Magazine article Management Today

A Capital Idea

Magazine article Management Today

A Capital Idea

Article excerpt

A monthly primer on a hot topic in management. What is it? Who's doing it? How can you gain from it? We kick off with 'intellectual capital'

What is intellectual capital?

The recognition that 'intangible' assets (intellectual property, internal knowledge and capabilities) and external relationships with customers and suppliers are often more valuable and critical to success than 'tangible' assets such as physical property, equipment, stocks and cash. And that these intangible assets need to be actively managed, invested in and exploited.

Who are its proponents?

The best known populariser is Thomas A Stewart, author of the book, Intellectual Capital. However, Stewart would argue that it was a Swede, Karl-Erik Sveiby, who was the first to classify knowledge assets in three categories:

* Structural capital: the company's patents, trademarks and copyright, proprietary databases, software, systems and networks. These are 'hard intangibles' whose ownership can be defended in court.

* Relationship capital: the value of established relationships with customers and suppliers.

* Human capital: the cumulative skills, knowledge and productivity of an organisation, as individuals and as a group.

Who are the practitioners?

Businesses that spend heavily on R&D or brand marketing have always managed their 'hard intangibles' aggressively. Good examples include Glaxo Wellcome and Merck in the pharmaceuticals sector, software giant Microsoft and mass consumer brands such as Coca-Cola and Nike.

On the broader intellectual capital front, many large corporations in the US and Europe have created a new position of chief information (knowledge or learning) officer, or CIO, as it is shortened to in the US. Among well-known practitioners in Europe are BP and Shell, Nokia, ICL, Unilever, and Skandia. (Stewart is struck by how active Scandinavian companies are in this area.)

In practice, it is not obvious that responsibility for all intangible assets can or should be combined under a CIO. Managing patents and brands is very different from managing the sharing of an organisation's knowledge, or from developing and exploiting long-term customer relationships. The CIO staff role may well end up being devolved to business unit managers and head office specialists, such as copyright lawyers, with more specific line responsibility for outcomes. …

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