Knowledge Asset Accounting at last!

Since 1994, I have been very interested in the notion of Knowledge Asset Accounting. This term may delight you, surprise you, or simply horrify you!

It all started, actually much earlier, when I wanted to become a Chartered Accountant, in the UK, as my chosen profession. I was only 18 years old at the time and my first job was with a Chartered Accountancy firm in Regents Street, London. There I learned the principles of accounting, and I started life as an auditor. My job, initially, was to ‘cast and cross cast’ (manually at the time) day books of sales and purchase invoices, perform cash book reconciliations, check postings of financial transactions to sales and purchase ledgers, and ultimately to the general ledger, from which the profit and loss statements and balance sheets duly emerged.

Frankly, it was so low paid and I found it boring for me, so I left and went to work for the foreign exchange accounts department for the  Japanese Bank of Tokyo in Moorgate, in the City of London for a few years. This was far more exciting for me, with a quite different Japanese management team, but eventually, again, I became bored.

My next move forward to Knowledge Asset Accounting happened when I was in my mid twenties, and I fell in love with computers, software development, and systems analysis. After several years of this, I started my own packaged software development and distribution companies. Our claim to fame then, was our first successful software solutions for, wait for it, integrated accounting software for the personal computer. We gave birth to bundled software solutions with the leading personal computer manufacturers, marketed by Apple, Amstrad, NEC, Lotus, at least, as ‘Apple Accounting’, Amstrad and NEC Accounting, Lotus Innovations etc. These were exciting times.

I moved on in my career to work with an even more exciting organisation called TMI with companies around the world. They are a world class organisation in human potential and they taught me so much about people productivity, relations and quality. I formed a 50/50 company for several years with its Danish founder, Claus Moller, called TMI Technology, and we developed software to help individuals, teams and organisations achieve better results, or key results. This focused on prioritised task management, goal management, time management, contact and information management. It was from here that I felt that I needed to go even further, to the next  step, which for me was from information to knowledge.

Eventually, I founded Knowledge Associates in Cambridge UK, in the mid 90’s, as by this time I had become very passionate about better ways to create and share knowledge and, more importantly, the wise application of knowledge. I started to think deeply about the identification and application of knowledge assets.

Quickly, I realised, with many failures at the time, that knowledge could not be managed but ‘knowledge assets’ certainly could be easily measured, managed, and reported. My first primitive knowledge asset accounting reports appeared in the late 90’s. This then accelerated rapidly, as Knowledge Associates became a part of a 2 million euro European Commission collaborative research project called Know-Net, in the period 1998 – 2002. This looked deeply into a holistic framework for knowledge assets, combining tacit knowledge flows with codified knowledge stocks. INSEAD Business School, France, were research partners with us, and they did some really good work at the time, to show the relationships and inter-dependencies of human, structural and relational knowledge assets with financial assets. The results of this Know-Net project were published in the book we co-authored called ‘Knowledge Asset Management’, Springer, 2003. (available today on Amazon.com and Springer, but expensive).

But my enthusiasm for any form of knowledge asset accounting started to wain for a while, as I was also, at that time, Chairman of the BSI (British Standards Institution) Knowledge Management Committee, and, after much discussion and deliberation, we all agreed and published a BSI position paper entitled ‘Informed Clarity’ which is still freely available on the web. In essence, the KM Committee thought it was too early, at that time, for a KM standard and any associated standard measurements. So I put knowledge asset accounting on the back burner and went of to live with my wife in the vineyards of South West France, in the foothills of the Pyrenees, with straw hat and guitar too!

Then the big wake up call eventually happened for me when I remembered that, in 2002, there was the 16th World Congress of Accountants held in Hong Kong. Can you imagine 5000 accountants together in one large room! The theme of the conference was ‘The Knowledge Based Economy and the Accountant’. The first plenary session was entitled, and asked the two questions:

What are the opportunities and challenges presented by the knowledge based economy for the accountant?

How do we redefine ‘the accountant’ for the 21st Century?

I internally, intellectually,  exploded!

I started to look at knowledge assets and knowledge asset accounting again, with a more relaxed mind and much more enthusiasm.

The first step for me was to better understand the key and mission critical knowledge assets for each of the key industry sectors, and how to measure them. For example, identifying the key knowledge assets of the commercial Oil and Gas sector, or the key knowledge assets of the Finance and Banking sector, or Pharmaceuticals, Manufacturing, or the key knowledge assets of the public sector in Government, Education, Military, Transport etc. I set about strategically obtaining knowledge asset management consulting engagements for Knowledge Associates from the more receptive, enlightened and adventurous organisations in each one of these important sectors.

