Tom Stewart's Books

While a senior editor at Forbes magazine, Tom Stewart popularized the theory of intellectual capital accounting based on the initial work of Leif Edvinsson and Karl Svieby at Skandia. Intellectual capital is a term to describe the value of all of the knowledge worker capabilities that are not captured in standard financial accounting. The authors asked themselves the question that has eluded financial analysts for a hundred years – why is the stock price of certain companies (Microsoft, Google, Intel) considerably higher than the value of their fiscal and physical assets on their balance sheet. The authors realized that traditional financial accounting did not recognize the intangible assets that a corporation can accrue.

Their answer was to identify three types of value (intellectual capital) that were not captured in traditional accounting – structural capital, human capital, and relationship capital. Structural capital is the know how that is incorporated in processes and intellectual property (patents, trademarks …). Human capital is the capabilities of the knowledge workers that populate the enterprise. Traditional measures of human capital look at the degree of education of the work force and how much intellectual property and trade secrets are generated per employee. Relationship capital looks at the strength of relationships with customers and suppliers. Often the best indicator of relationship capital is the strength of the brand and what it represents to customers and to key stakeholders. Relationship capital may be captured in long term contracts with key customers.