Intellectual Capital

The competitive market and the rapid changes that occur almost dally require organization to stay abreast with learning and adaptation. The need to get the right personnel whether through recruiting or training is crucial in attaining the goals of an organization. The quest to assemble the necessary expertise needed in the various parts of the organization has become a daily strive for managers because of the demands of the consumer.According to Duncan (1 979), there are internal environmental components that need to be satisfied depending on a particular tutorial specification so as the output will conform to the necessary expectations. The composition of an organization remains critical to the realization of goals and achieving the expectations of stakeholders. In sustaining competitive advantage, the need to identify, enhance, and distribute the core competencies or the knowledge of an organization is critical (Passer & Rene, 2011).The knowledge or expertise needed to run an organ ization should be made available whether internally or by acquiring outside help. Internally, coaching, training and consistent supervision can transfer Information from one person to the next and that must be made as part of the business culture. The knowledge one attains through years of experience on the Job can be said to be invaluable, Xx (2013) shares that, human beings are endowed with different qualities and as such particular attention have to be paid to human resource especially in this knowledge-based economy.It is therefore imperative for organizations to develop mechanisms that will retain employees with knowledge that is Inherent. The knowledge and the skills of an individual or the collective brainpower f workers In an organization combined with the ability of the firm to create, collect, coordinate, retrieve, leverage, and collaborate forms the basis of Intellectual capital (Guppy & Sporadic, 2013). There can be diverse array of skills, expertise and knowledge across a given organization due to the differences in the type of work one is assigned to or the department an employee belongs.Employees have to meet set job requirements in order to be hired in the first place, however, the adjustments and adaptation of each person Is different and with time the level of knowledge fifers based on one's ablest. Definition of Intellectual Capital According to Stewart (1997), there are three forms of intellectual capital; the human capital comprises of skills, competencies, and abilities of individuals and groups.This type of capital relates directly with a person's knowledge or talent whether acquired on the Job or technical expertise from special training. The human capital therefore Is Inherent and organizations may not be able to claim ownership. An example of human capital is interpersonal skills, this may be listed as a core competence of a reticular position, but the degree of how each person exhibits may differ and as such there will be employees c onsidered as star performers when it comes to that.Transferring such capital is a task on its own sense it takes the consent as well as the ability to communicate effectively by the individual. Whereas human capital deals the company such as patents, copyrights, and trademarks, processes, methodologies, models, documents, computer networks and software (Steward, 1997). This can be said to be tangible knowledge and the organization can rely in the execution of their strategic plans. Customer capital deals with the value an organizations put on relationships with suppliers, allies, and customers (Steward, 1997).The image and reputation of organizations can be measured using relationships it has built over the years and the premium it places on customer service. Role In assessing intellectual capital, there is no one size fits all because organizations vary in their emphasis due to their past, the market, and their strategy to achieve their goals. The dynamics of the global economy wit h the rapid changes and advancement of technology makes intellectual capital an important factor for the success of an organization.Employing the different parts of an intellectual capital as a key system in an organization can function as the precursor to dealing with external changes that may impact the business. As stated above, the three parts of intellectual capital when managed can helped with issues from, employee training and that is utilizing the human component, building a strong culture through structural adherence and managing customer base and achieving the goals of the organization with the attendant profitability.Daisies (2013) in defining intellectual UAPITA stated that, organizations use the attributes of the intellectual capital as a resource to secure competitive advantage, and create Focusing on the intellectual capital of an organization can enhance the development of a competent workforce which has the capacity for action and creativity. So internally, this giv es the organization the area to invest more in terms of promotion or getting it to desired levels. Externally, the management of intellectual capital conforms to changes in market and the public perception of the image of organization (Daisies, 2013).There s therefore a significant value that can be assessed for an organization's intellectual capital which will correlate to the position and how investors make decision about the organization. The ability to have a quantitative value to intellectual capital as an asset drives the competitive advantage in the market place. Value Even though the term has been there for decades (since the sass's), the competitive global market brought about by the changes of the economic indicators from an agrarian to a knowledge or information based economy has made intellectual capital more relevant now than ever.According to Guppy and Sporadic (2013), the idea that the knowledge