From the Industrial Park to the Global Village

The Middle Class worker is sinking in a sea of change ... Is KAM the lifeline?

Knowledge Asset Management (KAM) is an emerging business process that curates the knowledge base within an organization. In the era of the Industrial Park, the value of a business rested primarily in material assets. Although intangible assets, such as brand recognition and market share, played a role in determining the worth of the business, there was no objective way to measure that worth accurately. It was lumped under "goodwill" and priced at whatever number might satisfy a typical buyer in the marketplace.

This obsolete pricing method, although it is still a Generally Acceptable Accounting Practice, simply will not work in the Global Village. Now the potential buyer may be miles apart from the seller in both distance and culture. Because there is currently no easy way to measure the value of the contributions of knowledge workers who now populate the Industrial Park, their value is often dismissed in a sale which pleases owners and shareholders but leaves these workers holding an empty bag once filled with Pension Funds, Income Streams, and Achievable Dreams.

A primary objective of electro-zeta, LLC is to introduce and promote the principles of KAM as a lifeline to save the displaced Middle Class worker from drowning in this sea of change. KAM extends the notion of "good will" into an accounting structure that uses Generally Acceptable Accounting Practices (GAAP) to attribute real value to abstract assets such as the tacit knowledge of a company's workforce.

KAM valuation and reporting is of particular relevance to knowledge-intensive businesses whose financial success rests on the potential value of intellectual property, social media presence and the tacit knowledge of the workforce.

An example of knowledge being appraised as an asset using GAAP?

At UPS it was a common practice for truck loaders and drivers to record loading techniques or route tips they'd developed over the years. Since those artifacts were not identified, cataloged, or valuated, they usually disappeared when employees left the company or went on leave. Once that tacit knowledge was captured and became accessible in a central system, every UPS driver had instant access to it whenever it was needed.

This UPS anecdote underscores the concept of Knowledge Asset Management using knowledge capital valuation techniques. UPS was not trying to manage general “driver/loader knowledge” just their tacit knowledge about specific techniques and routes. To assemble this knowledge artifact required a $600 million route optimization system investment. That’s the top book value of this artifact. The ability to share this knowledge shaved off a documented 1-million miles per month of wasted driver/loader time. At x-dollars per mile, the market value of this artifact can be calculated using Net Present or Future Value formulas. Of course, there is no guarantee that this 1-million per month metric will remain constant. The cost savings can fluctuate much the same as dividends from stock. But the point is that UPS could, if desired, calculate both the market value and future opportunity value of this “driver/loader knowledge” artifact. With that ability UPS has transformed the tacit knowledge of their drivers/loaders into implicit knowledge that can be valuated using Generally Accepted Accounting Practices.