"Measuring the Strategic Readiness of Intangible Assets"

Robert Kaplan and David Norton

Harvard Business Review

February 2004, pp. 52-63

Among the "intangible assets" discussed in this article are employee skills, IT systems, and organizational cultures. These assets are more difficult for competitors to imitate, thus providing potential sustainable competitive advantage.

The authors state: "Although these characteristics make it impossible to value intangible assets on a freestanding basis, they also point the way to a new approach for quantifying how intangible assets add value to the company. By understanding the problems associated with valuing intangible assets, we learn that the measurement of the value they create is embedded in the context of the strategy the company is pursuing."

Drawing on their work as creators of the Balanced Scorecard concept, the authors present a method to systematically measure the company's strategic readiness—the alignment of the company's human, information, and organization capital in the service of its strategy.

Human capital is the skills, talent, and knowledge that a company's employees possess. Measuring human capital readiness involves identifying the critical few job families that have the greatest impact on successful strategy implementation, and then assessing the current capabilities and competencies of the employees in those positions. 360 degree feedback or self-assessment are the most common methods used.

Information capital is the company's databases, information systems, networks, and technology infrastructure. Measuring information capital readiness involves defining a portfolio of IT needs, and then assessing to what extent these needs are being met.

Organization capital is the company's culture, its leadership, how aligned its people are with strategic goals, and the employees' ability to share knowledge. Assessing organizational capital readiness is primarily about "assessing how well the company can mobilize and sustain the organization change agenda associated with its strategy." The areas that are assessed include culture, leadership, customer focus, fostering teamwork, open communication, alignment, and teamwork/knowledge-sharing. The article discusses how to measure each of these.

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