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The Knowledge Asset Measurement Model
The Knowledge Asset Measurement Model aims to improve on current approaches
The Knowledge Asset Measurement Model has been developed through leveraging our knowledge and understanding of the Knowledge Management systems by:
- taking into account the research findings relating to successful implementations of IC measurement systems
- integrating the best of the current approaches, and
- reviewing and minimising the shortcomings identified within each of the current approaches.
This translates into a model (see Figure) which:
- Provides a framework for systematic measurement of business performance measurements and knowledge assets/intellectual capital/Intangible assets.
- Follows the emerging standard of distinction among the IC categories into human, structural/internal and market/external.
- Incorporates the stocks from and the flows between Market Assets, Human Assets, Structural Assets and Financial Assets. This enables us to focus people's thinking about both knowledge as a strategic asset and the process for transforming (and managing) that asset which supports the basic premise on which the Knowledge Asset Management Method is based.
- Is developed through a Top down, Bottom up process.
- When implemented, will be company specific (i.e. not be the same as another organisation's or as one of the examples).
- Must consider the links between each of the categories and financial capital, i.e. how much the company is spending in each category as well as how much value is generated by each of the categories.
In describing this model we have created examples of asset stocks and asset flows which are a composite of intellectual indicators from other approaches. We reviewed these for robustness, precision and relevance and also developed others in relation to asset flows and key knowledge management concepts (eg. competence, best practice, learnings, best knowledge, Intellectual property etc).
Summary of Knowledge 'Stock' Indicators
The following table shows examples of the 'stock'
Human Assets | Structural Assets | Market Assets | Financial Assets |
- Average years in the industry
- Employee turnover/ industry average
- % of managers with advanced degrees
| - Key process efficiency indicators (e.g. order filling, error rates, R&D efficiencies)
- Organisational culture indices
| - % of net profits coming from new business or products
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Knowledge Asset Flows
The flow, that is the how knowledge is tranfered between human, structural and market assets and their resulting impact on the bottom line is extremely important
The following table gives some examples of the indicators that capture the essence of a flow through which an asset is transformed from one category to another. For example, let us assume we believe it is critical to the success of a strategy that some particular knowledge held by one person should be transformed into a structural asset (ie. Something that does not leave the office when the person does). Initially, just capturing, codifying and making available that knowledge to the key people it affects could be your measurement of success. What you need to consider measuring is not only the 'stock' of the human asset or the 'stock' of the structural asset involved but on the 'flow', focusing on how efficiently you have transferred this specific knowledge.
 | Human Assets | Structural Assets | Market Assets | Financial Assets |
| Human Assets | - Internal training expenses
| - Hours spent codifying processes
- Best Knowledge codified and easily available
| - Manhours spent on a relationship/ Customer profit contribution
| - Consulting fee per manhour (net of administrative costs)
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| Structural Assets | - Utilisation of best practices
- Attractiveness indices for recruiting
- Employee retention indices
| | - Profitability of uninvited contacts
| - Revenues from data base sales
- Price premium over competition
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| Market Assets | - Assessment by employee of personal development through external relations
| - Organisational learning from partners (JVs, suppliers, customer.…)
| | - Profitability of referrals
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| Financial Assets | | - Advertising and marketing investments
- Improvements in working environment
| - Investment in relationships
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Implementing the Knowledge Asset Measurement System
The process for developing the measurements is shown in the figure. We start Top Down: identifying the organisation's vision, strategy, critical success factors (CSFs), the business performance measurements for those critical success factors and the key knowledge assets that should be associated with the CSFs. The CSFs and their business performance measurements can then be cross referenced to the Know-Net IC model framework (ie. Asset categories of Human, Structural, Market and Financial).
We then switch to a bottom up process: starting with the knowledge assets identified for each of the key CSFs and developing the knowledge asset measurements for them. These are then cross referenced to the Know-Net IC model framework.
THE KNOWLEDGE ASSET MEASUREMENT PROCESS
Evaluate Your Strategy
Ask How do you achieve above normal returns?
Identify your Critical Success Factors
Ask What are the CSFs to succeed in your strategy.
Document Measurements for these CSFs
Ask How do you measure these CSFs. Ask What should you be measuring for these CSFs. Document high level snapshot of measurements
Identify your Key Knowledge Assets
Ask What are your intangible and knowledge assets? Ask What are the assets associated with your CSFs. Ask Do your existing assets match those needed to support your CSFs?
Develop IC Asset Measurements
Ask How do you best measure these assets? Agree and document bottom up developed details of measurements.
Implement/Pilot the Measurement Systems
Enhance and integrate reporting systems.
Establish Continuous Review Cycle
Introduce review cycle for measurement system. Ask Is this measure useful, indicative etc? Ask is there a better way to do this?
Figure: The Knowledge Asset Measurement Process
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