Some Thoughts about Knowledge Assets

The term Knowledge Asset always takes me back to my first career after my undergraduate graduation: accountant. In addition to defining knowledge asset, and discussing how to manage them, which are secondary thoughts in my accounting mind, I think about valuation, after-all if something is an asset, it has a value.

How do we value knowledge assets? Is it the cost to acquire the knowledge? Things like the cost of courses and books, and experience gained over a period of time. Is it what someone else would pay to obtain the knowledge immediately instead of going through the learning curve? Is it the opportunity cost: the cost of lost business or productivity, the cost of a missed connection?

Some of these are more easily determined than others. It is relatively easy to determine the cost of a course or a book, or to determine the cost of a degree or certificate. How is the cost of a missed connection or opportunity to leverage a previous project determined? How do you know what the cost is if you didn’t know that the opportunity existed?
For example, if instead of creating a document management application for your organization, you find that your organization has already purchased one off-the-shelf that you can use, what’s the opportunity cost and do you get credit for saving the company the months of development and implementation time as well as the quicker time to become productive (because you can start using the system within a month instead of 18 months from now)?

The 2009 MAKE (Most Admired Knowledge Enterprises) Report finds that “[t]he 2009 Global MAKE Winners trading on the NYSE/NASDAQ showed a Total Return to Shareholders (TRS) for the ten-year period 1999-2008 of 9.6% – over four times the average Fortune 500 company median.” How do we take this and translate it into the business case for better management of knowledge assets, whether they are tacit or explicit?

All of these things fly around in my brain when I think about Knowledge Assets, I don’t have a quick answer, other than to say pick whichever valuation method makes sense in the situation and use it to build your business case.