Introduction
The transformation from the industrial age to the information age(1) or knowledge society(2) represents a time of great change for business organizations as well as for individuals. Service industries replace manufacturing industries and the traditional
factors of production: land, labor, and capital are replaced by intellectual assets as the scarce resources. “If there is one distinguishing feature of the new economy that has developed as a result of powerful forces such as global competition, it is the
ascendancy of intellectual capital.”(3) Intellectual capital (IC) and its measurement is the main topic of this research project. The declining importance of physical assets as well as the quest for shareholder value creation have made the performance evaluation of companies that used to be solely based on financial figures inadequate.
For information age companies it is essential to value performance beyond quantitative measures.(4) Practitioners like Security Exchange Commissioner (SEC) Steven Wallmann as well as academics like New York University’s Stern School of Business accounting professor Baruch Lev stress the current accounting model’s bias
towards physical assets and emphasize the necessity of incorporating non-financial measures to evaluate organizational performance.(5) The Balanced Scorecard (BSC) is a performance management and measurement system that fulfills this criterion. In addition to the traditional Financial Perspective, the BSC measures performance
from the Customer Perspective, the Internal Business Process Perspective, and the Learning and Growth Perspective, thereby functioning as a tool to navigate businesses in a competitive environment that is growing more and more complex.
The aim of the thesis is to illustrate how the BSC can be used as a strategic management system that places a strong focus on IC and its measurement.
Furthermore, it will be analyzed how information technology (IT) can be used to facilitate a BSC and its implementation.
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1 Stewart (1997): p. 3
2 Drucker (1996): p. 67
3 Bontis (1998): p. 64
4 Eccles (1991): p. 131
5 Lev (1997): p. 1; Wallman (1997): p. 104
Table of Contents
1 Introduction
2 Strategic Management in the Information Age
2.1.1 The Industry-Based View of the Firm
2.1.2 The Resource-Based View of the Firm
2.2 A New Type of Organization
2.2.1 Characteristics of the New Organization
2.2.2 New Organizational Forms
2.2.3 New Strategies
2.3 Value Creation in the Information Age
3 Intellectual Capital
3.1 Shortcomings of Traditional Accounting Methods
3.2 Economics of Knowledge-Based Resources
3.3 The Concept of Intellectual Capital
3.3.1 Human Capital
3.3.2 Structural Capital
3.3.3 Customer Capital
4 Performance Measurement with the Balanced Scorecard
4.1 Financial Perspective
4.2 Customer Perspective
4.3 Internal Business Process Perspective
4.4 Learning and Growth Perspective
4.5 The BSC as a Strategic Management System
4.5.1 Cause-and-Effect Relationships
4.5.2 Implementing a Balanced Scorecard
4.5.2.1 Clarifying and Translating Vision and Strategy
4.5.2.2 Communicating and Linking
4.5.2.3 Planning and Target Setting
4.5.2.4 Strategic Feedback and Learning
4.6 A Critical Look at the Balanced Scorecard
5 Enabling the Balanced Scorecard
5.1 Requirements for an Automated Balanced Scorecard
5.1.1 Strategic Requirements
5.1.2 Technical Requirements
5.1.3 A Critical Look at Automated Balanced Scorecard Solutions
5.2 NetFicient
5.2.1 NetFicient Add-Ons
5.2.2 NetFicient Knowledge
5.2.3 eSurvey and NetFicient Project
5.2.4 A Critical Look at NetFicient to Support a Balanced Scorecard
5.3 Conclusion
6 Outlook
Objectives and Topics
The primary objective of this thesis is to demonstrate how the Balanced Scorecard (BSC) can be utilized as a strategic management tool with a specific focus on Intellectual Capital (IC) and its measurement. Additionally, the research analyzes how information technology (IT) and groupware-based applications can support the implementation and continuous operation of a BSC.
