| In economic theory, land, labor, and capital resources | | | | when relevant. Well educated and trained employees |
| are the three factors of production and distribution of | | | | must follow responsible leadership that motivates them |
| goods and services. In free markets, production and | | | | to be productive and efficient. The value of well |
| distribution activities are intended for profit, and the | | | | educated, trained, productive, and efficient human |
| prices that determine gross revenue are set by supply | | | | resources appreciates over time. However, to use |
| and demand. Net income results from operating profit | | | | human resources the most effectively, it is important |
| (revenue less cost and expenses), dividends, net | | | | for management to obtain feedback from its people, |
| interest, gains on sales of capital assets, and other | | | | especially those on the front line. |
| miscellaneous items. Net interest income comprises | | | | The risks of investment in human resources include |
| interest revenue less interest expense. Net income | | | | individuals that are unwilling or unable to reach their full |
| creates wealth, which is a source of future capital, and | | | | potential, or leave. The result is wasted education and |
| so the cycle repeats. | | | | training efforts. The return on investment results from |
| Land is a collective term for natural capital. Labor is a | | | | the enterprise becoming more effective and efficient. |
| collective term for human capital and the intellectual | | | | An enterprise can also contribute educated, trained, |
| capital it uses. Labor includes entrepreneurs, | | | | productive, and efficient human resources into the local |
| executives, managers, and associates (supervisors | | | | community for the social good. |
| and staff). Intellectual capital includes but is not limited to | | | | Intellectual: |
| those methods that are learned as competencies | | | | Intellectual capital represents knowledge that gives an |
| (knowledge and skills). Capital, or more specifically | | | | advantage, and hence must be protected. The more |
| financial capital, means wealth in the form of money or | | | | proprietary the knowledge is, the more the advantage |
| monetary equivalents used in the production and | | | | that can be gained because competitors cannot use it |
| distribution of goods and services, and is intended to | | | | without a licensing agreement. Intellectual capital is |
| generate income. | | | | derived from people (human capital), and is manifested |
| Entrepreneurs can be considered to be a distinct | | | | in processes and functions, and in products and/or |
| factor of production and distribution separate from the | | | | services. |
| other three; economies would not exist with them. | | | | Intellectual capital defines the enterprise and product |
| However, management competencies are required to | | | | and/or service brands, builds a competitive barrier, |
| organize production and distribution activities to | | | | provides a defense against other holders of intellectual |
| generate income. | | | | property, and increases revenue generation and |
| Utilization is about practical use of assets - capital has | | | | financing opportunities. More specifically, it consists of |
| a cost, and therefore must be used effectively and | | | | data, formulae, licenses, recipes, service marks, |
| efficiently. It is important to understand the costs, risks, | | | | software, trade dress, trademarks, trade names, trade |
| and returns associated with the use of each type of | | | | secrets, and written materials. |
| capital resource. | | | | Intellectual property can be protected through |
| Sustainability is about being able to provide for current | | | | copyrights, patents, and registrations of service marks, |
| generations without damaging the ability of future | | | | trademarks, and trade names. Patents are public |
| generations to provide for themselves. Sustainable | | | | information. |
| means being able to continue over time, either by | | | | Almost every enterprise has some form of intellectual |
| developing, enhancing, or maintaining the current state, | | | | capital ranging from the "secret sauce" in the recipes |
| or by changing it. Advantage means favorable, | | | | of menu items at lifestyle restaurants to the code in |
| superior, and beneficial. | | | | Microsoft Windows. The Coca-Cola Company has a |
| Natural: | | | | secret recipe for the ingredients of the world famous |
| Natural capital represents anything related to the | | | | beverage, and non-generic products of pharmaceutical |
| environment that is used by the enterprise, and is the | | | | enterprises are covered by patents. |
| initial source of all raw materials, including air, soil, and | | | | The risks of investment in intellectual capital include its |
| water. Sustainability is especially important with respect | | | | failure to perform as specified, which could cause |
