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344 Chapter 10

show the loss of intellectual capital, and the subsequent impact to the company, if
one thousand employees would suddenly leave the company ( Roos and Roos 1998 ).
However, KPMG ’ s research indicates that, after losing key employees, 43 percent of
organizations experienced damage to a main customer relationship, 50 percent had
lost knowledge of best practice information, and 10 percent had lost signifi cant
income ( Warren 1999 ).
Most current approaches place a value on intellectual capital in the following way:
for publicly traded companies, the value of intellectual capital (IC) is the difference
between the market capitalization and the book value (summation of assets less depre-
ciation) of the company ( Roos and Roos 1998 ). For example, Intel ’ s market capitaliza-
tion in 1997 was $110 billion, while its fi nancial book value was $17 billion. This
hidden value of $93 billion is stated as the value of Intel ’ s intellectual capital ( Sveiby
1997 ). Roos and Roos (1998) made a similar comparison with Microsoft. A recent study
by the Brookings Institute in Washington shows that this “ missing value ” grew from
38 percent of a company ’ s market capitalization in 1982 to 62 percent in 1995
( Dzinkowski 1999 ).
Skandia, a Swedish insurance company, has made strides to quantify its intellectual
capital through further exploration. Using work that won the 1992 Nobel Prize in
Economics, Skandia has divided IC into several subsets, customer capital, human
capital, and organizational capital ( Roos and Roos 1998 ). In Skandia ’ s annual Intel-
lectual Capital Prototype Report, these terms are defi ned with supporting details
regarding how calculations of value are made. Skandia ’ s advancements, as well as
efforts by KPMG ( Andriessen 2000 ), Buckman Laboratories, and McKinsey & Company
( Davenport 1996 ), are providing tools by which management can determine the com-
pany ’ s present IC value and foresee future IC growth (or shrinkage). These tools are
being used by Deutsche Bank to give loans with only IC as collateral ( Henry and King
1999 ).
The Skandia Intellectual Capital model is called the Skandia Navigator ( Wall,
Kirk, and Martin 2004 ). Four key dimensions of business form the core of this
model:
• Financial focus, represented in monetary terms
• Customer focus, a fi nancial and nonfi nancial measure of the value of customer
capital
• Process focus, addressing the effective use of technology within the organization
• Renewal and development focus, which attempts to capture the innovative capabi-
lities of the organization