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Turning knowledge assets into innovative business processes: an empirical example in the asset management industry Yasmina Khadir-Poggi * School of Business Trinity College Dublin College Green, Dublin 2, Ireland [email protected]

Mary Keating School of Business Trinity College Dublin College Green, Dublin 2, Ireland [email protected]

Stephen Chandler International Business Department Irish American University 2 Merrion Square, Dublin 2, Ireland [email protected] * Corresponding author

Abstract Purpose – This paper introduces initial insights into how Mediolanum Asset Management Limited (MAML), an innovative and expanding Italian asset manager based in Ireland, relies on a knowledge-based organisational structure fostering innovation in order to generate a sustainable competitive advantage. Knowledge-based SMEs such as MAML face a recurring challenge in the highly competitive asset management industry: they rely heavily on their staff expertise in order to generate innovation while trying to downplay at the same time their dependency on their human assets. The company fosters innovation while resting on KM practices and IC to build a social and organisational capital. Design/methodology/approach – Primary and secondary data are gathered from observation, documentation and semi-structured interviews and provide the material on which this study is based. Knowledge management and intellectual capital theoretical lenses are elicited for the critical analysis and interpretation of the results. Originality/value – This paper based on empirical evidence demonstrates how intellectual capital stocks and knowledge management practices are actually approached and implemented in order to create value through innovation-led processes. To our knowledge, MAML constitutes a rare case of a SME in the asset management industry

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that is positively and consciously concerned with managing and capturing intellectual capital so thoroughly. Practical implications – This paper provides interesting and valuable insights to other small asset managers on how they can employ intellectual capital and knowledge management practices as an alternative way to generate an innovation-led sustainable competitive advantage while reducing at the same time their dependence on human assets. Keywords – Knowledge Management, Intellectual Capital, Innovation, Asset Management, Ireland Paper type – Academic Research Paper

Introduction The asset management industry has dramatically changed since the beginning of the millennium under the combined influence of a profound mutation of the prevailing business models and the consequences of the last financial crisis. The historical supply-led, product-push distribution model has been revealed as increasingly obsolete in the current environment. Understanding clients’ needs and demonstrating a real capability in delivering value translates into a shift of power towards those nearest the client (Griffin et al. 2013; Rajan 2013). Asset managers are no longer in a stable and predictable business environment. In the aftermath of the financial crisis, they suddenly became part of an increasingly dynamic industry fraught with uncertainties and with a heavy and prolific regulation that stretches companies’ resources further while adding complexity to operating models. Griffin et al. (2013) identified that asset managers are evolving towards a more focused and better-structured approach to their markets. They also stress that companies are better off moving away from fragmented or silobased ways of working to make coordination, collaboration and effectiveness their new organisational philosophy. Furthermore, asset management firms need deeper skills and capabilities in order to develop relevant client-centric dialogues while at the same time simplifying and flattening their operating models. One of the favoured avenues for creating a better fit between market requirements and company’s resources and capabilities is to foster and nurture innovation. Innovation is viewed as an intellectual agility driven primarily by competition, an ability to use knowledge and skills, and an ability to build on prior knowledge and generate new knowledge (Roos et al. 1997). It is the implementation of both discoveries and inventions, and the process at the origins of new products, systems or processes (William 1999). Creating new ideas that add value for clients under a certain time frame in the same fashion as Apple, Johnson & Johnson or Toyota has gradually gained popularity among asset managers. Firms will generate a sustainable competitive advantage by implementing the four

