Intellectual capital is an asset that is created from knowledge. Intellectual capital is a combination of human capital (i.e. the brains, skills, insights and potentials of those in an organisation) and structural capital (things like the processes wrapped up in customers, processes, databases, brands and systems). It is the ability to transform knowledge and intangible assets into wealth-creating resources, by multiplying human capital with structural capital.
Developing intellectual capital is imperative, as knowledge is an asset and a source of power. Knowledge is the intellectual capital that every organisation possess. Technological developments and the internet have promoted an explosion in the scope and depth of available knowledge.
As there is so much information and knowledge available, it is important for organisations to know how to creatively develop and use information. Knowledge and information have to be collected, protected, and effectively managed if they are to be valuable resources.
Intellectual capital is divided into three types namely; human capital (in the heads of employees), structural capital (which remains in the organisation) and customer capital (deriving from the relationship that the company enjoys with its customers). Customer capital is often seen as a subset of structural capital.
To develop intellectual capital in an organisation, do the followings:
- Carry out a knowledge audit – few organisations know what knowledge they possess, because knowledge is confined to a few, or simply neglected. A knowledge audit will uncover the breadth, depth, and location of an organisation’s knowledge. It has three core components:
i. Define what knowledge assets exist, especially information or skills that are difficult or expensive to replace.
ii. Locate the assets; who keeps or owns them.
iii. Classify them, and assess how they relate to other assets. This will reveal opportunities in other parts of the organisation.
- Increase knowledge in key areas – this can be done in three ways: it can be bought, rented (e.g. by hiring consultants), or developed through training.
- Maintain knowledge – knowledge gaps make an organisation more vulnerable to competition. Lost expertise and experience following “downsizing”, and the erosion of traditional employee loyalty, highlight the urgent need to capture, codify and store people’s expertise and tacit knowledge.
- Protect knowledge – explicit knowledge, such as copyright or information codified in handbooks, systems, or procedures, can be legally protected. Tacit knowledge, information retained by individuals, including learning, experience, observation, deduction, and informally acquired knowledge, can only enjoy limited legal protection through, for example, non-compete clauses. It is necessary to ensure that valuable tacit knowledge is recorded and passed on.
- Establish information system – an efficient information management system will coordinate and control information, and help with planning. When developing a system, decide what information is needed to help improve decisions and achieve objectives.
- Manage the flow of information – understand how information flows, what it is used for, and the ways in which it can be applied.
All the above can be achieved through intelligently following the order and learning in the process. Remember, intelligence becomes an asset only when useful order is created out of free-flowing brainpower. Organisational intellect becomes intellectual capital only when it can be deployed to do something that could not be done if it remained scattered round like so many coins in the gutter.
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