Intellectual capital and strategic management are essential tools that managers within businesses are finding increasingly necessary to implement in their day to day activities. This implementation also allows managers and their companies to tap into their knowledge management resources and discover how they may create value within their companies, for future profitable success.
Intellectual capital is a significant part of any business and holds great value. Intellectual capital incorporates the people within a company, known as human capital, the relationships between one company and others, known as relationship capital, and structural capital which allows human capital to operate within a business.
There is some debate as to how strategic management should be defined. Strategic management can generally be defined as how firms analyse the external environment to their business, and how they analyse the internal environment that occurs within their business as well. This influences, and has an impact upon how the business operates on a managerial level. Strategic management is a critical aspect to implement within a business as it is essential to ensure an overall alignment between strategic priorities and the policies that must be upheld within the company.
Strategic management directly relates to knowledge management through strategic goals and objectives as these are essential for any business to have, and having a good understanding and grasp upon knowledge management significantly aids companies in terms of competitive advantage. Companies who are able to effectively manage their knowledge and apply it to their strategic decision making, may be able to gain competitive advantage within their industry.
Intellectual capital also relates to knowledge management, especially in terms of human capital. Primarily intellectual capital facilitates the ability for knowledge management to flourish. In a study conducted by Hsu and Sandherwal, they discovered that while the combination of intellectual capital and knowledge management does not necessarily increase overall total efficiency within a company, it does help to boost the learning of employees within the company, which in turn, helps to better the human intellectual capital within a firm.
The roles of knowledge and knowledge management in relation to strategic management are critical to the success of any business. Both knowledge and knowledge management are essential for managers to make key strategic decisions that may have a significant impact, and aid a company in gaining competitive advantage.
All four key aspects, knowledge, knowledge management, strategic management, and intellectual capital all help businesses in their ventures into the realms of value creation. Creating value is one of the core competences a business should have, as this is what keeps a business – in business. Value creation can also correlate with operational management, as this is concerned with maximising operational efficiency within a business, in order to increase their profits.
“You’ve got to think about big things while you’re doing small things, so that all the small things go in the right direction.”
― Alvin Toffler
This quote by American author Alvin Toffler, perfectly summarizes how businesses should operate in terms of value creation. It is important for managers to keep in mind their bigger goals, and work towards achieving their smaller day to day goals in order to achieve their end goal. In this case, a managers end goal should be innovative ways they can add value to already existing products or services their company provides. They can also think about how they may be able to innovate new products and services to become an industry leader, thereby increasing profits.
Overall, intellectual capital, knowledge management, and both strategic and operational management are all very closely aligned in terms of facilitating the opportunities for businesses to flourish and progress within their industries. It is important that businesses implement these into their business plans as without these tools, it is unlikely that a business will survive long in the competitive industries we see in the business world today.