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sequential activities of the innovation value chain that consist of idea generation, evaluation, design and delivery. Idea generation emerges from spotting gaps in the product market; then the feasibility of a business case is studied; design consists in stress-testing the chosen solution and delivery involves convincing the client and making things happen (Rajan 2013). Scholars made a compelling argument in demonstrating the intrinsic dependence of innovation on intellectual capital (IC) stocks and, how knowledge management (KM) processes and practices support organisational innovativeness (Andreeva & Kianto 2011; Kianto et al. 2013; Santos & Wane 2013). IC is understood as a collection of intangible assets and flows that contribute to the company’s value creating process (Bontis et al. 1999). IC is traditionally understood as a combination of human assets, structural assets and relational assets. Stewart (1997) defines it broadly as a “package of useful knowledge” introducing as such the approach in terms of IC stocks. KM is a broad and multidimensional concept that covers most aspects of an organisation’s activities. Whereas, knowledge encompasses data, information and tacit knowledge, KM can be seen as a management function that consists in creating or locating knowledge, in managing the flow of knowledge within the firm and in ensuring that knowledge is used efficiently and effectively for the long-term benefit of the organisation (Darroch & McNaughton 2002). It is understood in terms of processes or practices such as knowledge creation, acquirement, organisation, storage and distribution, and application between people, technique and technology (Bhatt 2001; Nonaka 1994). In other words, the overall objective of KM is to make a firm act as intelligently as possible in order to secure a sustainable competitive advantage, achieve organisational performance and optimize the use of its knowledge assets (Wiig 1999). Within a background of both a rapidly changing asset management industry and a rising interest in the innovation potential of using a combination of IC and KM, Mediolanum Asset Management Limited (MAML), a Dublin-based asset manager, part of an Italian group, with circa €28 billion assets under management (AUM), is singled out as an organisational exemplar within a broader research project involving several firms. Led by Furio Pietribiasi, MAML demonstrates a clear focus for innovation, knowledge management practices and intellectual capital in order to create a sustainable competitive advantage and build social and organisational capital. And, this is clearly asserted in its strategic statement. This paper aims at introducing initial insights into how MAML strives to design a knowledge-based organisational structure instilling an innovation-driven culture that is able to generate a sustainable competitive advantage within a highly

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competitive industry. Exploring one case study can be seen as problematic if one looks for generalizations. However, this is not the purpose here. Following the example of Starbuck (1992), gaining exceptional business success does not rest on imitation of other firms and exploitation of shared properties and in our views, MAML fits the profile. In addition, the value creation process is firm and context-specific (Bollen 2005). Focusing only on one particular case is sometimes the best avenue to make a contribution to knowledge (Starbuck 1993). The first section reviews the relevant literature. The research design is then introduced followed by the initial results stemming from the study in a second section. A conclusive section discusses the findings. Finally, the limitations of the study and potential further research are suggested.

Relationships between intellectual capital stocks, knowledge management practices and innovation The rationale for intellectual capital (IC) and knowledge management dates back to the 1980s where it became obvious that business differentiation and sustainable competitive advantage could not rest solely on tangible assets but more and more on developing unique resources, capabilities and endowments. Hence, the resource-based view of the firm introduces knowledge as a driver for the definition and implementation of a business strategy (Grant 1991; 1996). How the literature envisages the possible relationships between IC, KM practices and innovation is explored in the following paragraphs. Intellectual capital and innovation Bontis et al. (1999) defines IC as the collection of intangible resources and their flows. The former are under the control of the company and contribute the company’s value creating process. Formatively, IC is divided three pillars: human capital, structural capital and customer capital. Human assets encompass individual tacit knowledge, intelligence, skills, expertise, learning, capability, changing, innovativeness, creativity (Bontis 1998; Lynn 1998), problem solving, leadership, entrepreneurial skills, and managerial skills (Roos et al. 1998). Brooking (1996) includes also competence, attitude, motivation, and leadership qualities of top management as well as intellectual agility, innovation and adaptation capabilities into these assets. Lynn (1998) defines structural assets, the second pillar, as organisational routines consisting of systems that organise the intellectual efforts in order to generate more routine, a supportive culture, information systems, efficiency, and procedural innovativeness. They are the mechanisms, structures and systems that

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turn individual assets into group assets (Bollen 2005). They also comprise infrastructural assets such as corporate culture (Roos et al. 1998), internal structures such as management and legal structure (Edvinsson & Malone 1997), proprietary software, networks, corporate culture and policies (Bontis 1998), relationships with external organisations and, structural capital renewal development (Brooking 1996). The third pillar, relational capital, supports the organisation’s market orientation and relations with other organisations (Bontis 1998; Lynn 1998). Edvinsson & Malone (1997) depict the idea of external structure of the company versus the internal structure that is market assets such as brands, customers, repeating business, licences and, franchises (Roos et al. 1998). Intellectual Property Rights (IPRs) are legal mechanisms aiming at protecting corporate assets and infrastructure assets (Brooking 1996). They are the most tangible element of IC and the one most widely embraced by management and shareholders (Bollen 2005). This creates an issue when determining which category they belong to. Consequently, Bontis (1998) suggests supplementary family of assets that constitutes a fourth pillar of IC. Brooking (1996) considers IRPs as part of the structural assets groups while Roos et al. (1998) assign them as relational assets. This issue is of importance as following Edvinsson & Malone (1997), IPRs would rest whether in realm of the firm and strengthen its position vis-à-vis human assets or on the contrary, shift towards human capital. Bollen (2005) establishes a clear connection between IPRs and company’s performances in the pharmaceutical industry. He outlines that a comprehensive understanding of IC including IPRs impacts positively on company’s performance. In his views, IPRs constitute a kind of “interface” between human capital, structural capital and relational capital. While human capital is best approached as human-centred assets that cannot be owned by the company, structural capital refers to organisation-centred assets supporting employee’s productivity which are left behind when the employees go home (Edvinsson and Malone 1997). In turn, we can suggest that relational assets may be viewed as a shared attribute of the human and structural capital. Resting on firm-specific structural capital, employees are usually ensuring the relationships with clients and carry company’s culture with them. Furthermore, the existing dichotomy between human, structural and relational assets should not be so strict in our view. It can be argued that corporate culture for instance is a determinant for stirring innovative capabilities, creativity or a positive attitude to work. In the same manner, it influences the customer relationships. Table 1 offers a general view of different elements of IC. Consistent with a view following