| to the use of natural capital. Misuse of natural capital | | | | product liability claims, or its inability to generate income |
| damages the environment. | | | | at all. The returns on investment include profits from |
| Historically, natural capital has been available at lower | | | | competitive advantage not otherwise available, and |
| cost than its real value because sustainability has been | | | | revenue from licensing opportunities offered to |
| ignored. In the future, natural capital is likely to cost | | | | third-parties. |
| more to cover both the remedial efforts to repair the | | | | Financial: |
| environment, and the preservation efforts going | | | | Financial capital represents money and monetary |
| forward. The risk of investment is misuse, which be | | | | equivalents, and consists of equity (ownership) and |
| lowered by avoiding the use of contaminants and | | | | debt (long-term loans in various forms) invested in the |
| pollutants, and by encouraging energy conservation | | | | enterprise as operating and investment capital. Equity |
| and recycling programs. Opportunities should be | | | | comprises capital stock, current period income, other |
| pursued to use alternative fuels and other materials | | | | comprehensive income, and retained earnings less |
| that do not impact the environment negatively. | | | | treasury stock. Operating capital is used to finance |
| "Green" profit improvement programs are initiatives | | | | activities in the current cycle, and investment capital is |
| that can be put in place to find alternative resources | | | | used to finance capital assets, such as facilities and |
| and processes that are environmentally friendly, and to | | | | equipment, and positions in other enterprises. Operating |
| find offsets to any increased costs that may be | | | | capital can also be sourced from advances, |
| incurred. The economics related to the use of natural | | | | borrowings, credit extensions, and short-term loans that |
| capital can change dramatically if sustainability is | | | | are not considered part of the capitalization of the |
| pursued with vigor. A paradigm shift is occurring | | | | enterprise. |
| towards the ecological economy. | | | | The risks of investment in financial capital include |
| The return on investment in natural capital results in | | | | losses from revenues not covering costs and |
| higher quality resources such as pollution-free air, | | | | expenses, and depreciation because fair or market |
| purified water, and contaminant-free soil. Such | | | | value is lower than cost. The returns on investment |
| resources have significant benefits over the long-term, | | | | include profits from revenue in excess of costs and |
| especially for quality of products and/or services, and | | | | expenses, gains from appreciation because fair or |
| for health. | | | | market value is greater than cost, and from dividends |
| Human: | | | | and net interest income. |
| Human capital, otherwise referred to as "human | | | | In a knowledge-based economy, the value of |
| resources," represents those characteristics of | | | | intellectual capital and the human capital that uses it is |
| individuals that enable them to be economically | | | | increasing. "Tribal knowledge" represents know-how |
| productive for both themselves and the enterprise. | | | | within the enterprise that is essential to delivering |
| Human resources comprise both employees and | | | | products and/or services, and must be captured in |
| independent contractors. The characteristics of human | | | | practices such as policies, processes, and procedures. |
| resources include confidence, competencies, | | | | Using business intelligence as information for |
| experience, and commitment. | | | | competitive advantage can be a differentiator in the |
| An enterprise is dependent on its human resources for | | | | marketplace. However, the greatest opportunities may |
| results - process and product/service capabilities are a | | | | be in the delivery of knowledge-based products and/or |
| function of people capabilities. Therefore, it is important | | | | services that result from digital construction and |
| that human resources are developed to their full | | | | manufacturing processes. Innovation, infrastructure, and |
| potential. | | | | information are three factors of production in a |
| Ongoing education and on-the-job training programs to | | | | knowledge-based economy. Knowledge is only of |
| develop knowledge and skills are essential to keeping | | | | value if it is put into practice. |
| individuals economically productive as conditions | | | | Utilizing capital effectively is an enterpriship |
| change. Hence, education and training programs should | | | | (entrepreneurship, leadership, and managerial) |
| be considered to be an investment, not an expense, | | | | competency. |