Knowledge-Based Enterprise Business Development Guidelines

1. Knowledge-Based Enterprise Business Development Guidelines XIX ADIAT Congress 2008 From Knowledge Management to Innovation Acapulco, March 6, 2008 Jay Chatzkel, Principal Progressive Practices

2. Objectives • What is a Knowledge-Based Enterprise? • What are the critical factors to create a Knowledge-Based Enterprise? • How can the your organization become a Knowledge-Based Enterprise? • What are the strategies and next steps for making the change? Progressive Practices

3. Intellectual Assets/Knowledge:The Fourth Factor of Production • Land, Labor and Financial Capital - and now Knowledge Capital • Knowledge: An increasing percentage of value in organizations, goods and services • Are we cultivating and effectively using knowledge in our extended enterprises (i.e., know-how and know-what, learning, innovation, intellectual property)? Progressive Practices

4. What is a Knowledge-Based Enterprise? • An organization that bases its ability to create wealth on its capacity to generate and leverage its knowledge capabilities • Where enterprises and people link to form a knowledge-based network to achieve strategic goals, cultivate innovation and successfully respond to rapidly changing conditions • Has ability to grow, capture, leverage and share its knowledge as the basis for its competitive advantage in the world Progressive Practices

5. Knowledge for What? • What role(s) does knowledge play in your organization? • What is your key knowledge issue? • What difference would it make if you successfully captured, shared and leveraged the knowledge of your extended enterprise? Progressive Practices

6. Catalysts for Change intothe Knowledge Era • Computerization and the Internet • Globalization/Global competition • Hyper-exponential Change Progressive Practices

7. Building a Knowledge-Based Organization • Create the Vision • Engage in Strategy Making/Stretch Goals • Align Values • Assess and Nurture Capabilities • Enact Operating Model • Identify Accountabilities • Establish High Performance Teams Progressive Practices

8. The Role of a Vision Creating a Vision galvanizes an organization by: • Inspiring people to greater goals and linking them to a compelling strategic direction • Putting out the view that the organization is moving in an uncompromising way to a significant and promising future • Being as striking and motivating for everyone in the organization Progressive Practices

9. Creating the Vision • What is our reason for being? • How will we achieve that? • What are our non-negotiable values that support us day to day and year to year in pursuit of becoming more of what we are and in our strategies for getting there? Progressive Practices

10. Cemex: Construyendo el futoroVoluntad Para Emprender Retos • Creativa, estratégica, emprendedora... estos son algunos de los rasgos que simbolizan la cultura de nuestra compañía. CEMEX es un lugar de trabajo retador y un gran sitio para desarrollar las habilidades necesarias para crear valor y cementar relaciones duraderas con los clientes, colegas, inversionistas, comunidades y otras audiencias clave. • Una de nuestras prioridades clave es facultar a nuestra gente para que concentre su energía y creatividad en lo nuevo y no en lo usual. Mediante programas como nuestro Banco de Ideas, impulsamos activamente a nuestra gente a pensar sin ninguna concesión y proponer ideas y soluciones bien fundamentadas. • Nuestro vertiginoso crecimiento y rápida expansión geográfica también subraya las ventajas de contar con una fuerza laboral diversa, compuesta por personas de diferentes estilos, capacidades y antecedentes educativos. Por consiguiente, estamos comprometidos con el desarrollo y mantenimiento de un entorno laboral productivo, sano y estimulante, en el cual se trata a todos con imparcialidad y respeto. Progressive Practices

11. Fujitsu-Siemens Vision Statement • “Understanding you better – serving you best” • “The objectives we have set as a company, and the way we want to set ourselves apart from other vendors, are best expressed by our corporate vision ‘Understanding you better – serving you best.’ We are going to concentrate on closeness to our customers – with the commitment to listen, to analyze their needs, and to supply them with the best solution. Our vision goes hand in hand with our “we make sure” brand promise and the special "sense of responsibility" that is central to everything we do at Fujitsu Siemens Computers. We see our readiness for responsibility as a core strength – one we are constantly nurturing and developing. It shapes our entire company and determines how we serve our customers and partners. We take this responsibility very seriously, attaching great importance to delivering real value to our customers and optimizing the quality of our products, solutions and services”. Progressive Practices

