Measuring the Strategic Readiness of Intangible Assets

? A company’s intangible assets is a powerful source of sustainable competitive advantage. The challenge is how to estimate the value of it in order to manage their company’s competitive position easily and accurately.

? Difficulty in estimating the value of intangible assets rests on several factors:

?Intangible assets are worth different things to different people.

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?Intangible assets almost never create a value for themselves.

?Intangible assets seldom affect financial performance directly. They work indirectly in a complex chain of cause and effect.

?Measuring the value of intangible assets is about estimating how closely aligned those assets are to the company’s strategy. Balanced Scorecard presents a way to systematically measure the alignment of the of the company’s strategic readiness, without which even the best strategy can succeed.

?Strategy map shows that intangible assets influence a company’s performance by enhancing the internal

processes most critical to creating value for customers and shareholders.

?Intangible assets determine the performance of the critical internal processes.

?Human Capital: Strategic readiness is measured by whether employees have the

right kind and level of skills to perform the critical internal processes on the strategy map.

?Information Capital: Strategic readiness of Information Capital is a measure of how well the company’s information capital is a measure of how well the company’s strategic IT portfolio of infrastructure and applications.

?Organizational Capital: Determining Organization Capital readiness would involve identifying the changes in organization capital required by the new strategy of “organization change agenda” and then separately identifying and measuring the state of readiness of the company’s cultural, leadership, alignment, and teamwork objectives.

?The intangible assets described in the Balanced Scorecard’s Leaming and Growth Perspective are the foundation of every organization’s strategy, and the measures in this perspective are the ultimate lead indicators.

?Human capital becomes most valuable when it is concentrated in the relatively few strategic job families implementing the internal processes critical to the organization’s strategy.

?Information capital creates the greatest value when it provides the requisite infrastructure and

strategic applications that complement the human capital. Organizations introducing a new strategy must create a culture of corresponding values, a cadre of exceptional leaders who can lead the change agenda, and an informed workforce aligned to the strategy, working together, and sharing knowledge to help the strategy succeed.

? The Balanced Scorecard movement has encouraged organizations to face the measurement challenge. Using the systematic approaches, companies can now measure what they want, rather than wanting only

what they can currently measure. The act of attempting to gauge the capabilities of employees, information systems, and organization capital communicates the importance of these drivers for value creation.

The Balanced Scorecard’s way of measuring the strategic readiness of intangible assets is a challenging approach towards assessing company assets. While it is easy to measure quantifiable items such as the ones reflected in a financial report, the intangible assets of a company can give it a competitive advantage if only these are properly assessed.

The strategic readiness standard poses a challenge on the company’s human resources department, particularly with regards to the human capital readiness. Ultimately, it will gauge how many of the company’s workers are equipped with the capabilities and competencies required to realize the company’s vision. Such an assessment will give employees a clear understanding of their objectives, as well as a meaningful feedback on their current levels of skill and performance. Specific recommendations can be made by the supervisors and managers for their subordinate’s future personal development.

The strategic readiness standard will bring long term benefits to a company. Measuring is merely a

preliminary step towards the enhancement of this value. Through the implementation of this strategic and systematic method, a company’s portfolio may now reflect not only what can be quantified in financial terms, but also the oft-ignored yet powerful intangible assets.

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