators may include the number of library staff, number of staff in alliances, average years of service with library, average age of staff, full-time permanent staff over the total staff employed, staff working at home over the total employees, staff qualifications (Ph.D. and/or Master’s degree), staff satisfaction level (measured with Likert-type scale), user positive effects from implemented suggestions from staff, number of new services and operations suggested, qualitative descriptions of staff (commitment, loyalty, entrepreneurial spirit, enthusiasm), motivation and behavioral indicators, staff training, etc. Other examples of metrics from the organizational capital may include, for management philosophy, the number of internal disputes and complaints, qualitative measures of commitment, loyalty, etc.

Table 4.2 provides some more examples. The first column presents the intangibles, the second includes some statistical data corresponding to each intangible, the third column indicates their financial or non-financial nature, and the last one classifies them under an intellectual capital category. Thus, each metric can be initially classified according to whether it is an intangible or tangible library resource. Then, if intangible, it might be employed to express a specific intellectual capital resource within one of the three intangible categories (human, structural, and relational capital). Finally, intellectual capital can be expressed either financially (Financial Indicator, FI) or non-financially (Non-Financial Indicator, NFI).

Table 4.2. Examples of intangible resources measures

Intellectual capital categoryIntangible resourcesLibrary indicesItem type (*)Human capitalH1: Level of staff educationH.1.1. Number of librarians.
H.1.2. Number of library trainees.NFI
NFIStructural capitalS1: Use of informatics and network technologiesS.1.1. Virtual visit sessions at the library’s web page by remote users.NFIS2: Databases and documentation services
All types of documentation services (e.g. cataloging).S.2.1. User questions that have been dealt with electronically.NFIS3: Collection informative value
The informative value of a library’s collection is an important factor for achieving contributions to the wider system within which the library operates.S.3.1. Size of the library’s loan collection.
S.3.2. Size of the library’s collection.
S.3.3. Cost for acquiring monographs.
S.3.4. Cost for acquiring printed journals.
S.3.5. Total cost for acquiring electronic information sources.
S.3.6. Total cost for acquiring printed information sources.NFI
NFI
FI
FI
FI
FIS4: Operational processes and administration systemsS.4.1. Total library opening hours per day.FIRelational capitalR.1: Relations between the library and its users
The number of registered users expresses the diffusion of the library’s value (Stewart, 1997, in White, 2007) in that part of its external environment which is related to the users of its services.R.1.1. Total number of registered users.
R.1.2. Total number of active registered user-members of the library’s community.
R.1.3. Total number of users that attend the library’s educational activities yearly.NFI
NFI
NFIR2: Relations between the library and its suppliers The term “suppliers” is used to designate the publishers – providers of journal titles, as well as the teaching-research staff, students, etc., who provide content to the library.R.2.1. Number of current subscriptions to printed journal titles.
R.2.2. Number of current subscriptions to electronic journals.
R.2.3. Monographs that entered the library in one year.NFI
NFI
NFIR3: Relations with other organizations
Interlibrary loan requests and their successful course is a way to measure the value of the cooperative relations established between the library and other library-members of the inter-loan network.R.3.1. Interlibrary loan requests made by library users.
R.3.2. Interlibrary loan requests made by other libraries.
R.3.3. Interlibrary loan requests made by users which have been successfully completed by the library’s inter-loan service.
R.3.4. Interlibrary loan requests made by other libraries which have been successfully completed by the library’s inter-loan service.NFI
NFI
NFI

NFI: Non-Financial Indicator

FI: Financial Indicator

The interrelation between the intangibles presented in the first column and the intellectual capital categories of the last column has been based on a methodological approach introduced by Gallego and Rodríguez (2005). Thus, eight intangible resources are related to specific metrics: one of them is classified under human capital (H1), four fall into the category of structural capital (S1 to S4), and three are classified in the category of relational capital (R1 to R3). For instance, intangible asset R1, “Relations between the library and its users,” which is classified under the category of relational capital, is related to the metrics “Total number of registered library users,” “Total number of active registered users-members of the library’s community,” and “Total number of users that attend the library’s educational activities during every year.” Intangible resource S1, “Use of informatics and network technologies,” which falls into the category of structural capital, is expressed through the metric “Virtual visit-sessions at the library’s web page by remote users,” while the intangible asset H1, “Level of staff education,” which falls into the category of human capital, is measured through the item “Number of librarians” and “Trained library staff.” The metric “Trained library staff” is related to intangible asset S1, “Level of staff education,” since it is directly linked to ongoing education actions, depending on the position and the university degree obtained by staff members.

