Scott A. Snell
Cornell University
393 Ives Hall
Ithaca, NY 14853
(607) 255-4112
@
Competing through Knowledge:
The Human Capital Architecture
IBM“You can get capital and erect buildings, but it takes people to build a business.”Thomas J. Watson, IBM
Did IBM forget?
•• $168 billion (Tobins Q = )
• Hardware, software, and services
• Nobel prize-winning scientists
• 3,768 patents (1993-1995)
What’s Happening Today?
Industry Changes
• Globalization
• Information technology
Need for…
• Organizational agility
• Speed
• Innovation
• Cost
• Knowledge-based strategies
• Core competencies
• Innovation
• External partnerships
Leading to…
New Business Equation
Core Competence…
…is a bundle of skills and technologies that enables
a company to provide a particular benefit to
customers.
Hamel and Prahalad, 1994
SONY Miniaturization Pocketability
FEDERAL EXPRESS Logistics On-time delivery
HONDA Engine design/mfg. Reliable performance
MOTOROLA Wireless technology Untethered comm.
Core Benefit to
Competence Customer
KnowledgeKnowledge
TechnologiesTechnologies
ProcessesProcesses
RelationshipsRelationships
CRITERIA
• valuable
• unique
• extendable
• learning
Benefits
VALUE = ---------
Costs
UNIQUE = (social complexity + causal ambiguity)
LE
AR
N
IN
G
=
(e
xp
er
ie
nc
e
x
ch
al
le
ng
e)
Competing Through People
• Identify & develop core skills
• Integrate diverse activities
• Respond with agility & speed
• Empower action
• Innovate
Core Competence…
…is a bundle of skills and technologies
that enables a company to provide a
particular benefit to customers.
--Hamel and Prahalad
KNOWLEDGE
- customer
- technology
- operations
- managing
PROCESSES
- customer segmentation
- just-in-time (hrs)
- mass customization
- build to order (AIM)
- ROIC metrics
- experimentation
TECHNOLOGY
- Premier pages
- software installation
- TPM triggers (parts, service)
- customer purchasing systems
RELATIONSHIPS
- customer intimacy (Boeing)
- Platinum councils
- supplier partnerships (Sony)
- employee involvement
- third party service maintainers (TPMs)
- distribution agreements (UPS, Airbourne)
“V
irt
ua
l
In
te
gr
at
io
n”
Leading to… •• ValueValue
•• Uniqueness Uniqueness
•• Learning Learning
“A low-value product can be
made by anyone anywhere.
When you have knowledge
no one else has access to --
that’s dynamite. We guard
our intellectual assets even
more carefully than our
financial assets.”
--Roy Vagelos, former CEO Merck
KNOWLEDGE
- customer
- technology
- operations
- managing
PROCESSES
- customer segmentation
- just-in-time (hrs)
- mass customization
- build to order (AIM)
- ROIC metrics
- experimentation
TECHNOLOGY
- Premier pages
- software installation
- TPM triggers (parts, service)
- customer purchasing systems
RELATIONSHIPS
- customer intimacy (Boeing)
- Platinum councils
- supplier partnerships (Sony)
- employee involvement
- third party service maintainers (TPMs)
- distribution agreements (UPS, Airbourne)
“P
os
iti
ve
ly
O
ut
ra
ge
ou
s
Se
rv
ic
e”
Southwest Airlines
KNOWLEDGE
- microbiology
- biochemistry
- microbiology
- imunodiagnostics
(antibodies/conjugates)
PROCESSES
- R&D/Mfg.
- bioconjugation
- antibody purification
- PCR amplification
- DNA hybridization
- TQM
- commercialization
TECHNOLOGY
- immunoassays
- ELISA (serum/blood)
- rapid diagnostics
- DNA based
RELATIONSHIPS
- CRC-DT, CDC
- . Army
- World Health Org.
- universities
- distribution network
- employee (science/mkt)
C
2 =
“R
ap
id
L
ea
rn
in
g”
Leading to…
An organization at the
frontier of its intellectual field
is more likely to stay at the
frontier. It can attract and
challenge more and better
intellect than its competitors.
By solving more advanced
problems, it has more
capacity to solve others.
And so on.”
--- JB Quinn
•• ValueValue
•• Uniqueness Uniqueness
•• Learning Learning
BIOTECH INC.
