The study of intangibles emerged as a field in the 1990’s to explain the significant shift in our economy and businesses fueled by information technology. Today, knowledge is the key source of competitive advantage in the global market. This shift reversed the historical pattern where tangibles made up 80% of corporate value. Today, the exact opposite is true. Tangibles make up just 18% of corporate value and the remaining 82% is intangible.
How to describe this critical asset class? The field is still emerging and as such, there can be confusion about the meaning and usage of different words and phrases....
The terms intangible capital, intellectual capital, intangibles and intangible assets are often used interchangeably. Although we prefer the phrase “intangible capital” because it has a more precise definition (see below), “intangibles” is also frequently used. Below, for your reference, are some definitions of these and related terms:
The roots of the concept of an “intangible” come from the field of accounting. Today's accounting standards were optimized during the industrial era and are designed to measure tangible infrastructure such as property, plant and equipment. These standards are not built to track today's infrastructure such as people, brands, knowledge and relationships. Today, roughly 80% of the value of today’s corporation is intangible (necessitating the need for ICountants to identify and measure intangibles).
This is a phrase and a concept that comes out of the study of intangibles in an organization. The field of IC has identified four main categories of knowledge intangibles, each of which has a different character. It is important to understand individual intangibles as well as how they work together as a whole:
This is a specific asset class that is protected legally through copyrights, trademarks and patents. It is a subset of Structural Capital.
* We use intangible capital rather than intellectual capital for two reasons: