March 09, 2008

Knowledge as Asset?

Asset management is a broad topic, especially when asset is no longer a term only limited to physical asset. People more and more frequently using the term like Intellectual Asset Management, Intangible Asset, and Intellectual Capital.

This new trend, new economy, or even new value creation, has recognised by many intellectuals such as Peter Drunker who frequently used the term knowledge workers, knowledge organisations, and knowledge economy. The landscape also dramatically changed, since the proliferation of technology in particular information technology. According to research, prior to 90s 70% of U.S.A.'s investment went to tangible goods and some 30% went to intangibles. However, today the portion has inverted.

It is perhaps most noticeable in the stock prices,  the relationship of market value and book value was more than 6 times by the end of 90s in comparison with 1 time in the 70s. For some companies, especially IT firms, about 90% of their market capitalisation was in intangibles. Some, such like Skandia tried to visualise this change of value creation, and made an attempt to give a sounding explanation to their shareholders and the public at large. Skandia has included a series of supplement to accompany their interim and annual report through out the late 90s.

Skandia Market Value Scheme

However, since bust of dot com bubble in 2001, and the late crisis in financial industry, how much does the intellectual asset and capital contribute to the creation of value is remain to be justified. (Surely, such asset/capital is an very important and critical factor for any business. ) 

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