Transcript Risk Management Innovation-Looking Outside the Square

Innovation in a Global Knowledge Economy:
Challenges for Australian Service Industries
Professor Ron Johnston
Australian Centre for Innovation Ltd
Risk Management Innovation – Looking Outside the
Square
Risk Management Institution of Australasia Conference
August 2008
One Certainty
“the long-term trend towards a knowledge-based
economy continues, driven by the growing
globalisation of knowledge”
(OECD 2005)
Evolution of the Economy
C
18th
C
19th
C
20th
C
21st
Agricultural
Economy
Industrial
Economy
Knowledge
Economy
- Land
- Labour
- Land
- Labour
- Capital
- Enterprise
- Land
- Labour
- Capital
- Enterprise
- Knowledge &
Innovation
Roads, Sea -
- Roads, Sea
- Rail, Air
- Steam/Electricity
- Telecoms
- Roads, Sea
- Rail, Air
- Steam/Electricity
- Telecoms/Comput.
- Systems, Digital
Environments
Paradoxes of
Knowledge
Using knowledge does not consume it but it
does get obsolete.




Transferring knowledge does not lose it but
market mechanisms allow ownership.
Knowledge is abundant, but the ability to use
it is scarce.
Producing knowledge resists organisation.
Much of it walks out the door at the end of the
day.
What is a knowledge economy?
An economy in which the value of the goods and services
is primarily determined by the embedded knowledge
AND
there is a significant trade in the commodity of knowledge
itself
 All kinds of knowledge – codified & tacit, S&T & markets &
business processes
 Because knowledge does not wear out it is a source of
super-value and super-productivity.
 Knowledge alone can add value to a closed zero -sum
system
Key Features of the
Knowledge Economy
 Knowledge
Intensification
 Knowledge
Trade and Valuation
 Knowledge
Growth
Australian Centre for Innovation (ACIIC)
Growing Knowledge
Intensity of Trade
Value of Knowledge
400
350
300
Knowledge embedded
in goods and services
Capital value of
knoweldge
Knowledge production
250
200
150
100
50
0
1990
2000
2005
Growth of Knowledge Capability
Knowledge capability = Sum of knowledge
available x Power of technology to use it
– Knowledge is doubling every 3 years
– Technology power is doubling every 1.5 years (Moore ’s
Law)
SO
Rate of increase of knowledge capability =
1.3 x 1.7 = 2.2 ie doubling every year!!
Some Evidence





Investment in knowledge (R&D, education and software)
as a % of GDP in OECD countries is now comparable
with that for machinery and equipment (approx 5%)
Professional and technical workers are over 35% of
employment in Australia
The number of patents doubled in the past decade, to
450,000 pa
The ICT sector is 10% of business value added
New knowledge-intensive sectors like biotechnology,
nanotechnology and environmental services are growing
rapidly
OS≠FA
Each economy needs to enhance the
knowledge intensiveness of industries
with established comparative
advantage, and support the
development of unique competitive
advantage
Rules of the Global Knowledge Economy
Knowledge is being transformed
from an intellectual pursuit to a
commodity in the global capitalist
system. This leads to inevitable
pressures for increased
efficiency, productivity, outcomes
and ownership, of knowledge.
Knowledge Management Arrives
‘Silly me. I thought knowledge management meant it’s
not what you know but who you know.’
Innovation is central – it is the
mechanism whereby “economic
value is extracted from
knowledge” (OECD)
The Cutler Definition of Innovation
innovating and being innovative is
creative problem solving designed to
produce practical outcomes. The
outcome of this process is the
introduction of novel solutions to real
problems, needs or opportunities.
Three Facets of Innovation
There is no standard recipe
book for innovation – it is a
consequence of culture,
context, ingenuity, and risktaking driven by the pursuit
of identifying and satisfying
customer needs; in
particular, it is nurtured by
‘creative communities’
The Central Role of the Service Industries
The share of knowledge-intensive market
services now accounts for 21% of OECD
value added.
 Routine services eg accounting, market
research, sales, ICT management, trade
information
 Compliance services – auditing, legal services
 Network services – telecommunication, social
network providers, MICE
 Renewal services – R&D, strategic
management, consulting, value chain
management
Australia is well placed
(OECD STI Scoreboard 2007)
Case Study –
mining technology services





Gross sales A$ 8 billion
Growth rate of 20% pa
Export sales – 20%
20,000 employees
Generally small – 53% < 5; 26% < 25; 1%
>500
 Majority university-qualified
 BERD = 12% of revenue
Innovation in mining technology
Major New Service Industries
• Biological/health industry
- stemcell technologies
- tissue engineering
- organ replacement
• Carbon management industry
-
energy
transport
infrastructure
financial services
auditing services
capture