repository of an organization is the driving force behind its ability to survive, grow, and sustain its competitive advantage in the global marketplace has a long rich history. However, intellectual capital is now seen as key area where creativity, innovations are borne to sustain the competitiveness of the organization. Learning Organization The strategy of an organization to achieve its mission and goals depends on several factors.The direction of an organization to remain competitive given the market may all for an aspect of knowledge management that is intellectual capital. The use of intellectual implies the deployment of human resources, information technology, business strategy and employees participation in order to transfer the imperative experiences across the company (Be]inurn & larches, 2011). The onus is on recognize with distinct roles for such transfer to happen. The responsibility of facilitating this information sharing can be Herculean since it needs the buy in of the said individual and also the capability to teach others.Conclusion Th e dynamism of today's world such as high customer expectations, calls for organizations to stay abreast with changes in technology and evolution of new competitive ideas, with a workforce that has the skills and knowledge to adapt these changes. This concept of intellectual capital which promotes creativity and innovation is attractive to modern day organizations because of the value it brings in comparison to the competition. The saying that knowledge is power is indeed manifested with various mechanisms been put in place by organizations to enrich heir workforce to stay ahead of the game. Intellectual Capital The end of the 20th entry Is associated with the birth off new outlook on nature and science, that brings people a little closer to nature, a science that makes human intelligence and creatively an expression of a fundamental trend In the universe. Taking Into account this new perspective on the economy and on the society that Is based on knowledge, professor Quash from London School of Economics says that we live in a world that focuses on the economic value of intangible assets. This way, ideas worth billions, while the products still cost less.The society of the third millennium has employees who are valuable because of theirs knowledge. I n many of these companies, the value does not consist of tangible assets, but of the intangible ones. Intellectual capital is the combined intangible assets which enable the company to function effectively Judging from the information already provided, the essay focuses on the role of intellectual capital in the new economy. I chose this topic b ecause we are witnesses to the fact that the structure and dynamic processes of wealth generation are changing dramatically.In such an environment traditional methods are Inadequate, therefore I think that It Is Interesting but at the name time vital to find new methods. Not least what Is Important from my point of view is that people are regarded as the main resource in all sectors, which means 2. Definition of intellectual capital Since organizational knowledge is at the crux of sustainable competitive advantage, the burgeoning field of intellectual capital is an exciting area for both researchers and practitioners.Intellectual capital is conceptualized from numerous disciplines making the field a mosaic of perspectives. Accountants are interested in how to measure it on the balance sheet, information technologists want to codify it n systems, sociologists want to balance power with it, psychologists want to develop minds because of it, human resource managers want to calculate an ROI on it, and training and development officers want to make sure that they can build it .Intellectual capital is knowledge that can be exploited for some money-making or other useful purpose. The term combines the idea of the intellect or brain-power with the economic concept of capital, the saving of entitled benefits so that they can be invested in producing more goods and services.Intellectual capital can include he skills and knowledge that a company has developed about how to make its goods or services; individual employees or groups of employees whose knowledge is deemed critical to a company's continued success; and its aggregation of documents about processes, customers, research results, and other information that might have value for a competitor that is not common knowledge Some people mistake intellectual capital for nerds in a think-tank.Others confuse it with intellectual property (such as copyrights, patents and the like), which is actually merely a subset of intel lectual capital. To get a better sense of where the companies are heading to, we need to have a basic understanding of where they started and what forces are propelling change today. And then we need to keep our vision set on the path ahead. Although it has been around forever, intellectual capital was not identified as a key asset until a few years ago.In 1994, fortune carried several stories about intellectual capital (brainpower) based on pioneering efforts going on then in both the United States and Scandinavia. These articles helped generate awareness of intellectual capital in the mainstream of U. S. Business. Little by little several companies become interested on this topic and from all of them the representative is Canadians – the largest insurance company in Sweden – which, with the help of the first director of intellectual capital in the world, Life Dividends, developed a dynamic model and holistic reporting intellectual capital called Navigator.Under this model, intellectual capital was divided into human capital and structural capital as in the below diagram : The components of intellectual capital are defined as follows: ; Human Capital The stock of competences, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience . Many early economic theories refer to it simply as workforce, one of three factors of production, and consider it to be a fungible resource homogeneous and easily interchangeable.Other conceptions of labor dispense with these assumptions. ; Structural Capital: Knowledge means that remain in the organization when human capital is not taken into account. Is the knowledge that remains in the organization when people â€Å"go home†. The structural capital includes organizational capital and market capital. Unlike human capital, it may be subject to trade. ; Commercial Capital: It is the v alue resulting from the relations between the company and its customers. Organizational Capital: It includes the capacity of the organization under the form of hardware, software, databases, organizational structures, patents, trademarks and any other capacity of the organization that helps individuals sizing productivity by transmission and exchange of knowledge. ; Process Capital: It is represented by processes, activities and infrastructures used to create, exchange and transmission of knowledge that helps individuals sizing productivity of an organization. Innovative Capital This component of the intellectual capital reflects the ability of an organization and the current investments for business development: research and development, patents, trademarks. Between these components, the most important is represented by human capital. 4. Human Capital Basically, human capital is divided into educational capital (skills acquired by individuals in the training school, but outside it) and biological capital (physical abilities of individuals, summarized, usually by health condition).This type of capital caused difficulties because the experts did not know how to treat it: as an investment or cost. In general, it has been imposed the treatment of human capital as an investment because the abilities of human capital can be used practically any time, depending on the social and economic environment in which individuals can development (refresher courses or continuing education, for example) or maintain the capital stock (regular medical consultations, for example) . 5. Effects upon economyIn order to understand the effect the intellectual capital has upon economy let's take the example of an English relatively large company which was expected to raise some 2. Ban [pound sterling]. Although valued about six-times larger than Body Shop and significantly bigger than Dioxins (a British electrical retail giant), the company had no retail outlets, no factories, no physic al products and few staff. The business was altogether weightless. Its products could be reduced to a number of computer signals which could be flashed around the world for hundreds of millions of people to buy.It was a classic example of intellectual capital, an idea. Called Formula One, it was owned by Bernie Collections. The reason the idea was so valuable was that it regularly attracted about mm ABACI viewers worldwide. But intellectual capital is not only big ideas like Formula One. It is also millions of relatively small innovations which contribute to wealth and economic growth. Such capital will provide the future wealth of nations because international trade will increasingly be in intellectual capital.Alan Greenshank, chairman of the US Federal Reserve Board, recently pointed out that the weight of US output is now only little higher than it was a century ago but its value in real terms is 20 times higher. Although increased skills and a shift to service industries are par t of the story, much of the weightless portion of this trade can be defined as intellectual capital. Specialists sustain that future wealth creation and economic growth predominantly will depend on intellectual capital the generation of ideas which can be transformed into revenues..The element discussed is implicated in recent economic, managerial, technological, and sociological developments in a manner previously unknown and largely unforeseen. Whether these developments are viewed through the filter of the information society, the knowledge-based economy, the network society, or innovation, there is much to support the assertion that ICC is instrumental in the determination of enterprise value and national economic performance To suggest that prosperity no longer depends on building physical capital is not new.Indeed, much of the value of large knowledge-intensive corporations already stems from their patents – which are potential intellectual capital viewed as economic go ods. The importance of intellectual capital has been ender-emphasizes in business education. Once the necessary clarifications on the notion of intellectual capital have been made , it is necessary to emphasize the connection between it and the strategy of the organization. An important note is that the availability of some resources is vital to achieving the strategic goals of the organization.Briefly economists sustain that the strategy defines what kind of intellectual capital is required and the nature of intellectual capital defines successful directions of the strategy that the organization should take. Moreover it has to be mentioned that the advantage. This is why when it is released a strategy, it is important to know what valuable resources of intellectual capital are available, which are currently used, which are potential uses . 6.Uses of intellectual capital Intellectual capital is used: -to facilitate the formulation of strategy; -to assess strategy execution; -to assi st in formulating decisions for diversification or expansion of the company; -to be used as the basis for compensation; -to be communicated to external shareholders In conclusion properly managed, intellectual assets can reduce costs, place inventories with information, eliminate the need for expensive physical plant and improve corporate agility.