What is Intangible Capital?
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This document discusses the shift from an industrial to a knowledge economy fueled by investment in intangible assets like computers, workforces, processes, designs, products, networks and brands. It shows that the percentage of corporate value made up of intangible assets has risen from around 10% in 1975 to over 80% for most sectors by 2005. The document then defines different types of intellectual capital (IC) that make up these intangible assets, including human capital, structural capital, relationship capital and strategic capital. It notes that properly measuring, managing and monetizing a company's IC can provide benefits like optimized performance, increased innovation, higher valuation and a stronger reputation.
What is Intangible Capital?
- 2. This is now
- 3. It’s a seismic shift Agricultural Era Industrial Era Knowledge Era
- 4. Understanding the shift Industrial Knowledge Era Tangible Intangible Assets Factory Knowledge Factory
- 5. It’s been fueled by investment http://www.conference-board.org/data/intangibles/
- 6. Where has the money gone? …to build knowledge assets: • In computers • In workforces • In processes • In designs, products • In networks • In brands
- 7. Investment created new value Source: Ocean Tomo “Intangible,” off-balance sheet portion of corporate value
- 8. Shift happened economy-wide 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Energy Materials Industrials Consumer Discretionary Consumer Staples Health Care Financials Telecommunications Services Information Technology Utilities Intangible Value as a % of Total Market Capitalization by Sector 1975 2005
- 9. For now, holding at +/- 80%
- 10. This is about the rise of a new kind of economic asset
- 11. What is IC?
- 12. Human Capital • Employees: – Competencies – Experience – Loyalty • Management – Industry experience – Managerial expertise
- 13. Structural Capital • Processes/IT (the heart of modern business) • Technology/IP – Data, stored information and knowledge – Own product/service designs and knowledge – Intellectual property (patents, trademarks, copyrights, trade secrets) • Sales and marketing processes
- 14. Relationship Capital • Customers • External partners (suppliers, outsourcing partners, regulators, communities, press) • Brand and Reputation (the new bottom line)
- 15. Strategic Capital • Business model – How the knowledge factory fits together • Culture • External factors: – Industry – Economy – Competition – Globalization – Regulation
- 17. Benefits of IC Management • Optimized performance Healthcare co grew revenues with lower headcount • Increased innovation High-end consulting firm doubled in size • Higher valuation Tech firm sold at premium to the market • Great reputation Engineering firm doubled key hourly rates