Intellectual Capital Development for Technology Companies, Cost Effective Adjunct to IP

by Winstead PC

The term Intellectual Capital means different things to different people even in the technology space.  For business planning purposes, intellectual capital should be recognized as more than patents, copyrights, and other forms of intellectual property, extending broadly to employee skills, knowledge, and problem solving abilities.  This is sometimes referred to as a company’s or its employees’ know how, or even know who.  Patents, copyrights and trademarks all require navigating specific federal statutes and administrative proceedings and generally specialized legal counsel are required.  While lawyers, consultants and other business professionals can help in the process of managing a company’s knowledge, there is a lot more that can be done internally without incurring legal fees.

Intellectual capital comprises the knowledge of a company, its human resources, and its information technology.  Review and management of intellectual capital should include a company’s human resources, its structural resources and its external networks.

The human resources component of intellectual capital is evidenced in a business’ ability to develop the best solutions to its customer’s problems from the knowledge of its people.  Individual competence is important, people have ideas, create new products, and have relationships that work, and when they leave more than just one fte (full time equivalent) employee is lost.

The structural resources component would include the company’s routines and structures that support employee efforts.  This extends to systems: processes and outputs, organizational charts and responsibilities; strategy: goals, plans; and culture: the sum of opinions, mindsets, values and norms.  Current appreciation for a company’s structural resources has emphasized how closely linked a firm’s culture and ability to implement strategy are, something that may not be readily apparent.  A lack of fit between a company’s structures and culture can prove to be a big barrier to implementing change and strategies.

A company’s external relationships and customer base can also be considered part of a company’s intellectual capital, especially in the context of reputation, knowledge of market channels, customer and supplier relationships, industry associations, and knowledge of what the customers want.   Customer and supplier loyalty market targets, longevity of relationships and satisfaction are all measurable aspects of intellectual capital.  These external relationships cannot really be controlled, but they should be managed.  Improvements come from attention to developing relationships and trust with customers, suppliers, and connected communities.

One hears constantly that the world is moving to a knowledge based economy.  A company should pay close attention to its own knowledge management.  A management trend appears to be moving from command and control to delegation, empowerment and coaching.  Everyone in the company therefore has a role and responsibility in shaping the way the company works, and with proper management a company can guide and continually improve the applications of a company’s knowledge in ways useful to customers.

Developing intellectual capital is managing knowledge.  Knowledge is more than just information; it is information with an application.  Knowledge management or development of a company’s’ intellectual capital is then a systematic process for creating new competitive advantages.  Managing knowledge to develop intellectual capital begins with identifying and classifying a company’s knowledge assets, securing them, exploiting them properly, and managing them to improve quantity, quality and application.

An initial step toward managing intellectual capital could be an audit of the company’s intellectual capital and creation of a knowledge map of the business.  Other steps would be to formally define the role of knowledge for the business and to assess the competition.  A commonly suggested step is to require development and management evaluation of a similar knowledge map for each employee.  Finally the Annual Report should include an Intellectual Capital Statement summarizing these efforts.

A company’s hard assets such as buildings and equipment depreciate and wear out.  IP assets (trademarks/trade secrets excepted) have finite terms of enforceability.  In contrast a company’s intellectual capital can appreciate.  A systematic effort to identify, document, secure, and refine intellectual capital can facilitate turning knowledge into value, and can accelerate a company’s development of a proprietary edge over its competition.

There are plenty of resources focused on intellectual capital management, if it isn’t a part of the company operations, it should be.  Except in special cases, knowledge management would not be a replacement for building and managing IP portfolios, and securing rights to technology and information developed by employees, and other special areas where counsel should be utilized.  As part of a company’s overall strategy however, it can be a valuable company asset, and can be realized without the legal fees required for developing patents copyrights and trademarks.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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