Intangible Definitions

One of the most frustrating parts of working in the “intangibles” management business is the lack of accepted definitions and (more importantly) shared understanding of what we mean.

Just the name is challenging. Here are a few of the most common:

• Intangible Assets – accounting construct
• Intellectual Assets – used by IAM magazine
• Intellectual Property – legal construct
• Intellectual Capital – used and mis-used by everyone
• Intangible Capital – coined by the editor of our book

The terms intellectual capital, intangibles and intangible assets are often used interchangeably. Although we prefer the phrase “intellectual capital” because it has a more precise definition (see below), “intangibles” is also frequently used. Below, for your reference, are some definitions of these and related terms:

Intangibles/Intangible Assets – Strictly speaking, the definition of “intangible” comes from the field of accounting. Intangibles are organizational resources that do not appear on the balance sheet. On average, roughly 80% of the value of today’s corporation is intangible.

Intellectual Capital (IC) – This is a phrase and a concept which was popularized in the 1990’s to explain the significant shift in our economy and businesses as knowledge became the key competitive advantage in the global market. The focus of IC is how intangibles are manifest in an organization. The field of intellectual capital has identified three main categories of intangibles, each of which has a different character. It is important to understand individual intangibles as well as how they work together as a whole:

• Human Capital - This includes all the talent, competencies and experience of your employees and managers. This is the intellectual capital that “goes home at night.”
• Relationship Capital – This includes all key external relationships that drive your business, with customers, suppliers, partners, outsourcing and financing partners, to name a few. This kind of capital also includes organizational brand and reputation. Due to the growing importance of networks in organizational structures, this is also sometimes called Network Capital.
• Structural Capital – This includes all knowledge that stays behind when your employees go home at the end of the day. There is significant structural capital in today’s organizations including recorded knowledge, processes, software and intellectual property.

Intellectual Property (IP) – This is a specific asset class that is protected legally through copyrights, trademarks and patents. It is a subset of Structural Capital.

Bottom line, I like the IC concept because it includes the diversity of knowledge assets: people, process, IP, brands, networks and relationships–and begins the conversation about how an organization combines these assets to create something unique and valuable.