Leading Organizational Learning

price what it is? The easy and some would say obvious answer is
that when firms make more money, their stock price goes up.
Market value follows financial performance. On the surface, this
makes sense, but the facts refute it. Increasingly, a firm’s market
value is not fully explained by financial results such as earnings. A
number of studies have shown that financial results explain 50 to
70 percent of a firm’s market value. The rest is explained by
investors’ perceptions of the firm’s likelihood of achieving similar,
greater, or lesser earnings in the future. This perception about
future earnings is called “intangibles.” Intangibles describe the
capability of a company to deliver on its promises for making
money in the future. Organizations that learn have more investor
value because these organizations not only create new ideas but
also share those ideas throughout their structure, building knowl-
edge networks where technology and communities of practice
transfer experience from one setting to another.

Three Building Blocks of a Learning Organization

In our work, we have found that the following simple equation can
represent the extent to which an organization has developed its
learning capability and can help leaders assess their firm’s overall
ability to learn:^1

Learning capability = generate ×generalize ideas with impact

Examine each element of the equation. Generatemeans creat-
ing new knowledge through discovery, invention, experimentation,
or innovation. Generalizemeans moving ideas across boundaries.
Some companies may seem more adept at doing new things before
others, yet merely having an idea (generating) is not sufficient for
learning. Learning requires that the idea transfer across a boundary,
such as time, geography, or business units. Impactmeans that
something substantial has changed. Learning as an intangible

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