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Intellectual Capital: The Proven Way to Establish Your Company's Real Value by Measuring Its Hidden Brainpower Paperback – Import, May 28, 1998
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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. --This text refers to an out of print or unavailable edition of this title.
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. --This text refers to an out of print or unavailable edition of this title.
Top customer reviews
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.
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."
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.
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.
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.