Customer Reviews

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

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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.

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.

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.

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.

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.

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.

Its difficult to tap the exact talent in a thickly populated country with disturbed economy and democracy.Knowledge based industry cannot achive a break until unless manupulation is stopped in higher grades.Priority must be given to the basic human/mankind nature instead of mechanical approaches.There is a greater necessity of real/civilised kings instead of lion/uncivilised kings.