Thesis Abstract and Dissertation Abstracts

Introduction :

In the millennium less people will do physical work and more people will do brain work. This is intellectual capital. It doesn’t appear on the company balance sheet but it has more value for organisations than physical assets. Economic wealth is driven more by knowledge and information than the production process. While past economies depended on use of land, natural resources, equipment and capital for the creation of value, our information economy will depend on application of knowledge. Intellectual capital has also been defined as the difference between a firm’s market value and the cost of replacing its assets. Components of intellectual capital consist of human capital, structural capital and external (customer) capital. If managers manage knowledge effectively, their organization will enhance their intellectual capital.

Definition :

The most widely used definition of intellectual capital is “knowledge that is of value to an organization.” Its main elements are human capital, structural capital, and customer capital. That definition suggests that the management of knowledge (the sum of what is known) creates intellectual capital

Components of intellectual capital :

Components of intellectual capital consist of human capital, structural capital and external (customer) capital.

Human Capital

Human capital is defined as the knowledge, skills, experience, intuition and attitudes of the workforce. Intellectual capital can be increased by increasing the capacity of each worker. Human capital is the knowledge, skill and capability of individual employees providing solutions to customers. Human capital is the firm’s collective capability to extract the best solutions from the knowledge of its people.

Structural Capital :

This consists of a wide range of patents, concepts, models, and computer and administrative systems. These are created by the employees and are thus generally ‘owned’ by the organisation, and adhere to it. Sometimes they can be acquired from elsewhere. Decisions to develop or invest in such assets can be made with some degree of confidence, because the work is done in-house, or bought from outside. Also, the informal organisation, the internal networks, the ‘culture’ or the ‘spirit’, belongs to the internal structure.

1 Systems - the way in which an organization’s processes (information,

communication, decision-making) and outputs (products/services and capital)

proceed.

2 Structure - the arrangement of responsibilities and accountabilities that defines the

position of and relationship between members of an organization.

3 Strategy - the goals of the organization and the ways it seeks to achieve them.

4 Culture - the sum of individual opinions, shared mindsets, values, and norms within

The organization. There is a stronger linkage between strategy and culture than is generally assumed. In the beginning, an organization’s culture acts as a powerful filter on its perceptions of the business environment and, thus, contributes to the shape of the business strategies that are adopted. Later, when specific strategies are in place, they cannot be successfully implemented if the culture does not shape the organization’s behavior in ways that are congruent with these strategies. The largest barrier to success in implementing change is the lack of fit between strategies and the organization’s structures and culture.

External Capital

External capital is also named relational capital and customer capital. External - relational capital refers to the organization’s relationships or network of associates and their satisfaction with and loyalty to the company. It includes knowledge of market channels, customer and supplier relationships, industry associations and a sound understanding of the impacts of government public policy. Frustrated managers often do not recognize that they can tap into a wealth of knowledge from their own clients and suppliers. Understanding better than anyone else what customers want in a product or a service, is what makes someone a business leader as opposed to a follower. Customer and supplier loyalty, target marketing, longevity of relationships and satisfaction are all measurable elements of this form of intellectual capital.

External structure consists of relationships with customers and suppliers, brand names,

Trade marks and reputation. Some of these can be considered legal property. Coca-Cola, for instance, is the world’s most valuable brand name, worth about US$39 billion. But customer capital will show up in complaint letters, renewal rates, cross selling, referrals and the speed with which phone calls are returned. External capital, defines an organization’s vital, external relationships. The components of external capital include: Customer capital-the loyalty of valuable customers created by understanding their needs and meeting them consistently

1 Supplier capital - the mutual trust, commitment, and creativity of key suppliers.

2 Alliance capital - reliable and beneficial partners.

3 Community capital - an organization’s capabilities and reputation in its

surrounding community.

4 Regulatory capital - knowledge of laws and regulations as well as lobbying skills and contacts.

5 Competitor capital - critical understanding and intelligence about competitors. These relationships can only be managed; they cannot be controlled. Improvement in

external capital involves looking outside an organization’s boundaries to such things as developing relationships and trust with customers, suppliers, and surrounding communities.

Managing Intellectual Capital

The current debate on intellectual capital is set in the context of a changing model of

management and organization structures. It is said that organizations are moving from

command and control to delegation, empowerment and coaching. Through this, everyone in the organization has an opportunity to shape the way it works. It is the role of management to harness and maximize that potential. It’s clear that managers who want to grow their company’s intellectual capital must be able to expand intelligence, encourage innovation and exercise integrity. Indeed, these are the three core competencies of intellectual capital. The challenge for managers is to develop the three core competencies of intellectual capital companywide. That’s where dialogue comes in. Knowledge is created and transferred through conversation, and leaders must master the art of fostering a dialogue among team members. Facilitate and train teams on knowledge creation and innovation. Conduct team focused workshops to apply innovation skills to specific business challenges regarding

revenue generation, quality, etc.

Suggestions :

There is a transformation continually in the world. People, organizations and governments is affected by transformation. The idea of intellectual capital started a decade or so ago, as two trends began to emerge: 1) the shift from production-based economies to service and knowledge-based businesses; 2) the notion of “the invisible balance sheet”. Intellectual capital has more value for organisations than physical assets. Knowledge has been recognized as a valuable resource by researchers. Intellectual capital simply means the knowledge resources of an organization. Success of organizations depends on creating , discovering, capturing, disseminating, measuring knowledge. If organizations enhance their organizational learning, they will increase their knowledge and intellectual capital. Learning suggests ongoing, never-ending and always changing. It is the foundation of adaptability and innovation. The economic value of learning is a given because of its role in most business decisions and transactions.

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Submission Details: Thesis Abstract submitted by Srinivas Annabathula from India on 01-Nov-2013 07:28.
Abstract has been viewed 2605 times (since 7 Mar 2010).

Srinivas Annabathula Contact Details: Email: asrinivas9999@hotmail.com Phone: 8685900160