One way to move forward would be to investigate the well-known library performance groups of indicators for intellectual capital management. Performance measurement is deeply rooted in the history of libraries (Brophy, 2008) and is based upon well-established groups of indicators that cover stakeholder views and the quality of services provided. Among others, Poll (2007) reviews the literature on performance measurement approaches, while the Northumbria conferences series provides further information on the issue. Performance measurement approaches for libraries include, among others, international standards such as the ISO 11620 and ISO 2789:2003, the IFLA “guidelines for performance measurement in academic libraries,” the “New Measures Initiative” of ALR, the “Standards for Libraries in Higher Education” of ACRL, guidelines for the application of best practices in Australian university libraries, and the “Effective Academic Library” guide of Great Britain, as well as various national performance frameworks and European projects, including the CAMILE, the EQUINOX, the EQLIPSE, the PRISM, etc. The management of intangible assets may be further enhanced through the interrelation of performance indicators with specific management actions regarding intangible resources. In that respect, existing library performance approaches might serve as a basis for measuring library intangible assets, if the available data and indices are properly organized, so as to identify and measure intellectual capital resources, as indicated in Figure 4.3.

Introduction

Intellectual capital incorporates resources with long-term benefits for a library. Scorecard-type measurement methods measure intangibles and identify their contributions to library sustainability. Investments in libraries have to utilize both tangible and intangible resources, and there is no doubt that intellectual capital in libraries and information services goes beyond the financial dimension. Issues related to the identification, classification, assessment, and management of intangible assets, as well as metrics for their contribution to the overall library performance, have been addressed in previous chapters. In this chapter, some issues and methods for the financial valuation of specific intangibles or the overall intellectual capital of the library will be presented. The financial valuation of either specific intangibles or the overall library intellectual capital is not straightforward. The background for any financial valuation attempt is to clarify the objective of the valuation, and identify and prioritize intangible resources/assets.

An additional difficulty lies in the fact that traditional financial accounting standards are inadequate for the financial valuation of intellectual capital. Hence, most financial valuation methods and accounting standards focus on specific intangible resources. As highlighted in the literature (for example Brannstrom and Giuliani, 2009), they include only requirements for the financial valuation of a limited number of intangibles. It is quite clear, however, that the overall financial value of library intellectual capital cannot be estimated as the accumulation of individual intangible valuations. In this context, some financial valuation methods focus on a single intangible asset such as brand, human resources, and patents, while others focus on the system of library intangibles, which is the overall “intellectual capital.” Moreover, investments in different economic fields (public, private, and social) create distinct conditions for the overall value of a library (Grasenick and Low, 2004; Gallego and Rodríguez, 2005). In this chapter, three methods of this nature are presented—the cost approach, the market approach, and the income approach— together with a discussion of library value calculators, the accounting of intangible assets, and methods for intellectual capital reporting.

Resource mobilization theory focuses on the assets and capacities of aggrieved groups to explain the rise, development and outcome of social movements. Drawing on a rational choice approach, resources are defined broadly to include tangible resources, such as money and facilities, and intangible resources, such as the solidarities, cultural commitments, and identity networks of groups that facilitate their pooling of resources. To reduce free riding, organizers create selective and collective incentives and perceptions of large numbers of participants and a high likelihood of success. Most movements are indigenous, drawing on contributions from direct beneficiaries, but cheaper communications, institutional patronage, and political reactions to indigenous protest have also allowed political entrepreneurs to create professional social movement organizations. The rise and outcome of movements are shaped by the interaction of strategies with political opportunities. Movements that ‘think small,’ in terms of narrow incremental goals, avoid schisms, use unruliness and selective incentives, and have allies that are more successful. Political opportunities in terms of institutional permeability, favorable public opinion, elite divisions, and the availability of allies and patrons facilitate success.

A systems perspective for library intellectual capital management

Intellectual capital resources for the majority of organizations and enterprises constitute just an additional—though very important—issue to be analyzed and dealt with. Especially during the past 20 years, the study of intellectual capital management has been linked with several scientific fields and thus many interrelated concepts, methods, and techniques have been derived from different disciplines and different viewpoints. Intellectual capital and libraries, however, are closely interrelated in our experiences and minds. Library and information professionals, as noted in Chapter 2, throughout their long history have consciously or unconsciously been deeply involved in the management of library intellectual capital resources. Libraries contain and accumulate human memory, and library professionals are the gatekeepers of our past. This is an invaluable and unique intangible heritage which is traditionally managed by librarians and information professionals, and is kept and organized within libraries in order to be available for future generations.

