What every B2B exec needs to know about intellectual capital management

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It’s not just about patents, copyright and intellectual property. What your people know, your unique business practices and products, your company culture, your brand status and corporate reputation are all part of your B2B firm’s intellectual capital.

According to a growing number of business academics and consultants, the definition, inventory, and auditing of intellectual capital assets is an important part of an enterprise’s value to its owners, investors, clients and employees.

Unlike real estate, product inventory and equipment, intellectual capital is largely made up of intangibles. Even highly-defined legal traditions of intellectual property, such as copyright and patents, offer less protection in a completely networked, global economy.

Still, the idea is gaining traction as manufacturing continues to move offshore and international companies divide up their service sectors between offices around the world.

Before a sale, acquisition or an IPO, Intellectual Capital – and its management processes – will generally be considered in the valuation of the enterprise. For B2B enterprises that are often anchored on the specific skills of highly-trained individuals, or on a superior or specialized understanding of a business sector, the role of intellectual capital in its valuation can be significant.

The business processes and elements considered part of intellectual capital vary from consultancy to consultancy, theorist to theorist. The consistent elements can be broadly defined as human capital, structural or cultural capital and a relationship or relational capital.

Who knows what versus who’s learning what

  1. Human Capital

Human capital is perhaps the most intangible of the three elements of intellectual capital management. A number of critics of the concept assert that human capital management is just human resources and its duties of talent acquisition, talent development and talent retention.

Proponents of intellectual capital point to broader issues of organizational talent. Often, these issues are linked to the foundation or invention of a specific product or process tied to an individual or small group. Planning for, and implementing a process of knowledge succession and idea evolution is human capital management, not HR.

To simplify, human resource management is about who knows what and who does what. Human capital management is about who is learning what and how that fits into current and future plans.

How you work and how that helps you work better

  1. Structural or Cultural Capital

How companies are structured and the role of corporate culture is key to intellectual capital management. Some companies are structured as strict hierarchies throughout their operations, some as loose hierarchies with ideas and roles being more flexible for communication and operations while decision-making and accountability are more firmly defined. Still others operate as flat organizations with a range of consensus or partial-consensus models for operations and decision-making; no matter, a company’s structure informs its culture.

That culture, in turn, influences everything from office design to employee interactions. That culture, though, either serves or distracts from broader productivity targets, business development goals and product-to-market achievements. The defined or observed connection between corporate culture, or structure, and how the enterprise reaches its goals is captured by Intellectual Capital Management processes.

Who you know and how you know them

  1. Relationship or Relational Capital

Every B2B sales rep knows that profit doesn’t come from the first sale to a new client, but from subsequent purchases in an on-going relationship. That fundamental driver of customer relationship management can be expanded to describe relationship or relational capital.

If your clients or customers make immediate and accurate associations with your brand, if your logo is recognized at a glance, if your company is closely tied to a specific community or geographic area, you have some defined relational capital. The link is not general, but specific. It’s not about oil from Alberta as much as it about Jack Daniels Bourbon from Lynchburg, Tennessee.

But that is not the only kind of relationship or relational capital that Intellectual Capital Management will define, support and assign a value to. There is also the development and sustenance of strategic partnerships, co-productions and long term symbiotic partnerships like those with distributors and specific delivery channels, franchisees and licensees.

Our general understanding of Intellectual Capital Management comes from Thomas Stewart’s book Intellectual Capital: The New Wealth of Organizations. That a greater understanding of Intellectual Capital Management is needed has long been expressed. Berkeley’s Haas School of Business launched the Tusher Center for Management of Intellectual Capital last July for greater study.

“The center will address research, funding, and outreach related to intangible assets and long-run enterprise-level competitiveness,” said Professor David Teece in a press release. “Tangible assets matter, but even in resource-rich places like Australia and North Dakota, the path to riches involves building and leveraging intangible assets. These assets can anchor the long-run competitive advantage of nations.”

Photo via Flickr, user Jim Larrison (Creative Commons license)

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Kate Baggott

Kate Baggott

Kate Baggott is the Managing Editor of B2BNN. Her technology and business journalism has appeared in the Technology Review, the Globe and Mail, Canada Computes, the Vancouver Sun and the Bay Street Bull. She is the author of the short story collections Love from Planet Wine Cooler and Dry Stories. Links to recently published pieces can be found at www.katebaggott.com