129Knowledge Management • ©1995,1999 APQCKNOWLEDGE MANAGEMENT PROFILESSkandiaBACKGROUNDSkandia’s KM activities originated from the insight that more and more money flowedinto the soft factors of the company. There was a growing discomfort with that the com-pany focused too much on financial issues while many of the daily activities, necessaryfor sustained growth, were not reflected in the accounting system. Furthermore,Skandia/AFS expanded its number of point of sales from 5,000 to 50,000 in fiveyears. This expansion called for a widespread use of the existing knowledge. It wasclearly felt that a management process must be developed to increase the applica-tion of knowledge. Action was taken in 1991.Skandia prefers the term “Intellectual Capital Management” to “KnowledgeManagement” because the latter is seen as too narrow. Intellectual capital is the gapbetween the market value and the book value of a company’s shares. This differencecan be huge. The example of Microsoft shows, that the book value might be as lowas 15 percent of the perceived market value. The difference of 85 percent is Microsoft’sintellectual capital.Intellectual capital can be divided into:• Human capital (people) and• Structural capital, e.g., technology or the customer database (the most valuable assetof structural capital)The goal of Intellectual Capital Management is to leverage the combination ofhuman and structural capital. This includes:• Identifying and capturing hidden values,• Cultivating human capital, • Transferring intangible aspects into structural capital, and• Use and recycle external structural capital.SNAPSHOTIndustry:InsuranceHeadquarters:Stockholm, SwedenRevenue:SEK $59 billionEmployees:10,000Knowledge Management • ©1995,1999 APQC130PROFILESThere is no special KM function (except for Leif Edvinsson, now VP, CorporateDirector of Intellectual Capital). It is each individual’s responsibility to be actively involvedin KM—all the time. KM is looked upon as a process to share knowledge, and not asa means to store knowledge. This distinction is much emphasized, and a commontheme, in all the responses. The process of sharing knowledge with people that needthis knowledge leads to its application, the mere storing of knowledge (e.g., in acentral database) does not .Skandia divided their KM approach into 6 phases. All the phases were well plannedin advance. Leif Edvinsson developed these phases:Phase 1: MissionaryThe purpose of phase 1 was to get insights, market KM within the organization,and get people’s buy-in. Phase 2: MeasurementThe purpose of this phase was to develop metrics and indicator for KM. These indi-cators were used to visualize the importance of KM activities to top management.Phase 3: LeadershipThe leadership dialogue was initiated. Skandia focused on leveraging leadervalues and combining human capital with structural capital.Phase 4: TechnologyThis phase emphasized the building of structural capital among others by infor-mation and communication technology.Phase 5: CapitalizePhase 5 aims at upgrading the yield and the productivity through recyclingknowledge. Phase 6: FuturizingRecently initiated to nurture innovations based on an inquiring of driving forcesfor the future of Skandia and a new organizational concept called Skandia Future Each phase took about one year to complete. The phases weren’t completed in apurely sequential manner, one after the other. Instead, it was necessary to use manyfeed-back loops.There are four driving forces that stand behind Skandia’s KM activities:1. Trust:2. Technology: to enable KM as a process of sharing and applying information3. The domain of management: opposite to the old paradigm of working in afunctional structure, the domain of management has extended to working withpeople in a network that forms a virtual organization.4. Work with partners and ultimate clients: knowledge is shared with partners (brokers) and, finally, with the ultimate client (who buys the product from thebroker). If knowledge is attractive and of interest, it is automatically picked up by othersparts of the organization. English is used as a common language, and IT supports131Knowledge Management • ©1995,1999 APQCPROFILESthe sharing process. A flat organization is an important prerequisite for KM, as wellas trust.KEY APPROACHESKM is everybody’s responsibility, which is manifested in people’s jobs. Informationtechnology (IT) people, e.g., focus on packaging knowledge into IT products thatsupport the sharing of knowledge. Accounting people are responsible for developingindicators to measure KM activities and the role development of future controllers. Thereis no specific percentage of time allotted to these KM activities. KM is looked at as aphilosophy of working.The Consumer Based Advisor PackageThe consumer based advisor package is a software package that was initially dis-tributed to the brokers of Skandia’s financial services on a PC disk. The brokers usedit in dialogues with customers. The package is now available in the U.S. on CD-ROM. It enables American Skandia to electronically reach the ultimate customer.The procedure on the CD-ROM has been optimized to minimize Skandia’s admin-istration and paperwork. Since the customers follow the processes on the CD-ROM,they are electronically on-line with Skandia’s internal procedures. Customer acceptanceand satisfaction are high according to surveys.Examples of Skandia Knowledge Management BenefitsKnowledge ManagementActivitiesInternal Benefits(Operational Improvements)External Benefits(Customer and Market Reaction)Bottom-LineBenefitsIntermediate Benefits and EffectsKnowledge Management • ©1995,1999 APQC132PROFILESKnowledge ReuseThis approach is a means for knowledge sharing. The idea is to recycle experi-ence on a global basis and to obtain global structural capital, while having humancapital locally. For instance, when a new start-up is founded, the administrative man-power of an already established business unit in another country can be used ini-tially. This helps reducing the start-up costs and lead time as well as increasingproductivity and quality.Skandia NavigatorSkandia’s reporting model, the Skandia Navigator, is designed to provide a balancedpicture of the financial and intellectual capital. The focus on financial results, capitaland monetary flows is complemented by a description of intellectual capital and itsdevelopment. Indicators