Managing Intellectual Capital in Practice

Citation

Gupta, O. (2007), "Managing Intellectual Capital in Practice", Measuring Business Excellence, Vol. 11 No. 2, pp. 83-84. https://doi.org/10.1108/13683040710752751

The basic objective of “Managing Intellectual Capital in Practice” is to further our understanding of improving business performance through the active management and measurement of an organization's intellectual capital. As a scholarly, research‐based work that simultaneously serves as a management guide, it succeeds admirably. Its lead author, Göran Roos, is visiting professor of intellectual capital at the Centre for Business Performance, Cranfield School of Management and visiting lecturing professor at Helsinki School of Economics and Melbourne Business School. In his latest book, he and his co‐authors share their expertise and experiences in managing, measuring and valuing intellectual capital (IC) – a term they define as all non‐monetary and non‐physical resources that are fully or partly controlled by an organization and contribute to the organization's value creation (p. 19) – to provide a holistic perspective on how to improve value creation in companies and organizations by leveraging their IC. The concepts, tools and techniques presented throughout this book have been researched and developed by the authors over a period of fifteen years, based on extensive theoretical work, consultation in organizations and best practice studies.

The book comprises six chapters providing valuable advice and guidelines on how to extract more value from intangibles. Each chapter is summarized with key points, heavily referenced and contains a number of illustrative case studies including three learning cases built on real but anonymous organizations. The first chapter in the book, which considers the context, presents a number of proofs that the economy of today to a great extent relies on intangible elements and primarily leverages intellectual capital resources for value creation relying on business logics that are different from the conventional value chain logic. The second and third chapters of the book cover central management questions about how to ensure the availability of suitable resources (the static components of IC) and how best to employ them in order to successfully execute the strategy of an organization. These chapters present some surprisingly straightforward yet effective tools to make the management of intangibles more actionable. For example, the navigator tool, whose implementation and analysis is explained in‐depth, is a very visual way to clearly demonstrate the contribution intangibles make to a firm's cash flow.

In the fourth chapter, the authors share their insights on the difficult tasks of safely measuring and valuing intellectual capital. According to the authors there is a clear process to follow in order to build a proper measurement system that follows the foundations of measurement theory and fulfils a set of requirements which they also explain. They provide a strong foundation for a theory‐compliant measurement system that can potentially measure what really matters. This is important background reading for anyone devising measurement systems that are to be of relevance. The authors then go on to present a relatively simple‐to‐implement Intellectual Capital Index system that tracks a set of indicators based on the performance of intangibles. There is less precision offered here but again it's a tool that can be of extreme usefulness to practitioners.

The fifth chapter goes on to consider the issues of disclosing non‐financial information and is described in the situation as the authors see at the time of writing. They recognize that the area is still very much in an immature phase and the outline of possible methods to use is not to be considered as comprehensive but as a sample of approaches developed that have had some impact on the area of disclosure of intangibles. The final chapter finishes with introductions on applications of IC management where the authors explain how to use intellectual capital thinking to maximize value creation in mergers and acquisitions, knowledge management and human resource management.

As a practitioner in the field, I read the book with fascination. It is impossible to do justice to all the material included in the space of a short book review except by saying that the topics are unique and handled in an interesting, thorough and lively way. This is an important book catching the trend of the times and it is hoped it will be followed by further research on the concepts and methodologies presented such that we may be better informed on measuring the contribution of intangibles toward business performance.