12. Strategy Making • The capacity to constantly renew strategies to align and keep pace with evolving customer needs and the marketplace • Stretch Goals: Audacious goals that push the whole organization beyond the norm • Sample Goals: Tripling sales in 3 years, raising customer satisfaction by 80%, cutting your cycle time for bringing products to market by 30%, closing your books in 1/2 the time • These goals force the organization to rethink its outlook, structures and processes, and ask people to rethink how they relate to and go about their work • People need new knowledge, excellent knowledge flows, continuous learning and collaboration to succeed in meeting these stretch goals Progressive Practices

13. Values Alignment and Outcomes • Shared Values – The “glue” holding organizations together • Values + Skills = Capabilities • Values provide the meaning and motivation (willingness) to learn new skills (new abilities) “Values provide the meaning and the motivation (the willingness) to learn new skills (new abilities). Without both of those in play - values and skills – people rarely sustain the new skills in stressful situations because the inner motivation to do so is (the values component) is missing or weak.” Don Tyler Progressive Practices

14. Cemex Valores Nos esforzamos por alcanzar la excelencia en nuestro desempeño, desarrollando relaciones de largo plazo construidas sobre la confianza y nuestros valores esenciales de colaboración, integridad y liderazgo. • Colaboración: Trabajamos en conjunto y compartimos conocimiento en una búsqueda constante de la excelencia. • Integridad: Nos comportamos honesta, responsable y respetuosamente en todas nuestras interacciones. • Liderazgo: Vemos a futuro y enfocamos nuestros esfuerzos en el servicio al cliente, la excelencia y una mayor competitividad. Progressive Practices

15. Engaging Stakeholders • The vision, values and strategies need to cascade throughout the organization, be shared with customers and partners for comment and response and adjusted accordingly • If people see these changes are in their interests, they will invest their “human capital” to get a return on that capital and make the stretch goals work Progressive Practices

16. Cemex: Perspectivas de Oportunidades en Puerta Retadora y dinámica • Me gustan los trabajos que presentan retos y ofrecen oportunidades profesionales; y en mi opinión, escogí la mejor empresa para lograr mis objetivos. CEMEX es una compañía en crecimiento muy dinámica. Ildikó PappCEMEX, Hungría Innovadora • CEMEX fomenta la innovación y permite a toda su gente crecer en un entorno de trabajo retador y creativo. La gente aporta su mayor esfuerzo, sabiendo que la compañía apoyará sus iniciativas. Javier MerleCEMEX, España Visionaria • Lo que separa a CEMEX de los demás es su visión y las acciones que la compañía emprende para lograrla. Héctor Kelvin Castillo Then CEMEX, República Dominicana Profesional • CEMEX ofrece una atmósfera muy profesional y dinámica, donde los valores y la ética son sumamente importantes. Trabajar en CEMEX es un proceso de aprendizaje que nunca termina. Kamla Sherif NassarCEMEX, Egipto Progressive Practices

17. Types of Capabilities • Organizational • Strategic, Structural, Cultural, Systems and Leadership • Individual • Attributes, Skills, Mindsets, Values • Generative • Enable Generation of Other Capabilities: Learning, Collaboration, Strategy Making Progressive Practices

18. Compentencias Cemex • Trabajo de equipo • Creatividad • Enfoque en las audiencias clave • Espíritu emprendedor • Pensamiento estratégico • Enfoque al servicio al cliente • Desarrollo de los demás • Administración de la información • Desarrollo de alianzas Progressive Practices

19. Operating Model • The operating model consists of the core elements that the organization uses to carry out its strategies: • Guiding principles • Policies for decision-making • Accountabilities • Reworking organizational processes in relationship to stretch goals • Renegotiating relationships with suppliers and partners to obtain higher performance and productivity. Progressive Practices

20. Accountabilities • Every person chooses to be accountable for making the organization work. • Each individual has their particular set of accountabilities and those accountabilities thread together to insure that all areas of the organization move forward in concert. • As demands and stretch goals change, these accountabilities adjust accordingly. Progressive Practices

21. High Performance Teams • Groups become teams through disciplined action. They shape a common purpose, agree on performance goals, define a common working approach, develop high levels of complementary skills, and hold themselves mutually accountable for results • In any situation requiring the real-time combination of multiple skills, experiences, and judgments, a team inevitably gets better results than a collection of individuals operating within confined job roles and responsibilities John R. Katzenbach and Douglas K. Smith, The Wisdom of Teams Progressive Practices

