Intangible Capital: Putting Knowledge to Work in the 21st-Century Organization

I enjoyed Intangible Capital very much. Two specific areas were highlights for me. First, the conceptual framework for uncovering and beginning to measure intangible capital (IC) is very clear, concise, and useful. Breaking down IC into human, relationship, and structural capital is important to discover what a company possesses in each three and how they interrelate. Second, the measures suggested for IC are very promising. In particular, the ratios--for example intangible capital intensity, profitability return on IC, and employee effectiveness--are a good starting point for companies trying to understand their IC.What makes Intangible Capital most interesting is an approach that is simple to begin, but can build into a very powerful toolset. The lego technique for visualizing the interrelationships of IC is both enlightening and fun. I highly recommend Intangible Capital to anyone trying to understand the hidden capital in their organization.

I was a little put off by the title, but after reading the intro and first chapter I really get the concept about which the authors are writing. They use anticdotes, excellent examples and real life experiences to make the idea of intellectual capital come alive. I also liked how many of their references were to online articles. I thought the interactive questions at the end of each chapter were challenging, but also a way to make a connection to the book and the concept. I think all business types should read this book and do the exercises. It would certainly make a difference in how they look at their company and their employees.

This book opens the door to new thinking on old subjects. Bankers have been talking about making "air ball" loans for years. Institutional lenders and investors talk about "cash flow lending". They are really talking about loans based on Intangible Capital. But before this book, who's had the tools to follow how this important part of a business enterprise is managed and valued? This book draws parallels to the ways businesses managed their tangible capital assets and the way lenders and investors valued such capital. Must reading for any investor or manager of the typical 21st century business, where value is most often being created "out of thin air" and there aren't the tangible assets to point to as an explanation of the value of the business.

This introduced a new area of thought for me. This book is a thorough treatment. It discusses the different types of intangible capital, the value of measuring it and the different ways of doing so.

Intangible Capital is a book that seeks to create a new way of thinking about our businesses and how we operate them. Traditionally our businesses and how we organize them, even how we measure and report on them, have been based on labor and tangible capital (property, plant and equipment). That's because traditionally these were the motive forces behind how firms differentiated and made money. Firms that managed their tangible assets and labor effectively made more money than those that didn't. But what if the situation changed and tangible capital wasn't as important as intangibles. Those intangibles might reflect the accumulated knowledge in the business, its strategies and recipes, its intellectual property and ideas. What happens to how we structure an organization and how we value an organization if intangible capital becomes as important, or more important, than physical capital?One could argue that in many businesses - software firms for example - intangible assets have far greater value than the tangible assets. And software firms are probably just the leading indicator. More and more as the US moves from a manufacturing economy to a services and intellectual capital economy, intangible assets will be what we use to derive value and differentiation. And if that's so, everyone will need to read and reflect on the ideas in the book Intangible Capital.Adams and Oleksak argue that there are four kinds of "structural" capital - culture, organizational knowledge, intellectual property and processes. They begin the book by defining these kinds of intangible capital and why, increasingly, these are becoming ever more important. The book mentions a presentation by Irving Wladawsky-Berger who argued that "future work will be in market-facing solutions where you are dealing with people and services (intangibles)...". Adams and Oleksak go on to argue that intangible capital of these types is the "new" factory, and firms that hope to compete in this environment will need to create "knowledge factories" that are designed to create intangible capital.The focus on intangible capital doesn't simply change the way you "produce" ideas and intellectual property. It also changes how you organize. Adams and Oleksak argue that "networks are the new organization charts" and begin the argument about the importance of social media. I would have liked to see them take this further - since much intangible capital is created at the intersection of firms, or industries, or communities. But their main point here is that a top-down, hierarchical organizational structure doesn't support the development of intellectual capital as well as a network. Additionally, "managing" within this space is more about orchestrating and encouraging collaboration than directing and correcting. Innovation isn't a "nice to have" in this worldview but is a requirement. Firms that create the best ideas, and constantly create new ideas, have an advantage over those that don't create new intangible capital.Toward the end of the book Adams and Oleksak look at how intangible capital is measured. Intangible capital, while increasingly valuable, isn't adequately captured or reported in a balance sheet or an income statement, neither of which can sufficiently capture the value or report the impact of intangible capital and its role in value generation.Every once in a while a book will pull back the covers and try to direct our vision and thinking toward what is likely to happen next. This book is an attempt to introduce what's already happening, although many businesses still haven't recognized it yet. Increasingly, intangible capital is far more important than tangible capital, and as that becomes more evident and more true over time, we have to adjust our businesses to that new reality. It impacts how we organize, how we manage, what we produce and what we report. The creation of intangible capital will require different skills than we have in our organizations today, and different interactions with our customers and suppliers. If you want to know what issues businesses will be grappling with in the next few years, read Intangible Capital and think about the possible impacts as, not if, the ideas presented in this book come to pass.Cross posted from the review on my blog Innovate on Purpose