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knowledge-based_economy

VIEWS: 22 PAGES: 20

									The Corporation in the Evolving Knowledge Economy




                   Fred Gilbert
                  Stacey Gomez
                   Ted Manvitz
                  Ina Stefanova
                Sybren van der Leij




                    April 12, 2002
Introduction
The evolution of the world economy continues. Physical labor and fertile soil provided the
foundation for the initial agricultural economy while the application of technology resulted in
new machinery which became the driving force for the transition into the modern industrial age.
And now the economy is again poised to make another epic transition. Founded on information
and knowledge, this new economy will have a profound impact on everything as we now know
it. Welcome to the knowledge economy.

As a result of this fundamental shift from an industrial economy to the new knowledge economy,
individuals, organizations, corporations, and even countries, will have to change the way they
approach and manage those around them. These entities will have to (i) address new
opportunities, (ii) modify the way they learn, (iii) deal with fundamental shifts in their culture
and environment, and as a result, (vi) ultimately define and appraise their ability to establish a
sustainable competitive advantage and create value.

This paper seeks to concisely address these four themes as they pertain to the corporation in the
evolving knowledge economy.

Opportunities
The time that we are living-in is a period of very rapid transition. In the economic sector, the last
era was exclusively an industrial economy, based on tangible assets and a command and control
style of management. We are now moving to a new way of doing business, dealing instead with
information and knowledge. We stand in the midst of these two distinct economies, both founded
on different visions, paradigms, and management theories.

This transition puts us in a new reality where new technologies, open markets, and speed of the
exchange of digital information are leading us to a new way of thinking, working, and
structuring organizations.

The opportunities put forth by this new reality are various and full of challenge.

We used to manage tangible assets when the industrial era was based on productivity and human
beings were employed for their handiwork not for their creativity or vision. The main
competitive advantage for these companies was their productivity. With the improvement of
technology, in many cases, machines and computers have replaced people and the competitive
advantage of the organization is not productivity alone.

From now on, the differentiation of these companies will be the intangible assets, the human
capital, the knowledge and the know-how in all of us. The focus will be on creativity, innovation,
communication skills, natural leadership, and entrepreneurship. This is an enormous opportunity
for entrepreneurs because many of them possess open minds that are without boundaries. Such
talent is required in order to find a new way of doing things that establishes new paradigms.

To manage these new skills and talents, a major change in management style is necessary. The
command and control style is based on the military model, where true creativeness is inhibited.
We now have the opportunity to reorganize our corporations in a way that allows creativity and



                                                 2
innovation to emerge. Such a change will foster a holistic management style that will make the
management process less bureaucratic and hierarchic. The skills for the new economy are
informal and cannot fully develop within a formal environment, like that which existed in the
past.

Another opportunity is for talented people to be recognized. Until now, their opportunity to excel
within the workplace has been limited. Now, they will have a predominant place in corporations
and they will ultimately be a company’s competitive advantage.

The major challenge we will face is retaining these people in order to keep the knowledge and
the know-how inside of the corporation. An efficient human resources strategy must be built
within a strong corporate culture, one in which employees feel acknowledged and motivated to
do their best.

Learning
The challenges that organizations face in general, and managers face specifically, will likely
revolve around the nebulous business and strategic concept of learning. The concept is nebulous,
because learning, like the truth, is in the eye of the beholder. As companies strive to obtain more
and better knowledge with a concomitant competitive advantage resulting there from, we
consider what learning looks like in a knowledge economy and discuss some of the challenges
that managers and organizations can expect to encounter. See generally, ―M. Raich, Managing
in the Knowledge-Based Economy, 2000, www.raich.net.‖

Learning can be thought of as the discovery process used by individuals and organizations to
acquire knowledge. Within most organizations, there is a heavy emphasis on the output, i.e., the
acquired knowledge (or resulting skill). We feel the focus will shift to the process itself and if
designed correctly, will include an infinite number of iterations:


