Exploring sources of knowledge and innovation

When it comes to measuring know-how, no single metric or approach can meet all purposes. Specific measures or indicators are heavily influenced by the nature of operations that exist within each business. So expect variations!

For example, a marketing function in a business could use metrics like a loss of key accounts or churn rate in a year as a measure of the worth of their know-how. While another part of a business like the human resource function may disclose staff turnover as a measure. Other operations may see investment in research and development and list its major clients as far more meaningful. Again, these measures will vary tremendously between profit-driven and not-for-profit enterprises , and are highly idiosyncratic. Therefore, it is imperative that assumptions that drive business reporting are communicated loud and clear. In some cases managers may be immediately attracted to a measure of knowledge and innovation, while on other occasions they will need to shop around.

To help consolidate the general picture, here are the various universal approaches being used in business. These indicators, of course, supplement traditional measures such as profitability, productivity, goodwill and increased sales growth which are currently listed in private sector business accounts. In government, the measures of intangible assets could be provided based on other measures such as productivity gains, capital outlays and savings to help provide a picture of success in innovation and knowledge.

However, such blanket measures at best only give a quick impression ; they can hardly be described as foolproof. It is, therefore, recommended that a series of measures be considered to help promote a more accurate and informative picture of your business landscape. Here are five areas commonly explored in existing reporting on intangible value:

• Customer capital attempts to place a value on the nature and quality of customer relationships, customer satisfaction rates, growth of customer learning, and involvement and improvement in decision-making and consultation.

• Human capital measures the current know-how of the people under its control. Jac Fitz-enz describes human capital as ˜that intellectual asset that goes home every night in the minds of employees . A high level of enthusiasm , desire and commitment in the workplace would be an indicator that the human capital or available talent is working in your favour.

• Intellectual capital comprises listings and perceived values of trade markets, secrets, patents and branding.

• Relationship capital involves describing important strategic alliances, collaborative relationships, business partnerships, joint ventures and industry associations that could help build reputation and industry standing.

• Systems performance explores how systems and processes directly or indirectly benefit or generate improved know-how. Measures can include investment in digital technology or how practices have been replicated or improved. Here you find measures of productivity, reduced wastage and efficiency savings, to name but a few.