People-focused knowledge management

Market
Value
Tangible
Capital
Intangible
Capital
Financial
Assets
Physical
Assets
Human
Capital
Structural
Capital
Relationship
Capital
Organizational
Captial
Process
Capital
Innovation 
Capital
Intellectual
Property
Intangible
Assets
Information
Capital
Intellectual
Capital
Figure 1-4
Normally, a company’s market value reflects the values of its tangible 
and intangible capital. The effective-acting enterprise achieves its current 
and future performance by diligent application of personal and structural
intellectual capital. Copyright © 1999 Knowledge Research Institute, Inc.
Reproduced with permission.
ch01.qxd 5/3/04 2:27 PM Page 20

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capabilities. As indicated above, the IC concept is important in 
identifying the underlying knowledge support for current enterprise
performance. However, it is more important as an indicator of the
enterprise’s future capabilities and potentials for success. A company
has a good future potential when it has extensive IC assets consist-
ing of human capital (employee expertise, relationships, competence,
and motivation) and structural capital, which includes innovation
capital (patents and R&D results, for example), process capital (such
as manufacturing expertise), and relationship capital (loyal customers
and suppliers and supportive employees and investors).
The connection between IC and business performance was
explored and elucidated in the work started in the mid-1980s in
Sweden by Karl-Erik Sveiby, Leif Edvinsson, and others. The Skandia
Navigator resulted from that work and incorporated IC perspectives
when evaluating the corporate potential and health (see Figure 1-5).
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With such views, many firms and countries have audited their intel-
lectual capital and use these insights to build new capabilities 
and competitiveness — mostly by strengthening personal IC assets
through education and training but also by building structural IC.
Notably, country IC audits have been performed by Australia,
France, Israel, the Netherlands, Singapore, and the Nordic countries
(Denmark, Finland, Iceland, Norway, and Sweden), among others,
and are updated annually for most.
Competing in the Global Economy Requires Effective Enterprises
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