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which a classification of IC elements pertains more to general guidelines rather than a strict compartmentalisation that could be counterproductive within the rationale of intangible assets, the elements of IC in Italics in Table 1 refer to the elements that are viewed as overlapping. Table 1. Elements of Intellectual Capital Human capital • Individual tacit knowledge • Intelligence • Skills • Expertise • Learning capability • Competence • Leadership capability of top management • Intellectual agility • Adaptation capability

• • • •

Innovativeness Creativity Attitude Motivation

Structural capital Organisational routines Risk assessment methods Information database Communication systems Management Legal structure Manual systems Attitude R&D Proprietary software Networks New plants and new products • Corporate culture, values and policies • Relationships with external organisations • • • • • • • • • • • •

Relational capital • Knowledge of marketing channels • Relations with other organisations • Brands • Repeat business • Organisation’s image and reputation

• Customer relationships

IPRs • Brands, licences, franchises, know-how, trade secrets, copyrights, patents, trade, service marks

KM practices and innovation KM is best understood as the principles, models, approaches, techniques and tools aimed at developing and using organisation knowledge in order to deliver organisation performance (Carlucci & Schiuma, 2006). Knowledge-based processes are typically composed of four elements: knowledge creation, intrafirm knowledge sharing, external knowledge acquisition and knowledge repository (Davenport & Prusak 1998; Andreeva & Kianto 2011). KM is posited as the fundamental prerequisite for innovation (Nonaka & Takeuchi 1995) with Santos & Wane (2013) demonstrating a positive relationship between the four steps of the knowledge cycle and innovation performance. However, knowledge creation is paramount and mediates the three other steps (Andreeva & Kianto 2011). Knowledge creation depicts the firm’s ability to generate novel and useful ideas and solutions in terms of products, technological processes or managerial practices (Nonaka 1991; Un & Cuervo-Cazurra 2004 in Andreeva & Kianto

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2011). Darroch & McNaughton (2002) provides empirical evidence of the existing relationship between types of innovation and knowledge management practices. Six managerial implications that positively affect innovation are identified: “being sensitive to information about changes in the marketplace, having a science and technology human capital profile, working in partnership with international customer, using technology, and being flexible and opportunistic” (Darroch & McNaughton 2002 p. 219). KM is viewed as the perfect medium for the networked, interactive and knowledge-driven nature of the innovation process. It is itself an outstanding example of what is referred to as interactive innovation, a practice that is knowledge-based and team-based that is dependent on the collaboration of a wide variety of groups (Scarbrough 2003). Leadership is an important element in choosing an implement KM practices in a knowledge-based innovative organisation. By instilling a supportive culture, leaders may influence innovation of both teams and individuals. Leaders stimulate innovation by influencing creative self-efficacy and by introducing a framework conducive to team reflection processes (Denti & Hemlin 2012); creating the environment and decision-making capability within which knowledge is generated and implemented (Noruzi et al., 2013). They stimulate a shared vision of knowledge and emphasise its importance (Nonaka 1994). Organisational culture influences the behaviours central to knowledge creation, sharing and usage. Culture shapes the connection between employees and organisational knowledge, hence creating the environment for social interactions and shaping the processes by which knowledge is managed (De Long and Fahey 2000). Top management is then a catalyst, an architect and protector of knowledge, considering the personnel in its entirety rather than through the intermediary of management (Hedlung 1994). Furthermore, the choice of flatter organisations favours collaboration, adaptability and lateral communication. Flexibility and opportunism are two other organisational attributes to consider as they foster particularly incremental innovation (Darroch & McNaughton, 2002). Transformational leadership or inspirational leadership are phrases that better reflect leadership as a KM practice as it inspires employees through constant motivation, intellectual stimulation, charismatic speech and being an exemplar. On a continual basis and through heuristics organisational learning and performance as they encompass any process, KM mechanisms participate in enhancing the practice of creating, acquiring, capturing, sharing and using knowledge wherever it resides (Scarbrough et al. 1999). It facilitates strategic renewal (Crossan et al. 1999). In turn, information technologies create an infrastructure and environment that support knowledge processes and ensure that individuals play an active part in knowledge management processes (Dalkir

