TABLE OF CONTENTS The reality of understanding and measuring knowledge represents a difficult task. Having said this, we must understand how vitally important knowledge management and measurement are to any organization. Elements of knowledge management were covered in the previous chapter because of its significant impact on value and value management. There will be no single answer on valuation methods that will be satisfactory, least of all to accountants. In this instance, the financial people are going to have to accept some nonlinear concepts and measures.
Knowledge, while it defies measurement, is the key strategic component to creating and sustaining value. There have been four primary tools for measuring intangibles and knowledge that include:
Direct intellectual capital (DIC) Methods where the value is estimated using assessment methods and placing a dollar value on the components.
Market capitalization methods (MCM) Equivalent to the difference between a company s market capitalization value and shareholders value.
Return on assets (ROA) methods Discussed under the knowledge scorecard technique in Chapter 12 and also the other value-based metrics that have been previously described.
Scorecard method Identifies the various components and is measured through indexes and graphical presentations based on using a composite index of some type, but without placing a dollar value on the amount of intangible assets.
There will not be a clear method that will satisfy every question. The best advice I can offer is what you have already seen presented, which are EVA , balanced scorecards, and Baldrige assessment...