The methods and techniques presented in this book within each distinct chapter are related to each other and should be seen as a management continuum. As stated in the “Introduction of the Revised Edition” of Drucker (2008), one should “. . . understand and apply the subject of management as an organic whole and not merely as a set of isolated elements.” Figure 7.1 provides a system view of library intellectual capital management as a whole, connecting all distinct elements presented in this book. Library intellectual capital environmental tradition and trends were analyzed in Chapters 1 and 2, providing a political, economical, social, technological, and legal conceptual framework on which the library’s management system is based and developed. Furthermore, methods and techniques are adjusted in terms of their applicability in libraries from a pool of newly developed and either general or industry-specific perspectives. These adjusted or newly developed methods include identification and categorization approaches (Chapter 3), measuring and hierarchy frameworks (Chapter 4), financial valuation and reporting techniques (Chapter 5), and intangible life analysis methods (Chapter 6). All these aspects constitute the continuum of library intellectual capital management which is being put in practice to support library management decisions and actions as regards its internal environment. One should, however, apply all these methods with caution according to their specifications and their intended use. For instance, as we have already mentioned, it is difficult if not impossible to estimate accurately the financial value of a unique historic old library collection, and it is difficult if not impossible to estimate the value created by a public library when a child’s life is saved by a children’s disease prevention program!

Despite their uniqueness, libraries are organizations with resources that need to be managed and they cannot avoid pressure from their external environment (as shown in the lower part of Figure 7.1) including, in some cases, fierce socioeconomic realities. It is only logical that people all over the world are massively concerned with the economic depression and the impact that it might have on their quality of life, their communities, their children’s futures, their retirement, and society as a whole (Rooney-Browne, 2008). Under these circumstances, library financing may no longer be taken for granted, while the international economic reality might include several important drawbacks for libraries, such as financial resource shortage and lack of staff. Libraries now need, more than ever, to prove their value and enhance their entrepreneurship through the exploitation of their tangible and intangible resources (Kostagiolas et al., 2011):

Libraries stand at a crossroad of opportunity brought about by the confluence of economic and social challenges that the economic recession has caused, while—in parallel—the developments in information technologies provide a wider range of services and more channels of access to them.

In a similar manner, Davis (2006) suggests switching from high-cost systemic library reforms and investments to a framework of fully exploring the potential of the librarian’s creative energies and encouraging library innovation, inclusion, and participation. In order to increase social value and overall socioeconomic impact, the management of libraries should be proactive and able to foresee, when possible, the changing social and economic needs of communities. Socioeconomic development largely depends upon an active, socially cohesive, and well-informed population that has access to information sources.

Furthermore, innovative and proactive intellectual capital management might urge libraries to internalize intangible resources from their external environment in order to develop value added services further. Resources of this nature may include community information on local organizations, the government and services of all kinds, local events, places to visit, leisure and sporting venues, business information that builds business relations, legal information on national–international laws and regulations, specialized literature, genealogical searches, technical standards, reports, personalized services tailored to the needs of individuals or groups, training courses on the use of technology and website hosting and management, especially designed display areas for artists, career information, fundraising activities, etc. All these services contain intellectual capital resources related to the library’s (proactive) role which increases the ability of libraries to escape from perplexities and find ways to relax fiscal constraints in order to remain sustainable and look for alternative funding. According to the president of the ALA,1 during tough economic times, people turn to libraries for free resources, from computers to books, DVDs, and CDs, for help with job hunting or health information. It is not strange that library use is increasing in times of economic depression, when more people are turning to libraries for information, training, literacy programs, computer skills development, etc., taking advantage of the available free intellectual resources (for example, Seavey, 2003; ALA, 2007; ALA, 2008a; ALA, 2008b; Sheffer, 2008; Goulding, 2009; Mostad-Jensen, 2009). Incorporating intellectual capital into total value estimations and contributions may come to rescue libraries in the era of worldwide economic instability.

10.1.2.1 The resource litmus test

To understand how competitive advantage is created and sustained, focus on an ecosystem’s stock of “resources” (i.e., what is left in the bathtub in Figure 10.2) at any point in time. A resource refers to tangible assets such as a platform’s capabilities, functionality, user base, complementing apps, and patents as well as its intangible resources such as brand recognition and reputation.1 Intangibles such as brands are messier to count on because once they define the dominant design for a platform’s market category, there are no guarantees that their value can be captured exclusively by the platform owner. Xerox copiers, Scotch tape, the IBM PC, and iPhone define their entire product categories to such a large extent that they have become generic labels used to describe their many clones. This is particularly true of software-based platforms.

Identify the key resources of a platform, focusing specifically on what the platform owner directly contributes to the platform’s ecosystem. To keep this list focused on the key resources, put it on one side of an index card. For each resource, use the resource litmus test below to identify whether it can competitively differentiate a platform from its rivals. The resource litmus test is based on an assessment of four properties of a resource (Table 10.1).

Table 10.1. The Resource Litmus Test

Resource PropertyCompetitive AdvantageCreatesSustainsValuable?•Rare?•Inimitable?•Nonsubstitutable?•

Valuable: Is it of value in the platform’s market and industry?

Rare: Do very few rival platforms have it?

Inimitable: Is it difficult (prohibitively costly or time-consuming) for a rival platform to imitate?

Nonsubstitutable: Can something else substitute for it?

