The Value of Intellectual Capital

A recent post by Pat Sullivan prompted salutes here by IP Think Tank and here by IP Finance. Basically, Sullivan says that the current financial crisis “busts an intellectual capital myth,” that the value of intangible assets is the difference between the market value of a company and its tangible assets. It is from this approach that many of us often say that 70-80% of the value of a company today is intangible.

Sullivan entreats his readers, “I hope the recent vertiginous slide in stock prices will cause you to reconsider.”

I’m not convinced. The market does not value companies by looking at their balance sheets. In most cases, it never has. But I have always found the comparison between corporate valuations and tangible book value to be a powerful way Read more

Greenspan, the Black Swan and the Rest of Us

I had a colleague, Bruce Horwitz contact me about Greenspan’s testimony in front of Congress last Friday, described here. Bruce and I had a good conversation earlier this year about The Black Swan. The author of the book, Nassim Nicholas Taleb, has been appearing a lot on television in the past month.

Bruce thought that this was a great example of a “black swan” event, that is, when people are totally surprised by an event. At first, I disagreed. As a former banker, I have memories of the analysis that used to be done on our portfolios Read more

Jeffrey Philips on the Innovation Paradox

One writer I always read on innovation is Jeffrey Philips. He had a post recently on what he calls the paradox of innovation: that the more you think about innovation, the harder it is to do it. In this view innovation happens when you have the right ecosystem. His post said that “If your innovation team is forced to work within a culture and process that is not innovative, then your innovation team will not be innovative either.”

I spoke with Jeffrey a few months ago on the phone about this. The idea of creating the right ecosystem for innovation seems so critical. It is not just about culture. It is about having the right mix of competencies (human capital), building and leveraging the right external network (relationship capital), and also the right processes (structural capital)–am i making the link to intellectual capital obvious enough?

Jeffrey confirmed that many of the companies he sees are focusing on the act of creation and maybe the innovation process. This is obviously important. But there it seems to me that is more to it.

Context for the Current Crisis

This is a really interesting post from Hanna Edwards, “New York City Real Estate Goddess:”

“Throughout history, the middle class has also been “squeezed” by the adaptation of the old guard to the innovations of the times. Once the big guys get the gist, they swallow or copy the innovator. Constant innovation is required. The same is true today. Those who have the ability to recognize changes and work with them are the ones who will be able to survive the constant storm as it roars around us. Those who have given up their desire or ability to innovate, and instead are happy with “a good job” are the ones with the least security, because when the market changes, they can’t change with it.”

Edwards calls for young people to start their careers as microentreprneurs, saying the lessons they learn would be more powerful than entry-level  jobs in large corporations that drain their “passion and energy.”

An interesting counterpoint to Edward’s post can be found in the ideas presented by Michael Mandel, Chief Economist at Business Week, in in interview segment Read more

Before You Lay Anyone Off

At a neighborhood gathering this past weekend, I chatted with a neighbor about his business. Because he is dependent on automotive sales, he is already feeling the pain of the current downturn. And he has already had to let go employees that he had valued but can no longer afford.

In my 25 years as a banker and consultant, I have seen many businesspeople in this position (and sometimes have had to help them make decisions about layoffs). Sometimes, this is the only alternative they have. But I want to take just a few minutes to tell you why you should think twice today about laying people off even when it might have made sense in the past. Read more

AMD Smarter Split in Two

Last week, hidden amid all the financial news was the announcement that AMD would be splitting itself in two. One part will focus on cutting edge design of microprocessors. The other, to be called The Foundry Company will leverage AMD’s existing manufacturing base to provide scalable, high quality manufacturing services.The new deal is financed by new investments by the government of Abu Dhabi.

AMD is not the first company to consider this strategy. But it is a good illustration of the kind of intellectual capital management that even asset-intensive companies need to consider. The business of Read more

Getting Paid for Intangibles

Interesting look by Lucent-Alcatel here at “Business Transformation: Advanced Business Models for Converged Communications.” You don’t have to be in the communications business to find this article inspiring. They are making the case to companies that have traditionally built their businesses off the sale of “tangible” communication networks that they need to expand their revenue activities into intangibles. This is a shift that technology and product companies throughout the economy are making with increased frequency. It’s also a great illustration of how IT and IC have become so tightly intertwined in many companies.

The list of options includes services, asset sharing, outsourcing, advertising, fulfillment and community building, among others. This list could help you think about new revenue options in your own business. It’s also interesting to note that the last section of the piece highlights Lucent-Alcatel’s consulting services to help their equipment customers–a good example of how L-A has adapted their own revenue strategy to market needs and opportunties.

Gushing Black Ink on Income Statements

If there is one lesson of the current financial crisis, it is that strong balance sheets and income statements no longer tell investors enough about the performance of a company, whether it be a bank, a service or a product company.

Over the last few decades, technology has fueled a burst of knowledge creation that has allowed companies and economies all over the world to create greater and greater results using fewer and fewer physical inputs. Computers have made us smarter and more efficient. This has led to a problem in corporate valuation Read more

Dangerous Metrics for Universities

This editorial in the New York Times by Brent Staples highlights a problem with the misuse of student test scores. It seems that student scores on the SAT and ACT are used with regularity by two influential constituencies: the college-rating guides and Read more

The Current Crisis and Our Schools

It’s no coincidence that in the middle of the current financial crisis, there are also people talking about the crisis in education. David Brooks framed the challenge last summer in New York Times.  This week, Roger Frank Bass of the Milwuakee Journal Sentinel made his case and The Quaker Agitator blog also chimed in here.

There is still something of a gap in our understanding of the link between education, human capital and the development of our economy. It is absolutely clear Read more

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