Michael D. Moberly March 29, 2010
Intellectual capital management is certainly not new. Numerous colleagues have long been respected thought leaders, strong advocates, and practitioners in this arena, Mary Adams (I-Capital Advisors) among others.
In simple terms, intellectual capital (IC) includes ideas, innovation, know how, skills, and also I believe, the understanding how to best use (exploit) those ideas, knowledge and skills for commercialization, profit, and competitive advantage. Unfortunately though, given the amount and rising levels of IC embedded in companies, there’s little evidence that management teams and boards consistently recognize or ensure systems are in place to effectively practice the latter on a broad scale to better serve their company’s interests.
My characterization of a company’s IC focuses on the aggregation of know how and skill sets that are embedded in the various processes and procedures used to produce, develop new, as well as improve existing, goods and/or services. In today’s increasingly knowledge-based economy, while IC is one of three, it is, in my view, the more significant underlier to a company’s profitability, success, and certainly, its sustainability.
It is essential though, that management teams and boards recognize that IC is generally not a permanently embedded fixture, rather IC is quite perishable, often transferrable, and certainly vulnerable to a range of risks. In other words, IC can best serve a company’s interests only if those specific elements that deliver value, revenue, and competitive advantage are distinguished and considered proprietary or possibly bundled for licensing or other profit-revenue delivering modes.
In most instances, at least initially, I advocate the prudence of putting specific practices in place to retain the proprietary status of designated IC to reduce the probability it would (purposefully, inadvertently, sureptitiously) enter the public domain that would cause or hasten its value being diminished or its competitive advantages be undermined.
Also, let’s be clear, IC is not synonymous with intellectual property, i.e., patents, trademarks, copyrights, etc. IC is, to be sure, an intangible asset, like its intellectual property cousin. Typically, most forms of IC are not eligible for conventional intellectual property protection. Thus, having processes and procedures in place to ensure its proprietary nature is sustained becomes all the more important.
Be assured, conducting periodic inventories and/or audits of intellectual property is no substitute for, nor does it equate with what’s necessary for managing IC assets in today’s globally competitive business (transaction) environments. And, with steadily rising percentages of company value, revenue, growth potential, and sustainability tied directly to the production and effective use of intangible assets, of which IC is one, the notion of dedicating an individual and/or team to be responsible for identifying, managing, using, and protecting (a company’s) IC is becoming a prudent business decision with a strong and defensible value proposition!
(Those interested in learning more about intellectual capital management are encouraged to visit the IC Knowledge Center.)