The more of these properties a resource possesses, the more likely it can help competitively differentiate a platform from its rivals. A resource can help create a competitive advantage if it is valuable and rare. A resource can help sustain a competitive advantage if it is inimitable and nonsubstitutable. The mere possession of a resource does not give a platform a competitive edge; a platform owner must have the capability to widely exploit it as well. Alignment of a platform’s architecture with governance facilitates this.

As an illustration, Table 10.2 uses this resource litmus framework for a back-of-the-napkin comparison of one platform (iOS) with three rival platforms (Android, Blackberry, and Windows Mobile). The table succinctly helps recognize the competitive edge of individual rival platforms and therefore helps envision an actionable roadmap for evolving a platform. The list of resources in this example is merely illustrative and by no means comprehensive. A valuable resource must also be rare to create a temporary advantage for a platform (i.e., very few rival platforms should possess it). It must be inimitable and nonsubstitutable for it to sustain that edge. Therefore all four resource properties should have checkmarks in them for a resource to be an enduring source of differentiation. None of the resources in the quick-and-dirty analyses meet those criteria, suggesting that there is no durable source of competitive advantage in the market of these platforms. This is the norm for platform markets with Red Queen competition and the only source of advantage for any platform is evolving faster than rivals.

Table 10.2. An Illustration of the Application of the Resource Litmus Test

ResourceResource Litmus Test PropertiesRival PlatformsCreate EdgeSustain EdgeiOSAndroidBlackberryWindows MobileValuable?Rare?Inimitable?Nonsubstitutable?Perceived ease of use••✓✗✓Native cloud services••✓✗✗✗Integration with Gmail•✓✓✗✗Platform-wide messaging services•••✓✗Multiple form factors (phone, tablet)••••✓✗✗✗Existing proprietary network effects•••✓✗✓✓Large app developer community••✓✗✗✓Large end-user base•••✓✗✗✓Stickiness with end-users••✓✓✗✓Brand recognition••✓✗✓✓

Defining intellectual capital management in libraries

Roos et al. (2005) provide a useful definition of intellectual capital management:

Intellectual capital management is the deployment and management of intellectual capital resources and their transformation (into intellectual capital resources or traditional capital resources) to maximize the present value of the organization’s value creation in the eyes of its stakeholders.

Investments in intellectual capital assets, such as those discussed in the previous paragraph, provide the library with an added value, which is shared among its stakeholders, increasing the overall library contribution to the community. Hence, the library’s management team should regard intangibles as critical assets/resources that need to be identified, measured, and eventually financially valuated. Generally speaking, an increase in the amount of intangible resources within a library will diversify library outputs and strengthen the library against competition. Although the contribution of the intellectual capital in value creation within libraries is rather obvious, the intellectual capital management is based on the fact that a library’s real value is not the one presented in the balance sheet of assets and liabilities. Actually, a library’s total value is expressed as the sum of its financial position as presented in the balance sheet, along with the value of its intellectual capital.

Proper management actions and activities related to intangible assets are important for developing innovative library services based on the information behavior and needs of the users through the employment of specific online systems and databases, library acquisition practices, electronic document delivery systems, cooperation, etc. It is highly probable that the existence and development of intellectual capital assets increase the total value of the assets reported on the balance sheet of a library. There is an absence of a single commonly accepted framework for the identification and measurement of library intangible assets. One way to move forward would be to adopt the methodological approach proposed by the MERITUM2 project for companies or organizations that have not begun to identify and measure their intangible assets, or are at the beginning of this process. This approach requires those working in the library (Figure 1.2):

initially to identify their intellectual capital assets/ resources and intangible investments;

to determine specific indices for the measurement and dissemination of the information related to them (Gallego and Rodríguez, 2005);

to monitor the effects of intangible investments on the development of intangible assets/resources and then to assume action for the mobilization of intangible resources aiming at value creation.

This action can then create new intangible assets or reject old ones, thus requiring a repetition of the abovementioned process. Therefore, the framework conducts measurements using indices linked to intangible assets and the library’s strategic goals. Hence, it is actually a scorecard-type method with the intangible assets being categorized into human capital, information/technology capital, and organizational capital. For instance, an intangible asset that can be classified under “human capital” is the actual quality of the library’s staff (staff quality is determined by their ability to recruit new users/customers and maintain them over time, work in teams, be motivated by the goals that the library’s management has set, and generally be flexible and comfortable with change). Intangibles classified under “structural capital” include library systems, databases and the level of IT literacy. Organizational capital includes the library’s management, the existence of flexible service practices, the mobilization of available resources in order to achieve strategic goals, and the general culture of the library.

The overall library management strategy is presented in Figure 1.3 and includes actions for both tangible and intangible assets (left part of the figure), associated with intangible assets/resources (distinguished into the three intangible asset categories in the middle part of the figure). The right part of Figure 1.3 presents a set of indicators that may be used to measure the performance of the library and thus provide guidance for management issues. Roos et al. (2005) suggest that the library’s management team should make judgments based on the following three aspects of intellectual capital resources:

How influential is a given intangible resource upon the organization’s ability to create value?