                                               Analyze
                                                 Key
                                               Issues &
                                               Business
                                                Effects


                                                                           Formulat
                      Learn                                                    e
                     Again. . . .                                          Strategies
                                                                           to Guide
                                               Identify                    operating
                                                 Key                       procedur
                                                Issues                         es




                                     Revise                    Review
                                     overall                  strategies
                                    Strategy

                                                                                 Skill/ core
                                                                                competency


                                                          3
Managers should focus on the process to help ensure the knowledge and resulting skills and
strategies based thereon are not inaccurate or obsolete. Moreover, by concentrating on the
process, managers can make sure the resulting skills outweigh the costs, both tangible and
intangible of the process.

Will current organizations be able to implement such a learning process? Does the potential
value outweigh the significant cost?

The initiative to develop a focused learning process must start with top management and must
include a format that empowers all members of the organization to identify any relevant issues.
An effective system would include input from all of the organization’s stakeholders.
Specifically, (i) internal sources - such as employees, (ii) external sources - such as customers,
shareholders, suppliers, and society, and (iii) quasi-internal sources – such as legal, tax,
accounting and consulting advisors, should identify relevant issues.

The learning process must also include a mechanism or operating body to analyze the key issues
and effects on the organization. The financial and personnel resources will dictate the extent of
the analysis. For most organizations, it will not be enough to assign an individual or group of
individuals to the stated objective. Instead, the organizational structure will have to be adjusted
to reflect the structural change required by the iterative process. As a result, an ―evolutionary‖
approach, whereby individuals build new skills while performing their usual functions, will not
be an effective why to change current organizational cultures. Instead, we feel an ―incubation‖
approach, whereby a separate group focuses on specific competencies, will maximize the desired
results.

Multiple divisions and functions will have to combine their efforts to link all phases of the
process. Members of each group should serve for a period, not to exceed two years. New talent
should be rotated regularly to foster the development of fresh ideas and to foster the
decentralized structure of the process. The underlying rationale of the analysis will focus on the
concept of the value chain, with particular emphasis on:

     1. Issues that could affect key stakeholders (including impact on competitors)
     2. Flexible, long-term platforms embedded in the organization’s systems and capable of
        adaptation or evolution
     3. Skills or knowledge sets (not products or functions)
     4. Unique sources of leverage in the value chain, which provide potential access to a wide
        variety of markets (Where can the organization dominate?)
     5. Capabilities that are difficult for competitors to imitate (typically because they are a
        complex harmonization of various organization-specific elements)

Next, the management team who analyzes the key issues should develop and implement
strategies, thus beginning the metamorphic process of transforming knowledge into know-how.
The operational strategies must be consistent with the overall long-term objectives of the
organization. A process that encourages entrepreneurial actions requires a combination of
individual, as well as organizational, incentives that must be closely related to objective criteria.




                                                 4
The underlying strategies should also utilize an IT infrastructure to maximize the sharing that
must occur between individuals within the organization.

Once the new strategies are implemented, a review committee consisting of members of the
initial management team as well as new members should conduct a formal and informal review
to determine impact on the value chain. Eventually, the cumulative effect of these strategies will
determine whether value was created within the organization.

Finally, as old strategies are reviewed, some will be continued as-is, while others will be adjusted
or terminated. The process will help organizations anticipate and develop value-creating skills,
rather than reacting to future key issues. As strategies are revised, certain questions should be
considered:

     1. Are our skills truly superior?
     2. How sustainable is the superiority?
     3. Is our competence more powerful than other strategic levers? i.e., access to cheap
        resources
     4. Is the competence integral to our value proposition?

Managers will be challenged to change current organizational cultures and develop incentives to
facilitate the process of turning implicit knowledge into explicit knowledge for the benefit of the
organization. While the learning process and questions described above may be the same for
different organizations, the implementation and answers will surely depend on various different
components. One of the most important such factors will be the existing culture of the
organization.