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2005). KM reinforces its underlying dynamics, scope and overall synergy (Alavi & Leidner 2001). It supports working in teams and seeking out knowledge (Lee & Choi 2003). However, empirical evidence shows that the quality of information actually overrides the importance of IT investments (Andreou & Boone 2002). Finally, Scarbrough (2003) makes a compelling case for the role of human resources management (HRM) activities in organising the flow of people (selection methods, compensation strategies and career systems) for the development of innovations. More specifically, HRM is of a particular concern for innovation-driven firms. Knowledge resides in individuals; hence knowledge needs must be properly managed. In order to strengthen their IC, firms should design HR architectures that fosters knowledge acquisition, knowledge sharing and knowledge application (Intan-Soraya & Chew 2010). Table 2 – Sample of knowledge management practices leading to innovation KM processes • • • Knowledge creation dynamic • Intra-firm knowledgesharing orientation • External knowledge acquisition capabilities • Useful and usable knowledge repositories

• • • •



KM practices Transformational leadership Supportive corporate culture Network-based structure and infrastructure KM-driven HR architectures Ad hoc organisation structures ICT and science friendly structure and infrastructure Etc.

Innovation dynamics

• Incremental innovation • Radical innovation • Intellectual property portfolio

Interactive innovation

The literature overall establishes clear relationships between IC, KM and innovation. Kianto et al. (2013) explore the potentials that accrue from a holistic understanding of IC and KM and identify seven groups of KM practices: strategic KM practices, organisational structural arrangements, KM-friendly organisational culture, ICT practices, learning mechanisms, KM-related HRM practices, knowledge protection practices. Intan-Soraya & Chew (2010) suggest a framework capturing the ways in which an organisation’s knowledge management capacities have a positive relationship on its IC, which in turn has a positive influence on its innovative capabilities. Fig. 1 suggests a representation

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of a holistic view of KM, IC and innovation, which is the one that is retained for this study. Fig. 1. The relationship between KM, IC and innovation

Innovation assets and IPR Intellectual capital

KM practices

Mediolanum Asset Management Limited: KM practices, IC and innovation An exploratory strategy of inquiry is implemented drawing on multiple sources of evidence inclusive of observation, documentation and semi-structured interviews. Documentation includes company documents and electronic data. Fourteen executives of the company identified as decision-makers were interviewed at the Dublin-based premises of the MAML. This process allowed a certain degree of observation, in particular on the layout of the working stations and the culture of the company. The KM and IC theoretical lenses are elicited for analysis and interpretation while considering at the same time how the firm is interacting with its business environment. At the end of the inquiry process, clear concerns are identified and constitute at the same time the drivers and the framework of the innovation dynamic. The data collected was analysed using Dedoose. MAML is one of the asset management companies of Mediolanum Banking Group, an Italian financial market leader based in Milan and founded in 1982 by Ennio Doris. It provides portfolio management, cash management and investment advisory services. MAML is characterised by a client-centric approach and targets principally a retail market. The Dublin-based asset manager works very closely with Mediolanum International Funds Ltd (MIFL), which has a proprietary product development process (MedInSynC®), leveraging on open innovation, and develops and markets mutual funds through its distributors to a very broad network of clients primarily located in Italy, Germany and Spain. Consistent with the current business and economic environment requirement,

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MAML addresses several challenges with a view of maintaining and developing its sustainable competitive advantage through innovation. It strives to (1) identify clearly how it creates value and convince its clients that Alpha (i.e. active return of an investment) does not rest on luck or minor accidents; (2) align its business MEDIOLANUM ASSET MANAGEMENT - FINANCIAL STATEMENTS 2013 operations and ethos with the industry requirements and the emerging business model while (3) develop business agility; (4) build organisational skills and capabilities. (5) Systemic tensions such as reducing firm dependency on its human assets or determining plans that are too ambitious are other challenges the firm must address. While the previous points are more concerned with process innovation, the last point (6) is about product innovation. The following section introduces the initial results of the data analysis. Using IC and KM practices lenses, document analysis as well as coding, axial coding and selective coding techniques were applied. For the purpose of clarity, the IC and KM-related results are shown consecutively. However, the separation is only theoretical as in practice, IC, KM and innovation in MAML constitute a sole entity. The IC view: a process-driven innovation in the first place When considering the three foundational pillars of IC, MAML favours with no doubt structural assets. For this case study, IPRs fit then naturally within these structural assets. Prior developing further the three elements of IC, Fig. 2 describes the approach MAML has on its entire capital. It reflects clearly the emphasis on structural capital that is echoed by our findings. Fig. 2. Mediolanum’s view of corporate tangible and intangible capital TOTAL CAPITAL OF A FIRM ENTERPRISE VALUE

