Stepping up to the growing challenge of recognizing all capitals- possible?

Organizations still stutter in their appreciating of where their true value resides. It resides in all their collective capitals.

So who is stepping up to the plate to get this nailed, buttoned down, once and for all clarified?

Recognizing where our true value resides is still a real organizational problem.

The real problem we have on most organizations is they lack the appreciation of what makes up their value, the real underlying wealth creating value, the one that truly ‘generates’. The tangible part is easier to appreciate (plant, land, material etc.) but is becoming a significantly declining part of the total sum of value of our organizations- sometimes it is only making up 30 percent.

It is our difficulties of understanding the intangibles as it is a very challenging task. Yet this has huge implications on the ‘health’ of the organizations we continue to invest in. Most organizations resort to “inferring” the value. This needs to change. The value today is in the interactions between the different components that make up our intangibles, out intellectual capital.

We are in need to identify what ‘drives’ organizations for gaining and sustaining real advantage, and showing why it has the potential for creating new wealth. This needs to be far more forwards looking; it needs to be more open and more transparent. The call is growing increasingly for a new valuation model. Static knowledge where we view financial numbers is just not good enough, we do need to understand the underlying dynamic capabilities that make-up the organization.

Conflicting signals of what makes up intellectual capital dominate still

The same old problem exists today that has plagued the concept of intellectual capital and its promotion. The community that has been arguing for this as a measuring of the real value of an organization remain divided, locked in their own interest and models; the conflicting nature of these different views has held intellectual capital back. Organization management will never invest the dedicated time and interest unless they see some level of coherence and understanding that can be translated into an actionable framework.

There have been many attempts but nothing has really changed our traditional reporting of financials with some (restricted) board discussions. Organizations are hiding under rocks, taking cover from the potential relentless sun that would force them to adapt if a community of practice came together and provided a definitive body of work that all could agree upon, it simply turns up the heat. We need to change this lack of organization focus by having a collective focus to offer.

We urgently require a common approach for measuring all our organizations capital.

Measuring often many intangibles is for many very uncomfortable territory, until the approach becomes ‘standard’. If those within the IC community continue to offer conflicting advice, organizations are very reluctant to commit.

Of course, many rile at the word standard so how about a common model or common approach?

Can the IC community come together and give them a clear model to work from? Please, or will it be eventually taken out of those existing hands, passed into the hands of a new, more business savvy group of individuals that can ‘piece together’ capitals in a way organizations will actually welcome and adopt.

To encourage acceptance you need clarity, a common understanding and approach, then the value potential begins to emerge with any adoption , because it offers clear language and common measurement instruments that organizations understand and can work with.

A growing imperative

It is a growing imperative to gain a common framework to measure the sums of all our capitals.Those that have spent many years keen to establish this, I'd suggest, or to be bolder, should find the ways and means to combine. In 2014 we need to "embrace", it is not premature to define a working model, it is the right time. Organizational adoption will remain stunted unless it 'believes' there is a good degree of certainty in what they will commit too, for investment and their learning. They need help, a common understanding that may not be perfect but sensible, practical and workable.

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ICountant
Comment by Mary Adams on February 6, 2014 at 10:49am

Paul - I keep thinking about your comments and wanted to revive this discussion....

When I said a few years ago, I was saying that I used to think/hope that a standards body or institution could create a solution that would be adopted. But I now realize that you can't have standards without usage. So the task remains for us to spread the word and, more importantly, show the value of IC thinking to as many people as we can.

To win hearts and minds, we need to strengthen our community of practice. That gives us critical mass. But the work of creating value still has to happen one person, one team, one organization at the time.

On a practical level, I would love to hear your suggestions.

What I have tried to do to seed this is to put out the start of an open-source toolkit and provide this community as a platform. What more should we do to make this happen?

Comment by Paul Hobcraft on January 19, 2014 at 10:09am

Mary, "a few years"......then we need to pass the baton to others, or mentor those that can. I agree this is not a top down imposition, it needs a solid undercurrent of all, recognizing and appreciating its value.

