Don’t Separate Innovation and Intangible Capital

There has been a discussion going on at Blogging Innovation and BankerVision about the move from the knowledge economy to the innovation economy–and the need for companies to develop innovation capital.

I would like to argue that the knowledge economy and the innovation economy are the same thing.  Not just to argue but to keep the focus where it needs to be. [Read more...]

Getting the Most Our of Your Workforce - Manage It As Part of Your Intellectual/Intangible Capital

Gary Hamel has a new article on human capital called Management’s Dirty Little Secret. He talks about the very large lack of engagement of most employees (in a global survey by Towers Perrin, only one-fifth of employees are “truly engaged”).

Hamel explores all the reasons that this may be true including ignorance, indifference and impotence.

But his discussion is totally focused around the human capital itself. He doesn’t make a good case for how human capital fits into the value creation process of today’s knowledge-based economy.  [Read more...]

Accounting for Intangibles - The Income Statement is Not the Answer

I guess it’s time to talk about Accounting for Intangible Assets: There is Also an Income Statement by Stephen Penman. When this new paper first came out from the Center for Excellence in Accounting & Security Analysis at Columbia University, I decided to ignore it as an apology for current accounting standards–which are completely inadequate for the knowledge era.

But now the paper is getting more attention so I feel the need to answer it.

We are not talking about some theoretical accounting issue.  70% of the value of the average M&A deal is intangible. 60% of the average corporate investment is intangible. 50-80% of the average public company is intangible. That means that intangibles are ignored by accountants (the only real exception is in the case of a merger, when the lack of understanding ends up as 50% of the purchase price going to goodwill). None of this is helpful to the cause (and stated mission of Columbia’s center) of “excellence in accounting and security analysis.” [Read more...]

IT Management is Really IC Management

The KNOW Network just declared IT Departments Fail to Deliver Value based on a global survey of IT executives by Axios Systems. Here are a few of the data points they cite:

• 57% believe their systems do not deliver the value expected by the business
• 64% are unable to provide the business with real-time quantifiable metrics demonstrating the value of their services
• 39% believe that business decision-makers still do not understand the value IT brings to the business.

The reason that IT management is so hard is that it is so closely tied to IC management. And companies are doing an even worse job with IC than they are with IT. [Read more...]

Three Ways to Look at IC

Intangible capital is still a very abstract concept to most people. As we begin to do more and more work that is explicitly related to IC optimization and corporate growth, we are finding three approaches to visualization that are especially  helpful.

Inventory - The first one is to look at a simple inventory of the key intangibles that drive an organization. This is usually focused on the revenue generation side of business. This is a high-level list but a good starting point for a discussion of the basic assets driving the organization’s operations. [Read more...]

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