Intellectual Capital: What is it, Types, Characteristics, Examples and MORE

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In today’s business environment, the Intellectual capital It is one of the most critical factors that generate development and competitiveness in organizations. This asset tends to be intangible in nature and is often questioned when it comes to determining its value.

However, one of the ways used to define and describe intellectual assets is determined in terms of value creation and competitive improvement. Intellectual assets help create wealth and produce other high-value assets. Stay with us to learn more about this topic.

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What is Intellectual Capital?

ANDl Intellectual capital is the valor from the knowledge, skills, business training, or any proprietary information of a company’s employees that can provide the company with a competitive advantage.

Intellectual capital is considered an asset and, in general terms, it can be defined as the collection of all the information resources that a company has at its disposal and that can be used to generate profits, obtain new customers, create new products or improve. the business. It is the sum of the experience of the employees, the organizational processes and other intangibles that contribute to the final result of a company.

Some of the subsets of intellectual capital include human capital, information capital, brand awareness, and instructional capital.

Types

There are several types of Intellectual capital, which can be considered derivations of three basic types, namely:

  • Human capital. Understood as the knowledge, know-how, skills and creativity that the employees of an organization have. At present it has changed the name to “Human Talent” motivated by the criticism of calling people capital.
  • Structural capital. They are the tangible elements of the organizational culture, business processes and innovation capacity that an organization has. This includes documents, process surveys, applications, databases, trade secrets, patents, etc.
  • Relational capital. It is the relationship of the company with the outside world. That is, the formal and informal relationships that the organization has with clients, suppliers, investors, employees, partners, communities, among others.

Characteristics of Intellectual Capital

Today few doubt that the Intellectual capital it is an important resource and a key factor in the success of a company. In fact, it is considered an intangible value factor within organizations that generates future benefits. Especially in today’s markets, where competition is high and buyers are more informed.

The survival of many companies depends on their willingness and ability to adapt to change. This type of capital allows not only that organizations can adapt quickly but also that they do so through high-value innovations. In this sense, companies with high intellectual capital present the following characteristics:

Promotes innovation and stimulates productivity

The Intellectual capital contributes to the innovation process in organizations, because it promotes ideas that generate new products and improve existing ones. This is because each component of intellectual capital contributes to the innovation process.

For instance, human capital contributes to professional competence and motivation because it encourages employees to turn their ideas into products. That is why, the better the human capital, the greater the capacity to innovate and produce within an organization.

Increase in competitive advantage

In today’s business environment, this body of knowledge offers a competitive advantage to organizations. Through this type of capital it is possible for companies to have successful strategies that cannot be easily copied.

For example, companies can register trademarks, patents, and even copyrights, preventing competitors from imitating the products. In this sense, employees can add value to the organization through unique skills they acquire through experience.

The management of an organization must strive to recruit and prepare the best team in an organization to gain a competitive advantage. What’s more, it is important to ensure that knowledge is properly stored through intellectual assets that can improve the competitive position of an organization.

Facilitates research and development

Intellectual property facilitates research and development through human capital. Which takes advantage of the investment in research and development made by the organization, which helps to improve current products and develop new products.

Research and development also helps improve processes within an organization. The greater the ability to invest in research and development, the greater the potential for an organization to add value to its growth.

Without intellectual capital, such as the skills and experience of employees, it is difficult to participate in research and development, and investments of effort in this area cannot be fruitful. Both human capital and structural capital contribute positively to research and development, adding value to the organization.

Increase business performance

Intellectual property generates better business performance both in qualitative and quantitative terms. In quantitative terms, it contributes to higher profitability, return on assets and investments.

Quantitative aspects include customer satisfaction and loyalty and employee satisfaction. Which increases business profit due to customer retention rate and market share.

Organizations that are able to manage their intellectual capital well can perform better than others. In the past, organizational performance depended more on financial and expense items. However, this approach is no longer valid.

Power the creation of value

The value created by Intellectual capital it is much greater than that created by tangible assets. The services sector, for example, has been able to grow significantly and even outperform other sectors thanks to investments in this type of capital.

By properly utilizing intellectual assets, an organization can grow to become an industry leader. Managers who are able to effectively manage these assets can devise better business management strategies, processes, and even methods to improve performance..

Examples of Intellectual Capital

To mention some examples of Intellectual capital, it is better to do it considering each type. That is, from the point of view of human capital, relational capital and structural capital. In this way, we can associate the examples with the different elements that make it up.

From human capital, leadership skills, management skills, specific knowledge and professional competencies of employees are some of the examples. This is because this type of asset is related to employees, their knowledge, experience and relationship with the organization.

From relational capital, customer satisfaction, relationship with stakeholders and reputation in the community are some of the examples. This is because this type of asset focuses on the internal and external relationships of the organization.

From the structural capital, vision, mission, organizational goals, work culture and approach to training are some of the examples. This is because this type of asset focuses on the processes of the organization, databases, policies, culture, vision, mission and statement of values.

Keys to Maintaining the Intellectual capital

The current problem in many organizations is the attrition of employees through layoffs, resignations, retirements and other forms of employee separation.. The human resource has extensive knowledge about their work, processes and data that support their jobs, including how to make things happen.

Unfortunately, in most cases today, your knowledge has not been captured, transferred or made available to others.. This is concerning when the trend is that the best performing employees may be recruited by other organizations.

It is very likely that many employees at this very moment are quietly investigating other places to work. If you don’t want this to happen in your organization, here are some keys to maintaining not only human capital, but also the other two types of intangible assets:

  • Evaluate and catalog the different types and sources of knowledge within the organization.
  • You analyze that knowledge to determine how it could be updated, shared within the organization, and used to maximize its usefulness.
  • Protects intellectual property through the registration of trademarks and copyrights. As well as through practices and procedures to keep other confidential and proprietary information confidential.
  • Optimize human capital with strategies and processes related to the acquisition, management and retention of quality employees.
  • Develops company policies to create and maintain good communication and relationships with customers, suppliers, regulators, and investors.

Intellectual Capital Measurement

The fact that the Intellectual capital have value is obvious. However, unlike a warehouse or machinery, intellectual capital is intangible, making it difficult to assign a monetary value to it.

If the value of an organization exceeds the value of its physical assets, the excess is considered the value of intangible assets.. However, dividing it into several components would be very unreliable.

Companies sometimes create an intellectual capital report, which describes the various aspects of that asset, but without any attached monetary value.. Such a report can only be used in planning or it can be shared with shareholders, investors or others in conjunction with the company’s financial reports.

Thanks for reading!

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