Intellectual Capital: Realizing Your Company's True Value by Finding Its Hidden Brainpower

by Leif Edvinsson

Book Overview

One of the greatest challenges facing any business today is the gap between its balance sheet and its market valuation. This gap, representing the bulk of a company's true value, consists of indirect assets -- organizational knowledge, customer satisfaction, product innovation, employee morale, patents, and trademarks -- that never appear in its financial reports.Only in the last few years have companies and academics around the world tackled the...

• Format: Hardcover
• Language: English
• ISBN: 0887308414
• ISBN13: 9780887308413
• Release Date: March 1997
• Publisher: Harper Business
• Length: 240 Pages
• Weight: 3.15 lbs.
• Dimensions: 0.9" x 6.1" x 9.3"

Customer Reviews

Superb Representation of the Breadth and Depth of IC

Edvinsson and Malone do an excellent job with a complex and relatively esoteric topic. The authors have created an enviable work and set up the foundation for companies and managers to act accordingly.

The Skandia Market Value Model

Intellectual capital is a truly critical topic for twenty-first century business. As known, the subject of intellectual capital appeared on the business world in the 1990s. Patrick H.Sullivan writes, in his 'Value-Driven Intellectual Capital,' "this history actually began in the early 1980s, as managers, academics, and consultants around the world began to notice that a firm's intangible assets, its intellectual capital, were often a major determinant of the corporation's profits...By the mid 1990s it was becoming clear that there were two separate but related paths of thinking about intellectual capital. One path, the knowledge and brain power path, focused on creating and expanding the firm's knowledge. The other path, the resource-based perspective, was concerned with how to create profits from a firm's unique combinations of intellectual and tangible resources." In this context, by proposing a new intellectual capital measurement and reporting system, Leif Edvinsson and Michael S.Malone elaborate the Skandia Model. According to this model, Skandia divides market value into financial capital and intellectual capital. Intellectual capital is further divided into: 1. 'Human Capital.' The combined knowledge, skill, innovativeness, and ability of the company's individual employees to meet the task at hand. It also includes the company's values, culture, and philosophy. It cannot be owned by the company. 2. 'Structural Capital.' Brands, trademarks, written procedures for processes, and everything else of organizational capability that supports those employees' productivity-in a word, everything left at the office when the employees go home. Structural capital also includes customer and organizational capital, representing the external and internal focus, respectively, of structural capital. Organizational capital consists of innovation and process capital. Process capital is the sum of know-how that is formalized inside the company: manuals, best practices, intranet resources, project libraries are all part of the process capital. Innovation capital is what creates the success of tomorrow: it is the source of renewal for the whole company, and it includes intellectual assets and intellectual property. Unlike human capital, structural capital can be owned and thereby traded. Finally, they argue that "rather than replacing the current financial measurement system, the product of generations, Intellectual Capital measurement in fact complements and augments it. Orthodox accounting has found its way again. It is relevant once more to our future. And thus the work of much of the last millennium is made ready for the next." Highly recommended.

Interesting journey into the hidden assets of organisation

The hidden truth of harnessing knowledge within the organisation has been lucidly explained. This is of more relevance in the present IT revolution, where the synthesis and analysis of domain knowledge plays a crucial role. Ultimately this intellectual capital is what makes a country strong in economy. In a sense this can also be linked to collapse of the asian market (asian tigers) which was just a production economy, but not an intellectual economy. The policies in these economies in hand with the conglomorates never gave an opportunity to harness the human capital, which was a serious drawback.Public policy makers, governments etc., should make a note of this. It is not just important to open up the economy, but it should give a serious try to harness its underlying human capital.

An Accurate Approach to Intangible Assets

This is an excellent books that explains how to fill the gap between the book value of corporations and their market value. This gap, represents the bulk of a company's real assets which consists of organizational knowledge, customer satisfaction, product innovation, employee morale, patents, and trademarks. However these so-called "intangible assets" never appear in financial statements. That explains why they are often overlooked and undermanaged.In a straight forward language and concepts, Leif Edvinsson tackles the real source of wealth creation in today's learning corporations. He defines what is really meant by "Intellectual Capital", how it is classified, how it is measured, and how it can be used to create wealth to stockholders.In today's rapid changing and turbulent technological environment, this book is an essential reading for those managing any kind of organizations today. Many CEOs are finding the hard way, that Intellectual Capital is transforming the nature of doing business by establishing the real value of enterprises for those who manage them, work in them, and invest in them The result is a whole new way in performing in an emerging information economy where brick and mortar corporations certainly are out of place.

As an MIS professional - this book is my new mantra!

Outstanding. This book is the edge! If capitalizing on your company's information assets through the use of technologies like data warehousing and intranets is the leading edge - then intelletual capital is the BLEEDING edge. If your organization - your people - are what's between you and your goals then you MUST read this book. Talk about a check in persepctive - its not about information, its about knowledge and know how. That's advantage! I'm just blown away.