The intellectual capital of an organization is the qualitative aspects of the expertise and knowledge contained in it, which helps in delivering a competitive advantage. While many have the impression that intellectual capital relates to only R&D and the patents that the organization holds (or has filed), R&D is only one section of intellectual capital.

Humans have a role to play in intellectual capital as well. The skills and competencies that get developed over time and through training are of immense value to the organization and are a key differentiator for any business. While in modern times it might be over-ambitious to accept that every fresher joining from college would also retire from the same company, any investor would look at the retention age and the average tenure of work.

Another aspect of intellectual capital may be the knowledge that an organization will have concerning its suppliers, customers, brand relations, and other interactions. This grows over time and normally should be maintained at the organizational level. For this reason, we have a school of thought that no member of the organization should be kept in the same role for a very long time. While it is tempting to have the same person in a customer relationship role, this school maintains that it is not advisable, as the relationship shifts from the organizational level to the personal level.

Lastly, we have the organization-level intellectual capital such as the management systems, policies, processes, and all that is in the knowledge base acquired during the tenure of the operation. The patents and copyrights that the organization acquires or files for would also fall under this category. In a nutshell, this is the knowledge embedded in organizational structures and processes.

These forms of intellectual capital need to be protected with the utmost care. While protection of data privacy through technology implementation is common and important, investors would also be eager to know if the other information, especially the knowledge capital such as patents, special and innovative technology, brand secrets, copyright, and other business secrets are also protected through industry-compliant standards.

The more intellectual capital an organization holds the more lucrative it is for the organization. But as with the other capital, that we have been discussing, quantifying them through a common currency may be extremely difficult and needs a subject matter expert for proper evaluation.

Is it an exact science? I would say, far from it.