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Summary of the Value Creation Index (VCI). Abstract

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CGE&Y - CBI


Books

 

Edvinsson, Corporate Longitude

Kaplan, Norton, The Strategy- Focused Organization

Standfield, Intangible Management

Lev, Intangibles: Management, Measurement, and Reporting

Smith, Valuation of Intellectual Property and Intangible Assets

 

     


Description

 

The Value Creation Index (VCI) is a tool designed to quantify the link between an organization's non-financial performance and its valuation in the markets.

 

Traditional methods of assessing organizational performance are no longer adequate in today's economy. Stock price is less and less determined by earnings or asset base. Value Creation in today's companies is increasingly represented in the intangible drivers like innovation, people, ideas, and brand.

 

Yet these non-financial factors for creating value are difficult to quantify, rarely acknowledged in accounting methods, and are not adequately measured, managed or reported on by organizations.

 

The Cap Gemini Ernst & Young (CGE&Y) Center for Business Innovation (CBI) created a tool to quantify the link between an organization's non-financial performance, creating value and a firm's valuation in the markets. The VCI not only quantifies the impact of non-financial performance on market value, but also identify the specific intangibles that drive value for a given industry. Models have been created for a number of industries including financial services, airlines, pharmaceuticals, telecommunications, and others.

 

While the crucial non-financial value drivers vary by industry, the value creation research team has settled upon some critical categories of intangible performance that determine corporate value creation:

  • Innovation

  • Customer relations

  • Management capabilities

  • Alliances

  • Technology

  • Brand value

  • Employee relations

  • Environmental and community issues

More value creation methodologies

 


Category

Valuing Intangibles

Intellectual Capital

Creating Value

 

 

 

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