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Intangible Assets

Studies like these are themselves on the cutting edge of their own field of research. For that reason, they entail a large number of assumptions that remain to be tested in subsequent work. Still, Lev’s studies are helping fuel a growing movement to get companies to produce such data in quarterly and annual reports, much as they generate traditional financial information. Indeed, following a three-day intellectual capital symposium in Amsterdam last June, the Organization for Economic Cooperation and Development reported widespread international support for the voluntary reporting of knowledge assets.

On this front, the clear pioneer is Skandia Life Insurance, a Stockholm-based global financial services powerhouse, which has published an intellectual capital supplement to its annual report since 1994. The supplement has tracked turnover rates, the number of contracts generated per employee and the percentage of women managers. It also includes stories meant to illustrate trends behind the figures.

A story in the 1998 supplement called “Female Potential,” for example, centered on a Skandia program aimed at bringing more women into sales leadership. The goal, according to the piece, was “to obtain more female leaders, and to actively eliminate obstacles to the realization of the full development potential of these women and add to the collective value-creating process within Skandia.” Toward that end, each woman was paired with a “personal mentor” from a different business area. “The mentor’s role is to be a dialogue partner and to be on hand for support and advice, while facilitating the candidate’s continued development and career in the company.”

If it all seems a bit touchy-feely, it’s because innovation itself is still a somewhat mysterious combination of work, skill, inspiration and environment. But for companies concerned with staying on the leading edge, such factors have become paramount. Now corporations are taking fresh looks at the whole value-creation chain, seeking to maximize returns on everything from employee-training programs to the colleges of expertise that enable people to share knowledge and skills.

Mark B. Myers, senior vice president of Corporate Research and Technology for Xerox, concedes that astute managers have always paid attention to these issues. What’s different now, he argues, is that the efforts are more sophisticated and they’re starting to tease apart the deeper elements of innovation.

Over the past two years, Myers has worked with Harvard Business School’s Rosenbloom to develop methods for determining whether Xerox is investing correctly in key elements of innovation. This undertaking, which involves tracking decades of R&D expenses against revenue growth and benchmarking Xerox’s investments against those of principal competitors, is still confined to tangible measures. But Myers is hoping the effort will lead him to greater inroads on the intangibles as well. After all, he notes, “a higher portion of the value creation in a knowledge-based economy versus a manufacturing economy may be contained on the intangible side.”

To the extent that Xerox is onto something, it will still represent a rare victory for the measurement forces. Nevertheless, a host of corporate leaders, academics and others remain bent on prying the lid off innovation’s black box. Each success promises to help the gears inside turn more smoothly.

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