Transcript Business in the Knowledge Economy

Business in the
Knowledge Economy
Pandelis Ipsilandis
School of Business and Economics
Technological Education Institute of Larisa, Greece
Socrates IP
Mobile and interactive marketing, IT for convergence
internet marketing & eBusiness management
Virrat, 2008
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The Knowledge Economy
A knowledge economy is one in which
knowledge is the key resource.
… one in which the generation and the
exploitation of knowledge has come to play
the predominant part in the creation of
wealth.
It is not simply about pushing back the frontiers
of knowledge; it is also about the more
effective use and exploitation of all types of
knowledge in all manner of economic activity.
DTI, 1998, Our Competitive Future: Building the
Knowledge Driven Economy
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Contents

What is the knowledge economy?

What is new about the ‘Knowledge
Economy’?

How do we prepare for the future?
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The forces behind the
Knowledge Economy

Rise in knowledge intensity
IT revolution
 Technological Change


Increasing globalisation of
economic affairs
National and international
deregulation
 IT based communications
revolution

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Economic activities
are knowledge driven

Products and Services


Assets


Consumer ideas, information and
technology is part of the product. Smart
Products
Knowledge worker is any organisation’s
greatest single asset (more important than
capital, land etc.). Capital is more and more
a function of knowledge.
Human Resource Management

Labour is not a commodity. Companies
must attract, retain and continually grow
the capabilities of knowledge workers.
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

1980 – Engine Control Unit
New Industry: Open source based h/w and s/w
systems for cars

New products: On board computing functions


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Replace ECU functions with open source based h/w
Freescale’s Linux OS for car makers


audio-video control, on-board internet interfaces,
informatics, telemetric and navigation
available with MPC5200 Board Support Package
Similar growth path as Linux in mobile phones?7
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IT Revolution







Digitalisation
Open Systems
Memory & storage technologies
Scanning / imaging technologies
Display systems
Fast Speeds
 Virtual Stores
Rich Content
 Virtual Shopping Malls
 Virtual Bulletin Boards
 Virtual Government
Agencies
and the list goes on……
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Technological Change

Low cost



Manipulate, store, transmit large quantities
of information
Marginal cost of is virtually zero
Pervasiveness



Generic Technology. Not centred on
particular products or industrial sectors
Impact on every element of the economy:
both goods and services
Across the business chain: R&D, production,
marketing, distribution
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Globalisation

Towards a global open economy




Reduction of tariff and non-tariff barriers on
trade (goods and services)
Integration of world financial & Capital
markets
Reduction of barriers to foreign direct
investment and capital flow and of barriers
to technology transfers
Deregulation of product markets


Telecommunications, Air Transport, Finance,
Insurance…
Less barriers to movement of workers

Knowledge workers
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Globalisation – New trends

7-24 s/w development


World – wide distributed service
centres


Scheduling of continuous flow of s/w
development process across units located
at different time zones
Calls at a help desk may be answered by
personnel in another country. Transparent
to caller
Changes in Universities

A large number of graduates in
engineering, medicine are employed in
other countries
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Knowledge Economy
The emergence of the knowledge economy
can be characterised in terms of the
increasing role of knowledge as a factor of
production and its impact on skills, learning,
organisation and innovation.
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EU view of the Knowledge Economy

The Lisbon Strategy to create a world-class
knowledge-based economy in Europe by 2010
Production, codification and dissemination of
knowledge are the key determinants of
economic success
“Stodgy old national income accounts are said to do a poor job of
measuring the modern knowledge economy. They are especially bad
at picking up firms’ “intangible” investments, such as building brands
or training staff. Measuring this spending properly and America’s true
economic health would be revealed. Investment and output growth
would be higher”
– The Economist, 4th March 2006
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Historical Perspectives
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1911 – the first time the Census included
occupational breakdowns: ‘knowledge workers’
were a 15% minority
1962 – publication of Machlup’s seminal work
on the US knowledge economy
1970 – the quickest route to a middle class
income was a skilled factory job (now it’s
getting a degree)
1982 – tidal waves of de-industrialization,
knowledge workers a 28% minority
2002 – services dominant and knowledge
workers grown to a 40% minority
2012 – Working Futures Report projects the
minority will grow to 45%
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What is New in the KE?
Knowledge,
Skills &
Learning
Clustering
Strategy &
Location
Learning Organizations
&
Innovation Systems
Global
Competition &
Production
Innovation &
Knowledge
Networks
Flexible
Organization
Systems of
Creation
Production &
Distribution
Economics of
Knowledge
Discordance
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Flexible Organization
Τίτλος οργανογράμματος

Integration of
“thinking” & “doing”
at all levels of
operations




Molecurization
Projectized
Organizations
From
Economies of Scale
to
Economies of Scope

Elimination of middle
management
Multi-task job
responsibilities
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Knowledge Skills & Learning

Shortage of
Tacit Knowledge
Codified
Knowledge
•Know-what
•Know-why

Tacit
Knowledge
•Know-how
•Know-who
ICT investments complementary with
investments in human resources and
skills
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Innovation


