Articles and Presentations

Inbound Logistics - February 2002

Intellectual Capital: The Tangible Corporate Asset
By Donald Jacobson

Your CFO sees this most important asset on the liability side of the financial statement. The budget shows it as an expense. When revenues fall and stock prices plummet, we look to reduce this overhead. Unfortunately, too many executives and managers have failed to recognize the value of intellectual capital, and have forgotten where their companies would be without it.

Intellectual property is an element of business guided by rules, regulations, and laws. In most states, the justice system has defined it, and its ownership, rather clearly. However, often companies are focused on the nuts and bolts of doing business: strategic planning; research and development; sales; production; distribution; with that focus clearly identifying the properties of manpower (meant in its most non-gender specific manner). Top management needs to understand the imperative bottom-line value of brainpower - intellectual capital.

How Does Your Company Grow?

In these difficult economic times, when a reduction of workforce appears to be a major factor toward keeping the company solvent, there must be an accurate assessment of the impending loss of intellectual capital. The origination of ideas and concepts is not an exclusive function of upper management. So often, it is a situation on the front lines of the business that inspires the innovative thinking that leads to doing it a more efficient and effective way. An astute CEO knows that companies are not just built from the ground up...they are grown from the ground up. The misconception that the little people are all ignorant drones that live to blindly follow management's command is not only 19th century thinking, but is limiting and unproductive to the company's bottom line. Position is not an accurate measurement of intelligence, as we all know. Neither is IQ. The insight of innovation - the ability to see things not as they are, or as they have always been, but as they can be - can provide your company with the impetus it needs to function more profitably. Are you certain you want to throw this employee's mind out with his/her salary?

Human Intellect vs. Artificial Intelligence

Can you replace human intellect with artificial intelligence at a higher ROI? In the early days of computer technology, when robotics was in its infancy, there were concerns that this might be true someday. 'Robots don't call in sick and don't take coffee breaks.' Yet, as our technological advancements progress, and computers get smarter and smaller every day, we have all experienced the fallacy of that statement. Anyone with a personal computer has experienced the instantaneous freeze and/or crash of a computer which then refuses to function (time for the computer to take a coffee break, or did it just go home early?). One overzealous electrical surge and your computer just quits (without giving two weeks' notice!). Nothing is perfect. Probably the saddest fact in the high expectations of artificial intelligence is that as capable and intelligent as it may be...it still needs humans to function. Therefore, when you analyze whether or not the return on the investment in technology is automatically higher than your investment in humans remember to factor in all of the issues.

The adage is true - Knowledge Is Power. However, a strong, progressive company has the collective power of the knowledge held by its senior management, its middle management, and even, its front line personnel. Evaluate the tangible and intangible aspects of the most powerful part of your financial statement, the unseen asset of intellectual capital.

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