Now, in 2015, after many years of developing, testing, abandoning and adopting, I am getting much closer, as we have some pretty good measurements for each of these key assets for each sector.

Today, with our clients, we not only help them identify their key or mission critical knowledge assets, but we are able to suggest meaningful and practical measurements and reporting systems. Wherever possible, we are collaborating and co-creating knowledge asset systems that actually work in very meaningful and valuable ways for them.

If I now refer back to my software roots, I decided to develop a first knowledge asset management system in 1998 using the Lotus Notes collaborative platform. It worked for some and failed for many. In 2007 I launched the next version based on the free tools for social media, wiki’s, blogs etc. This gained much more traction. I believe that the main reason for this is that this version was driven more dynamically by the people themselves, as opposed to being just centrally IT driven. Knowledge must be driven and created by individuals and teams, and leave the security and management of corporate information to the organisation.

This year, we have launched our third version of knowledge asset management and knowledge accounting software, based on mobile phones, tablets, personal computers and an integrated ‘knowledge driven platform’ that can be cloud based or within the corporate firewall. We use this system daily ourselves, as a small knowledge asset management consulting firm with knowledge associates consultants around the world. It helps us to more wisely manage our knowledge assets and forms a bridge to our innovation management.

We have called this KNOWLEDGER. Or, if you wish, you can consider it as a KNOW-LEDGER.

Actually, if you think about this for a moment, the notion of knowledge asset accounting is not rocket science. Instead of accounting for invoices and cash transactions in day books, we can now account for learnings, ideas and insights in a very measurable way. Instead of posting our invoices to day books and to ledgers, we can now post our key learnings to our most relevant knowledge bases. We call these learnings ‘knowledge nominations’ until they are accepted, and the number of knowledge nominations made, accepted, re-worked or rejected are easily measured. They are a good indicator of how well we are working with knowledge. We can now better capture and record our ideas,  get ‘ideas about ideas’ and create ‘great ideas’ to feed into our innovation management processes. Here we can easily measure, as a good indicator, what we call ‘creativity traps’ and the level of creative activity in the organisation. Instead of cash books recording vital cash flows, we can report on the alignment and performance of our ‘knowledge driven tasks’ and ‘knowledge productivity’ with our corporate objectives, recording vital knowledge flows.

So is knowledge asset accounting approaching the more simple, powerful, affordable by all, mainstream usage! We hope so. I have certainly seen knowledge accounting and knowledge asset management grow as a reality around the world this last 20 years.

But why am I writing this blogpost today?

Well, firstly, I will be speaking about the importance of knowledge assets and the emergence of knowledge asset accounting in Jersey, Channel Islands, on Monday. It occurred to me that if Jersey has established itself as a leading international offshore financial centre over many years, managing financial assets, it might also be interested in knowing more about managing and accounting for knowledge assets too. I look forward to these discussions next week.

Secondly, the BSI have asked me to participate once again in their newly formed Knowledge Management Standards Committee. This is because the ISO (International Standards Organisation) have decided to go ahead with an international knowledge management standard and associated measurements. I have been co-opted to this ISO Committee too. Let’s see what happens this time with standards and measurements?

As I said in the beginning of this blogpost, you may love, and you may welcome the idea of knowledge asset accounting. You may be pleasantly or otherwise surprised. Or you may simply and truly hate the idea! I certainly know great thinkers who are firmly in all of these camps. Corporate life seems to me to be a continuing battle between structure and creativity, organisation and mess, knowledge flow and knowledge object. I personally believe that its not an ‘either this or that’ situation but a ‘both this and that’ balance.  Maybe knowledge driven platforms will better provide this.

But if you are intrigued to know more, or if you are interested in following these developments with mission critical knowledge assets, or if you are interested in our knowledge asset management consulting methodologies and tools, and even knowledge asset accounting, across key industry sectors, please let me know.

With enough interest, Knowledge Associates would gladly host a focused Knowledge Asset Management and Accounting Conference next year, with a suitable sponsor(s), with papers and presentations from those organisations around the world that are committed to this new way of becoming more knowledge driven through the wiser application of their key knowledge assets.

For my part, I am re-writing the book ‘Knowledge Asset Management’ with the significant developments since 2002, and I am writing the book ‘Knowledge Asset Accounting’ for publication next year. So I plan a series of regular blog posts to get feedback to help me along the way.

I have also made a note to check out the next World Congress of Accountants Conference, and the key international conferences that are held in the more traditional tangible Asset Management area, to see if their thinking has moved forward towards knowledge asset management and accounting in any way.

I would welcome your feedback, and, if you are interested, I will certainly keep you posted with our developments, and our progress with relationships to emerging international standards.

Ron Young

Ron Young

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