Managing Intellectual Capital
(Leif Edvinsson)

Executive Summary

• Intellectual capital is already gaining significantly in recognition and acceptance, as a means of valuing and developing the key intangible assets of a business.

• Surveys indicate that two thirds of all U.S. companies have started to look proactively for new ways to collect and report non-financial data, including intellectual capital.

• At least a third of the current investment decisions by U.S. companies are considered partly on the basis of intangibles. Statistics suggest that greater reliance on nonfinancial measures results in more accurate earnings forecasts.

Introduction

Intellectual capital (IC) is an offspring of the knowledge era. It is still in its formative phase, having first been formally recognized in 1991 when the large Swedish corporation Skandia started implementing a comprehensive set of innovative knowledge practices to account for its intangible assets. The pioneering initiative, championed by Jan Carendi and Bjorn Wolrath, resulted in Leif Edvinsson being appointed as the world’s first Director of Intellectual Capital (IC). How will business assets be evaluated over the next decade—will they take account of those assets that are frequently and simultaneously both the most important and the most intangible? It is worth considering:

• why just a handful of the millions of companies started since 1900 achieved solid growth for two decades, and why most of them failed within less than five years

• why managers try to achieve results by imposing financial goals and controls, while knowing next to nothing about their company’s products, technologies, and customers

• how managers succeed without having any idea of the return on investments in network relationships, the costs of seeking information, or the state of their IC-index