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Patrick H. Sullivan: Patrick H. Sullivan is a Partner in the ICM Group, LLC, California, USA
The interest in intellectual capital was sparked by Tom Stewart's series of articles in Fortune magazine. Stewart focused his articles (as well as his recent book, Intellectual Capital, the New Wealth of Organizations) on how firms create value through their "brain power" (intellectual capital). Indeed, virtually all of what has been written on the subject to date focuses on the strategic issue of how to better create knowledge and intellectual capital in order for the firm to achieve its strategic objectives. This literature deals with the knowledge-creation and information-sharing aspects of ICM. But what about the other side of the equation? How can firms develop financial benefits and routinely extract ever more value from their intellectual capital? Extracting value from intellectual capital is the focus of this paper.
Companies that make their profits by converting knowledge into value are called knowledge companies. As a practical matter, those companies whose profits come predominantly from commercializing innovations are at the core of the knowledge company definition. Companies such as Microsoft, 3M, and Netscape are examples of firms whose knowledge or intellectual capital is the firm's major asset. They are clear-cut examples of knowledge firms. Other firms, whose profits come largely from commercializing their innovations but where the commercialization requires large and expensive business assets (such as manufacturing facilities and distribution networks) are also considered here to be knowledge firms as far as the management of their intellectual capital is concerned.
This paper describes how a number of major international corporations have been successfully extracting profits from their intellectual capital. It describes the innovative way these companies have been viewing their intellectual capital (IC) and some of the methods they have developed for harvesting profits (as well as other forms of value) from this new form of capital. The companies referenced in this paper comprise an informal interest group called the ICM Gathering; all of whose member companies are actively managing their intellectual capital (see Table I). The ICM Gathering companies meet to discuss and share ideas and methods around the extraction of value from intellectual capital.
What is intellectual capital? Is intellectual capital, as one company has defined it, "what walks...