Benefits
= ---------
Costs
Combination of people and systems
leads to...
Human
Capital
Social
Capital
Organizational
Capital
BioTech, Inc.: Intellectual capital
People
Systems
KNOWLEDGE
- microbiology
- biochemistry
- bioconjugation
- imunodiagnostics
PROCESSES
- R&D/Mfg.
- bioconjugation
- antibody purification
- PCR amplification
- DNA hybridization
- TQM
- commercialization
TECHNOLOGIES
- immunoassays
- ELISA (serum/blood)
- rapid diagnostics
- DNA based detection
RELATIONSHIPS
- CRC-DT, CDC
- . Army
- World Health Org.
- universities
- distribution network
- employee (science/mkt)
C2 = “Rapid Learning”
P
E
O
P
LE
S
Y
S
T
E
M
S
Core Competence
How does human capital
contribute to the core competence?
• Value
• Unique
Resources need to be:
Benefits
VALUE = ---------
Costs
Drives innovation
Responds to customer demands
Provides excellent customer service
Achieves highest quality
Instrumental in process improvements
Develops new business opportunities
Directly affects efficiency and productivity
Minimizes costs of production, service, delivery
Not widely available in the market
Cannot be bought or appropriated
Difficult to imitate or duplicate
Specialized KSAs
Difficult to replace
Customized to our firm
Developed through on-the-job experiences
Distinguishes us from our competitors
R&D
Manufacturing/
Operations
Distribution
Sales
Sales
TMT
Cust
Serv
HR
R&D
Rapids
Fin
Customer
Service
Mfg
R&D
R&D
Partners
Core
Knowledge
Low VALUE high
Lo
w
U
N
IQ
U
E
h
ig
h
BIOTECH, INC: Mapping Human Capital
KEY
Finance
HR
TMT
MIS
Mfg/Operations
Market/Sales
R&D
Quality
Biologicals
Cust. Service
Rapid Diag.
Legal/Reg.
Distribution
Rapids
Scott A. Snell, Cornell University
C
2
=
R
ap
id
L
ea
rn
in
g
HR
Legal MIS
Biologicals
Fin
Quality
TMT
Compulsory
Knowledge
Idiosyncratic
Knowledge
Ancillary
Knowledge
High ValueHigh ValueLow ValueLow Value
GenericGeneric
CoreIdiosyncratic
Ancillary Compulsory
UniqueUnique
Human Capital Architecture
Human
Capital
• unique
• value
HRM
System
Employ
Mode
Core Human Capital
• High Value: Direct link to core competence
• High Uniqueness: Firm-specific knowledge and skills
Employment Mode: knowledge work
Employment Relationship: organization-focused
Examples: software developers (Microsoft)
drug researchers (Merck)
fund managers (Fidelity)
“gold-collar” workers
High ValueHigh ValueLow ValueLow Value
Unique
GenericGeneric
IdiosyncraticIdiosyncratic
AncillaryAncillary CompulsoryCompulsory
Human Capital Architecture
Core
High ValueHigh ValueLow ValueLow Value
Unique
GenericGeneric
CoreCoreIdiosyncraticIdiosyncratic
AncillaryAncillary
Human Capital ArchitectureHuman Capital Architecture
Compulsory
Employment Mode: traditional job
Employment Relationship: job-focused
Examples: staff accountants (Andersen)
sales people (Sears)
truck drivers (UPS)
HighValue: Direct link to strategy
High Uniqueness: Generic knowledge and skills
Compulsory Human Capital
• High Value: Direct link to core competence
• Low Uniqueness: Generic knowledge and skills
Employment Mode: contract work
Employment Relationship: transactional
Examples: assemblers (Nike)
clerical workers (Halliburton)
payroll (Continental)
catering (ARAMARK)
High ValueHigh ValueLow ValueLow Value
Unique
GenericGeneric
CoreCoreIdiosyncraticIdiosyncratic
CompulsoryCompulsory
Human Capital ArchitectureHuman Capital Architecture
AncillaryAncillary
Ancillary Human Capital
• Low Strategic Value: Operational role
• Low Uniqueness: Generic knowledge and skills
Employment Mode: partnership
Employment Relationship: collaborative
Examples: “wild ducks” (IBM)
design engineers (w/ Boeing)
trainers (Merck/Forum)
authors (McGraw-Hill)
High ValueHigh ValueLow ValueLow Value
Unique
GenericGeneric
CoreCoreIdiosyncraticIdiosyncratic
AncillaryAncillary CompulsoryCompulsory
Human Capital ArchitectureHuman Capital Architecture
Idiosyncratic Human Capital
• Low Strategic Value: Intermittent link to competence
• High Uniqueness: Specialized knowledge and skills
TRADITIONAL
JOB-BASED
EMPLOYMENT
ALLIANCE/
PARTNER
CONTRACT
