Managing Intangibles
Linking Behaviour to Bottom Line Performance
Managing Intangibles
By making the traditionally intangible aspects of an organisation tangible,
managers can benefit from superior information and greater choice. This
new perspective combines insights and knowledge that would previously
only have been available by chance alone with a comprehensive view of the
organisation in question.
Factors that Drive Intangibles looks at two main areas. The first is a managers is built around the realisa-
broad consensus that intangibles con- tion that we directly control very few
The recognition and subsequent rise in tribute to superior financial perform- things. By extension, much of what we
the importance and value of intangi- ance. Examples include linking activi- manage is intangible6 and therefore
bles has been an ongoing feature of ties such as brand valuation1 , human we are best guided by our experience.
management for some time. Examples capital2 and innovation3 to increased This idea is perhaps best summarised
such as Knowledge Management, shareholder returns. A second econom- by Albert Einstein who said, “the only
Balanced Scorecards (BSC) and ic aspect of intangibles looks at increas- source of knowledge is experience”. By
Strategic Planning all attempt to quan- ing efficiency and reducing costs building on and codifying our experi-
tify and make tangible aspects of an through an improved understanding of ences (where possible), we are able to
organisation that are initially intangible intangible costs and the factors of pro- turn the intangible, tangible and in
in nature. duction. Activity based costing4 is one doing so, we are able to create a larger
example of this approach and by better pool of knowledge from which to draw.
While there are many examples of understanding the tangible and intan- Furthermore, as we increase our pool
tools and techniques to make informa- gible costs of production5, it is possible of knowledge, we are able to ask more
tion more tangible, it is also useful to to generate improvements and effi- probing questions about what is cur-
ask why this trend has been put in ciencies in resource allocation. rently intangible and seek new ways to
motion and what advantages are avail- manage it and make it tangible.
able from it. The three ideas below are The second idea, execution, is perhaps
by no means exhaustive, but are an best summarised by the maxim ‘you The Value of Intangibles
attempt to shed light on the factors can’t manage what you can’t measure’.
that drive the importance of intangi- Turning this on its head, one might pro- Whilst economics, execution and expe-
bles. pose that being able to define or meas- rience may not be the only factors
ure an intangible aspect of an organi- influencing intangibles, when com-
• Economics sation makes its control, management bined, they go some way to explaining
• Execution and related execution possible. the increasingly important role that
• Experience intangibles play in modern manage-
The third idea concerns experience. In ment7. Equally, intangibles impact on
The economic aspect of intangibles particular, some of our experience as three key constituents of an organisa-

Managing Intangibles
tion, namely its values (cultural and
Tool Values Process Resources
financial), processes (how work is Balanced Scorecard (BSC)
done) and resources (e.g. human, IT, Business Process Reengineering
facilities). By simultaneously impacting Core Competencies
on the values, processes and resources Knowledge Management
Lean Operations
(Christensen’s VPR framework)8 of an
Mission and Vision Statements
organisation, intangibles offer new
Offshoring
ways to manage and influence aspects
Outsourcing
of an organisation that are historically Shared Service Centers
very difficult to administer. Six Sigma
Strategic Planning
The Use of Other Tools Supply Chain Management
TQM
While there are numerous tools and
Motorola or GE might well consider that particularly in light of linking together
techniques to help manage intangibles,
they have ‘Six Sigma values’ as part of intangibles around values, processes
particularly around people, they have
their corporate culture. Likewise, it and resources. Perhaps the best start-
tended to focus on discrete parts of an
would be simplistic to suggest that off- ing point comes from Kaplan and
organisation, rather than offering a
shoring and outsourcing have no Norton’s own writing where they state
complete or holistic view. Continuing
impact on the resources of the organi- that “the three principal categories for
Christensen’s Values, Process and
sation in question. With these excep- the learning and growth perspective
Resources based view of the firm, it is
tions in mind (and there are more are: employee capabilities, information
possible to examine a variety of tools
besides), the key consideration for the systems capabilities and motivation,
which aid the management of intangi-
selections made in the table came from empowerment and alignment”11.
bles. With this framework in mind, it is
each tool’s area of organisational What is particularly striking about this
possible see which tools impact on val-
impact or primary focus. extract is how one could quite easily
ues, processes and resources.