Culture
―The only thing we can be sure of is that knowledge will be the basis for most industries, and
culture will be the key leveraging factor‖ (p.84). One of the major challenges facing managers in
the new knowledge economy will be fostering a corporate culture that not only encourages
innovation and learning, but also manages new work styles made capable through technology.
Most importantly, if we understand that the value of a company is held in the knowledge of its
employees, retention becomes an extremely important factor.

As quality, relevance and usability of knowledge become the key metrics for determining the
success of a company, employees will be valued more for their ability to generate and synthesize
this information. As such, contribution from key talent individuals will be tremendously valued
and companies will go to great lengths to encourage and retain these individuals. This means,
adapting to and creating an environment where creativity and learning can flow and be as
effective as possible. This concept is more than just the physical work environment, extending to
for example: flexible work hours, job share, and telecommuting. It is a big departure from what
we now see in terms of the relationship between the corporation and the employee. Currently,
corporate success is measured by market share (power) and personal success by status level
(hierarchy/status). Because of this, we have a situation where the motivations of the individual
and the company are the same, but there is no common goal. The individual is doing everything



                                                 5
they can to get ahead personally, working to create a competitive advantage. The corporation is
doing the same and unfortunately, these two events cannot occur in concert without one
damaging the chances of the other. The key is getting these two in line by focusing more on
responsibility than status.

To create a successful culture in a knowledge economy corporation, companies must first
recognize that the employee is their number one asset along with their ability to innovate, create,
learn and teach. But, how do we get the culture of a major corporation to change so drastically?
Is this even possible? Even if we can manage to do this, how do we sustain this ideology within
a ―virtual organization‖ where there is little to no physical interaction between people?
Traditionally, corporate culture is defined by the attitudes and motivations of employees while
shaped by attitudes of their managers and value the company places on them in terms of how
they are nurtured and rewarded. Without physical interaction of work-groups, corporate culture
will be more focused on the companies’ ability to foster strong interactive relationships, and their
ability to show their employees how much they are valued, instilling in them a success base of
achievement and ownership versus power and status.


Value Creation
The movement from the capitalist economy into the knowledge economy can be characterized by
the shift towards knowledge as the main raw material of a company. In today’s economy, a
company’s balance sheet is no longer a valid reflection of the wealth of the company. Instead, it
is the intangible aspects such as employee skills and experiences, corporate culture, brand equity
and strategic partnerships that truly define a company’s worth.

A company’s wealth is measured by its potential to generate revenues in the future. This revenue
potential has for a long time been measured in part by a company’s historical performance but
mostly by a thorough investigation of a company’s fundamentals. This is particularly relevant on
the stock market where past history is not sufficient to determine a company’s future revenues.
At best, history can only help an analyst to determine when to buy a share. It doesn’t offer much
insight into what to buy. For this, an analyst needs to investigate more intangible qualities such
as management capability, corporate culture, strategic partnerships and general information
about market trends.

It is evident then that knowledge is critical to wealth creation. The key question is how to turn
knowledge into value. In today’s information age, data is becoming increasingly easy to gather
and no company can claim a competitive edge just by having superior data gathering abilities.
The new age media such as the internet and worldwide news agencies have made it increasingly
difficult for companies to gain a competitive advantage through superior technology. Worse still
is the fact that, in the global economy, patents are much harder to defend than in the days when
the domestic market was sufficient for a company’s survival.

The trend towards outsourcing also creates situations where companies are no longer the sole
possessors of what was once their own ―knowledge.‖ Similarly, knowledge stored in the minds
of employees is lost if the employee leaves and, in such a situation, this knowledge can no longer
be regarded a secret.