- Evolution of strategic management in the information age
- Economic importance and classification of Intellectual Capital
- Methodological framework and perspectives of the Balanced Scorecard
- Integration of non-financial measures in corporate performance systems
- Technical requirements and IT support for automated BSC solutions
Excerpt from the Book
3.3.1 Human Capital
At the beginning of the information age Human Capital becomes more and more important. Not the physical assets but the brains that created Notes were the reason for IBM’s acquisition of Lotus at 15 times its book value. It is crucial to realize that Human Capital is more mobile than ever and that the best people can easily walk out the door taking all their skills and knowledge with them. Thus, Human Capital cannot be owned by the company but only rented. It can be defined as the employees’ capabilities, their knowledge, their skills, and their experience. For a company to capitalize on its Human Capital it is essential to establish what is commonly referred to as efficient KM. Although KM is only a small part of the IC concept I am going to present it as a digression because of its growing importance.
The intention is to offer a brief introduction to KM theory by giving some definitions and comparing the knowledge approaches of Japanese and Western companies. It is difficult to clearly distinguish between KM and Intellectual Capital Management as the two terms are often used synonymously although they are in fact complementing each other. However, according to Edvinsson “the goal of KM is to improve a company’s value creation capability through the more effective use of knowledge” while the focus of Intellectual Capital is “to improve the company’s value generating capabilities through identifying, capturing, leveraging, and recycling intellectual capital” or as Johan Roos from IMD in Lausanne puts it: “Whereas knowledge management is a theory in search of practice, IC is a practice in search of theory.” Thus, IC includes value creation as well as value extraction. KM is not the focus of this study. Moreover, I am trying to show the role of KM within the IC approach and the necessity to give some definitions in order to make IC measurable.
Chapter Summary
1 Introduction: Provides an overview of the transformation from an industrial to an information-based economy and outlines the research focus on Intellectual Capital and Balanced Scorecards.
2 Strategic Management in the Information Age: Explores the evolution of strategy frameworks and the transition toward value innovation and resource-based views in competitive environments.
3 Intellectual Capital: Defines IC components, analyzes the economics of knowledge-based resources, and introduces measurement concepts through a case study on Skandia.
4 Performance Measurement with the Balanced Scorecard: Describes the BSC framework, its four perspectives, and its role as a strategic system for translating vision into operational metrics.
5 Enabling the Balanced Scorecard: Examines technical requirements for automated BSC systems and evaluates the role of the groupware-based application NetFicient in supporting the BSC process.
6 Outlook: Summarizes the challenges of the ‘new economy’ and the long-term potential for integrating IT and management practices to measure organizational performance effectively.
Keywords
Balanced Scorecard, Intellectual Capital, Strategic Management, Knowledge Management, Performance Measurement, Information Age, Human Capital, Structural Capital, Customer Capital, NetFicient, Shareholder Value, IT Infrastructure, Economic Profit.
Frequently Asked Questions
What is the core subject of this thesis?
The work focuses on the intersection of strategic performance measurement and the management of Intellectual Capital (IC) in modern, information-age organizations.
What are the central thematic areas?
The core themes include strategic management evolution, the economic valuation of intangible assets, the structure of the Balanced Scorecard, and the role of groupware IT solutions in enabling management systems.
What is the primary goal of the research?
The aim is to illustrate how the Balanced Scorecard serves as a holistic strategic management system that emphasizes IC and to analyze how IT tools can facilitate its implementation.
Which scientific methods are applied?
The author performs a conceptual analysis of management literature and business frameworks, supplemented by a case study (Skandia) and an evaluation of specialized groupware software (NetFicient).
What is covered in the main section of the paper?
The main part details the theoretical foundations of Intellectual Capital, the four perspectives of the Balanced Scorecard, and the technical requirements for automated scorecard systems.
Which keywords characterize this work?
Key terms include Balanced Scorecard, Intellectual Capital, Knowledge Management, Shareholder Value, and performance indicators.
How does the author define Human Capital?
Human Capital is defined as the knowledge, skills, and experience of employees, which cannot be owned by the organization but only rented, making retention a critical strategic issue.
What role does NetFicient play in the BSC process?
NetFicient acts as a groupware-based enabling infrastructure that facilitates communication, knowledge sharing, and structured data presentation throughout the Preparation, Implementation, and Feedback phases of a BSC project.
- Quote paper
- Vincenz M. Behn (Author), 2000, Performance Measurement from the Intellectual Capital Perspective. A theoretical approach through a groupware-based intranet application, Munich, GRIN Verlag, https://www.grin.com/document/294
