1.
Association for Consulting Expertise
Friday, September 18, 2009
Intellectual Capital:
-Define It
-Understand It
-Capture It
Mary Adams
President
Intellectual Capital
Advisors
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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?
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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?
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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
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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
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6.
The clearest answers come from
the field of intellectual capital
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7.
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8.
Value is created when IC elements
are combined in a system
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9.
Human Capital
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10.
+ Structural Capital
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11.
+ Relationship Capital
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12.
+ more Structural Capital
(that generates revenue)
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13.
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+ more Relationship Capital
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14.
This “knowledge factory”
grossed $22+ billion in 2008
From: You Can Grow Like Google on YouTube
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15.
Every business has a knowledge
factory
Specialty
Contractor
Medical
Device Co.
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16.
Implications for management
Corp
Industrial Era:
Hierarchy/ Division
Strategic Control
Unit or Project
Knowledge Era:
Collaboration/
Innovation
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17.
Management dualities
Networks Org charts
Orchestration Command/control
Innovation Strategy
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18.
Accounting dualities
Investment Capital expenditure
Assessment Balance sheet
Indicators Income statement
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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
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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
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21.
Resources
• Slides will be posted on my blog:
www.smartercompaniesblog.com
• Bibliography/discussion:
www.icknowledgecenter.com
• Worksheet for knowledge factory:
http://tinyurl.com/you-can-grow-like-google
Mary Adams, 781-729-9650
adams@i-capitaladvisors.com
Twitter: maryadamsica
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22.
Additional Detail
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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
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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
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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
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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
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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
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28.
Triangulate intangible performance
Cost
Assessment
Indicators
Graphic from: http://amath.colorado.edu/outreach/demos/hshi/2000Sum/TaT.html
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