Measurement of intangible success factors – not easy, but must have

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The importance of intellectual capital (IC) for the success of companies and other organizations is nowa-days widely acknowledged – both in academic discussion and in practice. An organization’s IC is com-posed of various intangible resources, such as employee’s competence, organization’s image, customer relationships, business processes and management philosophies. IC plays an important role in organiza-tions’ value creation and the competitive advantage and success of companies depends heavily on their ability to manage their IC. Nowadays it is not easy to find an organization that does not include the intan-gible success factors somehow in its strategy.

However, the term IC is not used in practice to refer those intangible aspects of the success – and, accord-ing to my experience, it may not even be reasonable. Instead, understanding the different components of IC may provide managers with a new way of thinking and guide them to focus on all critical resources – not only those that are tangible.


In order to manage the IC, it needs to be defined and measured. During the last 20 years tens of models to support the various IC management activities have been developed. These models typically provide a com-prehensive process which contains a wide set of actions from the identification of IC to the practical devel-opment and measurement of IC. However, the practice of applying these models does not seem to be common. Instead, it seems to be more suitable to combine measurement and management of IC with prac-tices already in use. For example, the Balanced Scorecard seems quite suitable for paying attention to and measuring IC.

In the end, it is important to recognize the (intangible) success factors and define applicable measures. Defining measures for intangible factors is typically quite challenging. Measures may be subjective or ob-jective, direct or indirect. In most cases perfect measure is not available. Instead, compromises are often needed. The benefits and burdens caused by the measurement should also be taken into account. For ex-ample, the validity and the reliability of a measure are worth analyzing. In addition, factor affecting the choice of measures is the availability of data. Most of all, it is important to take in to account the use of the measures – why to measure?

As best the chosen measures constitute a sound entirety. In other words, the measures represent different perspectives and are intended to form cause–effect relationships. In addition, the measurement system includes only the most important measures – not all you can measure.

Building sound measures for intangible success factors requires consistency and patience. On the other hand, you do not need to do everything at the same time. Perhaps starting from the easiest measures and learning from developing, implementing and using them for management purposes could be the first phase.

Paula Kujansivu, D.Sc. (Tech)
Adjunct Professor, LUT University
Chief Transformation Officer, Government ICT Centre Valtori

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