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

192 Pages·2010·0.976 MB·English

by  Mary Adams, Michael Oleksak

INTANGIBLE CAPITAL
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INTANGIBLE CAPITAL
Putting Knowledge to Work in the
21st-Century Organization
MARY ADAMS AND MICHAEL OLEKSAK
Foreword by Leif Edvinsson
Copyright 2010 byMary Adams andMichael Oleksak
All rightsreserved. Nopartof thispublication maybe reproduced,
stored in aretrieval system, ortransmitted, in anyform or byany
means, electronic, mechanical, photocopying, recording, or otherwise,
except for theinclusion of brief quotations ina review, withoutprior
permission inwriting from thepublisher.
Library of Congress Cataloging-in-Publication Data
Oleksak, Mary Adams, 1959–
Intangible capital :putting knowledge to workin the21st-century
organization/MaryAdamsandMichaelOleksak ; forewordbyLeifEdvinsson.
p. cm.
Includes bibliographical references andindex.
ISBN 978-0-313-38074-7 (hard copy : alk. paper)—ISBN 978-0-313-
38075-4 (ebook)
1. Intellectualcapital—Management. I. Oleksak, Michael M.,1957– II.Title.
HD53.O44 2010
658.40038—dc22 2010000833
ISBN: 978-0-313-38074-7
EISBN: 978-0-313-38075-4
14 13 12 11 10 1 2 3 4 5
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T
his book is dedicated to Harroll H. Adams,
an accountant who understood the value of intangibles
and who always believed in this endeavor.
We wish you were here to share it.
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c o n t e n t s
ForewordbyLeifEdvinsson................................ ix
Preface.................................................. xi
Introduction............................................ xiii
I.THENEWFACTORY................................... 1
1. KnowledgeIstheNewOil ......................... 3
2. IntangiblesAretheNewRawMaterials ............ 19
3. IntangibleCapitalIstheNewFactory.............. 39
II.THENEWMANAGEMENT ........................... 51
4. NetworksAretheNewOrganizationCharts........ 53
5. OrchestrationIstheNewCommandandControl ... 65
6. InnovationIstheNewStrategy.................... 77
III.THENEWACCOUNTING............................ 89
7. IntangibleCapitalExpenditureIstheNewCapital
Expenditure..................................... 91
8. AssessmentIstheNewBalanceSheet ............ 107
9. PerformanceMeasurementIstheNewIncome
Statement..................................... 123
10. ReputationIstheNewBottomLine.............. 139
Conclusion ............................................ 153
Notes ................................................. 157
Index ................................................. 163
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f o r e w o r d
In the 1980s, the global economy began to shift dramatically. Fueled by
information technology, the investment by the major economies became
concentrated in software, process, and knowledge, all considered ‘‘soft’’ and
invisible—intangible—in accounting systems.
Yet,intangiblesinvestmentisattherootofthegrowthofoureconomies.Ifirst
usedtheconceptofintangiblesastherootsofatreeinmy1997bookwithMichael
Malone. I continue to use it in my practice of Intellectual Capital Leadership to
expressthatintangibles,althoughinvisible,providethefoundationfortherestof
theorganizationinthe21stcentury—andfuelcorporateearnings.Thetreeandthe
Legosthattheauthorsuseinthisbookarerepresentationsoftheholisticperspec-
tivethatisnecessaryforunderstandingtheecosystemofintangiblecapital(IC).
Beginning in the 1990s, there has been a greater effort in many countries at
makingtherootsofoureconomy—intangibles—visiblebycreatingICreporting.
TheWissenbilanzinGermany,RICARDISandInCaSbytheEU,workbyMETI
inJapan,andeffortsinHongKongandChinahaveallendeavoredtospreadthe
promiseofICasawayofempoweringcompaniestouseintangiblestofuelinnova-
tion. Broad partnerships represented by the World Intellectual Capital Initiative
(WICI)haveunitedthepublicandprivatesectorsonresearchanddevelopmentof
newintangiblesstandards.AlthoughrepresentedinWICI,theUnitedStateshas
notdevelopeditsownapproachtointangiblestodate.
Despite all these efforts and the great progress by interested academics
and business and government leaders, the ideas and the power of IC has not
yet moved into the business mainstream. That is why I am very heartened by
this new work from Mary Adams and Michael Oleksak. This book is a pio-
neering work with an innovative way of explaining IC. It is excellent reading
material with illustrative learning cases. The focus on monetization of knowl-
edge products and services is very inspiring. The worksheets at the end of
each chapter are a very practicable approach. It has a good theoretical base,
building on the work of Professor Paul Romer and the New Growth Theory.
The book has many helpful distinctions on human capital, relational capital,
and organizational structural capital, as well as intellectual property.
I can strongly recommend this for not only reading but also application.
It is timely and interesting for business as well as the G 20 leaders as we
move out of the global recession.
Leif Edvinsson
The World’s First Director of Intellectual Capital
The World’s First Professor of Intellectual Capital