Don’t Separate Innovation and Intangible Capital
January 12, 2010 by Mary Adams
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.
Today, business value and competitive advantage are based on knowledge. Roughly 70% of the average company’s value is in knowledge intangibles. Knowledge is different from tangible goods. With tangibles, ownership was concentrated inside the firm. In the industrial era, what you owned was the key question. Today, it’s what you know.
But the knowledge a company uses to operate isn’t necessarily owned or even controlled by it. It is distributed throughout its knowledge intangibles (aka intangible capital) including in the heads of its people (human capital), its systems and IP (structural capital) and its networks (relationship capital).
This distribution of knowledge has turned the strategy process on its head. One of the chapters in our book on Intangible Capital, is entitled Innovation is the New Strategy. Where traditional strategy was mostly top down, innovation is mostly bottom up. To win at the innovation game, you need to have knowledge flowing from the bottom up and the outside in. You need the knowledge of your employees and external partners to continue to evolve and improve–in a word, to innovate.
So let’s not turn our backs on the important conversation about knowledge intangibles. Let’s incorporate it into the conversation about innovation. They are two sides to the same coin and we need to promote understanding of both perspectives.
I am sorry to say that I agree totally with Marys comments (sorry – ´cause disagreements often give better discussions). That is why Innovation Management and Knowledge Management both have to be taken into considerations when working with either of them.
But this is not always realized, wherefore I have had to form two consultancies; one focusing on Innovation; the other on Intangibles (Intellectual Mapital Management); but in my perspective, and the tools I use, they companies do the same. It is perhaps due to my lack of communication, but the clients, however, find it easier to understand when split in this way.
Thank you for sharing this Thomas. I absolutely understand the market reasons for keeping them separate. But I hope we all can continue to search for ways to integrate the IC and innovation conversations. One way is in the new community at the IC Knowledge Center in which I know you participate. Let’s keep talking!
Actually; You are both quite correct. The information economy, the knowledge economy and the innovation economy are profoundly related as a differential equation. The higher order economy is derived (a mathematical derivative) from the lower order economy by integrating (a mathematical Integral) the tools developed during the lower order economy.
So, they are separate in a static sense but in a dynamic sense they act as a system. If you lose one component, you lose the other two. The reason for keeping them separate is indeed a marketing issue, unfortunately.