What is the level of quality held by the intangible asset as compared to the ideal intangible asset quality?

How many intangible resources should the organization acquire, compared to an ideal situation?

The identification and evaluation of intellectual capital, along with the above mentioned issues, constitute a rather challenging environment for the management of intellectual capital in libraries and information services.

It is rather obvious, however, that not all intellectual capital resources hold the same importance within the library’s process of value creation. A first step towards managing intellectual capital would be to identify the intangible assets that have the highest positive effect on library stakeholder viewpoints. For instance, the main concern of a corporate library is to maximize the company’s financial returns. This, however, might not be the case for non-profit libraries, such as academic and/or public libraries. Vasconcelos (2008) recommended focusing on the unique features of each organization or enterprise, where most of its value lies. Roos et al. (2005) set five requirements for the utilization of intangible assets, which are:

to be valuable, in the sense that they are able to support the library’s strategic goals;

to be durable, in the sense that they preserve their attributes over time;

to be scarce, in the sense that they are not easily accessible by potential competitors;

to be inimitable, in the sense that a potential imitator will experience significant costs for their duplication;

to be irreplaceable, in the sense that a substitute is difficult, if not impossible, to develop.

A similar effort to develop a general framework for recording intangible resources and assessing their value (framework for the valuation of intangible assets) was undertaken by Andreou et al. (2007) and was based on the eight value drivers as defined by Green and Ryan (2005): customers, competitors, employees, information, partners, processes, products/services, and technology. These drivers were linked to four specific administrative goals (innovation, organization, socialization, and culture) in order to identify and manage intangible assets. The identification and the subsequent recording of intangible assets were based on two parameters: the added value generated by each intangible asset and the critical indicators of success/ performance (CSF, Critical Success Factors) related to the useful life of each intangible asset. The value of a library is a complex combination of the economic, cultural, social, and intellectual contribution to those who directly use its services or indirectly obtain benefits from the existence of the library itself and the services it provides (British Library, 2004).

Subsequent to their identification and categorization, the valuation of an intangible asset may be necessary for determining, for instance, their price of sale, use, supply or concession or, in a supplementary way, takeovers or mergers, tax treatment, or assistance in several legal proceedings (Reilly and Schweihs, 1998). Intangible asset financial valuation methods that are presented in Chapter 5 are distinguished into three categories (Reilly and Schweihs, 1998): the cost approach, the market approach, and the income approach. The cost approach depends upon the analytical methods of reproduction, replacement, creation, cost aversion, historical prices, etc., and on the concept of intangible asset substitutes. The market approach, on the other hand, includes valuation methods that are based on the analysis of assets that are similar to the intangible asset under valuation, known as comparables, for which recent transaction data are available (e.g. sales or concessions of license of use). The income approach includes the analytical valuation processes that are based on the discounting of future income that is expected to occur due to the use or possession of the intangible asset under valuation. Despite the fact that there have been some very important efforts, such as those mentioned above and those carried out through certain inter-sector researches (e.g. Gallego and Rodríguez, 2005) there are no library-specific studies on intangible asset valuation.

In order to evaluate the intellectual capital of an organization, Vasconcelos et al. (2001) proposed the so-called “relationship to product versus content dilemma.” They expressed the uncertainty that characterizes any estimation or measurement of the intellectual capital. Frequently, the value of the intangible asset depends upon the context of its deployment and it often “lies in the eye of the beholder” (Vasconcelos, 2008). The author also suggested that one should focus on a specific time or on the library’s future, based on its strategic goals. A library’s value can be expressed as a financial value (in monetary terms) or as a numerical measurement of the library’s total contribution to the economy, calculated using a set of indicators that measure knowledge-based services (e.g. Missingham, 2005). The latter is based on the concept of ROI (return on investment) and the contingent valuation method (Missingham, 2005). ROI measures the net benefit/loss generated by a monetary unit invested in a company/organization and is calculated as the percentage of the ratio between the net profit/loss and the relative amount of the investment (Kannan and Aulbur, 2004). The contingent valuation method (Missingham, 2005) is a quantitative economic methodology, supported by a panel of scientists including Nobel Prize winners Kenneth Arrow and Robert Solow, which estimates the total benefit of a non-market good derived from publicly funded organizations or programs. The contingent valuation method is based on the estimation of the amount of money an individual would be prepared to pay in order to maintain access to the underlying good. Missingham (2005) supports the notion that the set of indicators, developed by the Australian Bureau of Statistics, related to innovation and entrepreneurship, human capital, and information and communication technology (ICT), can be used to assess a library’s contribution to the knowledge economy.

