Time to get serious about a Knowledge Economy

Whether it be ‘surfing the wave’, ‘navigating sea change’ or ‘missing the boat’, commentators seek desperately to create knowledge wave headlines that catch the attention of seemingly disinterested public. Ask most people what they remember of, or think last year’s much-hyped Knowledge Wave Conference achieved and the answer is usually variation on the theme: “not very much”. Why is it that topic so crucial to the future of New Zealand invokes such reaction?

The argument that New Zealand must shift its economic base is well worn and now generally accepted. Population, geography, globalisation and our reliance on commodity products make the shift essential. Embracing the concept of knowledge economy is, in many ways, an ideal solution. The potential of knowledge economy is recognised by number of forward-looking individuals and organisations, and some excellent work and initiatives have been launched over the last two years.

It seems, for those not directly involved, that the notion of knowledge economy is viewed as something for the universities or Government to do – because universities are associated with knowledge and the Government manages the economy. These two bodies are, of course, important to the process but they are only catalysts for change.
Building knowledge economy in New Zealand will require the transformation of many existing business enterprises and the creation of new ones. Perhaps it is time to step back and reflect on what needs to happen.

A knowledge economy is…
Simply put, knowledge economy generates high proportion of its wealth by leveraging know-how. By comparison, traditional economies such as New Zealand, rely predominantly on raw resources, commodities and primary processing to generate income and wealth.

There is an important point here. Knowledge economy does not mean an information technology economy. Knowledge is about unique know-how. Knowledge of specialised industrial process qualifies for consideration as much as the latest electronics hardware or software.

Knowledge economies are built on the wealth created from know-how – by selling it for cash, exchanging it for something else of value or leveraging it to create added value.

New Zealand is doing quite well as seller of knowledge. An example is the education sector’s ability to earn fees from overseas students. We should not, however, be complacent. It might well be the relative cost of education and the country’s attractive physical environment that are more of factor in our success in attracting students than the quality of knowledge/education we provide.

We also appear to be good at selling or exchanging our ideas internationally, although it is mute point whether we get full value for them. Ironically, our success in selling knowledge should be concern. What we are doing is moving knowledge towards the commodity end of product continuum – the very position from which New Zealand is trying to escape.

Creating real value
Leveraging knowledge to significantly transform commodity products and to create new ones, which have high knowledge rather than high raw material content, is the true building block of knowledge economy. Some remarkable success stories show how this can be done. Three examples illustrate the point.
* Industrial Research, Crown Research Institute, has developed robotics and sophisticated software to automate part of the process line in meat works. It now markets this equipment in the United States and Australia.
* Virtual Spectator is an important example of the development and marketing of leading-edge software with application now in many sports and many countries.
* New Zealand’s yacht-building industry is spectacular success, which relies as much on design and construction know-how as it does on high-tech development.

There are more examples but they all serve to highlight two important points.

First, New Zealand is country of small to medium businesses. Some 93 percent of all businesses employ less than 10 people and almost quarter of the workforce are employed in enterprises of five or less people. Development of knowledge economy in this country is very different proposition than that featured in the international case studies. We need an approach appropriate to New Zealand conditions and model that the numerous businesses wanting or needing to be part of the knowledge economy can follow. We must encourage as many of them as possible to become knowledge companies.

Second, common thread runs through the quite diverse range of successful organisations – they have or are developing the characteristics of being true knowledge enterprises. Management theories have been developed to describe what this means. It is essentially straightforward but, like many other aspects of management, we are in danger of overcomplicating it.

Successful knowledge companies?
Knowledge companies employ knowledge as their core asset and investment – and become adept at managing it. And, whether they are in the business of selling knowledge or leveraging it for added value, they share similar characteristics.
• Vision builder: Project themselves forward to think about what could be possible in their market and what customers might want (although they may not know it yet). Construct and sell vision. They ask, where might our unique knowledge lead?
• Strategy developer: Understand what key elements of knowledge they already have.
They ask how can we use our unique knowledge to develop unique products? How can we use our ideas to differentiate our products? How can we make money from our unique knowledge? How can we encourage the development of the knowledge we will need in the future?
• Investor in knowledge resources: Seek the best available people with the knowledge they will require and continually upgrade the knowledge of their people.
Introduce processes and structures that make it easy, desirable and non-threatening for people to share knowledge.
Develop culture that considers acquiring and maintaining their knowledge resource as an investment rather than cost.
• Manager of knowledge investment risk: Identify with whom their core knowledge assets lie, and the risk of that asset being lost. Put in place processes to protect that asset and plans for replacement if necessary.
• Communicator of the importance of knowledge: Publicise the importance of knowledge assets to stakeholders.

Continually reinforce the value of knowledge in internal practices through reward and recognition.

It is tempting to say these characteristics are ‘How to do it’ guide. Guides like this are always popular with consultants who make money by producing the latest six or 10-step formula. Becoming knowledge company cannot be reduced to standard model because every company and its knowledge are different.

Successful companies do seem to end up with many of the characteristics noted. But developing the characteristics usually requires cultural change, process that is different in every case. As the psychologist said, it might take just one person to change light bulb but the light bulb must really want to change.

This indeed is the key. Creating the excitement that makes people want to change. Constructing the vision, sharing the passion and aligning everyone to the goal are vitally important in knowledge company. From this base and little work, the required characteristics can be grown. M

Mike Cowey is member of the national board of NZIM and an independent consultant working in the area of knowledge management, intellectual capital and e-business. Email: [email protected]

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