substitute the three constituent parts
What about the Balanced Scorecard? above12 for Christensen’s VPR frame-
The following table details thirteen
From the table above, it would appear work. The table below illustrates these
management tools9 and their primary
overlaps.
organisational and VPR focus10.
that the BSC and to a lesser extent,
Strategic Planning offers the perfect In essence therefore, we are back to
As can be seen the tools tend to con-
tool for managing intangibles and where we started. In trying to better
verge on the process component of an
equally providing a holistic view of an manage intangibles and in particular
organisation. Equally, while BSC and
organisation’s values, processes and those around people, we are left with a
Strategic Planning do span the three
resources. While it would be wrong to choice of tools which focus on discreet
elements of VPR, achieving this cover-
suggest that this isn’t the case, there parts of an organisation, rather than
age from other tools requires them to
are some relevant intangibles that the tools which offer a holistic overview,
BSC can fail to capture, in particular linking the learning and growth per-
be used in conjunction or combined
those associated with the learning and spective and/or values, processes and
with one another.
growth perspective. resources together.
It is also worth acknowledging that
While it is beyond the scope of this arti- A 4G Perspective
some of the tools could cover alternate
cle to present a comprehensive
parts of the VPR framework, creating a
overview of the BSC, there are a few Given this brief overview of manage-
different table from the one above. For
observations that can be readily made, ment tools and in particular, the BSC
example, organisations such as

Managing Intangibles
and the VPR framework, there are two and aspects of the BSC/VPR perspec-
potential conclusions that can be tive. At its heart, 4G offers insights into
drawn. The first is that as we have seen three key areas, namely;
above, BSC and VPR focus on discreet,
as opposed to interlinked aspects of • Understanding individual’s behaviours
people focused intangibles. The second and personality (Social Profiles)
conclusion, as evidenced both by the • The prediction and articulation of rela-
BSC’s raison d'etre and the diversity of tionships (Social Relationships)
management tools as covered by Bain • The definition and measurement of
Learning and culture and values16 (Social Groups)
Christensen’s
Growth
Values, Processes
Perspective from
and Resources The diagram at the bottom of the page
the Balanced
Framework
Scorecard illustrates how Social Profiles,
Relationships and Groups link to VPR
Employee
Resources ideas.
Capabilities
Information By understanding and predicting the
Systems Processes interlinked roles played by individuals,
Capabilities
their relationships and group culture, it
Motivation, is proposed that 4G goes some way to
Empowerment Values providing managers with new tools and
and Alignment13 techniques for getting more from their
people. Equally, such a perspective
and others14, is that management offers insights that historically would
tools which provide a holistic view, have only been available by chance
rather than discreet view offer greater alone.
value. Building on these two ideas,
4G15 offers a means of simultaneously
analysing the people based intangibles
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Footnotes and references 14. http://www.valuebasedmanage-
ment.net/
1. http://tinyurl.com/5pf8hq 15.
2. http://tinyurl.com/5trapx http://www.fourgroups.com/4g/4g_f
3. http://tinyurl.com/5dfhfv aq.html
4. http://tinyurl.com/5r9efq 16. http://tinyurl.com/6xhvse
5. This analogy can also apply to trans-
action costs and better understanding
the costs associated with various organ-
isational processes, again with a view
to increasing efficiencies.
6. Examples of intangible factors that
are managed on a day to day basis
might include; relationships, processes,
costing structures and tacit knowledge,
amongst others.
7. By way of example, of the 25 man-
agement tools given in Bain’s
Management Tools survey, at least 8, or
32% are concerned with the manage-
ment of intangibles.
http://tinyurl.com/6g6vt8
8. http://tinyurl.com/5qwshk
9. The 13 tools are a subset of the 25
tools detailed by Bain at
http://www.bain.com/management_t
ools/
10. The remaining 12 tools listed by
Bain are felt to bypass the VPR frame-
work in that they are a combination of
specific technologies, customer man-
agement and methods focussed on
dealing with the external environment.
11. http://tinyurl.com/5fx4fp
12. Further thoughts on the Balanced
Scorecard and attempts at linking and
improving the management of the
learning and growth perspective can be
found in the CIMA and INSEAD paper
entitled “Effective Performance
Management with the Balanced
Scorecard” http://tinyurl.com/5vu5z7
13. For the sake of completeness, one
might wish to focus solely on the over-
lap between alignment and values, but
this may be a case of splitting hairs.