Over the past decades, the competition among libraries has become all the more intense, mainly due to the existence of Internet services that are in competition with the services traditionally provided by libraries. For example, “Google Scholar” is a free search engine specializing in academic publications. Therefore, the members of the academic community could use “Google Scholar” as a starting point for scholarly searches rather than their academic library. On the other hand, publishers often have contractual agreements with institutions (for example, universities) and/or networks of libraries. Hence, individual libraries function as the proxy for the agreement between the publisher and the institution or network. In this case, free information, shared through the Internet, is considered to be a service competing with the ones provided by libraries. Google’s ambitious “Google Books Library Project” may also evolve to be a service in competition with those provided by public libraries. According to Google (2010), the aim of this project is to:

. . . make it easier for people to find relevant books— specifically, books they wouldn’t find any other way such as those that are out of print—while carefully respecting authors’ and publishers’ copyrights. Our ultimate goal is to work with publishers and libraries to create a comprehensive, searchable, virtual card catalog of all books in all languages that helps users discover new books and publishers discover new readers.

To survive in the long run, libraries need to manage and thus utilize intellectual capital resources.

The overall aim is to make good use of intellectual capital assets. Small-scale investments in library intangible assets (as compared to those made in tangible assets) may yield benefits way beyond the invested capital. Motivating library management teams to participate in professional networks is an example of such action. The participation of libraries in collaborative networks adds significantly to the intellectual capital of the library by:

enabling broader access to the available information material (e.g. databases, documents);

improving human capital (e.g. skills, competencies, experience, and teamwork);

sharing experiences or actions aiming at structural capital assets (e.g. management techniques and practices, user surveys, software platforms access for heterogeneous data storage, and retrieval environments); and

improving relational capital (e.g. relationship marketing, trust development, user training programs in information literacy and lifelong learning).

All these actions can lead to the development of innovative information services that are difficult for competitors to imitate. Invisible and unsurpassed quality along with the provision of an integrated system of components that serve differentiated needs is also difficult to imitate. Whatever their type, libraries can accumulate clear-cut benefits from providing services that are hard, or almost impossible, to imitate and have lower prices, have a longer useful remaining life expectancy, and offer sustainable cash flow (benefits).

9.4.2 Service Pattern Description Language

This section formulates the key syntaxes and basic notions of SPDL. Figure 9.17 presents the relationship of basic notions through a Unified Modeling Language (UML) diagram. There are four basic elements (resource, activity, role, and entity) in service pattern strategies (RA, AO, SC, and PD). A role class owns many resources, and an entity class has many attributes and states. The concept of activity is redefined by adding roles and attributes. The step denotes the execution order, from one activity to another.

4.3.3 Infrastructure management

The Infrastructure Management block is about the how a company creates value and maintains customer relationships. It describes what abilities are necessary to provide its VALUE PROPOSITION. Infrastructure Management outlines the value network that generates economic value through complex dynamic exchanges between one or more enterprises, its customers, suppliers, strategic partners and the community (Allee, 2000). In other words, this block specifies the business model's capabilities and resources, their owners and providers, as well as who executes which activity and how they relate to each other. As linkages are more and more electronic, the members of a network are flexible in coordinating schedules, sharing assets, utilizing each other's competencies and resources, and they develop, pursue and close business together (Andrews and Hahn, 1998).

In order to understand this value network the Infrastructure Management block describes the value system configuration (Gordijn et al., 2001) that is necessary to deliver the value proposition. This comprises the activity configuration of the firm, in other words the activities to create and deliver value, and, the relationship between them, the in-house capabilities and resources and those acquired through the firm's partner network.

Activities

As outlined above, the main purpose of a company is the creation of value that customers are willing to pay for. This value is the outcome of a configuration of inside and outside activities and processes. The VALUE CONFIGURATION shows all activities necessary and the links among them, in order to create value for the customer. To define the value creation process in a business model, we use the value chain framework (Porter, 2001) and its extension, such as defined by Stabell and Fjeldstad (1998). These two authors extend the idea of the value chain with the value shop and the value network. Former describes the value creation process of service providers (e.g. consultancies), whereas latter describes brokering and intermediary activities (e.g. banks and telecommunication companies). It is in this component of the e-Business framework that we describe such activities as Supply Chain Management (SCM), Efficient Customer Response (ECR), or e-Procurement.

We distinguish between three basic value configuration types, which are the value chain (Porter, 2001), the value shop and the value network (Stabell and Fjeldstad, 1998).

The VALUE CHAIN contains the different activities a firm performs to deliver low-cost or differentiated products. The activities of the value chain framework (Porter, 2001) include inbound logistics, operations, outbound logistics, marketing and sales, and service. The value creation logic of a value chain is the transformation of inputs into products. The main interactivity relationship logic is sequential (Stabell and Fjeldstad, 1998).

