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Emerald Article: Leading the strategic development of intellectual capital

Irene M. Herremans, Robert G. Isaac

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LODJ
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142

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Leading the strategic

development of
intellectual capital
Irene M. Herremans and Robert G. Isaac

Received April 2003

Revised May 2003
Accepted July 2003

Haskayne School of Business, University of Calgary, Calgary, Canada

Keywords Intellectual capital, Knowledge management, Management strategy
Abstract The Intellectual Capital Realization Process (ICRP), developed by the authors, permits
the leaders of an organization to develop strategies to realize the potential of intellectual capital
(IC). This process is consistent with the resource-based view of the firm, which suggests looking
inward to develop core competencies for building competitive advantages. By utilizing a public
sector organization as an example, this paper seeks to inform the reader of the preliminary work
and subsequent steps to follow when implementing the ICRP. The Canadian Sport Centre Calgary
(CSCC) organization serves this purpose, although the ICRP has also proven equally successful
when used in a private sector company. The ICRP helped the CSCC identify and plan the
development of its unique capabilities, relationships, and processes that benefit the organization
through the creation of leadership ability and the generation of wealth.

The Leadership & Organization

Development Journal
Vol. 25 No. 2, 2004
pp. 142-160
q Emerald Group Publishing Limited
0143-7739
DOI 10.1108/01437730410521822

The genetic underpinnings of the organizations intellectual capital

Any organization, whether profit or not-for-profit, manages its organizations
strategy to find the best fit between its resources and the environment in which
it operates. Strategic management allows the organization to seize the best
opportunities as they become available (Shanklin and Ryans, 1985). In the past,
an organizations primary resources were located on the organizations balance
sheet. Increasingly, in the information age of knowledge workers and service
organizations, resources such as the organizations capabilities, relationships,
and processes constitute crucial off-the-balance sheet assets.
All of these forms of corporate know-how among employees constitute
intellectual capital (IC) elements, a term that is utilized throughout this
paper in relation to the Intellectual Capital Realization Process (ICRP). To
explain further, a helpful analogy exists between the IC elements of the
organization and the genes that provide the foundation for the genetic
composition of an organism. Just as the gene programs the organism to
develop and respond to its environment in unique ways, IC elements
similarly program employees of the organization to follow unique work
methods, utilize special capabilities and contacts to secure various
corporate needs, and a host of other activities that enable organizational
The authors are grateful to the J.W. McConnell Foundation for providing funding for this
research.

competition and survival. In this sense, IC elements, when aggregated,

represent the DNA of the organizations IC.
IC elements reside in the minds of employees at both conscious and
subconscious levels. In the latter case, patterns of work such as work habits,
capabilities, processes followed, and contacts utilized to get things done, have
become so ingrained and taken for granted by the bearers of this know how,
that they are unable consciously to identify these patterns anymore. The only
way to bring such work patterns to the surface of conscious awareness is to
teach the bearers to start taking the time to notice them or to have an outside
observer identify them. Whether conscious or subconscious, IC elements
powerfully program employee behaviors, ultimately leading the organization
along the pathway towards survival or extinction.
IC elements differ from other types of intangible assets in two main respects,
namely their usefulness and their life spans. Regarding usefulness, some
intangible assets, such as patents or trademarks, can lay dormant for long
periods in terms of revenue generation, failing to contribute significantly
towards organizational survival. By contrast, we define IC elements as almost
continuously providing employees with the means to attain desired
organizational ends, resting only for brief periods between work
assignments. On an ongoing basis, they either directly generate wealth for
the organization or they do so through indirect means, by facilitating the
probability that the organization will attain its profitability goals. In
recognition of this subtle distinction between IC elements on the usefulness
dimension, they constitute either generator IC elements (by directly creating
wealth) or facilitator IC elements (by supporting and enhancing the creation of
wealth).
In general, we believe IC elements live comparatively shorter lives than other
intangible assets, especially for organizations operating within knowledge
intensive and dynamic competitive environments. As technologies, clients, and
organizational pursuits change, it becomes crucial to modify or abandon IC
elements and develop new ones. This is especially the case for generator IC
elements in relation to their facilitator counterparts. By comparison, other
intangible assets generally enjoy longer life spans, whether useful or not.
In the pages that follow, we share with the reader a method developed to
enable organizational leaders to identify IC elements and thus control their
utilization to further organizational objectives. This method is briefly
summarized in the next section.
The ICRP
The ICRP permits an organization to treat its off-the-balance sheet assets in a
manner similar to balance sheet assets. The ICRP allows leaders to identify,
inventory, and assess IC elements and then select the best strategies required to
develop the most valuable of these elements, thereby realizing their potential.

