Resources — Book Review
Measuring the Strategic Readiness of Intangible Assets
by Robert S. Kaplan and David P. Norton, Harvard Business Review, February 2004, www.hbr.org
A real and revolutionary opportunity lies in studying and assessing how well prepared a company's people, systems, and culture are to carry out its strategy.
How valuable is a company culture that enables employees to understand and believe in their organizations mission, vision," values? What's the payoff from investing in the knowledge management system or in a new customer database? Is it more important to improve the skills of all employees or focus on those in just a few key positions?
Measuring the value of intangible assets is the holy grail of accounting. Executives know that these intangibles, being hard to imitate, are powerful sources of sustainable competitive advantage. No asset has greater potential for an organization than the collective knowledge possessed by all its employees. If managers could measure intangibles, they could manage the company's competitive position more easily and accurately. In this article, the creators of the Balanced Scorecard draw on its tools and framework—in particular, a tool called the strategy map—to present a step-by-step way to determine "strategic readiness," which refers to the alignment of an organization's human, information, and organization capital with its strategy. In the method the authors describe, the firm identifies the processes most critical to creating and delivering its value proposition and determines the human, information, and organization capital the processes require.
The authors propose a rigorous and complex model to link intangible assets to shareholder value creation. Their Strategy Map has four areas: Finances, Customer Value, Internal Processes, and Learning and Growth.
Learning and Growth is divided into Human Capital, Information Capital, and Organization Capital:
Organization Capital includes:
1. Culture in which
people were deeply aware of an internalize the mission, vision, and core values
needed to execute the company's strategy.
2. Leadership at
all levels, that could mobilize the organization towards its strategy.
3. Alignment between
the organization strategy cheek objectives and individual, team and departmental
goals and incentives.
4. Teamwork, especially the sharing of strategic knowledge throughout the organization.
The authors give several excellent examples of how their strategy map can be implemented. If you're a fan of the Balanced Scorecard you'll find this article well worth reading.
To purchase the article from HBR click on:
http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=R0402C