Growth, above-average earnings, and sustainable competitive advantages are no longer driven by investing in physical assets such as factories, offices, or machinery, but instead by investing in and managing intellectual capital. The success of leading companies such as Amazon, Google, Microsoft, and Wal-Mart is based on their intellectual capital. Physical assets such as distribution warehouse, office buildings, and stores are important, but not as much as (for example) knowledge about customers, technology, and markets. For example, organizations such as Wal-Mart, with its huge store infrastructure, couldn’t perform as well as it does without the intelligence to build its stores at the right locations, the knowledge about consumers to stock the right goods, and its expertise in inventory replenishment. Intellectual capital allows organizations to leverage their tangible resources. Identifying and managing the right intellectual capital is and will increasingly be the key differentiator between successful, mediocre, and failing enterprises.
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