                                                 6
It is clear that it is not knowledge that is the key to value creation but the application of
knowledge. All companies have equal opportunities to employ brilliant new talent. It is the
nurturing of that talent and the manner in which it is used that will be the key to a company’s
survival. It is no longer up to the individual, or even teams of individuals -- partnerships are
required. An organizational culture that encourages co-operation among individuals to the point
where each individual’s talents and entrepreneurial spirit is encouraged will create a company
that has the luxury of drawing on a wealth of ideas and resources.

Furthermore, it would also be a mistake to underestimate the contribution of diversity towards
the wealth of a company. The sum total of likeminded ideas is a likeminded idea. Any company
that has the opportunity of drawing from a pool of individually unique and complementary ideas
must surely have a major competitive advantage.


Summary
This paper presents an interesting perspective on the opportunities, learning, culture, and value
creation that might be possible if not now, in the near future. As organizations analyze the
frontier of challenges and prospects before them, those that honestly and critically assess their
position will be poised to realize the various benefits of such thinking. From this vantage point,
a new processed-based learning will begin that will radically change the manner in which
everyone from entry-level administrators to top-level executives address business problems and
work with those internal and external to the firm. Such progression will fundamentally shift the
way individuals behave within the firm and thus the culture of the organization will be
transformed. The employee will be valued for his ability to analyze and synthesize detailed
information and thus the firm must align the motivation of the employee with that of the firm to
maximize efficiency and effectiveness. Ideally, this process leads to the ultimate goal of most
corporations—value creation. Companies that can breed and retain knowledge and then apply
this knowledge will be best positioned to establish a sustainable competitive advantage and thus
create value for stakeholders.

It goes without saying that the knowledge economy is anything but a singular comprehensible
concept. It is an evolution that, as it progresses, generates more questions than answers. As
such, our effort to address the changes and importance of the knowledge economy with regard to
the corporation is only a small tip of the iceberg in terms of what can and will be explored as this
phenomenal advancement continues.




                                                 7
   GLOBAL MANAGING
           IN
THE KNOWLEDGE ECONOMY




        11/02/2002




      Submitted by:

      Alicia Esteve
     Chang Gaechun
     Quillian Gunn
     Melissa Medina
       Tim Pratt


            8
       To debate whether or not our society will be dominated by the coming knowledge
economy is not the intention of this paper. The idea that the Knowledge Economy is the result of
propaganda created by Consulting firms and the like, to perpetuate the idea that there are firms
that possess mass amounts of the valued commodity ―knowledge‖ will not be debated. The
authors will assume a knowledge economy to be eminent and will concentrate on exploring the
different manifestations of these knowledge economies in various cultures around the globe.
Specifically, North American, Latin American, European, and Asian cultures will be examined
for their differences and similarities in managing within these knowledge economies.

       Unlike the traditional factors of production, knowledge is a resource that cannot be easily
quantified. Nor is it easily assessed as to who possess these resources. But creating and sharing
knowledge is essential to stimulating innovation, which is the key challenge of the knowledge-
based economy. Within the various cultures, there are different value systems and languages.
All of which are things that create barriers to communication and understanding. To create a
climate in which employees volunteer their creativity and expertise, managers will need to go
beyond their normal scope in order to build trust.

       Trust is an issue that has been explored many times before within the traditional
industrial culture. And often it was found that a lack of communication between divisions,
subsidiaries and executives exists. This problem will be magnified upon a move into the
knowledge economy and must be circumvented if production is to be realized. Some cultures are
less trusting than others and this will cause a difference in the manifestation of the knowledge
economy within such cultures.

North America

       There are two themes in particular, of American life that will be primarily impacted by
the knowledge economy in the United States. These two themes will be American work life and
American personal life. In short, the knowledge economy will change how America works and
―plays‖. Basically, the knowledge economy will affect the very fabric of American society.

