To generate new knowledge and apply it in new ways, or simply to innovate, is the main compe­tence an organization needs in the knowledge economy to create and sustain a competitive advan­tage. To create and sustain a competitive advantage that is unique to your organization is the quest of strategic management. The SWOT (strengths, weaknesses, opportunities, and threats) analy­sis, developed by Ken Andrew of Harvard Business School in the mid-1960s, is the essence of strategic planning. Considering the organization's strengths and weaknesses, top management can strategize how to lead the organization to exploit opportunities and deal with threats. The SWOT analysis has been dominated until very recently by Michael Porter's five forces model. Porter explains that five factors determine the threats and opportunities faced by an industry. These factors include the bargaining power of customers, the bargaining power of suppliers, the threat of new entrants, the threat of substitute products, and, finally, the nature and strength of rivalry in a particular industry. According to Porter, there are three generic strategies for compet­itive positioning: cost leadership (offering a lower-cost product), differentiation of products (unique features commanding a price premium), or market focus (specializing in a certain prod­uct market segment).

In contrast to the five forces theory, the resource-based approach directs the organization's attention inward and applies the SWOT analysis to its capabilities. This approach asserts that organizations have unique resources, capabilities, and endowments, including intellectual and other capabilities; reputation; and relations that stem from the history and culture of each organ­ization. Those resources, capabilities, and endowments that have a strategic importance and can­not be imitated or replicated by the competition are the source of competitive advantage. Based on this view the generic strategy is to identify your organization's unique strategic resources and decide in which markets and analogous markets these resources can be effectively capitalized. According to this theory, financial and physical assets do not provide an organization with a com­petitive advantage.

In the knowledge economy the resource-based view of the organization gave birth to the knowledge-based view where these resources, capabilities, and endowments are knowledge intensive. Strategic management under this approach entails the identification of unique intellec­tual and knowledge resources and capabilities and utilizing them in target and analogous markets. The main point is that a competitive advantage comes from within the organization and is not one that is created by balancing some external market or industry forces. It follows that strategic management involves organizational soul-searching as well as understanding the market.

The main goal of course is to create and sustain a competitive advantage that is hard for com­petitors to imitate and eventually creating strong entry barriers in the way of competition. This explains why the value of intellectual properly is appreciated more in the knowledge economy. First, it is well grounded in the organization, being the product of its collective brainpower, inter­nal practices and routines, and business philosophy. As such, its uniqueness is not limited to the legal rights accorded by the patent, trademark, or copyright, but rather the technology, the brand, or the creativity that underlies each of these respective properties. Thus, the intellectual property is only the tip of the iceberg. The source of the competitive advantage is not IP per se, but the knowledge, brainpower, practices, and systems that give birth to them.

Of course, for some industries generally service industries IP is not the most effective generator of entry barriers to the competition. Even when it comes to R&D or patent-intensive industries, it is not the quasi-monopoly afforded by IP that enables the achievement of a compet­itive advantage. To a great extent, that depends on other capabilities like time to market and cre­ating new uses for the technology in related markets. The aggregate of these capabilities, including the ability to acquire IP, is what forms an organization's unique mix of IC and hence the basis of its competitive advantage one that cannot be imitated by the competition.

One intellectual asset, however, does not offer a competitive advantage, but rather the unique combination of such assets. Increasingly, organizations, regardless of industry and strategy, gain a competitive advantage by having one or more of the following: a strong brand that commands customer loyalty and a price premium, a demonstrated research capability with new products in the pipeline, strong IP rights that create high entry barriers for competition and huge licensing revenue, or a reputation for having and keeping creative and innovative people.

How to manage IC to achieve a competitive advantage is the mission of strategic management in the knowledge economy. The main question is: What are the core competencies that an organ­ization should develop to effectively manage IC for maximum value? Therefore, the dynamics of competitive performance in the knowledge economy are IC enabled. An organization's ability to compete is now dependent on how well top management identifies, manages, and leverages the organization's IC. In particular, it depends on one or more of the following competencies:

• Speed with which the organization can acquire and apply knowledge (knowledge man­agement)

•   Ability to anticipate change in the market and respond to it (innovation management)

•   Ability and speed to protect and leverage intellectual capital (IPM)

•   Ability to assess the organization's values and culture, and to adopt the culture that sup­ports and fosters effective knowledge, innovation, and IP creation and management

•   Ability to coordinate, oversee, and synchronize organization-wide practices and pro­grams related to all of the above through strategic alignment (CICM).

Part Two will outline the requirements for establishing a system for the management of knowledge, innovation, and IP, under the comprehensive intellectual capital management (CICM) model I developed. But before getting into the CICM model, the competencies required for managing IC effectively are explained.