Measuring organizational renewal capability: case training service business

Abstract

PurposeThe purpose of this paper is to provide a quantitative measure for organizational renewal capability which would enable inter‐firm comparison and external communication. To make the tool more concrete for the reader, a case organization with the measurement results and conclusions is described.Design/methodology/approachA method of how renewal capability can be shown on an organizational level and measurement is demonstrated. The approach is based on systems thinking, but it also has boundary surfaces with the knowledge‐based theory of the firm, dynamic capability approach, and intellectual capital (IC) research. A tool for analyzing and measuring organizational renewal, called KM‐factor®, and the theoretical model behind it, is presented.FindingsThe preliminary analysis indicates that the indexes of KM‐factor® correlate strongly with the future financial success of the company. Thus, the results refer to the fact that companies with (system based and strategy connected) renewal capability have more competitive advantage than others. It is crucial for the organization to understand the required change direction in renewal capability to achieve sustainable competitive advantage.Originality/valueThe topic of renewal has been increasingly dealt with by the research traditions of IC, knowledge management and strategic management. However, even if several relatively consolidated theories about the composition of IC or competitiveness have been presented – renewal being one of the components – the operational and measurement perspectives of continuous renewal have mainly been neglected. This paper demonstrates a quantitative and practical implementation of organizational renewal capability measurement.