s A. Stewart, author of Intellectual Capital, The New Wealth of Organizations, sees three main components of IC: Human Capital, Structural Capital, and Customer Capital . Stewart defines Human Capital as "the capabilities of individuals required to provide solutions to customers.” His definition of Structural Capital is "the organizational abilities of the organization to meet market requirements . . . to codify bodies of knowledge that can be transferred, to preserve the recipes that might otherwise be lost . . . to connect people to data, experts, and expertise--including bodies of knowledge--on a just-in-time basis.” Finally, Stewart adds Customer Capital, which is the value of the business relationships forged by a company.Stewart further narrows the definition by stating that IC must be:1. “Knowledge that exists in an organization that can be used to create differential advantage.” Therefore, any knowledge in the company that offers a competitive advantage is IC.2. "Intellectual material that has been formalized, captured, and leveraged to produce a higher-valued asset." One virtue of this definition is its distinction between "intellectual material" and capital. The key point here is that IC must be formalized. Intelligence becomes an asset when some useful order is created out of free floating brainpower. Only when knowledge is given coherent form (e.g. a new customer base, a database, a detailed description of a process) is it considered IC. Knowledge is captured in a way that allows it to be described, shared, and exploited. IC is knowledge that can be deployed to do something that could not be done if the knowledge was not formalized.The Importance of Intellectual CapitalThe old system of accounting no longer accurately reflects a firm’s position because it ignores IC. There has been a dramatic shift in the production functions—assets that create value and growth—of companies...
