Intellectual Capital: Managing Your Company’s Ideas and Innovation

Michael D. Moberly   February 6, 2012

Managing a company’s intellectual capital is certainly not new.  Numerous colleagues have long been respected thought leaders, strong advocates, and practitioners in this arena, i.e., Mary Adams, Michael Oleksak, Dr. Nir Kossovsky, Jonathan Low, and Dr. Ken Jarboe among others.                                          

Intellectual capital (IC) in straightforward terms includes ideas, innovation, know how, and skill sets, etc., that

  • are coupled with the understanding how to best use (exploit) those ideas, that knowledge and those skills
  • serve as the basis to achieve and solidify competitive advantages and/or be predicates for strategic alliances and other (business) transactions.

IC is routinely embedded in companies.  Unfortunately however, its importance and contributory value has not consistently translated to:

  • comprehensive recognition by management team and boards
  • ensuring procedures and practices are in place to identify, monitor, and extract value.

I characterize a company’s IC more as the aggregation of its knowhow and skill sets that have evolved or been acquired, somewhat akin to a (company) culture.  In that context, IC is an (intangible) asset that’s truly embedded in various processes and procedures used (by employees and management teams) to produce, develop new, as well as improve existing goods and/or services and create efficiencies, etc. 

In today’s increasingly knowledge-based businesses and economies in general, Adams and Oleksak, in their fine book ‘Intangible Capital’ quite correctly state a company possesses three forms of intangible capital, i.e.,

  • relationship
  • structural
  • intellectual

While each is interconnected in various ways, it is my view, the more significant underlier to a company’s competitive advantages, profitability, and sustainability is its intellectual capital!

It is essential though, that management teams and boards recognize IC is not something which is always permanently embedded within a company.  Rather, IC can be perishable and certainly vulnerable to a broad range of risks.  In other words, IC can best serve a company’s interests in my view only if the elements that actually deliver the value, revenue, and competitive advantages, etc., are distinguished and considered proprietary.

Necessarily then, at least initially, I advocate putting specific procedures/practices in place to signify and sustain the proprietary status of designated IC.  The intent of such measures is also to reduce the probability that designated IC will (purposefully, inadvertently, surreptitiously) enter the public domain and/or be acquired-replicated by a competitive adversary.  Should either of these, plus a myriad of circumstances occur, it would likely cause or at least hasten the IC’s value being diminished or its competitive advantages be undermined or lost altogether.

But, 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.  Most forms of IC are not eligible for – cannot be converted to conventional intellectual property protection.  Thus, having processes and procedures in place to ensure IC’s proprietary status is sustained becomes all the more important.

Conducting periodic inventories and/or audits of intellectual property is certainly no substitute for, nor does it equate with what’s necessary for managing IC assets in today’s globally competitive, predatorial, and winner-take-all 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, 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 and read ‘Intangible Capital for Business Leaders’ authored by Mary Adams and Michael Oleksak.)

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