The concept of intellectual capital isn't new. In the 16th century, for example, the demand for Leonardo da Vinci's innovative abilities led the Florentine authorities to impose a ban on his travels throughout Renaissance Europe. But while intellectual capital has long been recognised, quantifying it is a problem whose solution would have challenged Einstein.
How do you measure your organisation's innovative capacity, let alone the types and categories of information it holds and the skills and experience of staff?
Since the term was coined by American economist JK Galbraith in the 1960s, the number of organisations attempting to manage their intangible assets as effectively as their tangible wealth has increased significantly. Swedish car maker Scandia published an intellectual capital report in 1994, and many multinationals have followed suit.
A recent collaboration between SAS and the Balanced Scorecard Collaborative (BSC) aims to unpick the knotty problem of measuring intangible assets. The SAS-BSC alliance, which is based on the French tableaux de bord tool of the 1930s, seeks to create practical solutions to the following during its six-month long collaboration:
BSC president and co-founder David Norton says, "In an economy where value creation is dominated by human capital and other intangible assets, there can be no better starting point for this new management science than measuring human resource strategies."
John Wilkes of SAS believes the initiative will profoundly affect IT. "Investors and shareholders are beginning to understand that the strength of an organisation's share price can be attributed to sound business practices and its intellectual capital," he says. "Intellectual wealth inspires confidence in an organisation, especially when times are tough."
Gšran Roos, CEO of consultancy Intellectual Capital Services, says there are three main constituents to an organisation's intangible assets:
Headhunters are constantly on the look-out for individuals with great intellectual wealth. "A prime example is in the telecoms industry where there's a great deficit of people who are 'high' in both intellectual wealth and the ability to extract and generate it," says Roos. "One of the big challenges for operators is how to make money out of their intangibles. They have to turn their licences and business models into cash and that requires skills that aren't abundant in the telecoms industry."
Managing Intangibles in an E-world
Do you have necessary and sufficient resources for creating value?
Are you deploying them in the most effective way possible?
Are you extracting the full value your systems allow?
Once you've achieved the above, what value does intellectual capital hold in your organisation?
This was first published in January 2001