Tangible Capital

Intellectual Capital

Financial Assets

Human Capital

Employee skills, expertise & know-how

Tangible Assets

Relational Capital

Customer, supplier & other external relationships

Structural Capital Organisational Capital

Process Capital

Innovation Capital

Organisation Systems and philosophy

Processes, techniques, procedures & programs

Intellectual Property: Patents, trade secrets

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(1) Structural assets Structural assets are identified as the backbone of MAML’s success and instil an innovation-driven culture and performance. Basically, they encompass a solid portfolio of IPRs that protects unique processes in terms of investment, product development, R&D and risk assessment. MAML refers to the previous as “innovation capital”. It also overlaps with “Process capital” mentioned in Fig. 2 and outlines the reliance on clear processes, techniques and procedures that are developed in the following section. These items are the core value-adding centres that have been identified by the firm, conceptualised and protected. In particular, Med3® encapsulate MAML’s investment process and captures the know-how and IC accumulated over the years. It is constantly refined and amended by reviewing each active investment choice pay-out to improve decision making (“Hit Ratio”) aiming at better future outcomes. Also this process leverages on global intelligence and delineates different identified steps to translate into investment decisions the opportunities and risks arising from financial markets (see appendix). These processes constitute strong points of reference for company’s and Group’s stakeholders, foster a strong corporate culture, organisational routines and participate in communicating the company’s strategic vision. Those processes are designed with a view to generate innovation. A network-based philosophy is central to internal and external organisational structure and infrastructure. Focusing primarily on value-adding activities, the philosophy strives to outsource other functions to selected external partners with whom they build long-term relationships, i.e. other companies, universities, research centres or governmental bodies. MAML refers to this as ‘Global Intelligence’. In MAML’s view, this pertains to relational capital and outlines the endeavours to ‘collaborate with partners’ rather than ‘work with suppliers’. Internally, a so-called flat organisational structure is observed together with an open-plan layout office where the desks are not attributed following the ranks (only two individuals have closed offices as they handle confidential matters). This facilitates lateral communication, learning, knowledge sharing and collaboration between all staff. This pertains to the ‘organisation capital’ section of the company’s structural assets. Supporting IPR and the network-based ethos, information technologies are another strong structural asset on which company’s organisational performance rests. Within budget constraints and a prioritization agenda, it strives to implement the most updated systems that are deemed relevant. Substantial investments are made into information systems, equipment and software with a view to alleviating staff workload, gaining flexibility and speed and enhancing

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risk assessment. This infrastructure is also key in easing knowledge flows. Proprietary systems are developed in-house such as their Data Warehouse (Big Data platform), a Virtual Library with its collaboration tool MedCred® or, its Knowledge-Network Platform (KNP). The KNP is an idea management tool involving local and Group stakeholders and guaranteeing maximum transparency and collaboration among the different stakeholders that often inadvertently work in silos when it comes to managing their relationships even if they are all dealing with the same provider. (2) Relational assets Relational assets are strongly embedded in the client-centric culture of the company. Consistent with their value-centred outsourcing model, final investors’ relationships are primarily in the hands of MIFL distributors and their network of ‘family bankers’ in Italy, Spain and Germany. Those ones are professional ‘Financial Advisors”. Following the model and spirit instilled by the original founder, Family Bankers possess a very deep knowledge of the local market and their clients’ needs; but they also demonstrate a certain level of expertise in the product itself that bring them closer to asset managers per se. A very close relationship exists between the asset management unit based in Dublin and the distributors. Consistent with its technology-driven and client-centric philosophy, MAML has bespoke services (Connect and Learn® and MedRadar®) to provide to MIFL distributors’ final investors regular training on investment strategies, product investment updates, etc., in the Dublin offices or through videoconferencing. They also provide insights to the Irish-based teams about their experience. All sessions are video-recorded and made available to the staff and distributors via the Virtual Library. (3) Human capital In terms of human capital, the leadership capabilities of the top management are a very strong asset. This represents a good example of transformational leadership with the individuals in charge constantly stimulating and sharing the company’s vision, instilling a supportive innovation-driven culture, organising a framework favouring team reflection and nurturing a creative self-efficacy. The people interviewed that were not part of the top management had a positive reaction to leadership and a positive attitude towards providing inputs into the in-house processes under copyright. MAML demonstrates also a strong emphasis on managing its employees and address the pertaining issues in terms of ‘Human Capital Management’ (HCM) and Talent Management instead of Human Resources Management (HRM). The

