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Intellectual Capital: Define, Understand and Capture It


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Intellectual capital is the driving force behind our economy today. This presentation from Mary Adams of Intellectual Capital advisors helps you visualize your IC and put it to work in your business.

Published in: Business, Economy & Finance
  • Thanks Iynnelle- Association for Consulting Expertise is a great group--really stimulating conversations! Good luck with your social media event in October--the BIG Conference, Mary
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  • Excellent, thought provoking presentation this morning (9-18-09). This is a wonderful explanation of the evolving business paradigm. The IP / Structural Capital discussion dovetails into the social media discussion and the flattening of the organization required for success in that arena.
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Intellectual Capital: Define, Understand and Capture It

  1. 1. Association for Consulting Expertise Friday, September 18, 2009 Intellectual Capital: -Define It -Understand It -Capture It Mary Adams President Intellectual Capital Advisors ICA-1
  2. 2. Interesting company? • Many decades in business • Growth and profits over the years • Great people • Tough 2009 but will be OK • Industry has good outlook • Opportunities for innovation Good client, investment, employer? ICA-2
  3. 3. Co’s main production facility • Today is the company’s key competitive advantage • Started as experiment in 1980’s • Mostly internally-built components • Customized for this business • Never kept track (still don’t) of cost to build, maintain or operate What do you think now? ICA-3
  4. 4. Economic value is increasingly intangible Components of S&P 500® Market Capitalization 14,000 Market Premium 12,000 Intangible Book Value Tangible Book Value 10,000 8,000 S&P 500 Market Cap ($ billions) 6,000 4,000 2,000 - 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 Research: Ned Davis ICA-4
  5. 5. This change touches all sectors Intangible Value as a % of Total Market Capitalization by Sector 100% 90% 80% 70% 60% 1975 50% 2005 40% 30% 20% 10% 0% ner gy als ials ary ap l es ar e cia ls ice s o gy tie s teri st r tion er St th C in an er v tili E M a I nd u cr e al S chn ol U Dis o ns u m He F ion s Te er ca t tion um C u ni ma C o ns o mm Inf or lec Te ICA-5
  6. 6. The clearest answers come from the field of intellectual capital ICA-6
  7. 7. ICA-7
  8. 8. Value is created when IC elements are combined in a system ICA-8
  9. 9. Human Capital ICA-9
  10. 10. + Structural Capital ICA-10
  11. 11. + Relationship Capital ICA-11
  12. 12. + more Structural Capital (that generates revenue) ICA-12
  13. 13. Sponsored Links Häagen-Dazs® Ice Cream New Häagen-Dazs Five™ ice cream. Crafted with only five ingredients. Edy's® Ice Cream New Edy's Slow Churned® Cups. Now You Can Have It All! Edys.SlowChurned.comMassachusetts Schwan's® Official Site Delicious Time Saving Meals. Home Delivered Meals, 866-208-1540. Schwans.comMassachusetts + more Relationship Capital ICA-13
  14. 14. This “knowledge factory” grossed $22+ billion in 2008 From: You Can Grow Like Google on YouTube ICA-14
  15. 15. Every business has a knowledge factory Specialty Contractor Medical Device Co. ICA-15
  16. 16. Implications for management Corp Industrial Era: Hierarchy/ Division Strategic Control Unit or Project Knowledge Era: Collaboration/ Innovation ICA-16
  17. 17. Management dualities Networks Org charts Orchestration Command/control Innovation Strategy ICA-17
  18. 18. Accounting dualities Investment Capital expenditure Assessment Balance sheet Indicators Income statement ICA-18
  19. 19. Implications for consultants 1. A lot of consulting involves helping companies see intangibles ad hoc Increase your intangibles skill set 2. A lot of consultants have weak structural capital Find the leverage in your firm’s intangibles ICA-19
  20. 20. Intangibles battle cry “Technology and especially the internet can really help you be lazy. Find the leverage in the world, so you can be more lazy!” - Larry Page ICA-20
  21. 21. Resources • Slides will be posted on my blog: • Bibliography/discussion: • Worksheet for knowledge factory: Mary Adams, 781-729-9650 Twitter: maryadamsica ICA-21
  22. 22. Additional Detail ICA-22
  23. 23. The org is now a network Social Networks: Value Networks: Patterns of connections Content of connections Dietmar Offenhuber, Judith Donath, MIT Media Lab, “Comment Flow: Visualizing Communication Along Network Elizabeth Reuthe, and Verna Allee, “Knowledge Management: Move the Path, 2008 Case Model From a Snapshot to a Story,” Health Forum Journal, May/June 1999 ICA-23
  24. 24. I-Capex* ($1 trillion/year) • Intellectual capital expenditures are expensed under today’s accounting • Should be tracked in a management report • Cost is actually the most concrete piece of data available about intangibles • Internally, will help with better decisions • Externally, will help tell corporate story * the new capital expenditure ICA-24
  25. 25. IC assessment* • Like a 360-degree review of the knowledge factory • Review is by stakeholders (both internal and external) • Asks whether it is working well today, outlook and risk • Used for strategy, reporting, M&A * the new balance sheet ICA-25
  26. 26. IC Rating assessment output Intellectual Capital AAA - AA A BBB R BB B CCC RR CC C A BBB R D RRR Business Recipe Organizational Relational Human Capital Structural Capital Structural Capital B BBB A R BBB BBB R A BB RR BBB BBB R BB BB BB BBB BBB R BBB BBB R BBB BB RR AA BB R BB BBB - BB BBB R IP Processes Management Employees Network Customers BBB BBB RR Brand ICA-26
  27. 27. Performance management* • Uses non-financial indicators • Examples: headcount, customer demographics, IP mapping, process metrics • Bottom up for learning • Top down for management and reporting—key performance indicators (KPI’s) * the new income statement ICA-27
  28. 28. Triangulate intangible performance Cost Assessment Indicators Graphic from: ICA-28