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To inform the reader and facilitate understanding, we demonstrate the ICRP at

work within a real organization, namely the Canadian Sports Centre Calgary
(CSCC), a public sector organization.
Before the implementation of an ICRP, each organization first needs to
determine the degree to which it possesses the cultural, climatic, and
operational context necessary to realize potential from the development of its
IC, without incurring multiple or significant obstacles. Depending on the
results, the organization may choose to proceed with the ICRP or decide that
the ICRP would not provide results that merit the time, effort, or expenses
involved. Further, the organization needs to determine which parts (areas,
departments, business units) of the organization stand to benefit the most from
IC development. Carrying out an initial diagnostic assessment that considers
these factors constitutes a preliminary step before implementing an ICRP. This
issue receives attention later in this paper.
Given that an organization decides that it has a green light to proceed, ICRP
implementation involves the completion of three general stages. The first stage
identifies, inventories and classifies IC elements belonging to the organization.
The second stage determines three unique characteristics for each IC element,
thereby permitting leaders to select those IC elements worthy of further
development in relation to the organizations strategic direction. Finally, the
third stage (containing three separate steps) generates a wealth of information
regarding current and potential levels of IC elements, allowing management to
make informed decisions about further development. This stage organizes IC
elements in quadrants, with each quadrant automatically suggesting different
organizational strategies appropriate for the further development of the unique
characteristics of the IC elements contained therein. Finally, this stage permits
leaders to assess the degree of resistance to expect when implementing IC
development plans. Before proceeding further with an in-depth description of
the ICRP, its relationship to the existing literature deserves elaboration.
ICs role in strategic planning
Strategic planning attempts to establish a strategic fit between the market
opportunities available to an organization and its goals (Kotler and Andreasen,
1987). Thus, strategic planning constitutes a process that simultaneously looks
outwards towards the ever-changing external environment and inwards at its
resources to maintain congruence through a cycle of adjustments.
All strategic planning models attempt to align the organizations goals with
its resources in relation to the environment. However, models differ, in that
some suggest the organization ought to assess its external environment first
(external models), whereas others suggest that internal resources require initial
consideration (internal models). External models prescribe the identification of
characteristics of the external environment to ensure that the organization
possesses internal resources required to compete successfully in this

environment (Porter, 1980). By contrast, internal models prescribe the

identification, fitting, and matching of internal resources to an appropriate
external environment (Wernerfelt, 1995, 1984; Penrose, 1980).
Assessing opportunities and threats in relationship to the organizations
resources (external strategic planning models) were the predominant models of
the 1980s (Grant, 1991). However, the resource-based view of the firm gained
prominence in the 1990s, suggesting that an internal assessment of a firms
resources (strengths and weaknesses) will determine which external fit, or in
which particular industry environment, the organization can best compete
(Barney, 1991). This view places greater emphasis on developing strong
internal resources and then seeking profitable external opportunities consistent
with these internal resources.
Focusing on the development of an organizations IC congruent with a
resource-based view of the firm, as IC consists of human knowledge,
relationships, and processes. IC leads to the development of core competencies
that, in turn, readies the organization for capitalizing on external opportunities.
However, not all IC research focuses at the level of the entire organization, as
discussed in the next section.
The concept of IC multiple levels of research
Both macro and micro levels of IC research have evolved (Sanchez et al., 2000).
The macro level is economically based and deals with the aggregated value of
IC through measures such as market-to-book ratios and Tobins Q in an
organization or in a sample of organizations in a particular industry or industry
segment. Although not directly useful for management implementation, the
macro level of research attempts to raise managerial consciousness of the
administration of resources not normally found on the balance sheet.
In contrast, the managerially-based micro level provides the means to
implement IC processes within the organization through identifying,
managing, measuring and reporting IC (Edvinsson and Malone, 1997;
Sveiby, 2001; Roos et al., 1997; Kaplan and Norton, 1992), to monitor
progress in fulfilling IC organizational objectives. The micro level
disaggregates the total IC of an organization into smaller, descriptive
categories permitting managers to develop and realize its potential within their
spheres.
The IC literature frequently cites organizational processes, relationships,
and human knowledge as categories of IC (Stewart, 1997; Edvinsson and
Malone, 1997). This literature also discusses measures used to assess the
outcomes of managing IC, such as percentage of loyal customers, number of
patents, employee turnover and more (Stewart, 1997; Edvinsson and Malone,
1997). Kaplan and Nortons (1992) Balanced Scorecard and the Skandia
Navigator (Edvinsson and Malone, 1997) are examples of outputs from this
type of research.

