#PaiRED: AI & People Intangible Assets
What AI does is allow machines to create intangible assets by structuring and accelerating process controls. Examples of this include research and development, communications, computerization, information processing, operations, performance evaluations, operational processes and flows. Other examples are customer service, monitoring, systematic control, building goals and implementing strategies.
There are many ways to categorize and group intangible assets. These four are usually used: human capital, customer capital, organizational capital and intellectual capital.
Human capital is a term coined by the U.S. government. It is used to describe skills and procedures attributed to humans that impact business. It is the economic value of the workers’ skills and experience. Employers can improve human capital by investing in training, education and other benefits for their employees. HR is usually in charge of human capital. There is a correlation between investment and value. Human capital does not appear on the balance sheet as an intangible asset. It has become more valuable in a knowledge-based economy. Human capital can depreciate if the company doesn’t keep up with technologies or if the company doesn’t have the ability to innovate. The term Human Capital can be traced back to Adam Smith in The Wealth of Nations. He referred to investing in education and training. He said it was a win-win for everyone. Other economists use the term for the human aspects of improving production either in manufacturing or in technologies. These ideas are often criticized for making workers and people into capitalists.
Customer capital describes the relationships companies have with their customers. This includes the value customers place on the company and on increased customer solutions. Customer capital is an advantage. Companies can produce a particular good or service at a lower opportunity cost than other companies trying for the same market. These theories can be traced back to the mid-1800s. Customer capital is intangible. It can include relationships with workers and customers. It can also include franchises, licenses and trademarks. Customer capital is anything that influences customer relationships.
Organizational capital is a company’s ability to compose knowledge. It can include intellectual property such as databases, code, patents, proprietary processes, trademarks, software and more. It can also include business processes, shared culture, values and anything intangible that gives it an edge over the competition.
Intellectual capital is also a relatively new term. It is detailed in a 2002 article written by Paolo Magrassi, titled “A Taxonomy of Intellectual Capital.” He defines human capital as “the knowledge and competencies residing with the company’s employees.” He defines organizational intellectual capital as “the collective know-how, even beyond the capabilities of individual employees, that contributes to an organization.” Either by layoffs, retirement or attrition, much intellectual capital within an organization is lost. Until recently, it was not possible or a priority to capture this within an organization. In “The Gig Economy,” workers are less loyal and more mobile. Knowledge is lost when workers leave. Their skills are not passed along to others.
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