Value-Creation Models for Value-Based Management: Review, Analysis, and Research Directions

Models of value creation that have been proposed for supporting value-based management are described and analyzed, including the Balanced Scorecard, the Baldrige Quality Award Criteria, the Deming Management Method, the Service-Profit Chain, and the Skandia Intellectual Capital Model. These models are compared, their potential for guiding the identification of value drivers and performance measures for value-based management is assessed, and management issues that must be addressed if such models are to contribute to long-run value creation are explored. These issues include causally linking value drivers to each other and to financial outcomes, the extent to which the models take a dynamic, or whole-system, view of value creation, and whether multiple value drivers should be explicitly weighted and combined to form a “value index.” Finally, the substantial body of research evidence linking intangible value drivers to financial outcomes is reviewed, and some directions for further research are offered.