Intangible Metrics

I had an inquiry over the weekend from a reader about setting metrics for intangibles. Here’s my first level response.

One of my favorite articles about metrics is by Ian Graham, What’s Wrong with Targets? (it’s on page 15 of this document). It sums up most of the problems that happen with metrics.

The way I see it, there are two types of metrics: Read more

Knowledge is the New Oil - And Intellectual Capital is Your New Factory

If I ask you whether we live in the industrial or the knowledge era, you wouldn’t hesitate. You know that our economy has transitioned.

That doesn’t mean that industry and manufacturing have gone away, just that they are not the dominant source of value creation. Agriculture didn’t go away when the industrial era began. Industry won’t go away with the rise of the knowledge era.

But I find that most managers don’t have explicit models for the role of knowledge in their business. They know it’s there. They know what to do with it. But they are dealing with it all on a gut level. But you don’t want to rely exclusively on your gut to manage your business. Read more

The State of Intangibles Measurement - KPI’s Are An Imperfect Answer

In the industrial economy, we had lots of ways of measuring our work. It was a mostly physical process so we could literally see what was going on. Our financial systems were built around this industrial model and we could also put dollar values on products as they progressed through factories and machines, converting raw materials into finished goods.

The shift to a knowledge economy has changed that. A lot of the value created today happens inside peoples’ heads or their computers. This is the case in service and technology businesses but even in manufacturing settings where it is the process, not the product, that creates so much of the value. Read more

The Growing Importance of Community and Relationship Capital

Two of my recent Tweets @maryadamsica told stories about the growing importance of relationship capital:

What is Buddhist Economics - Showed the incredible difference in the growth of Business Week’s print edition versus their BW Exchange, where  readers choose the topics. Read more

How can we use IT to optimize our Intellectual Capital?

I received a call the other day from the administrator of a good-sized Sharepoint implementation. He had actually fielded a number of requests from managers in his organization about how to use IT to optimize IC.

Wow. I love questions like that, especially since I have had a category on this blog since last year called IT=IC. They were thinking in terms of knowledge management. I think that’s a great place to start but doesn’t get to the most exciting part. That’s because knowledge in itself is not that big a deal. Read more

Smarter Companies Chosen for BlogBurst

The Smarter Companies Blog by Mary Adams has been selected by BlogBurst, a site that syndicates blogs to top-tier on-line destinations.  including Reuters, USA Today, Gannett, Rodale and McGraw Hill.

Smarter Companies provides businesspeople with practical advice on leveraging intellectual capital for increased performance, growth and innovation.

The shift to a knowledge economy was identified decades ago. Today 80% of the value of the average company is in intellectual capital, which includes a variety of invisible knowledge assets.

Yet, when most managers go to work in the morning, they use tools optimized for industrial organizations and the tangible assets which represent just 20% of the value of their companies. They use an accounting system that is 500 years old and top-down management approaches that have no room for knowledge-based innovation.

This blog helps businesspeople get on the right side of that 80/20 split by focusing on their organization’s unique combination of knowledge assets. To improve internal performance, increase innovation and fuel sustainable growth. To build smarter companies today.

The blog is written by Mary Adams. one of the leading experts on intellectual capital in the U.S.  She consults, writes and speaks about how to fuel growth and innovation using knowledge assets. She is passionate about the urgent need to tap our nation’s intellectual capital in order to fuel innovation and economic growth.

Intellectual Capital Advice from Google’s Larry Page

In Larry Page’s commencement speech at the University of Michigan, he shares a lot of personal stories and also includes a gem about intellectual capital. The personal stories include his family’s connections to Michigan and a tribute to his Dad who was a professor there. He is an amazingly unassuming person. You won’t regret listening to the address.

What I want to talk about was one of his bits of advice at the end of his talk:

Technology and especially the internet can really help you be lazy. Read more

Does Your Intellectual Capital Walk Out the Door at Night?

You know how people always say that the value of a business walks out the door at night? They are right on one level. Human capital is a critical part of every business, more so all the time as we move more deeply into the knowledge economy.

But there is more to intellectual capital than what’s inside your employees’ heads. And if you worry about your value walking out the door, you better understand the rest of the story. Read more

Alternative to Moody’s and S&P Still Missing Intellectual Capital

There is a brief but powerful article in Wired this month about a crowd-sourced alternative to traditional credit rating agencies, Rick Calculators: Forget Moody’s and S&P. These guys know how to beat both.

The article features Freerisk.org, which provides XBRL data from SEC filings to what the article calls “a volunteer army of finance geeks.” It quotes co-founder Jesper Andersen:

The problem is too big to leave to private profit centers.

This is a great application of the power of the knowledge era. And it’s a critical first step. But it won’t be enough.

Remember that the majority of reporting in the data everyone uses (including Freerisk) is produced under a financial accounting paradigm that is broken. Modern accounting cannot describe the roughly 70-80% of every company’s value that is off balance sheet. For some reason, everyone inside our financial system continues to put up with a system that focuses on tangible assets that are NOT the key drivers of earnings, competitive position or future outlook of a company.

We need to get this intellectual capital into the reporting stream. The first step is for companies to learn how to see and measure these assets internally. Some of our ideas on how to do this are in the award-winning article I wrote last year for the Emerald Business Strategy Series, Management 2.0: Leveraging the Growing Intangible Side of Your Business. I welcome your thoughts.

IAFS Call on IP Metrics, Innovation Strategy and Metrics

On Friday (6/5/09) at noon EDT, I’ll be hosting the June call for the Intangible Asset Finance Society. This month, Andy Gibbs, former CEO of Patent Café and now CEO of Andy Gibbs IP CXO, will talk about IP metrics, innovation strategy, and value: you can manage what you can’t measure. The call is free. Recording is available for a small fee. Sign up at IAFS Events.

I’m looking forward to this conversation as Andy takes a very aggressive stance on IP. He feels the intellectual property will become “the core product” in the future. I’m an advocate for the power of seeing IP in the context of an organization’s full intellectual capital. But we share a passion for helping companies understand the power of the intangible. Hope you can join us!