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Features

Published March 2008

Leveraging Intellectual Capital for Organizational Gain

  

  Mike Prokopeak

As an increasing number of organizations strive to leverage their intellectual capital to drive innovation and adapt to rapid change, CLOs have the opportunity to be the fulcrum that pivots the knowledge of the workforce for organizational profit.

Knowledge is power. So said English philosopher Sir Francis Bacon in 1597.

The scientific method Bacon developed to collect knowledge through observation led, in part, to quantum leaps in our understanding of the world. As knowledge is collected and shared, it grows exponentially, setting off a chain reaction of new insights and innovations.

“The cumulative codified information base of the world is, within the next three years, scheduled to double every 11 hours,” said Nick Bontis, associate professor at the DeGroote School of Business at McMaster University in Canada, and associate editor of the Journal of Intellectual Capital. “That’s a fantastic statistic.”

Given that exponential growth in information, Bacon’s idea that knowledge is power has taken on a new dynamic in the 21st-century economy. More and more, businesses are realizing the role that the knowledge residing in their intellectual capital plays in creating economic power and value.

Learning executives, because they sit at the intersection between the organization’s strategic goals and the capabilities of its workforce, find themselves as the fulcrum that can leverage intellectual capital to drive growth, spur innovation and ultimately create value. But that role requires an expanded perspective on learning and a robust set of technical and social skills.

Turning Intangibles Into Tangible Results
From an economic perspective, value traditionally resides in the tangible assets — such as financial capital and real estate — that show up on a standard corporate balance sheet. But in a business environment driven by innovation, economists are focusing increasingly on intangibles, such as knowledge and relationships, as key creators of value.

“Ideas have always and everywhere been more valuable than the physical act of carrying them out,” said Ron Baker, founder of VeraSage Institute and author of Mind Over Matter: Why Intellectual Capital Is the Chief Source of Wealth. “Economies that create more ideas and test more ideas and turn those ideas into knowledge create a higher standard of living.

“It’s why architects make more than steel workers. And yet a lot of people confuse the physical act of carrying something out as being more important than generating the idea. And that’s simply not true if you study the economics of it.”

The U.S. Department of Commerce released a new report in January 2008 recognizing the increasing role that intangible assets play in driving growth. “Innovation Measurement: Tracking the State of Innovation in the American Economy” proposes that economists use a new set of measures aimed at balancing the traditional manufacturing measures of input and output with intangibles, such as intellectual capital and “innovation inputs.”

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