What Is Intellectual Capital?
Intellectual capital is the cost of a company’s employee knowledge, skills, undertaking training, or any proprietary knowledge that may provide the company with a competitive advantage.
Intellectual capital is considered an asset, and can widely be defined since the collection of all informational resources a company has at its disposal that can be used to drive profits, achieve new shoppers, create new products, or another way give a boost to the undertaking. It is the sum of employee revel in, organizational processes, and other intangibles that contribute to a company’s bottom line.
Some of the subsets of intellectual capital include human capital, knowledge capital, emblem awareness, and academic capital.
Key Takeaways
- Intellectual capital refers to the intangible property that contribute to a company’s bottom line. The ones property include the revel in of staff, organizational processes, and the sum of knowledge contained all through the gang.
- There is not any standard method to measure intellectual capital, and necessities for measurement vary all through organizations.
- Intellectual capital contains human capital, knowledge capital, emblem awareness, and academic capital.
- Corporations can increase intellectual capital by way of hiring upper staff, wearing out training strategies for staff, and developing new patents.
Figuring out Intellectual Capital
Intellectual capital is a undertaking asset, even if measuring it is a very subjective job. As an asset, it is not booked on the balance sheet as “intellectual capital”; instead, to the extent possible, it is integrated into intellectual property (as part of intangibles and goodwill on the balance sheet), which in itself is hard to measure.
Firms spend so much time and resources developing keep watch over revel in and training their staff in business-specific areas with the intention to upload to the “mental capacity,” so to communicate, of their undertaking. This capital employed to beef up intellectual capital provides a return to the company, even if difficult to quantify, on the other hand something that can contribute in opposition to a couple of years’ worth of industrial worth.
Measuring Intellectual Capital
Relatively numerous methods exist to measure intellectual capital on the other hand there is no consistency or uniform standard approved inside the enterprise. As an example, the balanced scorecard, which is an enterprise potency metric, measures 4 perspectives of an employee as part of its efforts to quantify intellectual capital. The perspectives are financial, purchaser, internal processes, and crew capacity.
Then again, the Danish company Skandia considers the transformation of human capital into structural capital since the enterprise of intellectual capital. The company has designed a house-like building with financial focal point since the roof, purchaser focal point and process since the walls, human focal point since the soul, and renewable and building focal point since the platform to measure intellectual capital.
Because of the nebulous nature and defining choices of intellectual capital, it is also referred to as intangible property and setting.
Types of Intellectual Capital
Intellectual capital is most typically broken down into 3 categories: human capital, relationship capital, and structural capital.
Human capital contains all of the knowledge and enjoy of staff inside an organization. It’s composed of their coaching, life critiques, and artwork enjoy. It can be upper by way of providing training.
Courting capital encompasses all of the relationships that an organization has, which include its staff, its suppliers, its shoppers, its shareholders, and so on.
Structural capital refers to the core agree with software of an organization, similar to its enterprise commentary, company insurance coverage insurance policies, artwork custom, and its organizational building.
Examples of Intellectual Capital
Examples of intellectual capital include the tips {{that a}} production facility line worker has complicated over a couple of years, a specific means of promoting a product, a method to reduce downtime on a essential research problem, or a mysterious, secret elements (e.g., Coca-Cola comfortable drink). A company can also bolster its intellectual capital by way of hiring qualified folks and process pros who contribute to its bottom line.
As an example, a mechanic graduates from technical faculty and starts artwork at an automotive manufacturer. Their intellectual capital consists of the tips they came upon in school. After 12 months on the job, their intellectual capital has upper by way of the enjoy they have got won through their job and the right tool of their knowledge. After two years, the mechanic is enrolled in a training program that focuses on new era and better efficiency. The mechanic’s, and due to this fact the company’s, intellectual capital has upper further.
As era and process improvements become further of a differentiating factor inside of of stylish firms, intellectual capital becomes a greater factor achieve good fortune in a competitive marketplace.