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Unfortunately, this literature rarely informs leaders of the methods to use to

identify and manage IC drivers within their areas of responsibility. In other
words, from the perspective of a manager, the literature lacks a clear method of
detailing how to move from the raw materials (inputs) to the final products of IC
management (outputs/outcomes). The upper portion of Figure 1 demonstrates
this dilemma for the manager.
The key concern for the manager lies in identifying organizationally specific
and crucial IC elements, as shown in the bottom portion of Figure 1. After all,
identifying important IC elements permits management activity to commence
in a rational fashion towards producing organizationally sanctioned outputs
and outcomes. For example, teaching new employees about a number of critical
IC elements and ensuring, as well, that ongoing employees know about these
elements, promotes greater workforce effectiveness and efficiency that
ultimately benefits the organization. The ICRP represents a managerial tool
that permits the identification of IC elements and the development of strategies
that drive the organization towards such positive outcomes. In the next section,
the discussion turns towards those individuals who ought to participate in the
identification and prioritization of IC elements.
The participant bears organizational IC elements
Using an approach that few others have tried (Marti, 2001; Heng, 2001),
participants of an ICRP identify and inventory IC elements pertinent to
operations within their specific area of the organization. These individuals bear
important IC and as such must necessarily participate in the ICRP. Thus, the

Figure 1.
Comparison of current IC
models to the ICRP
model

process takes place at the level where IC actually resides, within a discrete
operating unit or several units that are complementary.
Once identified, the IC elements are prioritized, based on which elements
hold the least and the greatest beneficial organizational outcomes that
ultimately generate wealth for the organization. Therefore, the formulation of
managerial strategy is developed in part through a recognition of what IC
actually exists in the organization, not what management hopes or believes
should be there. To this extent, the bearers of the organizational IC prescribe
the strategic direction of the organization. With the identification and mapping
of IC, the development of specific output/outcome measures follows to monitor
the effects of changes in critical IC elements. The ICRP ensures alignment of IC
development with core strategies and ultimately the organizations overall
strategic direction.
King et al. (2001) suggest that verbalizing core competencies that create
wealth for an organization is not an easy process. They also point out that
when organizations fail to verbalize their competencies, there is frequent
disagreement as to which ones are core and thus these organizations develop
unclear directions, failing to understand where critical resources should be
deployed. The ICRP attempts to address these difficulties.
Choosing the correct organization
This study reports some of the findings relating to the use of the ICRP at the
CSCC, a not-for-profit organization. However, the ICRP was originally
developed and refined in a for-profit organization, namely Flare Consultants
Ltd, a virtual company operating worldwide and registered in the UK. In both
cases, the organizations were carefully chosen as they possessed specific
characteristics to ensure that outcomes would prove useful to the recipients,
permitting the formulation and pursuit of IC development strategies.
These organizations are knowledge intensive with limited physical assets and
they both possess cultural climates conducive to the development of IC. They
enjoy strong reputations for innovation and creativity and the employees possess
an awareness of the necessity of learning how to develop their intellectual assets
and limit their liabilities. Both organizations are small in size, with ten or fewer
employees. This small number of employees naturally creates an atmosphere in
which participants feel at ease and it encourages them to share ideas. A larger
organization may also use the ICRP, but in such a case it is necessary to create
groups of approximately ten people or less to ensure the right atmosphere. In this
latter situation, it is necessary to identify areas of the organization where IC is
crucial to the success of operations before choosing participants.
Background on the CSCC
Fiscal responsibility is often a key concern for public organizations because their
major source of funding comes from taxpayers monies. However, despite
financial constraints, these organizations still want to provide the best service

