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The Intangible Labs Aims To Redefine Value Creation Metrics

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The Intangible Labs Aims To Redefine Value Creation Metrics

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In the dynamic landscape of the business world, metrics serve as our compass. Metrics track, measure, and evaluate every facet of an organization, offering invaluable insights that enable us to refine and optimize our strategies. However, one crucial component of the project cycle often eludes our grasp: the ideation phase. The question then arises, how do we quantify the effectiveness of the value creation phase?

Intangible Labs, co-founded by thought leaders Nilofer Merchant and Tim Kastelle, is taking on this formidable challenge. They hope their trailblazing research will prompt all sectors to reconsider their understanding of value creation and its metrics. Merchant, a recognized voice in business innovation, argues that our current conceptualization of value creation is too narrow and needs a redefinition.

During a one-on-one interview (see below), Merchant shared her insights. “The ‘make money part’ is how we often think about value creation. I’m backing up a little and saying that even before we figure out the business model, there is actual value being created. It could be a product, a service, or even a conversation that leads to a major insight. Those are all activities that create value.”

Missing Links

Astoundingly, given that we operate within an “ideas economy,” we currently lack metrics or indicators to measure this phase of value creation. The stock market, a quintessential barometer of a company’s worth, bases its analyst evaluations on tangible assets such as intellectual property, products, or equipment. But what about the “lightbulb moment”? What about the hours spent nurturing and developing ideas? These are considered “intangible,” yet they are the birthplace of innovation, with no clear way to measure their value or effectiveness.

Within organizations, our metrics tend to prioritize two key areas. The first revolves around market metrics, those indicators that measure efficiencies and outcomes. They include metrics like products shipped, revenue generated, and productivity levels. Then, these metrics get transformed into key performance indicators (KPIs) that serve as benchmarks for reviewing employee efficiency.

The second area focuses on employee engagement data. This data gauges the level of engagement and satisfaction of team members with their work, individually and collectively, across the organization.

However, Merchant argues that there’s a critical missing piece in this measurement puzzle. She said, “What’s missing is the interaction layer. We know how you individually are doing and whether or not you’re producing things. We don’t have any way to measure if you are working together with people to build value and create new ideas.”

Bridging the Gap

Intangible Labs aims to bridge this gap by designing metrics that liberate business leaders stuck between a rock and a hard place. By doing so, leaders can establish an effective co-creation process within their team, ensuring that productive ideation is happening even in their absence. This will also empower them to champion the significance of the ideation process to CEOs and CFOs who are primarily focused on market metrics like production and EBITDA. As many have painfully experienced, an excessive fixation on the bottom line can stifle innovation.

But Merchant doesn’t point fingers at CEOs and CFOs for their focus. Instead, she explains, “The person whose problem I’m trying to solve is that person who is literally trying so hard to help their team do their best work and yet caught between a rock and a hard place. That is not a leadership failure; that is actually a metrics failure.”

Recent Approaches

Intangible Labs is adopting a unique approach to identify this missing interaction layer. Merchant humorously likens their efforts to those of management’s “Caped Crusaders.” However, rather than shouldering the problem alone, they are soliciting input from individuals across various disciplines who have been contemplating these issues for years.

Merchant and Kastelle have engaged in numerous discussions to showcase their innovative metrics and theories to small cohorts of business leaders and leadership experts, actively seeking their input and advice. For example, these working sessions, like one held at Harvard Business School alongside Amy C. Edmondson, involve testing their metrics modelling against her psychological safety research. This practice allows the co-founders to examine their theories in real-time while embodying their co-creation ethos. It’s akin to drinking your own champagne.

At present, their metric model incorporates three levers. The first lever assesses whether everyone is empowered to contribute ideas. The second evaluates if those ideas are being synergized to generate accurate and robust solutions. Merchant articulates this brilliantly, “Real valuable work happens when we’re greater than the sum of our parts.”

The third lever is the measure of care for the community, the land, and the environment. It echoes a commitment that collaboration and decision-making processes are indeed purpose-driven.

While Intangible Labs envisions their model initially finding application in businesses, they aspire to create a tool that will have broader implications across all sectors. Merchant firmly believes in the potential of their work. “We’re in such early days, but I am very conscious of, ultimately, that this has to get solved for more than just business.”

In Summary

I anticipate Intangible Labs making a substantial, positive impact on the metrics of the value creation process. Merchant and Kastelle’s early thinking can be tracked on the Intangible Labs’ website.

Intangible Labs is more than just a thought experiment. It’s a clarion call to redefine our understanding of ideation and value creation. It’s a challenge to the business world to evolve, to look beyond traditional metrics, and to recognize the intangible but undeniable value of the ideation phase. It’s an invitation to embrace a more holistic, inclusive, and innovative approach to measuring success in the business world. And most importantly, it’s a promising step towards a future where every aspect of business, tangible or intangible, is acknowledged, measured, and (hopefully) celebrated.

Watch the full interview with Nilofer Merchant and Dan Pontefract on the Leadership NOW program below, or listen to it on your favorite podcast.

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Pre-order my next book, publishing in November, Work-Life Bloom: How to Nurture a Team That Flourishes, (You won’t want to miss digging in.)

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