What is Intangible Capital?
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Transcript of What is Intangible Capital?
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That was then
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This is now
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It’s a seismic shift
Agricultural Era Industrial Era Knowledge Era
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Understanding the shift
Industrial Knowledge Era
Tangible Intangible Assets
Factory Knowledge Factory
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It’s been fueled by investment
http://www.conference-board.org/data/intangibles/
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Where has the money gone?
…to build knowledge assets:
• In computers
• In workforces
• In processes
• In designs, products
• In networks
• In brands
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Investment created new value
Source: Ocean Tomo
“Intangible,” off-balance
sheet portion of corporate value
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Shift happened economy-wide
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Energy
Materials
Industrials
Consumer Discretionary
Consumer Staples
Health Care
Financials
Telecommunications Services
Information Technology
Utilities
Intangible Value as a % of Total Market Capitalization by Sector
1975
2005
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For now, holding at +/- 80%
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This is about the rise of a new kind of economic asset
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What is IC?
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Human Capital
• Employees:– Competencies– Experience– Loyalty
• Management– Industry experience– Managerial expertise
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Structural Capital
• Processes/IT (the heart of modern business)
• Technology/IP– Data, stored information and knowledge– Own product/service designs and knowledge– Intellectual property (patents, trademarks,
copyrights, trade secrets)
• Sales and marketing processes
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Relationship Capital
• Customers
• External partners (suppliers, outsourcing partners, regulators, communities, press)
• Brand and Reputation (the new bottom line)
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Strategic Capital
• Business model– How the knowledge factory fits together
• Culture• External factors:
– Industry– Economy– Competition– Globalization– Regulation
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-Measure-Manage-Monetize
IC Management
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Benefits of IC Management
• Optimized performanceHealthcare co grew revenues with lower headcount
• Increased innovationHigh-end consulting firm doubled in size
• Higher valuationTech firm sold at premium to the market
• Great reputationEngineering firm doubled key hourly rates
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