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possible for their clients. Acutely aware of this dual accountability to both
taxpayers and clients, the CSCC has been particularly innovative in creating ways
in which the organization is able to use cutting-edge research and technology to
their benefit, thus better serving their clients. The clients are athletes and coaches
associated with Olympic and other amateur high performance sport in Canada, as
well as other Canadian sport centres throughout the country.
To provide the best service possible for clients, the CSCC is well aware that
managing the human and intellectual capital of the organization is crucial to
success in the world of high performance sport. Each day, as the staff of the
CSCC encourages athletes to set their sights high, the employees realize that the
CSCC will remain credible only if it also sets its own sights high, by finding
innovative ways to provide better services to support athletes and coaches.
This ensures that athletes are able to compete with the best in the world.
Thus, the CSCC agreed to participate in the ICRP. Employees wished to
determine where the CSCC is unique so they could define and document
innovative ideas and approaches. The long-term intent of the CSCC is to utilize
IC to secure additional financial support and reduce dependence on
governmental assistance. Before implementing an ICRP in this organization,
an initial diagnostic assessment of the CSCCs suitability to participate in this
process constituted the first issue for consideration, as reported next.
Diagnostic assessment of the CSCC
CSCC participants filled out an IC assessment questionnaire. This instrument
determined the current emphasis that the CSCC places on IC. It also measured
the degree of knowledge uncertainty that the CSCC must cope with in its
external environment, as well as the degree of knowledge change within the
internal environment. Further, the instrument assessed the extent of
organizational readiness to further develop its IC, by examining certain
cultural and climatic characteristics that may facilitate or hinder this activity.
(For a thorough discussion of the development of this instrument, please see
Herremans and Isaac (2002).)
The findings from this questionnaire suggested that the CSCC already
placed some emphasis on the development of its IC, although it did not
consciously possess awareness of this situation. Fairly high rates of knowledge
change, existing both externally and internally for the organization, suggest
that the CSCC could benefit from further IC development. Further, organization
culture characteristics appear conducive for the facilitation of a greater
emphasis on the development of IC. Therefore, the researchers and the
management of the CSCC decided to implement an ICRP.
ICRP steps followed by the CSCC
Step one identify and classify the firms IC (resources and capabilities)
The ICRP is different from other IC models because the ICRP begins by having
participants identify capabilities (those things that the organization can do),

rather than resources (those things that the organization has). In other words,
the ICRP is not concerned with what the organization has, but rather, what the
organization does with what it has.
Because the ICRP starts with capabilities, the organization does not list
static resources that may or may not be productive (such as brands, patents,
and technologies). Instead, the emphasis is placed on what the organization can
actively accomplish, thereby automatically creating a list of capabilities that
can generate revenues in line with strategic capacities (Chatzkel, 2002). The
ICRP emphasizes the IC elements of brands, patents, and technologies that
generate or facilitate organizational wealth.
By providing participants with criteria (guidelines) for identifying IC, but
without the structure of any pre-formed classifications, the ICRP leads
participants to think in terms of their unique expertise that is not easily
transferred, copied, or imitated (Barney, 1991). At the CSCC, we provided the
employees with definitional criteria of productive IC as follows:
.
IC elements are not currently recorded assets on the balance sheet, such as
computers or software.
.
IC elements are not intangible assets, such as patents, trademarks.
.
IC elements are processes and systems, either formal, informal or housed
in the mind at preconscious levels.
.
IC elements create wealth.
.
IC elements employ action verbs that emphasize their use in creating
wealth.
Over a two-week period, each employee created a list of what he/she felt fit the
above criteria. The researchers were available for guidance and to answer
questions, but did not make any decisions as to whether the elements listed
actually created wealth for the organization. Employees made this distinction
themselves. They then submitted their lists and the researchers edited and
eliminated duplicates, resulting in an inventory of 144 IC elements for the
CSCC. IC elements supplied by participants were descriptive statements of
organization-specific knowledge, relationships, and processes benefiting the
firm and ultimately contributing to its wealth.
For illustrative purposes, we present three examples of typical IC elements
listed by the CSCC. Each IC element appears with its assigned number and
classification abbreviation in brackets:
.
IC Element 101 (TK) using access database to enter and maintain
athlete information.
.
IC Element 131 (ERM) communicating CSCC athlete results to
demonstrate both their successes and ours.
.
IC Element 024 (MESS) developing and sharing templates for
agreements (dbase; tracking activity; policy and procedures; protocols for

