Is Knowledge Really an Asset?

“Knowledge is the key asset of the support organization.”
The KCS Practices Guide, v5.1
The Consortium for Service Innovation

If I had a nickel for every time I quoted the KCS practices guide and asserted that knowledge is an asset…I’d have a lot of nickels.  I say it because it’s important to remind people that knowledge work isn’t just something “nice to do” if we get around to it.  Knowledge is central to the work of the service and support organization—and, to most of the other knowledge-intensive functions in the organization like development engineering, sales, product management, and HR.

So is it time to capitalize the knowledgebase?  (I know accounting probably isn’t your favorite topic, but please bear with me—this could be important.)

When we talk of knowledge as an asset, we’re generally speaking metaphorically.  Knowledge is a productivity enhancer, just like a lathe in a machine shop.  It costs money up front, but makes it faster, easier, and cheaper to do work over its lifetime.  A lathe should have positive ROI—that is, it should save more money over its lifetime (and ideally, over its first year or two) than it costs.  Knowledge should be the same way—it should generate more value that it costs to produce, maintain, and deliver.

Enterprises know how to account for lathes, and buildings, and mainframes, and other physical items that return value over years of use.  Accountants treat them as a capital expense, and depreciate them on the balance sheet throughout their usable life.  This isn’t accounting trickery; accountants are required to match the expense (the depreciation) with the same time period as the benefit.  And it’s not just tangible goods that should be treated this way: for example, home-built software that runs a web store can be capitalized just the same way a brick-and-mortar store can be.

So, are we serious about “knowledge is an asset?”  Should we fund knowledge development out of the capital budget?

I’m not an accountant, so I’m not going to weigh in on the GAAP aspects of this—I hope more knowledgeable people will in the comments.  I know some smart companies are at least looking in to it.

I am very interested in what this might mean for our knowledge programs:

• If we can move some portion of funding for knowledge development to a capital expense budget, can we make ourselves less susceptible to capricious budget cuts?

• For companies moving from licensed knowledgebase software (capital expense) to SaaS (operational expense), does this move free up capex budget for the knowledge asset?

• Is it easier to convey the value of knowledge if we capitalize it?  Or do we risk undermining the core KCS message that knowledge is a byproduct of solving problems?  (Maybe if we just focus on capitalizing Evolve Loop content?)

Anyhow, at this stage, I certainly have more questions than answers.  But I’ve always thought it a little bit backwards that we capitalize the knowledgebase tool, but not the knowledge itself.  Maybe it’s time to set it straight.

ps – a programming note: we’ve been very remiss about contributing to this blog.  As many of our support clients tell us, “this job would be perfect if it weren’t for all the customers.”  We’ll be back to our regular every-other-week or so schedule now.