posted 29 Feb 2004 in Volume 7 Issue 6
Put it to the board: Leif Edvinsson
Does intelligence or ignorance dominate your work? Do you create value through tangible assets or intellectual capital (IC)? How do you nourish your capital in waiting?
The strategic wave of intellectual capital is growing stronger as it evolves within universities, accounting-standards groups, and political and business communities. In response, we need new intelligence to understand and follow the rise of knowledge economics. Not investing accordingly will erode our national welfare, and we risk perishing as we follow the downward curve of the industrial economics lifecycle. Leadership will eventually become its own liability if it does not address the potential of the organisation’s intellectual capital in waiting.
We need to improve our views of new and strategic knowledge navigation and adopt a perspective of corporate longitude. Furthermore, we must clarify accounting, reporting and mapping systems to open our minds to the best options. In other words, we need to measure the angle of longitude for knowledge if we are to succeed in the future.
The concept of IC is defined by the combination of human capital (HC) with strategic structural capital (SC), which offers a multiplier for our future earnings capabilities. It is necessary to adapt this multiplier effect for individuals as well as enterprises or regions. Such new combinations allow us to shape knowledge creation rather than repeat old best-practice approaches. My research on the IC multiplier finds that SC/HC>1. A good approximation for this is the value added per head within an organisation. It shows how effectively staff use the structural capital provided by the stakeholders and is an interesting indicator of leadership’s ability to release the potential brainpower of the clusters of people within and external to the firm. To achieve this we need new arenas to exercise the mind.
We must also examine what kind of strategic structural capital we need to leverage human capital for public-sector organisations, cities and regions. Indeed, this is of growing concern for governance and policy development in Europe today. For example, as Dr Ante Pulic said earlier this year, the GDP of Europe is growing faster than its IC efficiency level. We must address these increasing levels of knowledge inflation. Financial inflation is on the agenda of the Central Bank. On whose table is the question of IC efficiency and knowledge inflation?
Tackling these issues requires an intelligence map for the complex opportunity space of intangibles, as well as powerful, strategic innovation to leverage the knowledge base. A new kind of ‘society entrepreneurship’ could be the key to nourishing this longitude value. The questions to ask now are where and how do we develop the training camps for such styles of leadership?
For further reading visit www.corporatelongitude.com