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company applies HCM practices and policies in order to increase its innovation capability. The senior management plays a central role in nurturing tacit knowledge which is understood as “personal, context specific and hard to formalise; (….) it gets embedded into our corporate memory through collaboration and learning by doing” (quote from 2013 Financial Statement). The IC foci and design of MAML are geared towards open innovation that consists in tapping into and exploiting technological knowledge available outside the firm’s area of expertise or R&D structure. It represents a solid competitive advantage accruing to companies that do not rely exclusively on in-house approaches to innovation (Whelan 2013). MAML refers to this in terms of ‘crowdsourcing’ that is a type of incremental innovation; it consists of the use of external resources in order to start or strengthen existing assets in a cost-effective manner. The KM practices view: identified supporting knowledge management practices We found overall that KM practices participate actively in strengthening MAML’s IC. They act as bridge between IC and innovation and set the bases for a dynamic of knowledge creation. The coding and decoding process run during the qualitative analysis outlined in the following eight themes. (1) Collaborative and knowledge sharing organisational platforms based on networks and team-based work and this is constantly incentivised for example through MedCred®, a virtual rewarding in-house tool. This rests on an extensive internal network connects the different employees in the company and sets the foundations for learning and sharing knowledge. It fosters a positive attitude of individuals for sharing knowledge which reflects their intertwined relationship of dependence. External networks are also of importance and it is the vector that allows access to global intelligence. The latter referred also as crowdsourcing, is composed of external research companies, consultants, brokerage firms, etc, that provide complementary expertise. (2) Organisational learning aimed at building the company’s knowledge repository at the centre of which the company’s in-house processes play a major role. They generate an internal dynamic of incrementally building a knowledge base. Continuous learning and understanding is constantly emphasised and the staff show a positive attitude towards learning and sharing. The Virtual Library and the project around the development of the Knowledge Network Platform is set to contain also the tacit knowledge generated.

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(3) Innovation is process-driven and stems from organisation learning. It focuses on contemporary value-creating activities. (4) Transformational leadership is a strong quality of the top team which is in charge of creating the right environment for creativity, motivation and innovation. They actively encourage employees to stay close to the company and closely follow market developments as well as adopting any new information and technology innovation. (5) A strong worker engagement and commitment characterises the company. The employees mentioned on many occasion how much they learned and they were learning everyday and how they appreciated the challenges they had to face. The company was considered to be very supportive of them with its talent management programme. (6) MAML can be viewed as possessing the organisational structure and infrastructure that favours innovation. There are very few hierarchical level with people working in an open-plan structure and within teams. (7) MAML is considered as a technology-intensive firm by its drive to be a “high-tech” company, but also by the substantial investments made in updated IT and the training provided to the staff. It also strives for a paperless working environment. (8) The last important theme identified relates to the portfolio of IPRs the firm possesses and intends to develop. Table 3 provides practical examples of knowledge management practices that relate to the eight themes. Table 3. Identified knowledge management practices generating innovation 1

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Leading themes Establishing a collaborative platform fostering knowledge-sharing

Organisation learning – fostering an incremental knowledge base

Identified corresponding KM practices • Establishing external networks for open innovation • Outsourcing – focus on core activities • In-sourcing global intelligence / relationships with suppliers • Partnerships with Irish leading universities • Intra-group client-supplier relationships – clientcentric culture at all levels • Teamwork • Company culture for learning and sharing • Staff teaching to other staff on specific issues • Regular meetings for sharing topics chosen by the staff

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3

Process-driven innovation and organisational learning

4

Transformational leadership

5

Worker engagement

• • • • • • • • • • • • • • • •

6

Organisational structure and infrastructure

7

Technology-intensity

• • • • • •

8

Building an Intellectual Property portfolio

• • • •

Importance of attitude Knowledge Network Plaform project Product development process Investment process R&D process Other processes currently under development Physical office space shared by all staff levels On-going communication Collaboration incentivised by MedCredit Constant sharing of insights Innovation-driven attitude Engagement based on freedom and responsibility/accountability Corporate culture and working environment Outsourcing repetitive and non-value adding tasks when possible Requirement for regular contributions in the processes Commitment partly driven by the in-house processes Flat organisation Open-plan offices Prevailing teamwork culture Use of collaborative technologies Substantial investment in up-to date equipment and technologies Regularly upgrading with relevant information technologies Striving for paperless environment Keeping staff up-to-date in terms of training MedInSync, Med3, MedLab, etc Drive for protecting and patenting any new innovation

