Intellectual Capital Balance Sheet

One of the fascinating phenomena in the business world is the substantial gap between a company's value as reflected in its accounting balance sheet and its market value. This gap reflects the value of the organization's intangible assets that are not reflected in the accounting balance sheet. For example: employee knowledge, organizational knowledge, expertise, customer satisfaction, patents, and technological infrastructure, among others. These and other resources come together to create intellectual capital.

The intellectual capital balance sheet presents the key success factors (both tangible and intellectual) that give the organization relative advantages over other organizations. Additionally, it serves as a management tool that complements strategic planning within the organization. As a continuation of the thinking process about the organization's future, the balance sheet reveals the organization's core capabilities and relative advantages, providing a basis for comparison and measurable targets for future improvement.

Measuring intellectual capital in an organization is based on a model developed and implemented by Leif Edvinsson, former Vice President of Intellectual Capital Management at Skandia, a Swedish company specializing in financial services. The model developed by Leif Edvinsson, known as the SKANDIA NAVIGATOR, enables obtaining a balanced picture of the financial capital and intellectual capital in the organization.

SKANDIA Model

The model describes the various IC focuses existing in the organization and the system of relationships between them. Additionally, the model positions the various focuses within the time framework in terms of their impact on the organization. The model is built on a house structure composed of five focuses, where fruitful interaction between them leads to value and knowledge creation in a competitive environment.

Here is the model:

According to the model, it can be seen that financial capital (expressed in the financial balance sheet) comprises the roof of the house and represents the history and past performance, which do not necessarily indicate future performance. The supporting pillars are process capital and customer capital, which are the capital focuses on which the company's present activity is based. At the foundation of the house is development and innovation capital, which measures how the organization prepares itself for the future. At the center of the house, in interaction with all its focuses, human capital is positioned.

What is the Added Value of the Intellectual Capital Balance Sheet?

Growth Potential

The balance sheet enables learning about the organization's growth potential through the visualization of innovation and development processes occurring within it.

Balance Sheet Valuation

The capital enables conducting company valuations more accurately and reliably by obtaining better information about future potential.

Relative Advantages

The capital balance sheet highlights the organization's core capabilities that provide relative advantages over other organizations.

Strategic Planning Completion

The capital balance sheet is a tool that complements strategic planning, as it helps organization managers navigate strategy implementation by defining vision, goals, and performance metrics, and facilitating periodic monitoring and control.

Marketing Tool

The capital balance sheet is a powerful marketing tool for the organization in both the local and international markets. The capital balance sheet enables an organization interested in attracting investors and strategic partners to present the total organizational assets, both tangible and intangible, that indicate future growth potential.

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