I'm not sure the "house by house" search equally works, "hearts and minds" come through a collective identification, not just in advocating selective tools but in this resonating you speak of.

Organizations are facing challenges, many of their own making, many totally out of their control but it all adds up to recognizing the knowledge intensity needs different management and that has the 'ripe' potential for a movement.


ICountant
Comment by Mary Adams on January 17, 2014 at 3:14pm

A few years ago, I would have agreed with you. But I've come to the conclusion that looking for a leader to drive the agenda is probably not going to happen. Many have tried and many have failed. I've come to the conclusion that this is precisely because they have sought to solve the problem from the top down.There isn't enough momentum to take experience and turn it into "the" answer.  In my experience, we can't tell people they have to pay attention to their intangibles.

But when we share intangibles thinking to help solve a problem, it resonates. That's why I have been advocating a bottom-up movement, winning hearts and minds one company at the time. Most of the people interested in our movement to date are consultants--which I think is because they are challenged with trying to bring change to organizations facing challenges. We advocate simple tools that are open and we hope to invite feedback and use.

Having said all that, I'm game. I'd love to hear who you think could pull this off and what they should do? What can we do to make it happen?

Comment by Paul Hobcraft on January 17, 2014 at 12:02pm

I would suggest, if I may, the major forces that have occupied the thinking space within the intellectual capital in field should reflect and determine what 'they' want to do about all that is shaping up around the capitals.

Repeating, my growing impression is we are a potential point where there is a convergence possibility, in the requirement for more cohesive, integrated reporting. There is this undercurrent of a broader understanding if the value creation mechanisms within and around the organization.

This is not isolated to one organizing movement but it is being driven by those that are responding to the recognition that financial reporting is not the way forward. It needs more of a future orientation, it needs to show the pathway to sustaining, the understanding of t5he aspects that make up all the capitals that are judged as capitals.

It needs someone or a group, or I would strngly argue a clear, respected, established group who understand what makes up 'capitals' to move beyond personal perspectives, to this higher 'feeding' ground of providing a clear, distinct, coherent pathway to providing organization structure to capitals.

This then becomes the "force to be reckoned with" and through this a growing acceptance that increases the potential, not keep it limited as it is today, due to lack of general adoption, due to organization reluctance to invest in something that 'seems' uncertain and having to much conflicting messages. With 45 and still counting alternative frameworks for IC that might be hard to piece together a common approach.

Who is wanting to put their hand up and say, "I can, we can" but it means separating personal need of sustaining a current business or position for this 'higher ground' of achieving a common ground. That calls for a tough, well connected and respected leader but it will take energy, commitment and plenty of resolve.


ICountant
Comment by Mary Adams on January 16, 2014 at 1:02pm

Thanks Paul for this compelling call to arms!

It's especially interesting to me that we changed our banner earlier today around the same time that you published this post. As you can see, we put up the four kinds of capital that we focus on to date in ICounting. Here's our simple explanation of each of the categories. The main reason for doing this was to make it easier to see what we mean by intangible capital. Not because we have all the answers but because it is important to keep advancing the conversation.

This site was first created in 2006 (wow--eight years ago!) in the hope of convening a broad conversation about IC and the "capitals." We make slow progress year by year. Publishing some basic open source tools last year and creating a name for this "ICounting" were, I hope, good steps forward.

We've set up an open source hub to capture feedback on the open tools. We also have an IC Practitioners Group that would be ideal for discussions about the way forward.  We used to have monthly conversations there that attracted people from all over the world. I would be happy to host these again on our Webex account and actually just sent out an email to the group asking for volunteers to get it going.

I've been building this and trying to keep as much of the conversation as open as possible. I do finance this work through our ICounts licensing efforts. But I've also been of the opinion that my business and everyone else's will benefit from creating shared definitions and basic methodologies--just the way technology companies benefit from creating standards that support interactivity, market stability and growth.

So I am with you. Where do you want to start?

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