Intellectual capital is not only a definition it is also an operating framework for organizing resources. Intellectual capital has three basic inputs that dynamically interact: human capital, structural capital and a relational capital or customer capital.

These three intangible dimensions are the critical drivers for creating wealth or value. For these three areas of capital to have true value they must ultimately come together to yield "financial capital." Human capital is sum of all of an individual's capabilities. It is the cumulative knowledge, skill, and experience of the organization's employees and managers. Structural capital is the embodiment, empowerment, and support­ive infrastructure of human capital. It is also the organizational capacity, including the physical systems used to transmit and store intellectual material.

Structural capital is the product of a company's organizational capital, innovation capital, and process capital.

* Organizational capital is an enterprise's investment in its systems, its operational philosophy, and its supplier and distribution channels. It is the systematized, packaged, and codified competencies of the organization as well as the systems for leveraging that capability.

* Innovation capital is the capability to renew the organization as well as the outcomes of innovation. Those outcomes include protected commercial rights, intellectual property, and intellectual assets. Intel­lectual property is the best-known element of intellectual capital and is the sphere of patents, trademarks, copyrights, and trade secrets.

Intellectual assets are the arena of diverse yet critically valuable resources such as the organizational brand and the theory of the business. e Process capital is all the processes of an organization that enable goods and services to be created and delivered to internal and external customers. Unfortunately, in most cases these processes are never valued at all. However, when a process is effective in producing value it has a positive value to a company. When a process is ineffective at producing value it will have a negative value.

Customer capital or relational capital consists of all of the market channels, and customer and supplier relationships, as well as an understanding of governmental and industry association impacts. Orga­nizational managers need to come to recognize that they do not need to operate as a self-sufficient island, but instead they can tap into a wealth of knowledge from their network of clients and suppliers to more effectively achieve the goals of their enterprises. Clients and suppliers can test products, give continuous feedback on organizational prac­tices, suggest new ideas and perspectives to explore, co-create new products and services, refer new clients, and operate as sensors for developments in the field and actions of competitors.

INTELLECTUAL CAPITAL AND KNOWLEDGE MANAGEMENT

Intellectual capital can be seen as the framework for intangible resources in an organization as well as a way to understand the stock of those resources. It is a strategic perspective. Knowledge management leverages intellectual capital through an integrated approach to create, share, and apply knowledge for desired outcomes. In that sense, both intellectual capital and knowledge management are two branches of the same tree.

Contemporary knowledge management comes from an information management and technology background and intellectual capital has arisen from an understanding that intangible resources are the hidden resources that add strategic value to an organization. Both deal -with knowledge as a prime resource of the enterprise. Intellectual capital provides the structure and knowledge management the means for productively using that knowledge. Over the last decade, the origins of each discipline have become less significant than the fact that both need to exist and work closely together to effectively maximize the performance and value of an organization.

EARNING POINTS

» Define intellectual capital in a form that best serves the interests
of your organization. a Common characteristics of intellectual capital:
knowledge applied experience
» organizational technology
* relationships skills.
» Intellectual capital is knowledge that can be converted into value or profit s Intellectual capital is also the ability to transform knowledge and intangible assets into wealth creating resources. » Major elements of intellectual capital:
human capital, structural capital, customer or relational capital. Intellectual capital is the stock, knowledge management is the flow.