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

Leif Edvinsson (Author), Michael S. Malone (Author)

Book Description

Publication Date: March 6, 1997

Intellectual capital is a phrase covering corporate brainpower, information technology, and relationships with customers and suppliers, all of which influence a company's ability to make money. They are all factors which tend to get overlooked because they are intangible and do not show up on a balance sheet. Yet without them, a good company can founder. This guide shows how to measure, manage and grow these hidden values as if they were money and takes accounting to a new level. It establishes the need for identifying hidden assets, develops principles for intellectual accounting, explains the metrics, applies the model with real examples and provides an action plan for managing development and growth of intellectual capital.

Editorial Reviews

Amazon.com Review

In a corporate world where true value is no longer determined by physical assets alone, but instead by a combination of material and nonmaterial resources, businessman Leif Edvinsson and journalist Michael Malone propose a new way to bridge the gap between balance sheet and organizational reality. In Intellectual Capital: Realizing Your Company's True Value by Finding Its Hidden Brainpower, they explain why today's companies must take intangibles seriously--and how to measure them so they can.

From Library Journal

The manager of intellectual capital for Sweden's Skandia Group, Edvinsson advocates "intellectual capital reporting" as a new type of accounting tool to measure the value contained in the structural and human capital of an organization. (LJ 4/1/97)
Copyright 1999 Reed Business Information, Inc.

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Product Details

• Hardcover: 240 pages
• Publisher: HarperBusiness; 1st edition (March 6, 1997)
• Language: English
• ISBN-10: 0887308414
• ISBN-13: 978-0887308413
• Product Dimensions: 9.6 x 6.4 x 0.9 inches
• Shipping Weight: 1.2 pounds
• Average Customer Review: 4.0 out of 5 stars  See all reviews (7 customer reviews)
• Amazon Best Sellers Rank: #1,245,385 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

19 of 21 people found the following review helpful:

1.0 out of 5 stars The book does not live up to its promise., August 10, 1998

By A Customer

This review is from: Intellectual Capital: Realizing Your Company's True Value by Finding Its Hidden Brainpower (Hardcover)

This should have been an article. It is good to learn what Skandia has done to supplement its financial statements, but the book is repetitious and replete with slogans, platitudes and exhortations. Prospective readers would be better served by Relevance Lost (Johnson, Kaplan), Cost & Effect (Kaplan, Cooper) and The Loyalty Effect (Reichheld).

Edvinnson/Malone start with the obvious fact that a firm's balance sheet equity, usually, is far less than its market value. From that, they suggest that investors and managers need better information about IC to make wiser investment/operating decisions. But they do not follow through on this useful line of thinking. I would like to have learned how Skandia selected its metrics, whether it believes it has made better operating decisions because of them, and whether the metrics help to predict Skandia's cash flows or its market value. It also would have been interesting to learn how the metrics relate to the creation, use ! and consumption of IC in the specific things a firm does to turn inputs into revenue.

9 of 11 people found the following review helpful:

5.0 out of 5 stars The Skandia Market Value Model, August 26, 2001

By 

Turgay BUGDACIGIL (Istanbul, Turkey) - See all my reviews

This review is from: Intellectual Capital: Realizing Your Company's True Value by Finding Its Hidden Brainpower (Hardcover)

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.

4 of 5 people found the following review helpful:

5.0 out of 5 stars Superb Representation of the Breadth and Depth of IC, August 9, 2003

By 

Greg T. Smith (Cincinnati, Ohio) - See all my reviews

This review is from: Intellectual Capital: Realizing Your Company's True Value by Finding Its Hidden Brainpower (Hardcover)

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.