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altitude, warmdown; testing and interpretation of data and explanation to

athlete/coach).
The ICRP does not attempt to fit IC elements, that form the underlying
foundations of organizational capabilities, into pre-formed generic
classification schemes (such as physical, financial, customer, organization
and employee resources). After identifying productive IC, the ICRP permits IC
elements to fall into natural groupings that more specifically represent the
organizational resources that are unique (Andriessen, 2001). For example, for
the CSCC, the IC elements fall into 12 groupings as follows:
(1) business strategy and planning activities (BSPA);
(2) management enhancement and support structures (MESS);
(3) organizational culture and climate (OCC);
(4) operational norms (ON);
(5) leadership (LP);
(6) team dynamics (TD);
(7) learning (LG);
(8) decision making (DM);
(9) individual differences (ID);
(10) technical knowledge (TK);
(11) client services (CS); and
(12) external relations and marketing (ERM).
No doubt, these 12 classifications all fit into the three commonly used
categories for IC, namely human, relations, and processes. However, the
participants are able to relate to the above specific classifications much easier
than to the three broad categories.
Step two rating of IC element on characteristics
After compiling the IC element inventory for the CSCC, all participants
provided ratings on a questionnaire that listed the 144 IC elements, within their
appropriate classifications, on three five-point Likert type scales. Each of the
scales are defined as follows:
(1) Value added (VA). This measures the value of each IC element to the
entire organization (regardless of whether you use the IC element
personally). Essentially, this measure tells us the value that you believe
this element contributes to the organization or the absolute market value
of the IC element.
(2) Level of knowledge (LOK). This measures the degree to which you
personally possess knowledge of the particular IC element.

(3) Need to share more (NTSM). This measures the extent to which the
knowledge associated with the particular IC element needs to be shared
more than it is currently shared among members of your organization
and/or other stakeholders.
The first factor, VA, suggests that the value of an IC element (Chatzkel, 2002;
Sanchez et al., 2000; Edvinsson and Malone, 1997; Stewart, 1997) is an
extremely important consideration when creating an inventory of an
organizations IC. There is little point in expending time and effort to
develop an IC element that possesses low value to the organization. Thus,
participant ratings on this scale permit the organization to create its IC
development priorities in a rational fashion. Participants deem IC elements
receiving high ratings as both important and crucial regarding their
contribution to organizational wealth.
The second scale, LOK, measures levels of personal knowledge regarding
each IC element (see Alavi and Leidner (2001) for a review on knowledge
definitions and related knowledge structures) with reference to concepts,
relationships, specific organization technologies, processes, and other issues.
Participants indicate, with high or low ratings, the extent of their awareness,
knowledge, and understanding on an element-by-element basis.
The third scale, NTSM, provides a measure of the extent to which individual
knowledge needs to become common knowledge (Sveiby, 2001; Dixon, 2000;
Chong et al., 2000). This concept represents the fundamental meaning behind
the IC development process, as it represents the degree that each participant
wishes the universal sharing of a particular IC element with other members of
the organization.
Step three analysis
After reviewing data received from participants on the questionnaires, 30 low
VA IC elements were dropped from any further analysis to permit the CSCC to
focus on only those IC elements that possessed high VA. This cut off allows the
organization to concentrate on developing only those elements the participants
as a whole deem critical for the organizations existence.
The cut-off for high VA is always subjective. However, the researchers
decided that IC elements receiving a mean rating of 4.0 or higher (out of a
five-point scale) were worthy of further consideration. This left 114 (of 144) IC
elements for further development. This rather large number of IC elements was
more than sufficient to command a considerable amount of organizational time
and attention, in terms of further IC development and strategic planning.
CSCC participants assigned most IC elements a high VA rating, with the
average of all VA ratings at 4.2 out of 5. To help prioritize the IC elements, two
cut-off points for VA ratings were established. All elements with a mean VA
rating of 4.5 or higher were labeled very high value-added IC elements (VHVA),
accounting for 61 IC elements, and IC elements with a mean VA rating between

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4.0 and 4.49 were labeled high value-added elements (HVA), totaling 53 in
number.
Next, three scores were calculated for each IC element in the VHVA and
HVA categories, namely a current IC (CIC) score, a potential IC (PIC) score, and
a flare ratio (FR) score. CIC provides a measure of the current state of affairs
regarding a particular IC element to the organization, whereas PIC gives a
measure of the potential of the IC element if it is shared more within the
organization. Essentially the main difference between CIC and PIC is that CIC is
the current state today of the IC element, and PIC is what the IC element could
be in the future. CIC and PIC calculations proceeded as follows:
(1) CIC: this measure is determined by multiplying the VA rating by the
LOK rating of that item, divided by 5 5 (the highest possible rating
values on each of the two scales) to produce a decimal number (between
0 and 1) that permits meaningful comparisons with other scores:
CIC

