In truth, all of the components of a business are essential in the systematic flow of finances (Strassman, 1998). This paper discusses the importance and significance of 'intellectual capital' and its impact to a business endeavour through the application of soft systems thinking methods.
Intellectual capital can be defined in many ways and its definition usually depends on the economic theory applied to it. The most common definition of intellectual capital states that it is a combination of both instructional (e.g. training materials coming from the employers) and individual capital (e.g. enthusiasm and mindset of an employee) in a financially-productive enterprise. Another common definition is that it is a form of capital that generates intellectual rights. 'Intellectual capital' is assumed to be intangible but is nevertheless significant in any enterprise. It has no monetary value and is not include in the actual accounting but it generates products that are considered to be intellectual in nature (Wikipedia, 2006a).
Economic theorists apply the term 'intellectual capital' in most modern financial sectors such as information technology (IT), innovative research, technological protocols and many more fields which are associated because of their use of modern technology. This definition may be due to the emphasis of modern economic theorists to industrial concepts. These definitions may have also originated from the Internet boom of the mid-nineties and the early years of 2000. During this period in history, professionals working on the information and computer technology sectors banded together to form several computer companies, some of which has achieved monumental success which continues up to today. This notion relates to the 1970's-80's 'tulip boom', where the whole world seemed to be entranced with tulips and their complimentary products. During that time, manufacturers and distributors of came up with various permutations of their products as they assigned different prices for each of the combination of tulips and their complimentary products such as pots. In the same way, computer professional constantly repackage and revise their products to market them in some other price group. Many consumers consider this as a sly ploy done by manufacturers for them to buy their products (Wikipedia, 2006a).
Leonard-Barton (1992 -1995) emphasised on the significance of knowledge in the formation of creative and innovative ideas on brainstorming activities done by most companies. Her studies reveal that the distribution and dissemination of knowledge to persons that are involved sparks innovation. She believes that the added social interactions done in the brainstorming activities are crucial and proves to be very effective in the creation of new ideas and knowledge for the firm. When persons contribute their own ideas to each other, organisational knowledge is formed thereby increasing the firm's knowledge base and creative capacities. These capabilities are innate to the participants and are not easily copied, obtained or stolen by others forming the so-called 'competitive edge' of the company (Gao et al, 2002).
The management of (restricted) knowledge among employees now becomes an actual part of intellectual capital which will provide the necessary 'push' or leverage needed for