value insights

Innovation and Well-being indicators- Valutrics

How should one measure well-being? Money is not everything. There are many more features that shape people‟s lives.  How comfortable is their housing? How clean and safe is their local environment? Are they able to participate in political  and social activities? Do public institutions respond to their demands? To what extent do people benefit from quality health care and education services? What is the value of services produced by households for their own use, such as  the care that they provide to their children and the elderly? All things considered, are people satisfied with their life in general?

Well-being-based innovation measures have the potential to capture those factors that are generally agreed to be very important to innovation, but are hard to measure. These include the culture or climate of an organization and the quality of management. These and similar factors can be crucially important to the well-being of organizational members, and to their effectiveness, but are acknowledged as being difficult to capture.
Organizations could potentially benefit from creating systematic methodologies for assessing the well-being of their employees; the development of standardized well-being-at-work audit tools would allow for comparisons between organizations as well as providing benchmarks for the organizations themselves. In this way well-being-based measures might be particularly effective in evaluating innovations that fail – with ‘stupid failure’ being due to a lack of organizational well-being and ‘intelligent failure’ being a symptom of healthy risk-taking.


We distinguish between current material living conditions and quality of life, on the one  hand, and the conditions required to ensure their sustainability over time, on the other:
– Material living conditions (or „economic well-being‟) determine people‟s consumption possibilities and their command over resources. While this is shaped by GDP, the latter also includes activities that do not contribute to people‟s well-being (e.g. activities aimed at offsetting some of the regrettable consequences of economic development) while it excludes non-market activities that expand people‟s consumption possibilities.
– Quality of life, defined as the set of non-monetary attributes of individuals, shapes their opportunities  and life chances, and has intrinsic value under different cultures and contexts.
– The sustainability of the socio-economic and natural systems where people live and work is critical for well-being to last over time. Sustainability depends on how current human activities impact on the
stocks of different types of capital (natural, economic, human and social). However, suitable indicators for describing the evolution of these stocks are still lacking in many fields. For this reason, indicators of  sustainability are not included in this Compendium, although some of them will feature in “How‟s Life?”.


The results of a positive innovation will be, depending on the nature of the organization, higher-quality products or services, increased revenues and profits, and greater satisfaction of service users and beneficiaries. The result of improved products and services and concomitant satisfaction levels would be expected in many cases to include greater well-being for the consumers or beneficiaries of these products and services.

More indirectly, increased revenues and profits might also lead to improved well-being to the extent that improved material circumstances contribute to well-being. Given the constraints on the ability of income and material wealth to affect well-being, however, some innovation which results in productivity gains will not result in lasting well-being outcomes. This provides a key reason why both the productivity and well-being outcomes of innovation should be measured separately, as they cannot always be assumed to correlate.
In some sectors of the public and third sectors, the relationship will be more direct. Social services that are aimed at reducing misery in its various forms have well-being as a specific outcome. Clearly, innovations that increase the impact of the factors that cause well-being will also increase the well-being of beneficiaries.



First, it distinguishes indicators based on objective, externally observable data and those which are subjective and therefore require asking people to report on their judgements, feelings and experiences. Approaches which involve both objective and subjective measures are described as ‘blended’ or ‘extended’. The second distinction is between measures which apply at the level of individuals, and those which are aggregated to apply to whole population groups or societies.

Objective, individual-level indicators of well-being range from those based on economic status, such as income measures, to basic-needs approaches which measure the state of a set of life conditions which are presumed to be required to allow people to survive and thrive, such as health, education and income. At the aggregate level, there are equivalent objective measures which range from GDP, to measures which adjust GDP to take account of aspects which are otherwise missing, such as inequality, environmental costs and expenditure due to negative events, and those which combine GDP data with objective measures of life expectancy and knowledge.

Subjective indicators are becoming increasingly accepted as the rapidly maturing science of well-being creates a stronger more robust evidence base particularly for the most commonly used measure – life satisfaction. Life satisfaction is effectively a cognitive assessment approach, asking people to appraise how their lives overall are going. Satisfaction measures have also been extended to multiple-item scales, for example Diener’s 5-item Satisfaction with Life scale.

Well-being has the potential for greater applicability to innovation outside the manufacturing sector. It is a more appropriate indicator for consideration of innovation in services, the creative industries, the public sector and third sector, where productivity and conventional economic indicators clearly fail to capture outcomes completely.
In particular, the service economy, the knowledge economy, creative industries and many services in the public and third sectors are all very dependent on the individuals carrying out activity. In this context it is natural that the well-being of those individuals would be a vital ingredient.
This dependency on individuals has different aspects. First, in many (though not all) of these sectors, the delivery of the product or service consists, in whole or in part, of an interaction between the employee/ member and the customer/ beneficiary. This is the case with many parts of the public sector – especially those at the local authority level. It is also the case in many knowledge-economy service businesses, such as accounting or consulting.





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