1st Edition

Making Sense of Intellectual Capital

By Daniel Andriessen Copyright 2003
    456 Pages
    by Routledge

    456 Pages
    by Routledge

    Peter Drucker has introduced us all to the knowledge era, where knowledge is the primary resource and intangibles (intellectual capital resources and assets) are now largely recognized as the most important sources of organizations' competitive advantage. With the recognition of the importance of Intangibles comes the problem of how to properly identify them and assign them a value within the corporation. This is an area of concern in 5 fields: 1) accounting and financial reporting, 2) performance measurement and management, 3) valuation in the finance field, 4) the Human Resources field in terms of management, strategy, and planning, and 5) Intellectual Capital. Over the past eight years, over 25 methods have been proposed for the valuation of intangibles coming out of these 5 fields.

    In this book, Andriessen evaluates 25 existing methods of intangible valuation according to highly developed criteria. In performing his evaluations, Andriessen synthesizes the state of the art research from these fields based on extensive research. He then presents his own method for valuing intangibles, which he began developing and testing as a Senior Manager at KPMG Knowledge Advisory Services in The Netherlands. He relates six case studies in which this method was tested in actual companies, carefully reviews the results of his tests, and then concludes by offering a new and improved method for valuing intangibles in his Weightless Wealth Toolkit, a complete step-by-step process for identifying, valuing, and managing Intangibles to help managers operate successfully in the Intangible Economy.

    Table of contents
    Preface and Acknowledgements xix
    1. Objective: Valuation and Measurement in the Intangible Economy
    1.1 Introduction
    The Intangible perspective
    The transformation of the economy
    Seven characteristics of the Intangible Economy
    Drivers of the Intangible Economy
    The Intellectual Capital community
    Valuation and measurement of intangibles
    Value
    Valuation
    Four ways to determine value
    Objective and problem
    My objectives
    Problem to tackle
    Methodology
    Practicing management research as a design science
    Using the developing multiple case study
    Structure of the book
    2. Methodology: The Science of Designing Practical Methods
    Introduction
    Making sense of the social world
    Distinctions make sense
    The world doesn't speak
    We know according to the way we are and the way we feel
    The social world does not sit still
    Social science
    Anything goes?
    How to test an empirical proposition
    How to test a practical proposition
    Bringing the two together
    Science follows its own rules
    Management research
    The subject of management research
    The scientific nature of management research
    My study
    The reflective cycle used in this study
    Difficulties in applying the reflective cycle
    The use of reconstructed logic
    3. Legacy: Methods for the Valuation and Measurement of Intangibles
    Introduction
    What: Distinctions & definitions
    Intellectual Capital
    Intangible Assets
    Human Resources and Human Assets
    Reflection
    Why: Problems & consequences
    Improving internal management
    Improving external reporting
    Statutory and transactional issues
    Reflection
    How: Solutions & results
    Financial valuation methods
    Value measurement methods
    Value assessment methods
    Measurement methods
    Reflection
    Implications for the requirements of a new method
    4. Design: Draft of a New Method
    Introduction
    Request for proposals
    Request
    Evaluation
    Iteration 1
    Design
    Evaluation
    Iteration 2
    Design
    Evaluation
    Iteration 3
    Design
    Evaluation
    Iteration 4
    Problem definition
    Requirements
    Design
    5. Test: Trying Out the New Method
    Introduction
    Bank Ltd
    Context & problem definition
    Specific requirements & design
    Implementation & results
    Additions to the design
    Reporting to the client
    Evaluation & modifications
    Electro Ltd.
    Context & problem definition
    Specific requirements & design
    Implementation & results
    Reporting to the client
    Evaluation & modifications
    Automotive Ltd.
    Context and problem definition
    Specific requirements & design
    Implementation & results
    Evaluation & modifications
    Logistic Services BU
    Context & problem definition
    Specific requirements & design
    Implementation & results
    Reporting to the client
    Evaluation & modifications
    Professional Services LLP
    Context & problem definition
    Specific requirements & design
    Implementation & results
    Reporting to the client
    Evaluation & modifications
    Consulting Dept.
    Context & problem definition
    Special requirements & design
    Implementation & results
    Reporting to the client
    Evaluation & modifications
    Result of the tests
    The method and its requirements
    The success of the method
    6. Lessons Learned: Contributions to Intellectual Capital Research
    Introduction
    Lessons about the method
    The application domain of the method
    The strengths and mechanisms of the method
    The weaknesses of the method
    Final modifications to the method
    Lessons about valuing intangible resources
    Valuing intangibles requires values
    Valuing intangibles requires a beholder
    Valuing intangible resources does not require money
    Valuing intangibles requires identification and demarcation
    Valuing intangibles requires diagnosis
    Valuing intangibles requires methods
    Lessons about practicing IC research as a design science
    Reconciling the rigor-relevance dilemma in IC research
    Determining the effect of the implementation
    Determining the contribution of the method
    The analyst versus the researcher
    Implications for future IC research
    Valuing and improving problem definitions
    Explaining and improving success-rate
    Explaining and improving the impact of numbers
    Epilogue
    Appendix A. Overview of 25 Valuation and Measurement Methods
    A.1 Balanced Scorecard (Kaplan & Norton)
    A.2 Calculated Intangible Value
    A.3 Citation-Weighted Patents
    A.4 Economic Value Added (Stewart)
    A.5 Holistic Value Approach HVA (Roos)
    A.6 Human Resource Accounting
    A.7 IC Audit (Brooking)
    A.8 IC-Index (Roos)
    A.9 Inclusive Value Methodologyâ„¢ (M'Pherson)
    A.10 Intangible Asset Monitor (Sveiby)
    A.11 Intangibles Scoreboard (Lev)
    A.12 Intellectual Capital Benchmarking System (Viedma)
    A.13 Intellectual Capital dynamic Value (Bounfour)
    A.14 Intellectual Capital Statement (Mouritsen et al.)
    A.15 iValuing factor (Standfield)
    A.16 Konrad Group
    A.17 Market-to-book ratio
    A.18 Options Approach
    A.19 Skandia Navigator (Edvinsson)
    A.20 Sullivan's Work
    A.21 Technology Factor (Khoury)
    A.22 Tobin's q (Tobin)
    A.23 Valuation approaches
    A.24 Value Added Intellectual Coefficient VAICâ„¢(Pulic)
    A.25 Value Chain Scoreboard (Lev)
    Appendix B. Weightless Wealth Toolkit
    B.1 How to Use the Toolkit
    B.2 Phase One: Do Intake
    B.3 Phase Two: Identify Intangible Resources
    B.4 Phase Three: Carry out Value Assessment
    B.5 Phase Four: Perform Financial Valuation
    B.6 Phase Five: Develop Management Agenda
    B.7 Phase Six: Report Value Dashboard
    Glossary of Terms
    Bibliography
    About the Author
    Index

    Biography

    Daniel Andriessen