This work offers a summary of the book “INTELLECTUAL CAPITAL: Realizing Your Company’s True Value by Finding Its Hidden Brainpower” by Leif Edvinsson and Michael S. Malone.
Intellectual capital represents the difference between a company’s balance sheet and its market value. It is frequently referred to as indirect assets, intangibles or goodwill, and consists of organizational knowledge, customer loyalty and satisfaction, a company’s ability to innovate and bring new products to market, employee morale and skills, patents, trademarks and a number of other factors.
The fact that traditional accounting methods fail to accurately capture intellectual property assets results in a significant management question: “How can management decisions be consistently made which will enhance the company’s intellectual capital base rather than detract from it?” Businesses need to develop a framework to measure intellectual capital, to track and improve it.
Edvinsson and Malone suggest a blueprint for this framework, by dividing intellectual capital into segments and explaining how best to assess them.
In short, Intellectual Capital demonstrates that small details that are often forgotten can be measured and built up into a business picture that’s vital knowledge for future business decisions.