Re-discovering Measurement
6. Profiling Measurement Approaches
6.1 Introduction to VMRC's online system for profiling measurement approaches
(128) In order to be of practical use, the concepts and criteria outlined in Sections 4 and 5
need to be embedded in a system that:
- enables comparisons to be made between and among various measurement approaches; and
- can portray the results of these comparisons in an accessible manner.
(129) In many cases, assessing a measurement approach in relation to these concepts and criteria
is a matter of opinion, and opinions may differ depending on whether the assessor is a user of the measurement
approach, or was involved in developing the approach, or has experience as a practitioner.
(130) This section provides a brief introduction to the online system VMRC has developed
that enables participants in the New Paradigm Initiative to contribute their views on how various measurement
approaches address the criteria described in the previous section.
6.2 Comprehensive Profiling Framework
(131) The concepts and criteria described in Sections 4 and 5 are reflected
in the following Profiling Framework.
6.3 Perspectives for profiling measurement approaches
(132) In order to obtain meaningful and useful results, it is important to capture profiling
information from various perspectives.
(133) The innovators or developers of a particular measurement approach may have certain
objectives in mind in developing the approach. Their assessment of an approach relative to specific criteria
might therefore reflect their design objectives.
(134) On the other hand, the users of the measurement information provided through a specific approach
are likely to reflect their actual experience in assessing an approach relative to the same criteria.
(135) Practitioners who are involved in implementing the approach are likely to bring another perspective
to bear, since they will have been involved in making the compromises and adjustments that are inevitable in translating
theory into practice.
(136) A fourth perspective might be that of measurement experts who can draw on a depth of
technical expertise in assessing a broad range of measurement approaches.
(137) VMRC's online system for profiling measurement approaches invites participants to first
categorize themselves as:
- A User;
- A practitioner;
- An inventor or developer; or
- A technical expert or measurement researcher.
(138) This distinction has three practical consequences.
(139) First, participants in the User category have the option to select a subset of
the Profiling Framework that excludes the more detailed technical criteria. The User framework is as follows:
(140) Secondly, the wording of the language ladders, as described below, differs for the various perspectives.
(141) Thirdly, capturing different opinions in this manner enables comparisons to be made across
the different perspectives. For instance, it is possible to compare how user experience with a particular approach
relates to the design objectives of the innovator of the approach.
6.4 How measurement approaches are assessed
(142) 1. Each "cell" in the above framework contains a number of "factors" that in total
encapsulate the relevant criteria for the cell.
(143) For example, here are the factors related to cell A1: Value Measurement Utility
| A1.1 Value measurement of tangible / intangible assets |
| A1.2 Value measurement of past/future value streams |
| A1.3 Value measurement of business units/enterprises |
| A2.4 Value measurement from enterprise perspective |
| A2.5 Value measurement from market/buyer perspective |
| A2.6 Value measurement from external stakeholder perspective |
(144) 2. Each factor has associated with it a "language ladder" that typically describes 4 locations
along a continuum. NPI participants are invited to select the statement that best corresponds to the positioning of
the measurement approach relative to the continuum.
(145) For example, here is the language ladder related to factor A1.1 Value measurement
of tangible / intangible assets, reflecting an Inventor Perspective.
| A. The approach is not designed to quantify value related to specific assets; |
| B. The approach is designed to quantify value, according to some value concept, related to a
tangible assets, but is not intended to quantify value related to intangible assets. |
| C. The approach is designed to quantify value, according to some value concept, related to intangible
assets, but is not designed to quantify value related to tangible assets. |
| D. The approach is designed to quantify value, according to some value concept, related to both tangible
and intangible assets. |
(146) From a User perspective, the statements read as follows, focusing on the user experience, rather than the
innovator's design intention:
| A. The approach is useful for quantifying value related to specific assets; |
| B. The approach is useful for quantifying value, according to some value concept, related to a tangible
assets, but is not useful for quantifying value related to intangible assets. |
| C. The approach is useful for quantifying value, according to some value concept, related to
intangible assets, but is not useful for quantifying value related to tangible assets. |
| D. The approach is useful for quantifying value, according to some value concept, related to both
tangible and intangible assets. |
(147) 3. Reflecting the fact that most measurement approaches are not static and that innovation
and development is continuing, participants are invited to make 3 selections with respect to each lanaguage ladder:
- The statement that best reflects the current situation (Current);
- The statement that best reflects the desired situation in the short-term (Short-term Target);
- The statement that best reflects the desired situation in the long-run (Long-term Target).