22. Experimental Practice Fields • Operating in a changing knowledge organization, with its distinct values, practices and norms is different from how business was done in the old ways • People need chances for trial and error to gauge what they are now able to do, trying out the new approach in many ways and varied conditions • Engaging people from all levels and areas on values, vision, and strategy-making starts new thinking and stimulates new actions • Action teams can be organized to experiment with these new possibilities in service, technology, or logistics and eventually learnings incorporated across the organization Progressive Practices

23. Examples

24. Telespectra • Telecommunications company facing bankruptcy • Experienced, innovative leader as CEO • Strong business strategy – unique niche • Customer focused • Shared understanding of operations • Continuous Learning • 2002 - Customer satisfaction rating was 3.8 out of 10.0 … November 2005 -Customer satisfaction rating was 9.3 out of 10 Progressive Practices

25. Wipro • Originally a salad oil producer • Hired GE VP as CEO to start a software/outsourcing organization in 1990 • In 1998, when Wipro went from 5,000 to 10,000 people the CEO called for a knowledge management program • Full KM program developed in 2 years • The company is now a knowledge-based global enterprise of 20,000+ people Progressive Practices

26. Brembo: The essential is invisible to the eyes • Smallest of the four global share leaders in the mature brakes market • 5300 employees, 10% working in R&D, operating in 10 countries, with sales in 70 countries • What makes Brembo different? • Brembo developed the characteristics ”to be fit to its role” • Focus • Flexibility • Speed • Not automotive parts but Auto-E-Motive: “The Pleasure of Driving, the Pleasure of Braking” “A simple business idea: To produce the highest performing brakes in the world” Progressive Practices

27. The Results Tell TheBrembo Story • From 1996 to 2007, sales increased from €181 million to €912 million • Keys to success: • Sustainable growth • Appreciation from the financial world • Corporate governance • 2008 Formula One season Brembo will supply: BMW Sauber F1 Team, Force India Team, Honda Racing F1 Team, Panasonic Toyota Racing, Red Bull Racing, Scuderia Ferrari Marlboro, Scuderia Toro Rosso\ • Awards • 2007 - Italian Prize of Mechatronics, science that combines electronics,  informatics and mechanics. • 2006 – Italian Creativity Award • 2005 - National Corporate Social Responsibility Award • 2003 and 2005 - Best Ferrari Partner in Innovation • 2001 - Oscar Award for Financial Statements and Communications for listed companies Progressive Practices

28. Code of Ethics and Governance • Code of Ethics • Distributed to all employees • Guideline for making business decisions and determining the conduct of all collaborators • Code of Corporate Governance: An Attitude – Not a Duty • Corporate Governance is the relationship of esteem and trust among people that must permeate every single aspect of company life • An affirmation of values inspired by recognised and shared ethical principles • Maximum transparency, rules, ethics, and reputation as the basis of its intangible assets, its brand name and its value • Annual Corporate Governance Report Progressive Practices

29. Intangibles for Brembo - Phase 1Selection and measurement of most significant indicators Progressive Practices

30. Phases 2, 3, and 4 • Phase 2 - Implementation of selected indicators into the corporate management model • Phase 3 - Integration of intangible assets in a coherent model of corporate governance • Phase 4: From Potential to Tangible • Correlation of intangible indicators with the “traditional accounting system” • A new way to look at financials • An instrument for “Predictive Management” Brembo’s Intellectual Capital Report at: http://www.brembo.com/ENG/AboutBrembo/InvestorRelations FinancialInfo/CompanyStructure/ Brembo Presentation at: http://www.ferraraonintangibles.net/OECD- FerraraIntangiblesConference/index.php?cat=16&proceedings=2 Progressive Practices

31. How can your organization become a Knowledge-Based Enterprise?

32. Take Control of the Future: Next Steps • Explore your organizational goals and how it can develop a knowledge strategy for it to become a Knowledge-Based Enterprise • Map out the opportunities and blocks to becoming a knowledge-based organization • Involve people and organizations in your organization and network to discuss the opportunities to become a Knowledge-Based Enterprise • Initiate a set of pilot projects • Build your capabilities as a Knowledge-Based Enterprise by facilitating the realization of those strategies and projects Progressive Practices

33. For More Information Contact: Jay Chatzkel Progressive Practices 1-623-551-5230 jaychatzkel@progressivepractices.com Websites: www.progressivepractices.com and www.knowledgecapitalbooks.com Progressive Practices