Editor's Note: Intangible Assets Lead To Real Success
Ask 20 people to describe the culture of their company and you'll likely get 20 different answers. Some may describe the more visual aspects of the company- casual dress code, flexible work hours, on-site amenities such as day care. But culture goes deeper than that. It could refer to how aggressive or risk-averse a company is, whether it's opportunity-seeking or slow to change, whether it places an emphasis on ethics or is known for questionable behavior, whether it rewards teamwork and creativity or if it operates under strict hierarchical structures, whether it's inwardly focused or if the customer is the No. 1 priority, whether there's an open-door policy with top management or if the CEO knows the first names of only the senior VPs. Indeed, there are many factors that make up a company's culture. And it's becoming clear that culture-how it's defined, nurtured, measured, and managed-is critical to success.
Cultural elements are part of a company's intangible assets, and C-level executives are becoming savvier about the importance of such intangibles as drivers of business value. In a new InformationWeek Research survey designed to gauge the collaborative relationships between the CIO, CFO, and CEO, most of the 225 respondents say intangible results carry as much weight as hard ROI. Now, there's a new study out of MIT that quantifies what intangibles can do for your business-something that's become increasingly intuitive to executives.
According to the study by Erik Brynjolfsson of MIT's Sloan School of Management and Lorin Hitt of the University of Pennsylvania's Wharton School, intangible assets, when combined with capital investment in IT, can lead to significant increases in productivity and market value. While there's no disputing that a huge surge in productivity in the U.S. economy since the mid-1990s can be attributed to technology, that's only the tip of the iceberg, Brynjolfsson says.
Brynjolfsson places value on intangibles such as open communication, employee empowerment, performance-linked incentives, training, and other investments in human capital (for more on workforce optimization, see "Hitting The Target," April 15, p. 41). Such characteristics help create what he calls a "digital organization." Editor at large Eric Chabrow and senior editor Eileen Colkin delve deeper into the research on page 22.
In times when companies weigh every dollar spent on IT initiatives, the research gives managers something else to think about when measuring the return on their investments.
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