(148) These perspectives may provide highly useful feedback to both innovators and practitioners.
6.5 Reporting
(149) Related to each of the 15 cells in the above framework is a chart in the
form of a "2 X 2 matrix". Based on the responses to the language ladders for each factor in the cell,
we can generate a composition position for each measurement approach in the "2 X 2 matrix". (The way this
works is by linking each individual factor to one or both of the axes of the matrix.)
(150) For example, here is the "2 X 2 matrix" corresponding to cell A.1 Value measurement utility:
(151) Participants are able to select from a number of reporting options, which in turn determine
which subset of assessments are mapped onto the charts. Reports are available both online and as downloadable documents
in Portable Digital Format (pdf).
(152) Sample reports illustrating the above points are available as described in Appendix B.
6.6 Initial phase of online profiling
(153) In order to move forward, rather than begin to profile all of new measurement approaches
(such as those listed in Appendix A), VMRC has selected a subset of approaches to be profiled in the initial round.
The subset chosen is as follows, although this may be expanded based on the preferences of the initial round participants.
|
Approach
|
Innovators / Exemplars
|
What it is
|
How it works
|
Intangibles
|
|
IP Valuation
|
|
|
Conventional tangibles valuation approach applied to
intangibles, using the market, cost, or income valuation methods.
|
|
IP Score¨
|
Danish Patent Office
|
Software that incorporates a method for valuing patents
|
Uses a set of qualitative inputs combined with basic
financial data to project a Net Present Value for individual patents, which
can be aggregated into an overall portfolio value, along with related
analytics. (Details at www.ipscore.dk )
|
Indicators
|
|
Balanced Scorecard
|
Kaplan, Norton
|
Framework for measuring organizational performance
|
Develops a framework of 20-30 metrics for tracking
performance in four categories (financial, customer, internal processes,
learning and growth) linked to strategy and related objectives. (Details at www.bscol.com )
|
Market
Cap
|
|
Future Value ManagementTM
|
Accenture, Burgmann
|
|
Market cap is decomposed into cash, value of current
operations, and the residual is Future Value. Various analytics are proposed to estimate how various
actions could potentially influence the value of this residual in the future.
|
Capitals
|
|
IC RatingTM
|
Edvinsson, Intellectual Capital.se
|
Method for valuing intellectual capital / non-financial
assets
|
Proprietary tool based on Edvinsson's work. IC is
decomposed into various components, each of which is assessed in relation to
Efficiency, Risk, and Renewal.
Approximately 250 elements are rated using a scale adapted from
Standard & Poor, where AAA is "best grade" and D is "worst". It is not yet clear whether the
methodology also generates a financial valuation.
|
|
IC Reporting
|
Danish Ministry of Industry
|
Method for external reporting on IC
|
Provides a framework for external reporting on
intellectual capital, based on a pilot project involving Danish firms
|
Value
Streams
|
|
Intangibles Value Stream Modelling
|
Sullivan, McLean, CICA
|
Method for quantifying the value potential of tradeable
intangibles
|
Models the value streams associated with intangibles
taking into account multiple contexts and perspectives.
|
6.7 Instructions for NPI Participants
(154) Detailed instructions for users, practitioners, innovators, and technical experts and
researchers who wish to participate in the initial round of the measurement profiling process are available on the
NPI website, as indicated in Appendix B.