VA LOK
:
55

(2) PIC: this measure is determined by multiplying the NTSM by the CIC
score for this IC element and dividing by 5 5 5 (the highest possible
rating values on each of the three scales) to produce a decimal score
(between 0 and 1) that permits meaningful comparisons with other
scores:
PIC

VA LOK NSTM
:
555

(3) The last calculation for each IC element is the flare ratio (FR). This is a
measure of the opportunity for the organization to capitalize on the
potential of a particular IC element, calculated by dividing the potential
IC score by the current IC score to produce a ratio that varies between 0
and 1:
FR

PIC
:
CIC

A large FR (value closer to 1) indicates a huge opportunity for the

organization to capitalize on the potential of a particular IC element,
whereas a small ratio (value closer to zero) suggests that the IC element
in question probably does not warrant further effort towards its
development. This enables a better determination of priorities as to
where the organization ought to expend its efforts.
Thus, part of the feedback that participants of the CSCC received was a
calculation of CIC, PIC, and FR scores for each of the 114 VHVA and HVA IC

elements originally identified. However, the ICRP does not stop here, as it
provides strategic guidance, as well as information on the feasibility of
implementing strategic plans, as will be seen in the remaining two steps.
Step four determining IC strategies
The identification of IC development strategies for VHVA and HVA elements
proceeded according to a logical rationale for the CSCC. Means were calculated
for LOK and NTSM scores, using only the VHVA and HVA IC elements. The
means in both cases were approximately 3.3 out of 5.0. LOK scores for IC
elements falling below 3.3 were subsequently categorized as low LOK and
those that were 3.3 or above were categorized as high LOK. The same
technique, again using a mean of 3.3, was employed for categorizing all IC
elements relating to NTSM, leading to both low and high designations. Thus, it
was possible to place all of these IC elements into one of four quadrants.
For illustrative purposes, Figure 2 presents the placement of the 53 HVA IC
elements (VA ratings between 4.0 and 4.49) within their respective quadrants.
Dot sizes indicate the magnitude of the FRs in each case. Normally, when
presenting quadrant information to ICRP participants, we not only use dots of
varying sizes with the IC element numbers printed on them, but also, we
present them with varying colours to visually illustrate the magnitude of the
FR in each case. Unfortunately, the need to utilize black-and-white
photography for publication purposes prevents us from providing the reader
with such a color illustration[1]. Further, for Figure 2, we felt that indicating the
IC element numbers would not be meaningful to the reader without an
accompanying list specifying the nature of each of these elements for reference

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Figure 2.
High value-added IC
element quadrant
placement

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purposes. However, all CSCC participants in the ICRP received both VHVA and
HVA quadrant color illustrations with all elements numbered and identified
(through the provision of accompanying lists), as described above. Each
quadrant suggests the adoption of a different strategy for the development of
the HVA (or VHVA) IC elements falling within it. Below is a brief description
summarizing how participants perceive the IC elements falling within each
quadrant:
.
Quadrant A individual knowledge emphasis. Only a few participants know
much about the IC elements in this quadrant (low LOK) and in general, the
participants do not feel the need to share a lot more (low NTSM).
.
Quadrant B maintain status quo. Most participants know quite a bit
about each of these IC elements (high LOK) but they do not feel that it is
necessary to share more knowledge and increase learning about them
(low NTSM).
.
Quadrant C individual knowledge and common knowledge emphasis.
Few of the participants actually know very much about these IC elements
(low LOK) and feel they need to learn more by increasing
knowledge-sharing and other learning activities (high NTSM).
.
Quadrant D common knowledge emphasis. Most participants already
know quite a lot about these IC elements (high LOK), but believe they are
worthy of the time and attention it will take to share even more about
them (high NTSM).
With all of the IC elements categorized into their appropriate quadrants, the
CSCC was able to proceed with the formulation of differential strategies based
upon logical grounds associated with each quadrant. It is critical to remember
that the IC elements falling within these quadrants all possess either VHVA or
HVA. Therefore, the organization cannot afford to ignore any of these IC
elements. Figure 3 presents the quadrants, their strategies, and techniques to
follow in each case to develop the IC elements falling within them.
One last important point in this section relates to inspection of each of the
four quadrants to determine the nature of the IC elements therein. For example,
in the case of the CSCC, many of the IC elements falling into quadrant D happen
to fit into the external relations and marketing category. Similarly, many
quadrant C elements relate to a client services category. Thus, careful
inspection of IC elements in quadrants will often show patterns of relationships
among IC elements, indicating greater general emphasis on marketing, client
services, or other categories of IC elements for that matter.
Step five determining agreement and resistance
The ICRP, as demonstrated above, provides guidance in the development of
strategies tailored to the specific characteristics of HVA IC elements. However,
the ICRP also provides one more important piece of information.

