Intellectual Capital

If knowledge is to be managed as a vital asset, then some method of accounting for the assset is needed. This has led to a perspective of knowledge management based on intellectual capital. This is the intangible asssets of a company that are not reflected in the physical assets rocrded on the balance sheet.

A Basic IC Model

In the late 1990s a group of three leading practitioners - Hubert Saint-Onge then at Canadian Imperial Bank of Commerce; Leif Edvinsson then at Skandia and Gordon Petrash of Dow Chemical built on the earlier work of Karl-Erik Sveiby to develop a model that with its variants is widely used today. They divided intellectual capital into three categories:

  • Human Capital: the knowledge and skills of individuals
  • Structural Capital: "what is left when the employees go home at night" - these are the databases and business processes etc.
  • Customer Capital: customer relationships; also patents and other market intangible such as brands.
intellectual capital

These days it is quite common to replace customer capital with the more general terms relationship or customer capital (see diagram). Often intellectual property, that which is protected in law, such as tradmarks, designs, copyright etc. is also often separated out as a separate category.

This is just one of many models of intellectual capital. Others take more account of other factors such as knowledge stocks and flows, and linkages to more general performance management models. In his report Measuring Knowledge and Intellectual Capital, the author lists 33 models associated with knowledge measurement.

The Concept in Practice

The whole point of intellectual capital models is that they provide a basis for measuring knowledge and other intangibles and identifying the sources of value. As the popular adage says: "If you are not measuring, you are only practicing and not managing". In our consultancy work we have found one of the key benefit is that it stimulates dialogue. It gets people thinking about where their valuable knowledge resides and how it can be managed better.

Last updated: 19th February 2011


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