Knowledge Capital

The worth of a business's intangible assets

 

The term "knowledge capital," usually referred to as "intellectual capital," is used to refer to the intangible component of a company's value. Of course, a company also has physical capital that has a monetary value. As a result, there are two categories of value for businesses: tangible and intangible. The concept of tangible value is simple. It is the value of physical capital, which is typically determined by its market value. A few indicators of physical capital are as follows:

 

•    Land 

•    Machinery

•    Office structures

•    Equipment Stationery (computers, pens, paper)

•    Storage facilities

 

Intangible value is less clear, on the other hand. The value of a company's assets is what lacks a market value. Knowledge capital refers to such assets.

 

It should be noted that a similar phrase, intangible asset, is typically used to represent concrete and recognizable non-physical assets. As a result, knowledge capital can comprise capital that is regarded as an intangible asset. Information capital, commonly referred to as intellectual capital, is a term used to define the intangible component of a company's value.

 

The value of a company's products and services is increased and protected through knowledge capital.

 

Human capital, structural capital (which is further separated into organization capital, process capital, and innovation capital), and relational capital are the three categories under which knowledge capital is classified.

 

Despite the fact that cognitive capital cannot be seen or touched like physical capital, it is nonetheless essential to a company's success. Knowledge capital frequently complements physical capital by enhancing and preserving the value of the goods and services that the physical capital produces. Three categories can commonly be used to classify knowledge capital:

 

•    Human Resources

•    Building Capital

•    Relational Capital

 

The three pillars of intellectual capital are interconnected, but this must be understood. In other words, it is highly challenging to fully utilize the other two kinds of knowledge capital without any one of the three types of knowledge capital being formed.  

 

In general, the term "human capital" refers to the use of knowledge and abilities. It's crucial to understand the subtle distinction between personnel who only possess the necessary knowledge and abilities and those who actually put them to use. Because of this, the company only benefits fully from its human capital when its employees actively use their knowledge and abilities to the fullest. 

 

The foundation of human capital, such as the abilities people build throughout training and the experience they acquire via employment, is intrinsic within the employees, which presents a challenge for businesses to maintain and continuously utilize human capital. As a result, when an employee quits the organization, the company may no longer have access to the individual's human capital. 

 

Senior management must create an organizational structure that encourages employees to stay and permits the transfer of human capital to other employees when an employee must leave the company in order for the company to keep its human capital. The three elements of intellectual capital are interrelated, as seen by the way a sound corporate organization fits into structural capital.

 

The non-physical infrastructure that enables and motivates workers to take advantage of their human capital is referred to as structural capital. They speak more specifically of the company's project procedures and databases. The varying characteristics of the various types of structural capital are further divided into three subcategories: 

 

Organization capital is the idea, mainly influenced by top management that guides the business structure and communication style. It is essential for enabling effective human capital management so that the business may maximize its potential.

 

Process capital refers to the company's initiatives that enable it to successfully complete projects and provide goods and services. Here are some instances of process capital: 

 

•    Company procedures

•    Methods of internal communication

•    interdisciplinary audits

•    mechanisms for reporting misconduct

 

The components of innovation capital are those that safeguard the business's intellectual assets, or the rights to its innovations; hence, the term "innovation capital." Value protection is a term used to describe how the law works to prevent one company's intellectual photographs from being stolen by another.

 

Innovation capital includes, for instance:

1.    Patents 

2.    Trademarks 

3.    Copyrights

 

Be aware that innovation capital is frequently referred to as the aforementioned "intangible asset." Innovation capital is by no means the only type of knowledge capital, though.

 

The value that results from the connections a business has with different parties, including suppliers and customers, is known as relational capital.

 

Relational capital examples include:

1.    relations with clients

 

2.    Arrangements with suppliers

 

3.    connection with retailers

 

4.    relation with government auditors and independent auditors

 

5.    a company's name, logo, and trademarks

 

6.    Licenses

 

7.    Franchises

 

Trademarks are innovation capital since they are the business's official property. They are, however, a part of relational capital when examined through the lens of value creation (as opposed to value protection) because they have value because of the company's relationship with customers.