Intellectual Capital Organization Tehran University Intellectual Capital Organization Akbar Roshanzamir Master student of HR in Management Faculty

“Intellectual capital is like a newly discovered, still uncharted ocean, and few executives understand its dimensions or how to navigate it.” - Thomas Stewart

What is Intellectual Capital? “Intellectual material - knowledge, information, intellectual property and experience - that can be put to use to create wealth” – Thomas Stewart “Representation of the financial value that human innovations, inventions, and intelligence bring to a business enterprise.” Source: H.P. Agency

Intellectual Capital Knowledge with potential for value Example: Ideas in people, processes and customers Intellectual Assets Knowledge providing value Example: Implemented know-how Intellectual Property Knowledge articulated with legal ownership Examples: Patents, trademarks, trade secrets and copyright

“In many cases, knowledge firms such as Microsoft, Xerox, Dow Chemical, Hewlett-Packard, Eastman Chemical and others have their marketplace value at a price far higher than their balance sheets warrant” - Sullivan

“A company’s value is more than the tangible assets, the source of its value and wealth is no longer the production of material goods but the creation and manipulation of its intangible assets” - Goldfinger

Skandia Concept of Intellectual Capital Market Value Financial Capital value of all physical and monetary assets Intellectual Capital Human Capital ‘thinking’ competence (knowledge and skills) attitude (motivation, behaviour, conduct) intellectual agility (innovation, imitation, adaptation) Structural Capital ‘non-thinking’ Customer (Relationship) Capital customers, suppliers, shareholders, alliance partners, other stakeholders Organisational Capital infrastructure processes culture Innovation Capital renewal and development value Process Capital Intellectual Property Intangible Assets Developed by Leif Edvinsson

Adam and Oleksak Concept of Intellectual Capital Market Value Financial Capital Intellectual Capital Human Capital Structural Capital Relationship Capital Business Model Management Intellectual Property Network Employees Processes Brand Customers

Current Concept of Intellectual Capital Market Value Financial Capital Intellectual Capital Human Capital Structural Capital Relationship Capital Spiritual Capital Business Model Management Intellectual Property Network Employees Processes Brand Customers

Human Capital This indicates tacit knowledge, skills, abilities and experience embedded in individuals within an organization. It stands out as collection of competencies based on skills, knowledge, abilities including leadership qualities of management and general attitudes characterized by motivation in the firm as well as intellectual agility for adaptation, innovation and cross-fertilization.

Structural Capital It represents knowledge and rules embedded within organizational routines, including mechanisms and structures of the organization, assets linked to methodologies, technologies and processes, licenses, patents, trademarks, research and development strength, in addition to architectural competencies which enable a firm to integrate component competencies in new and flexible ways and build new competencies in accordance with recommendation or requirements.

Relational Capital This involves every existing business network linking an organization to partners (distributors, suppliers and alliance associates) at higher and lower regions of its value stream; the scope of organizational and product brand, corporate image and perceptible reputation; in addition to building blocks of customer base, customer loyalty, customer-centricity quotient and market connectivity.

Spiritual Capital This stands for virtues, divine principles, extraterrestrial guidance and faith which operate within an organization.

Business Model This is a scheme showing how a firm intends to provide offerings and obtain revenue in return. It’s characterized by competitive ability, market control and business development strength.

“There is no other kind of capital that really works without an underlying base of spiritual capital.” - Zohar D. and Marshall I.

Intellectual Capital Management Evaluation Guide Intellectual Property Management IC Value Creation Intellectual Assets/ Knowledge Management Strategic IC Management IC Value Management Managing IC Creation IC Value Extraction Source: Canadian Institute of Chartered Accountants

Determinants of Value Creation Capacity Value Creation Formula Value Creation for Key Stakeholders Value Creation Reality Value Realization Formula Value Creation Analysis Value Stream Modeling

Mining Intellectual Capital Value Creation Value Extraction Human Capital Intellectual Assets Intellectual Property

Why should a firm establish Intellectual Asset Strategy? It drives management activity It facilitates value extraction process It enhances profitability It boosts research and development

“Approximately 70% of the asset value of firms on the NYSE is derived from their intellectual capital. In this information age, as business value continues to accrue to “soft” assets such as business processes, trade secrets, and know-how and away from physical forms such as property and equipment, companies are increasingly aware of the need for intellectual asset protection.” - Ian Reid

The Focus of Intellectual Asset Strategy Positioning as framework to ensure IP activities of a firm is consistent with corporate strategy, business strategy in addition to research and development strategy. Creating Competitive Advantage: Early recognition Market penetration Market control Pricing premium

Types of Intellectual Asset Strategies Defensive and Offensive Strategies for attaining the following: Design Freedom Market Freedom

Value Extraction Strategies Licensing Franchising Combination of Strategic Alliances Divestment and Spin-Off Financing Options Merger and Acquisition

The Value of IP to a firm Create Competitive Advantage: Block competitors, exploit new market opportunities, reduce risks and build loyalty. Establish Proprietary Knowledge: Protect technologies and business techniques, enhance research and development, improve effectiveness of branding, anticipate shifts in technology and market. Boosts Financial Performance: Obtain new revenues from IP, attract additional capital and reduce cost.

A Generic IP Management System, Functions and Decision Processes Patent portfolio database Budget & patenting fee decision Oversight of innovation process Generating new patents Patenting decision Portfolio maintenance Valuation Enforcement decision Initial valuation decision Competitive assessment Business and Market Strategy Review and Analysis internal source external source Competitive assessment database Source of new innovation decision Commercialisation decision Conversion mechanism decision

Steps for Managing Intellectual Asset Portfolio Identification Analysis and Measurement Crafting Strategy Implementation of Strategy Managing Communication IAM Tactics link IAM process to Value Extraction IAM Value Drivers Improved Management Decisions Effective R&D Lower cost Increased Revenue Competitive advantage

A veritable patent strategy positions a firm for proper patent portfolio management and unlocks great fortune.

Thank You AKBAR.ROSHANZAMIR@UT.AC.IR