Intellectual capital is the driving force behind our economy today. This presentation from Mary Adams of Intellectual Capital advisors helps you visualize your IC and put it to work in your business.

1. Association for Consulting Expertise
Friday, September 18, 2009
Intellectual Capital:
-Define It
-Understand It
-Capture It
Mary Adams
President
Intellectual Capital
Advisors
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2. Interesting company?
• Many decades in business
• Growth and profits over the years
• Great people
• Tough 2009 but will be OK
• Industry has good outlook
• Opportunities for innovation
Good client, investment, employer?
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3. Co’s main production facility
• Today is the company’s key competitive
advantage
• Started as experiment in 1980’s
• Mostly internally-built components
• Customized for this business
• Never kept track (still don’t) of cost to
build, maintain or operate
What do you think now?
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4. Economic value is increasingly
intangible
Components of S&P 500® Market Capitalization
14,000
Market Premium
12,000
Intangible Book Value
Tangible Book Value
10,000
8,000
S&P 500 Market Cap ($ billions)
6,000
4,000
2,000
-
1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Research: Ned Davis
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5. This change touches all sectors
Intangible Value as a % of Total Market Capitalization
by Sector
100%
90%
80%
70%
60%
1975
50%
2005
40%
30%
20%
10%
0%
ner
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Dis o ns u
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um C u ni ma
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6. The clearest answers come from
the field of intellectual capital
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7. ICA-7

8. Value is created when IC elements
are combined in a system
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9. Human Capital
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10. + Structural Capital
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11. + Relationship Capital
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12. + more Structural Capital
(that generates revenue)
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+ more Relationship Capital
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14. This “knowledge factory”
grossed $22+ billion in 2008
From: You Can Grow Like Google on YouTube
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15. Every business has a knowledge
factory
Specialty
Contractor
Medical
Device Co.
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16. Implications for management
Corp
Industrial Era:
Hierarchy/ Division
Strategic Control
Unit or Project
Knowledge Era:
Collaboration/
Innovation
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17. Management dualities
Networks Org charts
Orchestration Command/control
Innovation Strategy
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18. Accounting dualities
Investment Capital expenditure
Assessment Balance sheet
Indicators Income statement
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19. Implications for consultants
1. A lot of consulting involves helping
companies see intangibles ad hoc
Increase your intangibles skill set
2. A lot of consultants have weak structural
capital
Find the leverage in your firm’s intangibles
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20. Intangibles battle cry
“Technology and
especially the internet
can really help you be
lazy. Find the leverage
in the world, so you can
be more lazy!” - Larry Page
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21. Resources
• Slides will be posted on my blog:
www.smartercompaniesblog.com
• Bibliography/discussion:
www.icknowledgecenter.com
• Worksheet for knowledge factory:
http://tinyurl.com/you-can-grow-like-google
Mary Adams, 781-729-9650
adams@i-capitaladvisors.com
Twitter: maryadamsica
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22. Additional Detail
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23. The org is now a network
Social Networks: Value Networks:
Patterns of connections Content of connections
Dietmar Offenhuber, Judith Donath, MIT Media Lab,
“Comment Flow: Visualizing Communication Along Network Elizabeth Reuthe, and Verna Allee, “Knowledge Management: Move the
Path, 2008 Case Model From a Snapshot to a Story,” Health Forum Journal, May/June
1999
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24. I-Capex* ($1 trillion/year)
• Intellectual capital expenditures are
expensed under today’s accounting
• Should be tracked in a management report
• Cost is actually the most concrete piece of
data available about intangibles
• Internally, will help with better decisions
• Externally, will help tell corporate story
* the new capital expenditure
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25. IC assessment*
• Like a 360-degree review of the
knowledge factory
• Review is by stakeholders (both internal
and external)
• Asks whether it is working well today,
outlook and risk
• Used for strategy, reporting, M&A
* the new balance sheet
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26. IC Rating assessment output
Intellectual Capital
AAA -
AA
A
BBB R
BB
B
CCC RR
CC
C A BBB R
D RRR
Business Recipe Organizational Relational
Human Capital
Structural Capital Structural Capital
B
BBB A R BBB BBB R A BB RR BBB BBB R
BB BB BB
BBB BBB R BBB BBB R BBB BB RR AA BB R BB BBB - BB BBB R
IP Processes Management Employees Network Customers
BBB BBB RR
Brand
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27. Performance management*
• Uses non-financial indicators
• Examples: headcount, customer
demographics, IP mapping, process
metrics
• Bottom up for learning
• Top down for management and
reporting—key performance indicators
(KPI’s)
* the new income statement
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28. Triangulate intangible performance
Cost
Assessment
Indicators
Graphic from: http://amath.colorado.edu/outreach/demos/hshi/2000Sum/TaT.html
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