CFO's Guide to Intellectual Capital

See excerpt Measuring intellectual assets: 12 techniques used to value intangible assets

This Briefing gives non-technical managers a practical overview of “intellectual capital” -- what it is, why companies are paying closer attention to it, how it’s being measured and managed. Intellectual capital is human capital plus “structural” capital (e.g. databases, documents). The Briefing is unique because it explains and illustrates the topic from four different perspectives:

• information technology, such as “groupware” and the Internet
• information content, such as public relations, information storage and retrieval
• human resources, including leadership, organization structure, and employee development
• management, including financial reporting, investment decisions, and strategic planning.

Of particular interest to CFOs is the section on measuring intellectual capital, which describes eleven different techniques, ranging from the relatively mundane (business process auditing) to the more exotic (“calculated intangible value”). The Briefing also outlines the activities of the Securities and Exchange Commission and the American Institute of Certified Public Accountants on the issue.

Applications
Part I of the Briefing explains the concept of intellectual capital and illustrates how ten different companies are using it. Applications include:

• Skandia Insurance: educating investors
• Canadian Imperial Bank of Commerce: developing human capital
• National Semiconductor: speeding up product development
• Xerox: creating world class customer service
• Dow Chemical: increasing cash flow from intellectual property
• Federal Express: creating barriers to entry
• St. Luke's: attracting clients and employees
• Booz, Allen, Hamilton: maximizing brain power
• Buckman Laboratories: getting close to the customer
• Teltech: supporting scientific & technical innovation

Tools & techniques
Part II provides a layman’s description of tools and techniques being used to manage intellectual capital. It also outlines why different companies approach the issue in different ways, how the tools of different functional areas complement each other, and what are generally recognized as success factors.

A new way of publishing
Almost as interesting as the content is the way in which the Briefing was published. In addition to reading a printed document, purchasers can:

• explore the topics in PART I in greater depth through Web links to Internet sources;
• share comments with the author and other readers;
• order copies of commercially published source documents from the Corporate Librarian™ at the Montague Institute research service.

Says publisher Jean Graef, “The printed document is only the tip of the iceberg. It’s one entry point to a publishing web, with some elements available to the public, others available to purchasers, and still others available only to our own employees. We call this knowledge base publishing. It not only makes accessible much of the background material that is normally buried, it also leverages the research effort across a broader range of users and applications. It’s already making our professional staff much more effective, and it’s an added service we can offer our clients.

Created on October 27, 1997 l Updated on April 2, 2011