The VALUE SHOP represents an extension to the value chain framework provided by Porter (2001). Stabell and Fjeldstad on (Ives and Learmonth, 1984; Ives, 1999; Muther, 2002) argue that service provisioning has a different value creation logic than manufacturing. Service providers tend to come up with new solutions, rather than fixing on one solution and reproducing it time and again such as in the value chain. In this value configuration a firm concentrates on discovering what the client wants, figures out a way to deliver value, determines whether the customer's needs were fulfilled and repeats the process in an iterative way if necessary. The proposed activities of the value shop contain problem finding and acquisition, problem solving, choice, execution and control and evaluation. The value creation logic of a value shop is resolving customer problems. The main interactivity relationship logic is cyclical, spiraling (Stabell and Fjeldstad, 1998).

In the VALUE NETWORK value is created by linking clients or customers who are or wish to be interdependent. The firm itself is not the network, but it provides a networking service (Stabell and Fjeldstad, 1998). Afuah and Tucci (2001) see the value network as a direct outgrowth of brokering. According to these authors this is the value configuration that exists when a firm is an intermediary, such as a broker or a market maker. Rather than focusing on logistics such as the importation and delivery of raw materials and how they are transformed into finished goods (i.e. the value chain), the intermediary must focus on network promotion and contract management, service provisioning and infrastructure operations. The value creation logic of a value network is linking customers. The main interactivity relationship logic is mediating (Stabell and Fjeldstad, 1998).

Activities are at the heart of what a business does. They are actions a company performs in order to create and market value and generate profits. An ACTIVITY is executed by an ACTOR, which can be the firm or one of its partners. Activities relate to owned or partner RESOURCES and they are linked in a VALUE CONFIGURATION (see Table 4.7 and Figure 4.8).

Table 4.7. Value configuration and activities

The VALUE CONFIGURATION of a firm describes the arrangement of one-or-several ACTIVITY(ies) in order to provide a VALUE PROPOSITION.–

it provides VALUE PROPOSITION(s)

–

it relies on CAPABILITY(ies)

–

it has a type {VALUE CHAIN, SHOP, OR NETWORK}

The VC is composed of a set of one-or-more ACTIVITY(ies)

An ACTIVITY is an action a company performs to do business and achieve its goals.

–

it has a LEVEL

–

it has a NATURE

–

it requires {Fits, Flows to, or Shares} a RESOURCEs

–

it is performed by ACTORs

Figure 4.8. Value configuration and activities.

The activity LEVEL distinguishes between the firm's primary and support activities (Porter, 1985). Primary activities are those that are involved in the creation of the value proposition and its marketing and delivery. Support activities are the underlying fundament that allow the primary activities to take place. This includes activities such as firm infrastructure, human resource management, technology development and procurement (Porter, 1985).

The activity NATURE depends on the CONFIGURATION TYPE attribute in the VALUE CONFIGURATION element. The three types of configurations have different kinds of activities:

▪

Value chain: inbound logistics, operations, outbound logistics, marketing and sales, and services;

▪

Value shop: problem finding and acquisition, problem solving, choice, execution, and control and evaluation;

▪

Value network: network promotion and contract management, service provisioning, and network infrastructure operation.

An activity relates to one or several RESOURCES. Their linkages have a specific nature. We distinguish between fit, flow and share (based on Malone et al. (1999)). An ACTIVITY fits a RESOURCE when more than one ACTIVITY is required by a RESOURCE. An ACTIVITY flows to a RESOURCE when the outcome of an ACTIVITY is required by a RESOURCE. An ACTIVITY shares a RESOURCE when more than one ACTIVITY uses the same RESOURCE.

Mini case: Value configuration at ColorPlaza

We illustrate the VALUE CONFIGURATION, ACTIVITIES, RESOURCES and PARTNERSHIPS through ColorPlaza, a Swiss company in the photography industry (see Figure 4.9). The columns in Figure 4.9 represent a specific ACTIVITY and the lines represent the activities’ attributes and relationship to RESOURCE(s) and ACTOR(s).

Figure 4.9. ColorPlaza value configuration, activities, resources and partnerships.

ColorPlaza let us their customers upload their digital photos over the Internet and get them printed on photo paper, t-shirts and other gadgets, which are then delivered directly to their homes. In fact, ColorPlaza was so successful with this service that it is now sold under the name of big partners, such as Sony Europe, Nokia or Microsoft (through the Windows XP operating system). These tight co-operations are based on a close integration of the IS of the different partners involved.

Partnerships

A company's partner network outlines, which elements of the activity configuration and which resources are distributed among the firm's partners. In e-Business literature there are several terms arising for these new forms of strategic networks in the value creation process, some call them b-webs (Tapscott et al., 2000), or fluid and flexible organizations (Selz, 1999), others call them value networks (Nalebuff and Brandenburger, 1997). The appearance of such networks of firms in which market and hierarchical governance mechanisms coexist has significantly enhanced the range of possible organizational arrangements for value creation (Gulati and Singh, 1998). In general, partnerships and alliances have become an essential component in the strategies implemented by most companies. Although they have been used by some firms for decades already, today's partnerships and alliances have changed in nature. The more traditional concepts of joint ventures (e.g. for penetration of new geographic markets) have made place to strategic alliances that aim at creating and enhancing the competitive positions of the firms involved, in a highly competitive environment (Dussauge and Garrette, 1999) (Table 4.8 and Figure 4.10).

