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The Business Model And The IC Revolution - Carendi And The First Torch

Carendi introduced a new business model for Skandia based on alliances and relationship man­agement, or as he calls it, "specialists in cooperation." Instead of selling its own savings products or managing its funds, Skandia outsources fund management and product distribution, while focusing on product development and sales support, as illustrated in Exhibit 9.1. Skandia collects and assesses extensive information about fund managers' investment history in the process of approving them as partners. This information, along with Skandia's knowledge of the fund mar­ket, is then passed on to financial advisors to aid them in advising their own clients. Skandia thus manages two networks by acting as the link between them instead of managing its own funds or distributing its own products. This enables Skandia to focus on product development.

Skandia's products include two major categories: investment products for end users, and sup­port services and products for financial advisors. Under the first category, Skandia provides solu­tions (products) for every investment need, each with a platform of investment options. For financial advisors, Skandia provides packaged knowledge on the market as well as training pack­ages. All those specialists, including Skandia, are tied together through a common value chain, but operate autonomously in providing their products.

Skandia's business model is based on the ability to manage relationships over two major net­works of fund managers and financial advisors, and hence on its competence to manage IC inter­nally across the various divisions and externally across the portfolio of alliances. A few years into its life, Skandia had around 60 employees at the headquarters in Stockholm, 1,200 key executives at the operating units in the United States and another 20 countries, managed alliances with over 70,000 fund managers and brokers and serviced over a million end users. For every full-time employee and partner Skandia maintained almost 20 end users. This model saves billions in oper­ational costs compared to a traditional insurance company model where agents' networks or dis­tribution sales force are employed.

Analyzing the business model with the CICM lens, the model revolves around three main processes:

1. Managing knowledge resources of Skandia and those obtained from fund managers to share them with financial advisors, and generate knowledge about customer needs and market trends to enable product development

2. Managing innovation or new product development across Skandia's alliances and oper­ating units to provide new solutions that differentiate Skandia from competitors

3. Managing Skandia's primary IPs comprising work systems, business methods, software programs, and trade secrets to enhance competitive performance

Skandia's ICM model is not a program to boost value creation per se but the core process of the new business model. This is why Carendi was not content with appreciation of the value of IC at the top and senior management levels. He wanted this appreciation to penetrate all levels and per­meate the way business is done in Skandia as a whole. For this to happen, it was essential to rep­resent ICM in a systematic way and to tie it to everyday business reality. What is needed is a methodology to define what IC is, how it drives value creation, and how it can be captured and then leveraged. Faced with the challenge of allocating this task to an existing position or depart­ment, Carendi found no position that could cover this new revolutionary concept, so he created a new one. In 1991, Carendi appointed Leif Edvinsson as the world's first Director of Intellectual Capital, and entrusted him with making business sense of the IC concept.

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