Discussion The eight themes identified for MAML in the previous section demonstrate the existing interdependence between IC, KM and innovation (Fig. 2). The leading themes pertain to the different components of IC while pointing overwhelmingly to the structural assets and are backed by a whole set of knowledge management practices. A strong relationship exists then between innovation and KM (Darroch & McNaughton 2002). The IPRs that exists in this case in process innovation provide evidence of the outcome generated by a combination of IC and KM practices. This illustrates the idea of interactive innovation (Scarbrough 2003).

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Fig. 3. The relationship between IC, innovation and KM practices

Human assets, Structural assets, Relational assets

Innovation IPRs

KM practices

This study shows that the company demonstrates a conscientious and strong concern for knowledge management practices and IC. It positively addresses the issues and strives to identify and implement the right organisational structure and infrastructure that is a “flat” one in order to foster knowledge creation and sharing (Hedlung 1994; Noruzi et al. 2013). Such features are synonymous with hierarchical levels which are reduced to the minimum and simplified internal communications. This is consistent with Andreeva & Kianto (2011) who put knowledge creation at the centre of the processes that drives knowledge sharing, acquisition and storage and, ultimately innovation. MAML demonstrates its reliance on a strong transformational leadership that plays a key role in instilling the cultural and supportive environments that are innovation-friendly (Denti & Hemlin, 2012). This can be observed at the level of the Dublin-based business unit where “Even when our Managing Director is in London, he is still here” (employee’s quote). At the group level, the presence of the original founder who lives in Italy is also very perceptible as numerous examples of his actions were regularly mentioned. The business style and culture he adopted decades ago is still strongly imprinted in today’s company culture. Furthermore, and ad hoc understanding of HRM called HCM and Talent Management provides a compelling account of MAML’s investment in managing its human assets. The right HR architecture fosters knowledge acquisition (IntanSoraya & Chew 2010) and participates in achieving the strategic objectives (Scarbrough 2003). Next, there is a strong emphasis on IT that is crucial in supporting the company’s knowledge processes and innovative intent (Dalkir 2005; Alavi & Leidner 2001;

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Lee & Choi 2003). The quality of information that constitutes one of the primary inputs shows also as a concern. Consistent with Andreou & Boone (2002), it overrides the knowledge creation process and, MAML’s investment decisions, for example, rest primarily on independent research companies. In terms of addressing the challenges emerging from the asset management industry, MAML develops a clear market orientation that is relayed by technology and a strong historical client-centric culture allowing a good understanding of clients’ needs (Griffin et al. 2013; Rajan 2013) providing investment solutions and not products that leverage only on specific market opportunity (Alpha versus Beta). It perfectly illustrates the rationale for incremental innovation whose purpose is to meet immediate market needs. It accrues both to market-oriented firms that are sensitive to information about market changes and the ones that respond to knowledge about technology. MAML is also driven by radical innovation that manifests in the launch of new products or significant organisational changes. The latter type of innovation is said to preserve the future and, is an outcome for firms with a technological orientation (Darroch & McNaughton 2002). MAML is well positioned to deal with its identified challenges mentioned at the beginning of the second section. (1) It has a clear view of its value-creating assets that are protected legally. (2) Its business operations are very much aligned with the industry requirements and it shows so far an adequate business model. (3) Its focus on IC and KM practices provides the company with agility and adaptability. (4) It is well equipped to build organisational skills and capabilities. (5) The strong process-driven rationale and the focus on relational capital on which the firm is firmly grounded provide some relief from its reliance on human assets. (6) Finally, product innovation is an outcome of process innovation that constitutes the backbone of MAML’s business model and strategic intent. Meeting those six challenges enables the Dublin-based asset manager to address asset management industry competition that is briefly described in the introduction in terms of changing business model, market approach, hectic pace in regulatory changes, etc.