Table 4.8. Partnership

A PARTNERSHIP is a voluntarily initiated co-operative agreement formed between two or more independent companies in order to carry out a project or specific activity jointly by coordinating the necessary CAPABILITIES, RESOURCES and ACTIVITIES.–

it supports the VALUE PROPOSITION(s)

–

it relies on CAPABILITY(ies)

It is composed of a set of one-or-more AGREEMENT(s)

An AGREEMENT specifies the function and the terms and conditions of a partnership with an ACTOR

–

it has a REASONING

–

it has a DEGREE OF INTEGRATION

–

it has a DEGREE OF DEPENDENCY

–

it is made with ACTOR(s)

Figure 4.10. Partnership.

One of the goals behind many partner agreements is the optimization of a company's operations. This can take the form of outsourcing (i.e. make or buy), but also shared infrastructure (Lu, 2001). By entering these agreements a firm can profit of its partner's or supplier's economies of scale or of it is specialized knowledge, which it could not achieve on its own. In the apparel industry, the big player is like Benetton, The Gap or Hennes and Mauritz rely heavily on partners for their supply and production network (Camuffo et al., 2001). However, they apply different models. Benetton builds on a strong upstream vertical integration through its 32 production centres for strategic and capital intensive activities (weaving, cutting and dyeing) and out sources production of clothes (sewing) to a network of small and midsize enterprises that are directly controlled by the production centres. Benetton's competitors on the other hand rely on complete outsourcing. An example of shared infrastructure is the alliance between the Swedish car manufacturer Volvo and Renault of France in 1990. To stay competitive they initiated joint co-operation in R&D, design and procurement, as well as in manufacturing components for cars, trucks and buses (Mason, 1993).

A second motivation for partnering in today's uncertain competitive environment is the goal of increasing anticipation and thus reducing the risk premium (Mariti and Smiley, 1983). Companies are unable to afford launching costly experiments in the field anymore, because they have become too expensive and prefer engaging in temporary alliances with competitors (i.e. Co-opetition) (Brandenburger and Nalebuff, 1996). The co-operation by the wireless industry leaders in 1998 to create an open standard OS for data-enabled mobile phones illustrates this nicely. Jointly, Ericsson, Nokia, Panasonic, Motorola, Psion, Samsung Electronics and Siemens set up a collectively owned software licensing company called Symbian. By doing this they avoided risking a balkanized mobile telephony market with incompatible operating systems, decreased R&D costs and reduced uncertainty. The players had a strong incentive to cooperate on the OS in order to profit from increasing returns of network externalities and compete on other grounds.

A third motivation for partnering is the goal of leveraging a business model and a company's competencies through partnerships in order to acquire specific resources. A frequent form of resource acquisition is partnerships to conquer foreign markets. In 1992, Playboy, a famous magazine for men decided to set up a joint-venture with VIPress, a Polish press group, to launch its Polish edition (Dussauge and Garrette, 1999). RiverOne, an online market for electronics parts sells knowledge to support buying decisions. Using the firm's online research centre, electrical engineers can view product specification, learn how to use components, and compare alternatives across an aggregate catalogue of some 7 million parts (Dai and Kauffman, 2002). Instill Corporation, an electronic market for the food services industry not only helps restaurant chain operators improve procurement, but also standardize and integrate purchase data, which enables buyers to understand how their expenses were allocated across different purchase areas (Dai and Kauffman, 2002).

As PARTNERSHIPs are voluntarily initiated co-operative AGREEMENT(s) between two or more independent companies to carry out an activity jointly they are based on a commonly negotiated terms and conditions. Companies engage in partnerships for specific reasons. The attribute REASONING describes the firm's motivation to conclude a partner agreement and outlines its analysis. We distinguish between three rough categories of motivation; these are optimization and economies of scale, reduction of risk and uncertainty and finally acquisition of resources.

Which is an intangible resource?

Intangible assets are the resources a business owns that cannot be moved, like equipment, or handled, like physical property. These intangible assets include goodwill, patents, trademarks, copyrights and more.

Which of the following is an example of intangible resource?

The examples of intangible assets are: goodwill, patent, copyrights, trademarks.

What are the 5 intangible assets?

Types of Intangible Assets Patents, copyrights and licenses. Customer lists and relationships. Non-compete agreements. Favorable financing.

Which of the following is a tangible resources?

Tangible resources are physical items including cash, inventory, machinery, land or buildings. These items can be easily liquidated and have a set value.