Intellectual Capital (IC)
"Perhaps the best way to appreciate the role of IC is metaphorical. If we picture a company as a living organism, say a tree, then what is described in organization charts, annual reports, quarterly statements, company brochures, and other documents is the trunk, branches, and leaves. The smart investor scrutinizes this tree in search of ripe fruit to harvest.
But to assume that this is the entire tree because it represents everything immediately visible is obviously a mistake. Half the mass or more of that tree is underground in the root system. And whereas the flavor of the fruit and the color of the leaves provide evidence of how healthy that tree is right now, understanding what is going on in the roots is a far more effective way to learn how healthy that tree will be in the years to come. The rot or parasite just now appearing thirty feet underground may well kill that tree that today looks in the prime of its health.
That is what makes IC—the study of the roots of a company's value, the measurement of the hidden dynamic factors that underlie the visible company of buildings and products—so valuable."-- Leif Edvinsson and Michael S. Malone, Intellectual Capital: Realizing Your Company's True Value by Finding Its Hidden Brainpower . Harper Business, New York, NY, 1997.sa, pp.10-11.