       The first impacted area we will explore is American work life.          As the American
economy moves from a primarily industrial and service related economy to an economy based on



                                                 9
the collection, transfer, and assimilation of knowledge, the way that America will work must
undergo a severe change. It is believed that the age of the ―nine to five‖ work day will be
replaced by a work schedule that is much more fluid. Since the primary driver of the economy
will be knowledge based, jobs that are connected to this driver will have to maintain a more
continuous nature. This will be aided by the advancement of technology, but the impetus will
remain on the American worker. The knowledge economy will force American workers to retain
more specific skill sets than is currently the case. In fact the very structure of the American
workplace may have to undergo drastic change. The age of ―bricks and mortar‖ will be replaced
by one that is equally as fluid and mobile as the worker will be. This could be the workers home,
car or some facsimile thereof. For these reasons, as the American economy moves to one based
on knowledge, it is evident that the American worker and workplace will have to undergo
significant change as well.

       American leisure time will also be greatly affected by the knowledge economy. As
technology continues to evolve, and the key economic driver moves toward one based upon
knowledge and all associated activities, the dividing line between work and ―play‖ will merge.
Americans will have to become more specialized in the type of work they do, and flexibility will
become an integral employment factor. Employers will demand more and more from a smaller
and smaller workforce, using technology to increase worker efficiency. This will create some
societal issues as well, and could prove to be a major impediment to this knowledge based
economy. A knowledge-based economy will demand more time and specialization from an
American worker that is already showing signs of resistance to the ever-dwindling amount of
leisure time. The key element in this struggle will be how to match this tug of war for more
work and more personal time. Technology will doubtlessly allow for work to be done in a
mobile environment, but this could exasperate the issue even more. The knowledge-based
employee will be hard pressed to determine where work begins and personal time ends. In fact,
this growing rift will play a critical role in the movement towards the knowledge economy.
Understanding these factors is the first step in creating an environment that is conducive to
employee productivity and will also make assimilation of the new economy as consistent as
possible.




                                               10
Latin America

        If we study the knowledge economy we will find that it is an economy directly associated
with technological advancement. Therefore, it is a very computer-oriented, technology-driven
economy, which is extremely network related. Some regions of the world are already more
advanced in this knowledge economy in comparison to others. For example, the North American
region is believed to be a highly developed and advanced region of the world. On the other
hand, the Latin American region is not considered as technically advanced. However, these less
advanced regions are rapidly becoming more influenced by the advanced ones. Latin America is
a prime example where we are seeing the North American knowledge economy manifested into
its culture.

        This manifestation will definitely have a positive effect in Latin America. Of these many
effects we have found three that we feel are extremely important and will have the most impact.
First, this technological introduction, for example the use of the Internet, will make government
bureaucracies more efficient. Actually, this is already occurring in countries where many of the
government functions in cities such as Sao Paolo and Santiago can now be done efficiently on-
line. Of course, the efficiency in these countries is not comparable to that of the more developed
countries, but it has a more profound effect here because of the extreme inefficiency that they
had.

        Secondly, we feel that Latin American companies will become more competitive. With
the increase in the number of B2B sites companies can become more effective in their
purchasing. Moreover, with all the automation, their inventory management, payroll, etc. will
become substantially more efficient. Thirdly, the manifestation of this new knowledge economy
will empower individuals in Latin America. Traditionally, the only individuals who had a
chance of succeeding in Latin American countries came from wealthy families. Today, although
the Internet penetration is still dismal (it ranges from 1 to 6% as compared to 70% in the USA
and 15 to 20% in Europe), it will increase substantially. It’s unbelievable when you travel the
region to see the amount of people waiting in lines at the public Internet booths.




                                                11
           Of course, one cannot have a substantial penetration of the Internet and use of
applications that require large amount of bandwidth (videos, x-rays, etc.) without the right
infrastructure. Latin America, until recently did not have any undersea fiber optic cable routes.
Over the last five years, companies such as Telefonica (the Spanish phone company) and Global
Crossing (an American telecom company) have spent over $10 billion laying long fiber optics
around Latin American countries. This has resulted in a collapse of bandwidth prices and an
open door for the knowledge economy to be developed there.

