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
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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 and acknowledge the business Ownership

provisions.

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.
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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.
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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.