Conclusion Consistent with the leading extant literature, the importance of intangible assets in achieving a sustainable competitive advantage is corroborated once again in this study. Moreover, this paper provides an interesting and in-depth illustration of IC and KM approaches within an original small asset management company -

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firms that are usually excluded from the realm of knowledge-intensive organisations in literature. MAML constitutes a unique organisational exemplar as it negotiated the worst of the financial crisis not only in terms of surviving it, but also in terms of thriving through product development accompanied with new investment solutions and the evolution of the existing ones. This has enabled MIFL and its distributors to grow in terms of AUM. Its innovation-driven culture implying a heavy reliance on its IC stocks and KM practices is at the core of MAML’s organisational performance. The firm managed to build a strong knowledge-based business process that fosters innovation. Another interesting practical implication worthy of note is that this paper provides insights into how the human capital has been transformed into organizational capital, aiming at reducing the firm’s dependence on the individual capital. The results of this empirical study are limited from some aspects and first, by its reliance on a single case. The qualitative analysis and interpretative approach chosen here to make a contribution to research is highly subjective and reflects the authors’ points of view. Then, the choice of the particular context offered by the Irish asset management industry is not random as it is assumed to exacerbate companies’ strategic actions in order to compete successfully. Further research should consider investigating more cases in an attempt to generalise results. A fruitful avenue would also emerge from a comparison with small asset managers’ competitive moves in a more stable and bullish environment.

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Appendix – Med3 – Mediolanum investment process Available at http://www.maml.ie/med3-investment-process

E TH

INSTRUMENT SELECTION

T KE AR M

G LOSIN IDEAS

M ED

Google Trends

IDE AS

Twitter

Assets

Ideas Review

Independent Research

Informal Discussion

WINN ING IDEA S

Environmental, Social Governance and Reputational Considerations

Investment Blogs

Weekly Strategy Meeting

ESTMENT INV

Y RA

IDEA FORUM

EX

FR O M

IDEA GENERATION

Monthly Investment Committee

CO

NAL CONSULT AN TER EX T

M MITT EE

Regions

INVESTMENT

Research

WORLDWIDE OPPORTUNITIES AND RISKS

Instrument Evaluation

Cost Analysis

Instruments

Qualitative Analysis Internal Capability Assessment

NO

OU R

N T

RESEAR CH

E IM NT SE



Ad d

Portfolio Management Unit General Trading Team

Risk Management Team

INVESTMENT COMMITTEE Derivatives Trading Team

Manager Selection Team

Guidelines Approved

ME

R CER D ATABAS

E

C O M MIT T E E

Analyst Team

Ad

d

“O

PR

ur

”N

OC

Time Horizons/ Technical Factors Rationale

External Collaboration

ew F e a t u re s

ESS

E R EVIE W & D

B

Cash In __________ Exit

Trade Volatility

Time Horizon

UG

Trade Rationale

Trade Technical

ESTMENT INV

LESSON LEARNT

€ Instrument Selection

Investibility Analysis

YES

PA RT NE RS

ts” ec ef D

Res olv e

PO SIT ION ING

Other Managers‘ Strategy Analysis

AN D

Technical Analysis

Quantitative Analysis

ew Features ‘” N ers th “O

S EL OD M NT ME EST INV

O F

Manager Selection

Fundamental Analysis

Market Positioning

Target Reached

AGING TARGE AN T M

Contrarian Data

Trade execution

Position Size

Setting Target & Stop Loss

Position Review Required

CO

M MITT EE

Asset Allocation

Stop Loss _________

Trade Monitoring & Evaluation

Security Selection

Exit

STO

P LOSS

Credit

Liquidity VAR

Risk Budget Volatility

Rate Derivatives

Alternatives

Product/Solution

INVESTMENT DECISION MONITORING

Scenario Analysis

Equity Derivatives

FX

Risk Assessment

IMPLEMENTATION OF INVESTMENT DECISION © 2013 | Mediolanum Asset Management Ltd | All rights reserved.

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Authors’ Bibliographical Notes Yasmina Khadir-Poggi is a Doctoral student in the School of Business Studies at Trinity College Dublin. Besides, she is a Senior Lecturer in International Business at American College Dublin. Her research interests include knowledge intensity in organisation, knowledge workers management and the subsequent knowledge-based development. Mary Keating is an Associate Professor in the School of Business Studies at Trinity College Dublin where she lectures on Human Resource Management and supervises the Master in Business and Management. She is also the Irish Country Coordinator for GLOBE (Global Leadership and Organisational Behaviour Effectiveness) project. She was the Chairperson of the Irish Association of Industrial Relations. Her research interests include cross-cultural management with a focus on International Human Resource Management and Leadership, Human Resource Strategy and Practices. Stephen Chandler is the Head of Department of Business at American College Dublin, a constituent college of Irish American University. He lectures in Economics and Finance and supervises the undergraduate and masters degrees. His research interests include knowledge transfer and management.

© By Yasmina Khadir-Poggi, Mary Keating, and Stephen Chandler. All rights reserved. The work may not be reproduced without explicit permission provided that full credit including © notice, is given to the source.

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