Europe.

           Who had ever heard of Catania a few years ago? This city, in Sicily, Italy, was for years
a symbol of the depressed and desperate condition of Italy’s deep south. Now it is becoming a
high-tech capital, often described as a ―baby Silicon Valley‖ and fast becoming ―the most
competitive place in Europe for high tech industries‖.1 Or take, Ireland, a country that has
transformed itself in a few decades from an agricultural economy to another ―hot-spot‖ for
financial services and high tech industry. It achieved this through investment in education and
information technologies. Thirty years ago, 70% of Finland’s exports were wood and paper
products. Now, more than 50% of the country’s exports are knowledge-intensive products and
the country has become a world leader in information technologies.

           In a conference held by The World Bank last February, the Vice President for Europe and
Asia summarized very well the impact of the new economy on every level of our society. He
stated that in addition to capital, labor and land, knowledge has become an important factor in
determining economic growth in the advanced economies of the 21st century. He added, ―If
Europe is to become the most competitive knowledge-economy in the world in 10 years, as
stated in the 2000 European Summit in Lisbon, the challenge we face is to work together as
partners in making this a reality for all EU members‖.

            Is this goal attainable? It is clearer than ever that Europe cannot compete on price
against low wage economies of the developing world. Nor can we sustain and improve our




1
    Pasquale Pistorio, chairman of ST Microelectronics



                                                         12
quality of life in Europe by employing people in low-wage, low-margin production. Therefore,
Europe needs to focus on identifying and building competitive advantage.

       The knowledge economy confronts Europe with three large challenges. First, to create an
environment in which people and businesses can seize the opportunities created by economic and
technological change. Second, to construct a legal and market framework for economic success
– a framework that must be built at the European as at the national level. And third, to help
people make sense of the economic and social transformations taking place.         What makes it a
challenge is that these must be met at different levels – the local, the national and the European.

       According to a World Bank Report2, the member states of the European Union are well
placed to take advantage of the knowledge revolution because they have a well-trained labor,
considerable capacity in science and technology, relatively well developed communications
facilities and an increasing openness to foreign trade.       On the other hand, expenditure on
Research and Development, enrollment in tertiary education, computer availability and the
presence of Internet hosts are all low compared to the United States and some Asian countries.

       The Lisbon conclusions underline the fact that a modern and successful Internal Market
is the foundation on which EU policy for the new economy will be built. But the functioning of
the Internal Market is an ongoing challenge. A great deal of work remains to be done.

       In order to capitalize on Europe’s existing resources, EU members need to create the
necessary conditions to stimulate the effective use of knowledge, through the design and
adoption of comprehensive strategies that address the four pillars of the knowledge economy:

   An economic and institutional framework that promotes the efficient use of knowledge and
    the flourishing of entrepreneurship.
   An educated and skilled population to create, share and use knowledge to its full potential
   A dynamic information infrastructure to facilitate the effective communication,
    dissemination and processing of information
   An efficient innovation system of firms and research centers to tap into the growing stock of
    global knowledge and create new responses to local needs.




                                                 13
          This needs to be done at the same time that the barriers that prevent these from taking place are
lifted. Successful regulatory reforms have already been achieved in sectors such as telecommunications,
air and road transport and financial services. However, further efforts still remain necessary to speed up
the liberalization in these key strategic service sectors.