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Figure 3.
ICRP strategies to
develop high
value-added IC elements

By calculating standard deviations for both the LOK and the NTSM scores for
each VHVA and HVA IC element, management learns the extent of agreement
among participants in each case. Thus, should management wish to further
develop an element where agreement is high among participants (i.e. a low
standard deviation), one can expect little resistance. However, where agreement
is low (i.e. a high standard deviation), one expects greater resistance.
As an example, let us consider the placement of an IC element in quadrant
D. To qualify for quadrant D, the participants must have rated the IC element
above the means for both LOK and NTSM. The only remaining issue to
consider is how much did the participants agree among themselves as to their
levels of knowledge and their needs to share it more. For example, a low
standard deviation for the NTSM scores indicates that participants were
uniform in their ratings and thus in agreement that there is a need to share this
IC element more. Management will encounter little resistance if it goes ahead
with strategic development plans for this IC element. However, a high standard
deviation indicates that little agreement exists among participants and that
management will encounter more resistance with strategies designed to
develop the IC element further.
As all of the IC elements are either high or very HVA in nature, managers
may have to develop all of them whether expecting resistance or not. However,

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this additional tool provided by the ICRP at least gives leaders an idea that
with some IC elements, they can proceed using a full speed ahead philosophy
whereas, with other IC elements, they need to tread with caution and develop
plans to counter resistance.

156

Conclusions
In gratitude, we credit the IC literature with the provision of theoretical
constructs that provide a foundation and backdrop for the development of the
ICRP. However, on reflection, we believe this literature often fails to provide the
direction necessary for the translation of IC theory into practice for leaders
wishing to manage the realities of the IC they encounter, especially at a micro
level. By contrast, the ICRP permits organizational members to identify and
manage their IC to produce desirable outcomes and outputs. This simple and
powerful process moves IC stewardship from the abstract to the concrete, even
at the unit or department level.
Once the organization has worked its way through the steps of an ICRP, it has:
(1) identified and classified some or all of its IC elements;
(2) determined each IC elements current and potential contribution, as well
as its future potential to ignite wealth for the organization (the FR);
(3) identified IC development strategies for IC elements within unique
quadrants; and
(4) determined expected levels of employee resistance for the development
of IC elements when it pursues these strategies.
Table I summarizes the sequence of activities that the CSCC participated in
with the researchers to achieve the above outcomes. However, the authors
learned that with the CSCC, as well as flare, completion of the ICRP constitutes
only the starting point of a long journey of discovery. Both organizations
eagerly integrated the findings into their respective strategic planning and
development activities. This new awareness of IC and its contribution to wealth
generation fueled requests for the authors to assist with additional research
activities that are currently in process. In both cases, the ICRP provided the
initial and necessary first step for the undertaking of further IC initiatives.
By utilizing the ICRP proactively to manage IC in the organization, leaders
are finally able to make internal adjustments that fine-tune their operations to
accommodate external realities when required. However, the ICRP also has
additional functions for the organization. For example, the organization is now
able to demonstrate to outside stakeholders that it is competently managing its
IC, whether these outsiders are shareholders, suppliers, customers or lending
institutions.
For leaders overseeing organizations that must struggle for survival in
knowledge intensive environments, employee know-how, organizational
process, relationships, and other factors stand to contribute significantly

Activity
Diagnostic assessment
CSCC participants completed a formal IC
diagnostic instrument to determine whether
they need to manage IC in the first place

ICRP activities
Participants attended a workshop to
understand IC better
Each participant identified individual IC
elements that benefit the CSCC (homework
assignment). IC elements are any specific
resources used to benefit the organization
including processes, relationships, knowledge
and capabilities
Through a data collection instrument,
participants rated each IC element on
the following three scales: value added,
individual level of knowledge, and the
extent that the br>IC element needs to
be shared more among br>each member
of the CSCC and with stakeholders

Participants from the CSCC attended a

planning workshop in order to determine
how the results of the ICRP could be
implemented in order to reap specific
benefits for the organization and its clients

