How to Measure Intellectual Capital?

Converting knowledge or intellectual capital into long-term business value is, in practice, a far more difficult process than in theory. While developing and implementing knowledge or intellectual capital philosophy’s in management processes, companies experience difficulties in measuring the contribution of their intangibles to business results and, what is more critical, companies fail in their efforts to reproduce the conditions and the processes that have unlocked the value creation potential of their intangibles. The challenge for corporations in the coming years is to identify all the elements of their value creation cycle (their strategically important tangible and intangible resources) and how these must flow, interact and contribute to sustain the organic development of the organization and significantly enhance its value creation capabilities. Without a method and instruments to identify the inter-relationships and the conversion process between intangible assets – knowledge, competencies, partnerships – and all the situations and contexts to which they add value, performance measurement systems will not be able to reveal the true performance of a company or reveal the patterns of value creation. The concepts and methods that we will describe in this paper propose a critical and practical point in designing and implementing a performance measurement of intellectual capital.