By Dr Austin Nweze
The catch phrase in this 21st century is “knowledge rules.” Why not! Since creation, the world has gone through several dispensations. There are certain things that must happen whether we like it or not and whether we are ready for them or not. One of such things is the dispensation of knowledge or the knowledge economy as we know it today. The nature of business as we used to know it in the past is fast changing. Thanks to the new knowledge economy. The question therefore is whether businesses are aware of it and whether they are ready to embrace this change happening.
Let us not forget that innovation is the main driver of the knowledge economy. No wonder in 2004 the directorate-general for enterprise, European Commission (ECSC-EC-EAEC Brussels-Luxemburg) in Innovation Management and the Knowledge-driven Economy declared: “In the knowledge-driven economy, innovation has become central to achievement in business world. With this growth in importance, organizations large and small have begun to re-evaluate their products, their services, even their corporate culture in the attempt to maintain their competitiveness in the global markets of today. The more forward-thinking companies have recognised that only through such root ad branch reform can they hope to survive in the face of increasing competition.”
Where does organization’s knowledge reside? Does it reside in the legal entity called company or does it reside in the people that work in the organization? This is like asking the obvious question. The basic raw material of any organization is the intellect of the people that work within the organization. For the success of any organization such an organization must find ways of mining the intellects or intelligences of its people. Knowledge is critical as well as fundamental to the survival of organizations and in turn to economic progress of industries and nations. For organizations and nations to survive and thrive in the knowledge economy they must develop the capacity to create knowledge, not only to consume knowledge.
In organizations different levels of knowledge reside in the employees that work those organizations. Some members of the workforce are semi-skilled and some others are highly skilled. The organization’s critical knowledge resides in the highly skilled members of the workforce. In the knowledge economy, machines or computers will do the work that some people within an organization would ordinarily have done. Computers especially will replace and or displace some calibre of workers by doing their work. Some Nigerian workers are already trying to reinvent and reskill themselves and shifting away from such jobs they feel can easily be done by computers in the future. They try to engage in jobs that are oriented toward relationships knowing that it will take some time before computers venture into establishing and maintaining relationships as currently being done by humans.
The employment market has been democratized and has thus become a sellers market – with employees as the sellers and employers as buyers. The market for highly skilled members of the workforce who possess the key knowledge is in high demand but in short supply. That’s partly why they are highly priced or paid higher salary than ordinary workers. These are the people head hunters chase about from one organization to the other. The banking and telecommunication sectors are examples. Banks especially go after those employees that not only possess the skills or highly skilled but also manage the account of high networth individuals. That’s why when a bank loses any member of its workforce; it also loses the accounts of the high networth individuals being managed by them.
The bottom line is that the traditional way of doing business has been fundamentally altered or changed by the knowledge economy. John Sloman in his volume corroborated this point of view and noted that traditional limited liability company was based around five fundamental principles. The first of what could be called “the Sloman’s principle” states that individual workers needed the business and the income it provided more than the business needed them. That is to say that they operated a buyer’s market in the past. Employers could easily replace any worker they lose or fire. The old system made employers more powerful and also the dominant partner in the employer-employee relationship. But in today’s knowledge economy the reverse is the case. Knowledge has become the key resource of the knowledge economy and so are the workers that possess such key knowledge. The success of any organization in the knowledge economy is hinged on their having key knowledge as well as the workforce that possess such key knowledge. So, knowledge is important as well as having the workforce that holds such knowledge in the knowledge economy. Sloman believes that the balance of power between the business and the specialist worker in today’s knowledge economy is far more equal.
The second principle is that employees tended to be full time and depended upon the work as their only source of income. In the knowledge economy, full time work is not the only option available to workers. Workers will work as free agents. There will be diversity of employment contracts. Some will continue to work as full time, some as part time, while others will work as consultants. Home working will also be on the rise. Workers will opt for employment contracts that will enable them work as consultants or free agents having their own preferred flexible time schedule and days.
The third principle of a traditional limited liability company is that the company was integrated with a single management structure overseeing all various stages of production. Though the belief that it is the most efficient way of organizing productive activity, but in the knowledge economy, companies are fast finding out that the global marketplace has become more complex and they don’t have all the skills inside the organization and that some expert knowledge or skill resides outside. Such expert skills include research and development; some aspect of production; marketing and sales; and adapting their products to specific markets. Outsourcing of some noncore services will enable businesses become more efficient and deliver more value to customers. Some aspects of the business that can be outsourced include production and human resources. HR issues such as hiring, selection, training, and benefits could be outsourced to a third party firm who has the core competence to perform such jobs. Communication costs, which have become so insignificant these days have enabled businesses to outsource for better efficiency.
The fourth principle states that suppliers, and especially manufacturers, had considerable power over the customer by controlling information about their product or service. Today, power is shifting towards customer due to easy access to information via the Internet.
The fifth principle has to do with technology. Sloman stated that technology relevant to an industry was often developed within the industry. That has changed too. Today, unlike in the past, technological developments are less specific to industries. He mentioned further that “knowledge developments are diffuse and cut across industry boundaries. What this means for businesses, in a knowledge-driven economy, is that they must look beyond their own industry if they are to develop and grow.” Business dynamics have changed. Thanks to the knowledge economy. Tools used in the past to run businesses and national economies have been rendered almost obsolete by the advent of the knowledge economy. Managers need to rethink and retool their business in order to remain competitive in this dispensation.
Quite a few experts have made their contributions to the importance of knowledge in this knowledge economy. Paul Allaire, Chairman and CEO, Xerox Corporation, in his 1997 keynote address at the conference on Knowledge in International Corporations in Rome, Italy, stated that “the task of leadership is to create the environment for managing knowledge. It requires less emphasis on what we own and more emphasis on what we know. It’s not about managing hired hands, it’s about setting context and energizing hired minds. Our challenge is to manage the stage, so to speak, for the human spirit to thrive and create in the emerging knowledge society.” Furthermore, Nick Bontis et al in the European Management Journal, Vol. 17, No.4 noted that knowledge and information are nowadays the drivers of company life, much more so than land, capital or labor. The increased importance of knowledge does not simply add an additional variable to the production process of goods: it changes substantially the rules of the game. The capacity to manage knowledge-based intellect is the critical skill of this era (Quinn, 1992). The wealth-creating capacity of the enterprise will be based on the knowledge and capabilities of its people (Savage, 1990). Firms that are thriving in the new strategic environment see themselves as learning organizations pursuing the objective of continuous improvement in their knowledge assets (Senge, 1990). Having a good base of knowledge means that a company can in future years start leveraging that base to create even more knowledge thus increasing its advantages on the competitors (Arthur, 1996).
Sloman again noted that the dynamics of knowledge economy require a quite fundamental change in the nature of business. Organizationally it needs to be more flexible, helping it to respond to the ever-changing market conditions it faces. Successful companies draw upon their core competencies to achieve market advantage, and thus ultimately specialize in what they do best. For other parts of their business, companies must learn to work with others, either through outsourcing specialist tasks, or through more formal strategic partnership. Within this new business model, the key assets are the specialist people in the organization – its “knowledge workers.”