Analysing and improving the strategic alignment of firms’ resource dynamics

Purpose: The purpose of this paper is to shed light on improving value creation from intellectual capital (IC) through reducing causal ambiguity and finding effective IC interventions. Design/methodology/approach: First, several guiding rules demonstrating the contribution of system dynamics (SD) to the field of IC management are introduced. Second, evidence for modelling resource dynamics is provided across a knowledge-based industry, insurance. Third, a management problem of an insurance company is modelled and then simulated using SD tools to monitor and improve the alignment of key resources with the firm’s market growth strategy. Findings: The modelling and further simulation practice demonstrated the advantages of applying SD for analysing resource management problems to identify the critical IC components, intervention points and decision rules that may stimulate value-creating loops. Specifically for the case of an insurance company’s failure in market growth, it led to recognising the critical role of agency sales productivity as a key component of company’s relational capital and the intellectual liabilities that can lead to value destruction. Originality/value: Reducing causal ambiguity in IC value creation through modelling and simulating firm resource dynamics is the main contribution of this paper. It enables finding the best intervention points for developing IC-based initiatives to stimulate value-creation mechanisms, as well identifying possible points of value destruction.