Asia
          For decades, the focus of Asian countries’ education is ―Choosing the Answer.‖
However, today those countries understand that there’s not an answer but there are several
solutions. There are lots of ways to solve a math problem. Students in Asia have been taught
what is wrong and right and what is good and bad from their birth. As Asian countries go on to
the knowledge economy, they realize the importance of diversity, creativity, and adaptability.
They are trying to reform their traditional command & control educational system. More and
more people realize the importance of continuing education in their adulthood.
          Throughout Asia many new forms of media for learning are emerging. These include
TV, Internet, telephone, satellite broadcasting, DVD, and so on. Most Asian countries are
aggressively building a super highway for giving and taking knowledge. They believe that high-
speed network infrastructure will play a key role in building a knowledge-based economy. For
instance, Japan plans to make a super highway at a speed of 30~100 megabytes until 2005. They
also expect to supply all governmental services on the net by 2003. Those current trends add
fresh fuel to the building of net infrastructure in Asia.
          The demands for industrial goods are nearly full in the era of post-industrial society, or
the knowledge economy. The battlefield is changing to an information and service industry. This
means a totally new paradigm for Asian countries. Adapting to this information and service
industry will not be easy due to an attempt to ignore this new paradigm. They are breaking
tradition of a pay scale based on seniority and lifelong employment. More and more Asian
companies take an annual salary approach and reward or punish according to employees’
achievements.


          The ultimate challenge for coming managers is to create and maintain environments that
are conducive to stimulating and supporting trust, idea sharing, and corporate performance. This


2
    A Preliminary Strategy to Develop a Knowledge Economy in European Union Accession Countries, Feb. 2002


                                                       14
challenge will take different forms in these different cultural settings and inherently create a new
global society. Without this challenge being met, people and corporations are likely to withhold
their full cooperation and their creativity. The resulting outcome will be a severe punishment:
―3ideas that never see daylight and initiatives that are never seized.‖




3
    Harvard Business Review, July – August 1998


                                                  15
     The Atmosphere of Management in the Knowledge Economy




                                                                               Presented by:
                                                                               Jeffrey Bauer
                                                                          Shannon Bridges
                                                                             Lonnie Bryant
                                                                              Ju Young Ryu




                The Atmosphere of Management in the Knowledge Economy


The Knowledge Economy is beginning to change the world we know into a world where
knowledge is king. Those who lead in the Knowledge Economy will govern by a constitution
that believes in establishing a corporate culture that promotes creativity and encourages
individual ownership, which interprets the attraction and development of talented entrepreneurs


                                                16
as a necessity for success and enforces the understanding and management of key stakeholders
expectations.


The most important success factor in a highly competitive market in an emerging context is the
corporate culture. Corporate culture is an enabler for information, knowledge sharing and the
exchange necessary for success in highly competitive markets. The individual employees’
attitude toward work is very much driven by their own values which are reflective in the
corporate culture. The ability to manage this critical talent and knowledge, inside and outside of
the organization, will be essential for defining the corporate culture.


It’s hard to establish and maintain true partnership between corporation and employee. Building
and sustaining trust, common ground, and communication between individual people, in groups
and teams, and also, between large partnerships is imperative in the Knowledge Economy. Once
the link between a companies goals and the employees values are established, corporation is the
result. In the global economy, everybody is interconnected and in high competition with each
other. To be successful, company needs to build large networks of strategic partnerships and
alliances. These unique and hard to copy relationships need to be the foundation of the
Knowledge Economy.


These partnerships include the partnership between the corporation and the stakeholders.
Balancing and managing stakeholder expectations will be critical for continuous growth.
Companies leading in the Knowledge Economy must understand key-stakeholder needs and
expectations and continuously meet these needs and fulfill these expectations. For corporations
to met the aforementioned requirements of the Knowledge Economy, they will not only have to
understand and keep pace with technology development, but also learn how to lead with
technology. Technology was the catalyst that inspired the Knowledge Economy and will remain
as the impetus behind the Knowledge Economy.
Management ―best practices‖ in the Knowledge Economy will be unlike those ever recognized in
history. The normal behavior of employees will no longer be easily definable, and thus the
behavior of managers and corporations will need to be as flexible and accommodating as each
situation calls. Although this new management environment may seem to be unstructured and


                                                 17
unorthodox, structure and control will come from first identifying and understanding employee
behavior and business situations, followed by being proactive in behaving in a means that is
constructive to individual situations. The result for individuals and companies who can easily
adapt to this paradigm shift in management practices will be long-term business success, and for
those who do not, departure from the new business environment.


