The New I in IC: Why we stopped using the phrase “intellectual capital”

When I first became interested in the field of “intellectual capital,” I set up a Google Alert on the phrase and use this alert, among others, to find new content for this blog and for the IC Knowledge Center which I began close to four years ago. The alerts capture both website and blog use of the phrase. I now also monitor its use on Twitter.

One of the appeals to me of the phrase and the field was that there was a clear definition of what can be a vague concept: the knowledge capital of companies. The broadly accepted definition (among those that follow the field) includes three main categories of assets:

• Human Capital - This includes all the talent, competencies and experience of your employees and managers. This is the IC 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.

In our firm’s work with clients, we sometimes add a fourth category to address the business model or business recipe. This reflects the fact that it is critical to understand knowledge assets as part of a system or a network. This is what we try to communicate with our concept of the “knowledge factory” which we model using Lego’s.

The problem is that while lots of people use the phrase intellectual capital, it is rarely used in the sense of the definition outlined above. I know this from my searches and the fact that I talk with a lot of people about the concepts. Most people use intellectual capital (IC) as another way to describe intellectual property (IP) which is a small subset of IC. Some use the phrase to describe intelligence and/or shared knowledge. But very few think of the broad system that I am trying to convey.

Even if I explain this definition to someone, a few minutes later they invariably make reference to the intellectual property that “Mary’s firm works with.” The definition is set in folks’ heads. It seems silly to try to get them to change their conception. When our editor came up with “intangible capital,” we resisted it at first.

But we find ourselves using it more and more.  People seem less apt to confuse “intangible capital” with IP. It references intangibles which everyone senses are growing in importance. And it keeps the word capital, which is important. After all, intangibles drive something like 70% of value and performance in the average company today. Focusing on intangibles also makes a link with the accounting world–which ultimately has to be part of the solution here.

That’s why we’ll keep beating the drum to share the message of IC but will explain IC using the phrase intangible capital. Are you with us? Is this the right term? What terms are you using?