WORK
KNOWLEDGE
WORK
S-specific job
T&D-short-term
T&D-current job
T&D-external
$-internal equity
S-immediate perform
$-group
Job-narrow/simple
$-short-term
PA-quality
Job-customized
$-bonus
$-performance
$-industry experience
S-strategy contribute
$-salary
Job-rotation
S-solve problems
S-best
Job-security
$-high
Job-empower
PA-strategy contribute
T&D-investment
PA-work w/others
T&D-OJT
T&D-team
T&D-continuous
S-potential
S-promote w/in
PA-develop
Job-dynamic
Job-standardized
$-hourly
KEY
Job design
Staffing
Training
Appraisal
Compensation
Low VALUE high
L
ow
U
N
IQ
U
E
h
ig
h
Plotting HR Practices
STUDY:
152 multi-product firms
>200 employees
CEO, VPHR, line execs
Lepak & Snell, 2001Lepak & Snell, 2001
Rewards
Appraisal
Development
Staffing
Job Design • enriched & empowered• customized
• aptitude (able to learn)
• promote from within
• continuous on-the-job
• firm-specific
• focus on strategic contribution
• developmental
• external equity (high wages)
• pay for knowledge, experience,
seniority
• ownership and perks
COMMITMENT-BASED HRM SYSTEM
High ValueHigh ValueLow ValueLow Value
Unique
GenericGeneric
IdiosyncraticIdiosyncratic
AncillaryAncillary CompulsoryCompulsory
Human Capital Architecture
Core
Core Human Capital
Employment Mode: knowledge work
Employment Relationship: organization-focused
Rewards
Appraisal
Development
Staffing
Job Design • clearly defined• moderately empowered
• external recruitment
• achievement
• limited to firm-specific
• short-term focus
• developmental
• focus on performance
• external equity (market rate)
• pay for performance
High ValueHigh ValueLow ValueLow Value
Unique
GenericGeneric
CoreCoreIdiosyncraticIdiosyncratic
AncillaryAncillary
Human Capital ArchitectureHuman Capital Architecture
Compulsory
PRODUCTIVTY-BASED HRM SYSTEM
Employment Mode: traditional job
Employment Relationship: job focused
Compulsory Human Capital
Rewards
Appraisal
Development
Staffing
Job Design • well-defined• limited scope
• outsourced (perhaps)
• contract for a specific task
• limited to rules & procedures
• administrative
• hourly or contract-contingent
High ValueHigh ValueLow ValueLow Value
Unique
GenericGeneric
CoreCoreIdiosyncraticIdiosyncratic
CompulsoryCompulsory
Human Capital ArchitectureHuman Capital Architecture
AncillaryAncillary
COMPLIANCE-BASED HRM SYSTEM
Employment Mode: contract work
Employment Relationship: transactional
Ancillary Human Capital
Rewards
Appraisal
Development
Staffing
Job Design • team-based• enriched & autonomous
• ability to collaborate
• achievement
• continuous on-the-job
• firm-specific
• team-oriented
• goal accomplishment
• group-based incentives
• contract, salary, pay-for-
knowledge
High ValueHigh ValueLow ValueLow Value
Unique
GenericGeneric
CoreCoreIdiosyncraticIdiosyncratic
AncillaryAncillary CompulsoryCompulsory
Human Capital ArchitectureHuman Capital Architecture
COLLABORATIVE HRM SYSTEM
Employment Mode: partnership
Employment Relationship: collaborative
Idiosyncratic Human Capital
Human Capital ArchitectureHuman Capital Architecture
lo
w
U
ni
qu
en
es
s
h
ig
h
low Strategic Value high
Human
Capital
• unique
• value
HRM
System
Employ
Mode
R
el
at
io
na
l E
xc
ha
ng
e
T
ra
ns
ac
tio
na
l
InternalizationExternalization
Idiosyncratic HC
• Mode: Partnership
• HR: Collaborative
- select on past experience
- develop the relationship
- evolving scope
- rewards for ideas
Core HC
• Mode: Knowledge work
• HR: Commitment-based
- staff based on potential
- develop (firm-specific)
- extensive pay & benefits
- autonomy/self-direction
- mistakes are important
Compulsory HC
• Mode: Traditional job
• HR: Productivity-based
- staff based on current skill
- less development
- market wage
- focus on ST performance
- mistakes above the water line
Ancillary HC
• Mode: Contract work
• HR: Compliance-based
- standardize/simple (outsource)
- focus on rules & procedures
- narrow scope
- error avoiding
- hourly pay
One flaw in knowledge
management is that it
often neglects to ask what
knowledge to manage and
toward what end.
