Value-Driven Intellectual Capital

How do firms like Hewlett-Packard, DuPont, Dow Chemical, IBM, and Texas Instruments routinely convert the ideas of their employees into profits that sustain the corporation?

How can buyers and sellers calculate the assets of the acquired firm in a merger or acquisition?

How can an organization affect the firm's stock price using the leverage of intellectual assets?

Identifying a firm's assets, especially its intellectual assets — the proprietary knowledge expressed as a recipe, formula, trade secret, invention, program, or process-has become critical to a company's overall vision and strategic plan and essential in such transactions as stock offerings or mergers. In the era of the knowledge-based company, where the firm's genius and future lies in its ideas, a firm's collective know-how has become a measurable commodity — and as much a part of its bottom line as the condition of its cash investments, plant, and equipment. Extracting and measuring the real value of knowledge is essential for any corporate head who knows how high the stakes have become for corporate survival in the information age-where the innovative idea is as good as, if not better than, gold! Value-Driven Intellectual Capital is a corporate and financial executives' handbook to the new world of intangible assets — what they are and how to convert them into cash or strategic position. Written by one of the seminal thinkers in the field, and the key organizer of the ICM Gathering, a group of leading-edge knowledge-based companies, Value-Driven Intellectual Capital explains the new, boundary-expanding world of intellectual assets — where translating an innovative idea into bottom-line profits involves a tightly focused strategy with clear directives for making it happen. A blueprint for turning corporate knowledge, know-how, and intellectual property into a sustainable competitive weapon that will build a firm's reputation and market share, this practical, insightful book outlines:

• Basic concepts underlying IC (intellectual capital) and corporate value creation
• The linkage between IC, business strategy, and profits
• The different kinds of value — including qualitative and quantitative — firms realize from their IC
• Activities required to produce the value firms desire from their IC
• Methods for calculating the dollar value of companies-for market capitalization and mergers or acquisitions
• An economic model of an IC company

The book's appendix is a valuable distillation for corporate and financial executives, managers, researchers, and analysts of IC's basic working concepts and definitions, including the principles underlying value creation and value extraction, the concepts and strategies used by successful companies, the sources of value for knowledge companies, and the mechanisms used to convert that value into real profits. And since it is managerial talent that turns intellectual property into business assets, the book provides an arsenal of key concepts, methods, and processes for aligning with and using intellectual property as an active element of a firm's business strategies. It concludes with a discussion of how value is extracted from human capital, focusing on its elusive magnetic core: creativity and productivity. In an era in which firms are increasingly accountable to shareholders and success is judged solely by stock price, knowing how to measure and extract the value of a firm's intellectual assets has become one of the most critical and essential skills needed by CEOs today. Reflecting the most innovative thinking from some of the most sophisticated firms in the world, Sullivan's Value-Driven Intellectual Capital is a manifesto, a clarion call to excellence for any corporate or financial executive, merger and acquisition partner or investor who understands how much future corporate survival and success depends on the simple enduring genius of a good idea and the need to convert those ideas into corporate value.

• Part I: The Relationship Between Intellectual Capital and Corporate Value
1. Introduction
• What Is Intellectual Capital?
• How Does IC Bring Value to a Firm?
• Strategy and Its Effect on Value
• A Brief History
• The ICM Gathering
• Overview of the Book
  
2. A Framework for Intellectual Capital Management
• The IC Framework
• The First Dimension: Context
• The Second Dimension: Non-Accounting Models of the Firm
• The Structure of Knowledge Companies
• One Approach to Extracting Value from a Firm's Intellectual Capital
• The Third Dimension: IC Activities
• How to Use the IC Framework
• Begin with Vision and Strategy
• Summary
  
3. Linking Intellectual Capital with Value
• The Value Brought by IC
• A Menu for Value
• Summary
  
4. IC Value Chains
• The IC Value Chain
• Examples of IC Value Chains
• Creating Value Chains
• Allocating Internal Investment Resources
• The Relative Importance of IC Activities
• Summary
  
• Part 2: Valuing Knowledge Companies
5. Valuing Knowledge Companies (Basic Concepts)
• The Relationship Between IC and the Dollar Value of a Firm
• What Is Value?
• What Affects Value?
• Time
• One-Time versus Ongoing Value
• Why the Difficulty in Valuing IC?
• Frameworks for Determining Qualitative Value
• Frameworks for Quantifying Value
• Measuring Intellectual Capital
  
6. Valuing Knowledge Companies for Merger or Acquisition
• Introduction
• The Importance of Complementary Business Assets
• Defining the Purchase Price Using the IC Perspective
• Calculating the Purchase Price Using the IC Perspective
• Summary
  
7. Linking Intellectual Capital with Stock Price
• Why the Shift Toward Intangibles?
• Determining the Value of a Knowledge Company
• An Intellectual Capital Approach to Valuation
• Summary
  
• Part III: Managing Intellectual Capital
8. Extracting Value from Intellectual Property
• Historical Perspective
• Extracting Value from Intellectual Properties
• A Hierarchy of IP Activity
• The Roles of Intellectual Property in Corporate Business Strategy
• The Intellectual Property Management System
• Components of an Intellectual Property Management (IPM) System
  
• Alternative Methods of Protection (Extra-Legal)
• Summary
  
9. Extracting Value from Intellectual Assets
• Intellectual Assets
• Codified Knowledge
• Commercializable Intellectual Assets
• Intellectual Assets and Structural Capital
• Managing Intellectual Assets
• Measuring and Valuing Intellectual Assets
• Quantifying Value in Monetary Terms
  
10. Extracting Value from Human Capital (Basic Aspects)
• Knowledge and Intellectual Capital
• A Knowledge-Based Model of Intellectual Capital
• The Relative Importance of Intellectual Capital
• Value-Added Knowledge
• Direct-Support Knowledge
• Indirect-Support Knowledge
• How Knowledge Is Used
• Value Creation and Value Extraction
• Balancing Value-Creation and Value-Extraction Activities
• Summary
  
11. Extracting Value from Human Capital (Advanced Concepts)
• Core Human Capital
• Creativity vs. Productivity
• Focus for Human Capital
• The Usefulness of Software Tools with Creativity-Focused Human Capital
• The Productivity Focus for Human Capital
• Summary
  
12. Making It Happen
• The Foundation
• the Context
• Defining the Role of Intellectual Capital
• Designing the System
• Communicating the Value of IC to the Firm
• Summary
  
• Appendix: Basic Definitions and Concepts
• Basic Concepts and Definitions for IC and ICM
• A Brief History of the ICM Movement
• Management Concepts
  

At first glance, it is a disappointment. Not bad, but it doesn't seem to offer any unique value. A closer reading makes you acutely aware of the fact that what he says about "cash flow equals intellectual capital" makes you wonder why you haven't read this book earlier. Excellent value for money.