Tuesday, 10 May 2016

Can we view knowledge as an asset?

There are two views on treating knowledge as an asset. How do we resolve these views?

Creative commons image from jphotostyle
Some people like this view, as it emphasises the value of corporate knowledge. Others don't, as "asset management" generally is associated with the management of tangible things, and knowledge is far from tangible.

There are two components in the dictionary definition of an asset:
  • a useful or valuable thing or person
  • an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.
And you can see how these two components of the definition feed the two views of whether knowledge can be seen as an asset.

Certainly knowledge is both useful and valuable.  It's really hard to come up with an exact and defensible figure for the value of knowledge, but you can make an estimate in "orders of magnitude" terms. You can ask "if we forgot how to do what we do, how much would we lose?" (or even, "How much would it cost to rebuild or regain that knowledge (see examples from Boeing and the NNSA). Or you follow Larry Prusak, and claim that the value of knowledge equates to 60% of your organisations non-capital spend

When you do make an estimate, that estimate is a very large number. I know that one Drilling organisation estimated that their knowledge was worth $500 million on an annual basis.

Knowledge has huge value to an organisation, and as such is an asset.  However if knowledge is an asset, it is an unusual one, and so is it's management.

Knowledge is the ultimate sustainable resource. Knowledge is one of the few assets that you can give away to someone else, but still keep for yourself. It's like the flame on a candle. if you hoard it, your candle illuminates a small patch of darkness. If you share the flame among multiple candles, you can light a whole cathedral.

Unlike money, knowledge does not have a "one-time use" - it does not add value to one person at a time, and sharing it just multiplies the value. If you share money with someone else, you each have half the cash. If you share knowledge, you each have the same amount of knowledge. Often you have more, as by sharing knowledge with someone else, you often co-create something new. Therefore, while hoarding money is understandable, hoarding knowledge makes no sense.

 Also knowledge is a uniquely human attribute, and although knowledge can be conveyed, stored and shared (to some extent) through the medium of technology, it is only created and applied by people. Finally knowledge management has a multiplicative power. As the power of a network increases with the square of its nodes, so the power of knowledge increases with the square of the number of people involved. Double the size of your knowledge sharing community, and you quadruple its power.

So knowledge is both an asset in that is valuable, and a very unusual asset in that it is not an item of property. If we are to treat knowledge as an asset, and introduce some of the concepts of asset management such as

  • Clear ownership
  • Maintenance
  • Value delivery
then we also need to take account of the unique nature of knowledge, and manage it appropriately. 

That's what Knowledge Management is for. 

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