Obsolete your own products. If you
don’t, your competitors will
Product life cycles collapse
Companies
 Innovation must be prized,
rewarded and encouraged
Education
 Students must be
motivated to learn and to
be creative, rather than to
recall information
Governments  Liberate the human spirit
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Knowledge Networks and Clusters
Innovation is the result of numerous
interactions between persons and institutions,
which together form an innovation system.
 Within the Firm

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Partner networks
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Inter company interactive learning
Spread the costs and risks of innovation
Access to new research results
Technology based alliances
Government, Academia, Industry networks
Goal: Timely access by innovators to
relevant stocks of knowledge
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Global Competition and Production
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Global businesses need to be able to link with
customers, suppliers, employees and partners
throughout the world.
New opportunities in global financial markets.
With knowledge becoming the key resource,
there is only one world economy. Knowledge
knows no boundaries. There is no domestic
knowledge and no international knowledge.
Stay-ahead management: Ad hoc alliances,
strategic partnerships, use of information
technology
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Producer-Product-Consumer
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Mass customisation instead of mass
production
Consumers become involved in the
production process
Companies identify customer buying patterns
New forms of production / work scheduling
New enterprise is a real-time enterprise:
Goods are received from suppliers and
products shipped to customers «just in time»
Supply Chain Management: Increased
sharing of information between suppliers,
producers, customers
End of Customer Service?
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Disintermediation
OLD
Producer
Agents
Wholesalers
Distributors
Retailers
Brokers
…..
Consumer
NEW
Internet
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The end of Customer service
Ranked 2nd in Times
Magazine “10 ideas that
are changing the world”
• Tesko Fresh & Easy
grocery stores in the
US
• Alaska Airlines “Airport
of the future” in
Seattle
• Sushi restaurants in
Malaysia fitted with
IBM ordering screens
• Check in kiosks for
emergency room visits
1902

1916

1947

Horn & Hardart Self Service
Self-pumped
Automat
Grocery Store gas
1967

Barkley’s
ATM
1995
Alaska Air
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internet ticket
Identifying Consumer behaviour patterns

Supermarkets

Bar Code cash registers
Real time inventory monitoring and
control
 Demand forecasting
 Data mining to detect consumer buying
habits
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Internet Sales
Consumer preferences
 Low cost promotion and advertising

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“Old” Questions – “New” answers
The Airlines pricing model
Price
Po
S
Price
D
Seats

Q=72%
Pm
Price
Pn
Price
P1
S
D
Seats
Q>72%
Revenues ↗
Same Economic law, but IT allows for
“real time” dynamic pricing models
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Supply Chain Management in KE
2nd-tier
suppliers
1st -tier
suppliers
Project
Organization
1st -tier
customers
2nd-tier
customers
Traditional purchasing function
Materials Management function
Supply Chain management
Project
2nd-tier suppliers
1st -tier
suppliers
Integrator
1st -tier
customers
2nd-tier
customers
IS
implementation
project
Computer
components
supplier
H/W supplier
System
Implementer
IT Department Users in client
or client
firm
Consulting
Providers of
Contracted
firm on
knowledge, e.g. consultants
improving
research firm,
customer
regulatory
relationships
bodies
Consulting
firm
Immediate Customers
client wishing
of
to improve
immediate
C.S.
client
• Direct Investment,
• Knowledge Sharing
• Open Book Accounting
• Vendor Managed Inventory
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What does it mean?
Employment in Knowledge Based Industries EU15 2005
Notes:
High to medium tech
manufacturing, and
knowledge based
services.
Figures share of total
employment.
Knowledge and
technology based
industries are Eurostat
definitions.
Source: Eurostat
Manufacturing
Services
Total
Sweden
6.5%
47.8%
54.3%
Denmark
6.3%
42.8%
49.1%
UK
5.6%
42.4%
48.0%
Finland
6.8%
40.5%
47.3%
Neth’lands
3.3%
41.9%
45.2%
Belgium
6.5%
38.3%
44.8%
Germany
10.4%
33.4%
43.8%
France
6.3%
36.3%
42.6%
Ireland
6.0%
33.9%
39.9%
Austria
6.5%
31.0%
37.5%
Italy
7.4%
29.8%
37.2%
Spain
4.7%
27.0%
31.7%
Greece
2.1%
24.5%
26.6%
Portugal
3.3%
22.7%
26.0%
EU15
6.7%
34.7%
41.4%
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What does it mean?
Europe’s Knowledge Industries EU15 in 2005

Tech based manufacturing 6.9%
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Market services

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High-tech manufacturing
Medium tech manufacturing
High tech services
Financial services
Business/Communications
1.1%
5.8%
15.3%
3.5%
3.2%
8.6%
Health, education, cultural 19.4%
All tech and
knowledge based
41.5%
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Competences in the workplace
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Competences
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Thank You !
Pandelis Ipsilandis
TEI Larisa, Greece
Socrates IP
Mobile and interactive marketing, IT for convergence
internet marketing & eBusiness management
Virrat, 2008
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