What used to be peddled on their technical merits now must be relabeled as a way to increase a firm's capacity to accumulate knowledge. To illustrate this point, I got hold of a presentation Bill Gates gave last May to CEOs of some of the most powerful global corporations. It amounted to a fancy rebundling of Microsoft Excel, PowerPoint and Outlook. Yet an even larger problem than the costs would be discerning and measuring the benefits of doing it. It also follows that a big corporation could show greater gains than smaller but superior competitors, so we need a metric that permits comparisons across a range of firms with dissimilar financial structures.
Efficiency is the ratio of output over input.
On the other hand, information management activities that create long-term influences on the behavior of employees, customers and suppliers should be seen as an accumulation of KC and be accounted for on the balance sheet as a depreciable asset. If you accept this view of how accounting should reflect realities, then KC accumulation efficiency is the ratio of the difference in KC as divided by the corresponding cumulative cost of information management. In prior articles, I used five leading pharmaceutical firms to illustrate calculations of KC metrics. KC accumulation efficiency in excess of 100 percent can be seen as an indicator of the capacity to create wealth out of limited resources. Second, high spending levels for IT do not necessarily produce high KC accumulation efficiencies.