Intellectual Capital

One of the greatest challenges facing any business today is the gap between its balance sheet and its market valuation. This gap, representing the bulk of a company's true value, consists of indirect assets — organizational knowledge, customer satisfaction, product innovation, employee morale, patents, and trademarks — that never appear in its financial reports.

Only in the last few years have companies and academics around the world tackled the challenge of measuring this "Intellectual Capital." And no company has taken IC measurement as far as the Swedish financial services company Skandia, which in 1995 published the world's first IC annual report. The executive who led the team, the first-ever director of Intellectual Capital, was Leif Edvinsson.

Now Edvinsson has teamed up with noted business author Michael S. Malone to write the first book that explains the workings of IC measurement and its usefulness to the modern corporation. Intellectual Capital is also the first book ever to present a universal IC measurement and reporting system.

And that's only the beginning. The authors also show how IC measurement can be used in any organization, including government agencies and non-profit institutions; they present a simple new measure as a yardstick to compare the IC value and efficiency of different organizations; and finally, they propose a new kind of IC "stock market" exchange.

Intellectual Capital will transform the nature of doing business by establishing the real value of enterprises for those who manage them, work in them, and invest in them. The result will be a revolutionary transformation of the modern economy.

Highly readable and engaging, Intellectual Capital will prove to be one of the landmark business books of this decade.

1. The Hidden Roots of Value
• Toward a Definition
• Playing the Middle
• The Roots of Value
• Finding the New Balance
• Pioneering Efforts
• Implementing the Theories
  
2. The Hidden Capabilities of a Corporation
• The FASB Fiasco
• Naringsliv
• Capital Forms
  
3. Finding Its Way
• First Message from the Front
• Building an IC Report
• Marking the Trail
• Navigating New Waters
• IC Management
• Staking Out the Future
• The Future of the Future
  
4. Navigating Through a New World
• The Skandia IC Navigator
• Navigational Tasks
• A New Value Dimension
  
5. Real Value: The Financial Focus
• Raw Financial Data
• Financial Capitalization
• Financial Documentation
  
6. Real Worth: The Customer Focus
• The New Customer Metrics
• The Skandia Customer Focus Metrics
• A Universal IC Metric
  
7. Real Work: The Process Focus
• Weeds in Eden
• Rethinking Infrastructure
  
8. Real Future: The Renewal and Development Focus
• Where the Future Lives
• The Skandia Report
• Measuring Readiness
  
9. Real Life: The Human Focus
• Capturing Humanity
• The New Worker
• Measuring People Near and Far
  
10. All Together Now
• The Skandia Precedent
• Together for the First Time
• Reporting in Human Scale
• Common Viewpoints
• An Impetus to Adoption
• Agreeing on Standards
• Revitalizing the Audit
  
11. A Common Value
• Determining the IC Equation
• Measuring the IC Equation
• Measuring IC Value
• A Coefficient of Efficiency
• IC and M&A
• The Intellectual Capital of Municipalities
• A History Lesson
  
12. A Future Market
• The Bradley-Albert Model
• A True IC Exchange
• Preparing the Future
  

This is the seminal work on the IC Navigator.

Pretty good as a book, but the authors, as usual, seems to regard all staff functions as costs without value. As this is obviously not true, I tend to think this book is over-rated.