The value of a firm's staff expertise, skills, business training, or other proprietary information may give the company a competitive advantage in intellectual capital.
 |
| Defining, Identifying, Measuring, and Valuing Intellectual Capital |
The collection of all informational resources a business has at its disposal that may be utilized to increase sales, attract new clients, develop new products, or generally enhance the firm is collectively referred to as intellectual capital and is regarded as an asset. The total of a company's staff skills, organizational procedures, and other intangibles contribute to its bottom line. Human capital, information capital, brand awareness, and instructional capital are all subgroups of intellectual capital.
Although intellectual capital is a corporate asset, assessing it is a difficult undertaking. It is not recorded on the balance sheet as "intellectual capital" as an asset; rather, it is incorporated into intellectual property (on the balance sheet, as an element of intangibles and goodwill), which is difficult to quantify.
To increase the "brain capacity", so to speak, of their firm, companies invest a lot of time and money in educating personnel in business-specific skills and creating managerial knowledge. Even though the return on investment from this capital used to improve intellectual capital is difficult to measure, it can still add to the company's value over the course of many years.
Intellectual Capital Assessment
There are several ways for measuring intellectual capital, but there is no industry-accepted consistency or universal standard. For example, as part of its efforts to quantify intellectual capital, the balanced scorecard, an industry performance tool, examines four viewpoints of an employee. Financial, customer, internal processes, and organizational capability are the viewpoints.
Skandia, on the other hand, believes the translation of human capital into structural capital to be the task of intellectual capital. To assess intellectual capital, the organization has built a house-like structure with financial emphasis as the roof, customer focus and process as the walls, human focus as the soul, and renewable and development focus as the platform. Intellectual capital is also known as intangible assets and environment due to its nebulous nature and distinguishing characteristics.
Different Kinds of Intellectual Capital
Human capital, connection capital, and structural capital are the three most frequent types of intellectual capital. All of the information and expertise held by employees inside a company is referred to as human capital. Their education, life experiences, and professional experience all contribute to this. It can be improved by offering training.
All of an organization's relationships, including those with its shareholders, customers, suppliers, workers, and others are included in its relationship capital. The basic belief system of a business, such as its mission statement, corporate rules, work culture, and organizational structure, is referred to as structural capital.
Intellectual Capital Examples
Intellectual capital can be expertise accumulated over many years by a production line worker, a specialized manner of marketing a product, a means to save downtime on a key research project, or a strange, secret recipe (Coca-Cola soft drink, for example). Hiring competent personnel and process specialists who contribute to the bottom line may also help a company's intellectual capital.
A mechanic, for example, may complete technical school and begin working for an automotive company. Their intellectual capital is made up of the knowledge they acquired in school. After one year on the job, their intellectual capital has grown as a result of the experience they have received and the specialized application of their knowledge.
The mechanic enrolls in a training program that emphasizes new technologies and enhanced productivity after two years. The intellectual capital of the mechanic, and hence of the firm, has grown even more.
Intellectual capital is becoming a more important aspect in obtaining success in a competitive marketplace as technology and process improvements become more of a differentiating feature inside modern firms.