Output
This instrument evaluated the importance of IC
to the CSCC. It also allowed the organization to
identify barriers that may prove problematic in
the future relating to the development of
corporate IC, especially in the areas of culture,
climate, and other organizational
characteristics

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An inventory of 144 IC elements was compiled

from CCSC participant lists, grouped by
natural classifications such as operational
norms, team dynamics, individual differences
and external relations and marketing

Data analysis included a mathematical

assessment of the current and potential benefit
of each IC element. Very high and
high-value-added (114 IC elements in total) IC
elements were then classified into quadrants
allowing specific, unique strategies to be
determined (by quadrant) for the further
development and maintenance of IC elements
The analysis also determined standard
deviations for IC elements to forecast levels of
resistance to expect if developing each of these
elements further within the CSCC
The workshop permitted prioritization of
certain IC elements and clusters within the
CSCC for development

towards ensuring competitive advantages. The ICRP provides a critical tool to

identify unique competencies that achieve such advantages for organizations,
permitting leaders to invest their limited time and energy in both an effective
and efficient manner where IC development and maintenance is concerned.
The population ecology point of view of business advocates a Darwinian
survival of the fittest doctrine for organizations, suggesting that some
organizations with certain characteristics will flourish within their
environments, while others will perish. As we increasingly move towards
knowledge-based economies around the world, the ICRP offers organizations
an opportunity to achieve consonance with their environments and perhaps
avoid extinction.

Table I.
Diagnostic assessment
and the Intellectual
Capital Realization
Process activities and
outputs at the Canadian
Sports Centre

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158

Limitations of the ICRP

The ICRP is not a process designed to deal with large numbers of people.
Approximately ten participants or fewer constitute an acceptable number of
individuals to participate in this process at one time. Care is required when
using the ICRP in larger organizations, to choose individuals and areas where
IC is critical to facilitate operational functions. Of course, this does not mean
that an organization could not run, for example, five ICRPs simultaneously in
areas dependent on IC.
Another limitation of the ICRP is that it does not suggest strategy for
organizations using it. Instead, it provides a basis for the formulation of
strategy, by informing planners as to organizational capabilities with reference
to organizational IC. In a sense, while the organization engages in strategic
planning, knowledge of IC gained through the ICRP provides its planners with
awareness of tactical realities required to support the strategy.
Further, the ICRP does not assist the organization in identifying threats from
competitors or opportunities in the market. However, it does permit the
organization to respond rapidly, in either case, due to awareness of IC assets
and capabilities. Further, it allows management to discard or sell capabilities
and associated resources that no longer prove useful or contribute to the
revenue picture.
Finally, the ICRP does not offer specific prescriptive advice as to the best
way to fully exploit IC within the organization. Rather, it measures IC present
in the organization and identifies IC elements worthy of further development.
This is the point at which management must take over the process and develop
systems, processes, and controls to realize the potential of this valuable asset.
Future research
Pleased with the outcomes of the ICRP, the CSCC continues to work with the
authors. Current research is attempting further to classify IC elements as either
generator or facilitator IC elements. Generator IC elements, as mentioned
earlier, generate wealth for the organization and constitute IC that the CSCC
directly uses with their clients (other sport centres, coaches, and athletes, for
example). Generator IC elements produce revenues for the CSCC (or its clients)
or reinforce the organizations leadership role through the delivery of products
and services. Facilitator IC elements support these generator IC elements in the
production of revenues and the demonstration of organizational leadership
within the sports community.
This identification is critical given the CSCCs recent strict budgetary
constraints, as it assists the organization in prioritizing those IC elements that
most fully align with their strategic initiatives and relate to generating
leadership and revenues. The CSCC is utilizing this knowledge to identify core
competencies. As the CSCC considers issues, such as value added; ease of
imitation, transfer, or substitution by competitors; and risk, associated with its
IC elements, the organization is placing itself in a strong position to implement

its strategy to exploit its competencies and further develop its IC. The end
result will be congruence between its strategy and IC management.
The ICRP assumes that value -dded ratings for IC elements are indicative of
profitability and competitive advantage for the organization. Thus far, our
research has not challenged this assumption on an empirical basis but current
research is underway with a private sector company (Flare Consultants Ltd) to
examine IC element contributions towards the creation of cash flows. Apart
from assumption testing, the ultimate goal of this research is to place a
monetary value on IC generator elements and to do this on an
element-by-element basis.
Note
1. For an electronic color copy, please contact either author at the Haskayne School of Business,
University of Calgary and supply an e-mail address.
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