Knowledge should be
managed within the
context where value is
created.
--Tom Stewart
…Link Back To Core Competence.
Low VALUE high
L
ow
U
N
IQ
U
E
h
ig
h
BIOTECH INC: Mapping Social Capital
TMT
Rapids &
Ext. Partner
R&D &
Government
Quality Team
Production
& TMT
Marketing
& Sales
FOCUS ON:
• Governance
• TMT
• Culture
• Value Chain
• Task Environment
• Stakeholders
• Remote Environment
Production &
Raw Mat Sup
R&D & Suppliers
R&D &
Production
Tech Support &
Customer
R&D & Customer
R&D & Quality
TMT /R&D &
. Regulatory
Cust. Service &
Customer
Culture (TMT)
TMT &
. R&D *
TMT &
. R&D *
TMT/R&D &
. Mfg.
TMT &
. R&D
TMT &
Customer
R&D &
External R&D
Governance
Marketing
& Customer
R&D Team
Production &
Sales
MIS &
R&D
Production Team
Production &
Quality
R&D & Sales
Sales/TMT &
Distributors
Scott A. Snell, Cornell University
PATTERNS:
Explicit --------- Tacit
Transactional ---------- Relational
Effectiveness ---------- Efficiency
Low VALUE high
L
ow
U
N
IQ
U
E
h
ig
h
Mapping Organizational Capital
FOCUS ON:
• Databases
• Patents
• Processes
• Systems
• Manuals
LN: Feelings
LN: Sexions
(Suggestions)
LN: Gen News
LN: Contact
Database
LN: Research
Databases (20+)
R&D
Process
Production
Plate Coating
LN: New
Products
Product
Improvement
LN: Customer
Industry News
Production
Processes
Quality
Shipping Customer
Service
Management
Info. System
Patents
Scott A. Snell, Cornell University
Biotech, Inc.
CORE
ENABLINGSUPPORTING
LINKING
Summary Points
Mapping human capital helps structure
the conversation.
Different types of human capital are
(should be) managed in different ways.
In addition to HC, there are social and
organizational dimensions of IC.
The architecture of these knoweldge-
based assets underlies a firm’s core
competence.
CheckpointCheckpoint
Dynamique Yachts
Knowledge
Integration
Human
Capital
Social
Capital
Organization
Capital
C
or
e
C
om
pe
te
nc
e
...
a
bu
nd
le
o
f s
ki
lls
a
nd
te
ch
no
lo
gi
es
th
at
e
na
bl
es
a
c
om
pa
ny
to
p
ro
vi
de
a
pa
rt
ic
ul
ar
b
en
ef
it
to
c
us
to
m
er
s.
It
r
ep
re
se
nt
s
th
e
su
m
o
f l
ea
rn
in
g
ac
ro
ss
th
es
e
re
so
ur
ce
s.
(
H
am
el
&
P
ra
ha
la
d)
H
um
an
R
es
ou
rc
e
M
an
ag
em
en
t P
ra
ct
ic
es
S
ta
ffi
ng
, t
ra
in
in
g,
w
or
k
de
si
gn
, p
ar
tic
ip
at
io
n,
r
ew
ar
ds
, a
pp
ra
is
al
, e
tc
.
Systems
Knowledge
Creation
Intellectual Capital
Dynamic Capability
People
Knowledge
Transfer
Learning and Innovation
Flow
Stock
Change
Processes to integrate, reconfigure, gain, and
release resources—to match and even create
market change. Renewal
Valuable
Rare
Inimitable
Organized
Model of Strategic HRM
Unique
