The idea, in fact, arrived globally in 1997 through Leif Edvinsson, a thorough leader in the intellectual capital space, and creation of Intellectual Capital Sweden AB.
Now its seed has been planted in India with the formation of Bizworth India, which in partnership with the Swedish company will introduce intellectual capital services in the country.
Ashok Soota, chairman of MindTree Consulting, launched IC rating in Bangalore on Thursday and S R Gopalan, chairman of Bizworth India, announced two of the first three Indian client acquisitions, MindTree and e4e, both in the business of providing offshored IT and technology services.
Soota saw IC rating, which went beyond knowledge management, as enabling a firm to measure its strategic risks and prepare a roadmap for action.
Anal K Jain, who has initiated the India story of several IT MNCs like IBM (re-entry) and Sun and is now vice-president of Bizworth India, explained the increasing importance of intellectual capital by pointing out that a key study had found the unquantifiable and intangible value of the S&P 500 going down from 80 per cent in 1980 to 25 per cent in 2000 (post-tech bubble).
Thus intellectual capital is something that does not appear on the balance sheet but is critical to business.
Henrik Martin, CEO of Intellectual Capital Sweden AB, described IC rating today as a 'generic tool', which 270 organisations in 20 countries had adopted.
The rating model used 200 parameters to derive the future value of an organisation when accounting ratios essentially looked back at what had happened.
IC rating took a static view of an organisation at a given moment but its dynamism lay in the insight it offered on how an organisation could renew itself through the rating process.
IC rating measured the organisational and human capital of an entity as also the value of its relational structure. Organisational capital covered both intellectual property and processes.
The latter encompassed a critical element like company culture. Human capital covered both the management and employees. The relational structure covered a company's network, brand and customers.
IC rating is intended to enhance the operational efficiency of a firm so as to serve its business recipe and business idea, as also help enhance its strategic position. It provides key differentiators to be able to compete globally.
IC rating enables a firm to attach an IC report to its financial reporting, thus creating greater transparency for its stakeholders. It also greatly facilitates the valuation process, for both bidder and target, in a merger and acquisition exercise.