Intellectual Capital

- Overview

Intellectual capital is the collective knowledge, skills, experience and training of a company's employees. It can also refer to a company's culture, intellectual property, relationships, processes and other intangible information assets.

Intellectual capital is considered an asset. It can be used to increase profits, acquire new customers, create new products, or otherwise improve the business. If intellectual capital gives an organization a significant competitive advantage, then a significant portion of the company's valuation may come from this expertise and knowledge.

Intellectual capital consists of three elements:

• Human capital
• Structural capital (or organizational capital)
• Relationship (customer) capital

Instructional capital refers to the value generated by investing in training and development. This can add value to the organization by increasing employees' knowledge, thereby increasing human capital.

Today, most leaders realize the importance of human capital. This is the intangible value their employees contribute to their organization. But the most successful businesses are those that know how to leverage their intellectual capital. 

Intellectual capital is the total value of all intangible assets of an organization. It includes human capital, but goes beyond human capital. It provides a comprehensive view of all aspects of the business, giving it a competitive advantage. This includes raw data, customer satisfaction, employee experience, and internal processes and structures.

Companies measuring their intellectual capital can use it to:

• Create more value
• Improve products and services
• Drive sales and growth
• Improve efficiency 
• And, deepen customer and partner relationships

That last point is key. Managing intellectual capital well can actually create more intellectual capital. This makes it very difficult for you to compete.

- Measuring Intellectual Capital

Intellectual capital is the intangible asset of an enterprise. Measuring intellectual capital can bring real business benefits.

Here are some ways to measure intellectual capital:

• Market value-to-book value ratio: This ratio compares a company's book value to its market value. It can help identify undervalued or overvalued assets. 
• Market Capitalization: This method calculates the difference between a company's market value and its shareholders' equity. 
• Technical factors: This method calculates technology coefficients based on patents developed by the company. 
• Balanced scorecard: The method measures four perspectives of employees: financial, customer, internal processes, and organization capacity. 
• Calculate intangible value: This method compares a company's return on assets (ROA) to the published industry average ROA.

Intellectual capital includes human capital, relationship capital, structural capital, intellectual property, proprietary technology, copyrights and patents. 

Intellectual capital is the total value of all the intangible assets of an organization. It includes human capital but goes beyond human capital. It takes a comprehensive look at all aspects of a business to give it a competitive edge. 

- Intangible Assets

Intellectual capital is defined as a unique set of intangible assets. These assets give an organization a competitive advantage in a particular market. It is different from financial capital, which is tangible and measurable. 

Intellectual property includes:

• Individual knowledge and skills of team members
• Research and Innovation Capabilities
• Organization
• Information system
• Training
• Any other intellectual property created by the company

Intellectual capital also includes strong relationships with customers and strategic partnerships with other businesses.

Organizations can improve their intellectual capital by: 

• Creating new products
• Carrying out research
• Acquiring patents
• Hiring better employees
• Encouraging intellectual curiosity
• Improving training programs 

- Human Capital

The term human capital refers to the economic value of a worker's experience and skills. Human capital includes assets such as education, training, intelligence, skills, health, and other factors that employers value, such as loyalty and punctuality. As such, it is an intangible asset or quality that is not (and cannot be) listed on a company's balance sheet. Human capital is thought to increase productivity and thus profitability. The more a company invests in its employees, the higher its productivity and chance of success.

[Rome, Italy - Civil Engineering Discoveries]

- Relational Capital

Relationship capital, one of the three main components of intellectual capital, is the value inherent in a company's relationships with its customers, suppliers, and other key constituencies. It also includes knowledge, capabilities, procedures and systems developed from relationships with external agents. 

Relational capital is defined as all the relationships—market relationships, power relationships, and collaborations—established among firms, institutions, and individuals that arise from a strong sense of belonging and the highly developed ability to collaborate typical of culturally similar people and institutions.

Relational dependence can be vertical or horizontal, upstream or downstream, forming different types of cooperation, collaboration or competition mechanisms in different ecosystems. There are important conceptual differences in how industrial and regional economists view relationship capital.

Some studies have applied quantitative, empirical, and econometric techniques to verify the existence of relationship capital and its importance to corporate innovation activities. Agents were found to represent channels through which knowledge develops at the local level and thus indirectly represent relational capital.

- Structural Capital

Structural capital is one of the three main components of intellectual capital and consists of the supporting infrastructure, processes and databases of an organization that support human capital operations. Structural capital is owned by an organization and remains in the organization even when people leave. It includes: the capabilities, practices, methods, procedures and methodologies embedded in the organization. 

Structural capital is the supporting non-physical infrastructure that enables human capital to function. The three subcomponents that make up structural capital:

• Organizational capital includes organizational concepts and systems for developing organizational capabilities.
• Process capital includes the technologies, procedures and procedures that implement and enhance the delivery of goods and services.
• Innovation capital includes intellectual property and certain other intangible assets. Intellectual property includes protected commercial rights such as patents, copyrights and trademarks. Intangible assets are all the other talents and theories that an organization runs on.

[More to come ...]