Many professionals in academia, business and government related sectors have attempted to
define the ―Knowledge Economy‖. This seemingly simple phrase appears to have as many
meanings as parties interested in the concept, and may never have one agreed upon and widely
accepted definition. One of the most simple and widely transferable definitions of Knowledge
Economy is ―renewing the focus of knowledge as the means of inspiring economic
performance‖. In short, this concept focuses on the transfer of knowledge as an economic
product, defined by the context of discussion. The government may view the Knowledge
Economy in the context of GDP, businesses to top and bottom-line performance, and academia
to the ability to develop a long-term economic growth model. Although there are many different
parties interested in this concept with many different motivations, the common and consistent
interest in the subject is the relationship of the Knowledge Economy to the long-term future of
the world’s economic development.


The future development and success of the Knowledge Economy lies in its leadership. Mangers
in this new economy will be faced with a new and different set of challenges, and have a
different measure of personal satisfaction. Management motivations of the past have centered on
attaining power and status. To be seen as ―somebody‖ and have the ability to make decisions
were key indications of upward mobility and were characteristics that resulted in on-the-job
happiness. The manager in the Knowledge Economy looks for a sense of achievement and
ownership in their working environment as key measures of satisfaction. Achieving results with
freedom and flexibility as well as allowing employees to truly own their success are new
measures for professional satisfaction. This ―entrepreneurship‖ attitude required by new
managers is directly related to the change in management needs of the new economy. No longer
will business success follow a format. The new business environment will evolve with each
situation, and will likely call for a different problem solving technique for each set of



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circumstances. Therefore, management will need to be able to be agile in its approach to
problem solving and oftentimes be unorthodox in the treatment of business problems. The
ability of managers to ―think outside-the-box‖ will become an expectation, and will be the
determining factor for management success.


In order to be successful in this new management format in the Knowledge Economy, there are a
number of skills that a manager must possess. As stated before, an entrepreneurial attitude is key
to success in this new economy, and as such, the skills managers must possess are those usually
seen in entrepreneurs. It is important to note that in order to progress and move ideas and
companies forward, a manager must be creative. The manager must be open to new ideas, which
the manager may come up with, or see during in daily life. The manager must see how these
ideas will help companies business and create effective ways to implement them. This is the
most difficult part of being a manger in the Knowledge Economy. There are no set rules, so new
ideas need to be adapted to corporate strategy, or corporate strategy needs to become a mold new
ideas. If a manager is not creative and open to these new ideas and ways of thinking they will
not be able to create a successful company in the Knowledge Economy.


In addition, this new economy will be full of a great deal of complexity and uncertainty. No
longer are there set rules of commerce, as there were hundreds of years ago when the barter
system existed. Problems of today and the future are complex and have far reaching
consequences. No longer is competition bad, it can now be seen as a driver of new ideas, or
possible a joint venture of the future. Managers need to see where the business environment is
headed and where their company fits in the big picture. They need to anticipate change and
position their company where they can take advantage of this change. In order to be successful,
managers will need to search for and accept help. One manager who understands the concept of
the Knowledge Economy will not make a company successful. It is important that this new way
of thinking, this openness to change, this anticipation of what is coming is shared throughout the
company. Managers need to train their employees how to look at a larger picture of where the
company is and where it is headed in the future. Going to work and completing a task is no
longer what will be necessary to succeed. Employees will be evaluated on both performance and
ingenuity, and managers will need to help transition employees to this new type of ―work‖.



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In order for companies to fit into this new reality called the Knowledge Economy, they must not
only feel comfortable with, but also embrace the entrepreneurial attitude. Managers must be
open and ready to change and must take advantage of all resources and available knowledge.




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