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Unearthing hidden value by managing intellectual assets
For companies on the cusp of the Internet age, the resource in shortest supply is neither raw material nor capital, neither powerful technology nor new markets. What keeps managers up nights at these companies is the scarcity of brainpower, the talent to give wings to visions of a future that becomes present at the speed of light. [Business Week, Oct. 4/99]
The statement above highlights one of the most important focuses of business today-managing intellectual capital (IC). However, it emphasizes the people component of IC rather than the broader class of assets that accumulate from the interaction of people and ideas. These are the assets whose discovery and cultivation can unleash the hidden power of any company.
Every organization wants to succeed and expand. While pursuing these goals, however, managers too often overlook one of the core elements of organizational success-IC. For some, IC is nothing more than an intriguing philosophical concept. To others, however, it has become a driving force and a core competence in achieving their goals. Today, any organization must nurture IC if it really hopes to survive and flourish in the next millennium.
INTELLECTUAL CAPITAL DEFINED
Intellectual capital is very often confused with knowledge; hence, intellectual capital is seen as brainpower. Knowledge is important, but it is merely the raw material used to create IC. Converting that knowledge into something that has value is what we have come to know-or should know-as intellectual capital. It is a value concept, and properly managed, a dynamic growth tool for any company.
COMPONENTS
In order to understand how IC can create organizational value, we must first translate it into more practical terms. There are three types of IC-Human, Relational and Structural. Human Capital embraces all the skills and capabilities of the people who work in an organization: This is one of the critical assets in the IC group, since the management of human capital often creates and sustains an organization's wealth. Relational Capital, an organization's connections to its customers and suppliers, also creates value through loyalty, improved markets, speed and quality. Structural Capital is the backbone of the firm itself, its organizational tone and capabilities, including its management planning and control system, processes, networks, policies...