On Intellectual Capital

ON INTELLECTUAL CAPITAL Introduction 1. Intellectual Capital (IC) may be defined as the summation of intangible resources that are important elements underpinning the development of a business’s knowledge-based activities. IC creates or adds value through its contribution to the business’s outcomes. It needs to be managed effectively in order to maximise the effectiveness of the resource. To do so, the IC management processes need to be visible and understood by all the business’s people. IC Framework and Repositories 2. Understanding the business’s IC framework and where it ‘resides’ provides business with significant competitive advantages. One example of such a framework is shown in figure 1. An important component of IC is Intellectual Property (IP). Proper management and control of IP is a business essential. IC Management Objectives 3.

Normally, IC management objectives are to: a.

Enhance existing capabilities, including developing a ‘smarter’ work force, by improving people’s competencies, including their underpinning knowledge, skills, and attitudes.

b.

Generate efficiencies by retaining access to ‘corporate knowledge and memory’, to avoid ‘re-inventing the wheel’, and to thereby enable the more effective allocation of resources to directed tasks or to business initiatives.

c.

Achieve precise and continuously improved business practises and task execution.

d.

Create a business culture that is safety cognisant, outcome focussed using documented and authorised procedures and processes, and governance aware.

Responsibilities 4. Business’s are responsible for the management of their IC. Responsibilities normally include the: a.

management of IC under the custody or control of the business;

b.

efficient and responsible allocation of IC resources; and

c.

management and minimisation of exposure to IC risks.

5. Business’s should consider appointing a responsible manager to ensure that all foreground IP generated by the business, and any background IP provided to the business, is clearly identified and recorded. Initially, the focus of recording is to define those internal IC

2 resources that create or add value to the business’s desired / planned outcomes. Subsequently, management processes should detail the understanding and consequences of employing these IC elements. 6.

Business Employees. Business’s should ensure that their staff: a. disclose IP which they have generated or helped to generate; b. keep IP ‘confidential’ when required by the business or under a contract with another party; c. obtain appropriate approval for use of the business IP or facilities for external or private purposes; d. disclose any apparent or perceived conflict of interest; and e. understand provisions.

and

acknowledge

the

business

Ownership

Ownership 7. IP generated by business employees in the course of their employment is the property of the business, and is not generally available to subsequent employers in the event that the employee leaves the organisation. A business may also be entitled to claim at least part ownership of IP developed, acquired or contributed to by employees, (even outside the course of employment) if this has involved significant use of the business’s resources or facilities. Employee contracts / work place agreements should clearly outline IC ownership requirements and responsibilities. 8. Normally, business should require unfettered access to IP in which it has an interest. Accordingly, arrangements entered into with other parties should provide for business ownership of the IP that it pays to have developed (the foreground IP) and a royalty free, irrevocable licence to use, or have used, for the business’s purposes, any necessary background IP brought into the arrangement by other parties. Any variation from this position would require strong evidence of it being in the best interests of the business to adopt an alternative proposal. Security 9. Access. Only authorised employees should have access to a business’s IP repositories. All IP held within these repositories should have appropriate caveats for release clearly identified. Awareness 10. Employees should understand that IP is created in all processes during their day-to-day work activities. Businesses inherently produce foreground IP. Employees should be made aware of the value and importance of the creation of this IP. They should be encouraged to develop IP that they have created to its full potential, and be recognised and acknowledged for their efforts. Before commencing any new task, to generate efficiencies, employees should review existing IP held in the business’s data repositories for application or adaptation to this new task.

3

Figure 1 Human Elements are the ‘thinking’ components. Competence includes underpinning knowledge and practical skills. Attitude includes the willingness of the employee to use their skills and abilities to benefit the business’s outcomes, and may be influenced by motivation, behaviour and conduct. Intellectual Agility refers to the ability of employees to use their knowledge and skills in different contexts, and to increase their knowledge and skills through learning. Structural Elements are the ‘non-thinking’ components. Relationships include relationships with customers, suppliers, alliance partners, and with stakeholders. Renewal and Development includes the intangible side of anything that can improve the business’s IC; all the ‘items’ that have been built or created and that will have an impact on the future value of the business’s IC, but are yet to manifest that impact. For example research and development that has not yet realised value.

4

5 Organisation, comprising: Infrastructure includes all the IP assets of the business such as data repositories, concepts, designs, procedure manuals, ‘lessons learnt’; Processes refer to any internal business activity that contributes to the achievement of the desired outcome; Culture refers to the ‘rites’, symbols, and norms that help define the business.