Intangible Capital: Looking Inside the Black Box - I often explain that the 70% of corporate value that is intangible in companies today is stuck inside a “black box.” This article I wrote for Strategy magazine tells the story of a company that looked inside the black box to let loose its potential for innovation and growth.

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  • In IC Rating we argue that the Business Recipe is equally important a component of IC as Human, Organizational and Relational capital. In many IC models the Business Recipe (defined as Business idea, Strategy and Business Environment or Industry) is missing.

    We found that IC reports from companies using such models where impossible to grasp; we did not have anything to relate their measures to. The Business Recipe can really only be omitted if you have IC benchmark data from companies with similar Business Recipes, which is rarely the case.

    There are of course IC models that use other terms for the Business Recipe, such as the Knowledge Narrative from the Danish Guidelines, but even there the actual Industry component seems to be missing.

    I would even argue that one of the reasons why IC has such difficulty in becoming mainstream is that IC practitioners and scholars keep forgetting to relate IC to strategy, thus diminishing its value in the eyes of company executives.
  • You could say that Business Recipe is a metaphor for IC. I think a more precise description is as a map of how the other components (human, relationship and structural capital) fit together and fit into a market context. Another way of looking at is as a link between IC and strategy and business opportunity.

    Frankly, I started using this terminology because Business Recipe is a measuring stick used in the IC Rating approach. That is, when a segment of IC is evaluated by a stakeholder the question is asked in the context of the Business Recipe. Rather than asking "How would you rate this component?" We ask "How would you rate this component as to its effect on the company's ability to deliver on its Business Recipe?" It makes the rating much more meaningful.

    Does that make sense to you? I'll ask some other folks from the ICR network to chime in here too.
  • Mary, Is Business Recipe a metaphor for Intellectual Capital in your vocabulary? Or does it have a different connotation?
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