Accounting for “Social” Assets

by Dan Robles on 03/14/2010

A-L+EWall Street will often reward a company that has a large backlog of orders. This can appear in the eyes of most observers as an asset. After all, who would not want a backlog of orders?

However, in the world of social media, a huge backlog causes a serious problem – it represents commitments made that have not yet been delivered. An unfulfilled promise in a social network is a liability and not an asset. By extension, a backlog in an innovation economy is a liability and not an asset. Today we talk of all the problems that should be solved but have not; health care, global warming, education, recidivism, etc. – and cost to much to solve, so nothing happens.

Applying conventional wisdom to an innovation economy, we find that most organizations have an excellent inventory of the “liability” for innovation promised but a poor inventory of the “asset” of those forces that will execute those promises. All of their plans, specifications, blueprints, job descriptions, policies and procedures, etc., are liabilities in an innovation economy because these define the promise that is unfulfilled, not the asset that will fulfill them – humans.

Until recently, companies assumed that the right knowledge assets will always be available. Productivity has been defined in terms of land, labor, and capital. Each responding conveniently to price inputs to form the ideal balance. When knowledge is swapped for labor, we begin to encounter constraints in all three factors of production. No amount of money can balance the books.

The absence of a knowledge inventory limits the complexity of problems that humans can solve much like industry was limited to custom machinery before Eli Whitney demonstrated the concept of interchangeable parts less than 200 years ago.

Further, if the product line is expected to have a life cycle of more than a few years, the knowledge inventory must extend beyond the doors of the company and into the surrounding community. Therefore, the knowledge inventory must take on the taxonomy of the community, not the taxonomy of the corporation. Skill codes, levels, titles, etc., needs to reflect language of the community and that function now clearly lies in the domain of Social Media.

Yet, I still hear grumblings in the blog sphere that social networks cannot be monetized – nothing should be further from the truth. Mary Adams at the Intangible Capital Advisors demonstrates that 70 percent of the value of a corporation resides in the people that walk out the door and enter the community every night. Their connections represent value, their knowledge inventory represents productivity, they are money – they are owner’s equity.

The winners in Social Media are the ones that put people in the asset column, not the liability column.

{ 17 comments }

Alex Hall March 19, 2010 at 4:16 pm

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Harish Kotadia March 15, 2010 at 1:29 pm

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Ada Ming March 14, 2010 at 7:54 am

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prblogs March 14, 2010 at 5:57 am

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Achievers Network March 14, 2010 at 5:57 am

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The Social CEO March 14, 2010 at 5:36 am

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