Business in the Knowledge Economy

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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
• Consumer ideas, information and technology is
  part of the product. Smart Products
• Assets
• Knowledge worker is any organisations 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
• audio-video control, on-board internet
  interfaces, informatics, telemetric and
  navigation
• Replace ECU functions with open source based h/w
• Freescales Linux OS for car makers
• available with MPC5200 Board Support Package
• Similar growth path as Linux in mobile phones?

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IT Revolution

• Digitalisation
• Open Systems
• Memory storage technologies
• Scanning / imaging technologies
• Display systems
• Fast Speeds
• Rich Content

• Virtual Stores
• 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 RD, 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
• Scheduling of continuous flow of s/w development
  process across units located at different time
  zones
• World wide distributed service centres
• 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 Americas true economic health would
  be revealed. Investment and output growth would
  be higher
• The Economist, 4th March 2006

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Historical Perspectives

• 1911 the first time the Census included
  occupational breakdowns knowledge workers were
  a 15 minority
• 1962 publication of Machlups seminal work on
  the US knowledge economy
• 1970 the quickest route to a middle class
  income was a skilled factory job (now its
  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
Innovation Knowledge Networks
Clustering
Strategy Location
Flexible Organization
Economics of Knowledge
Learning Organizations Innovation Systems
Systems of Creation Production Distribution
Discordance
Global Competition Production
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Flexible Organization

• Integration of thinking doing at all levels
  of operations
• Elimination of middle management
• Multi-task job responsibilities

• Molecurization
• Projectized Organizations
• From Economies of Scale to Economies
  of Scope

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Knowledge Skills Learning

• Shortage of Tacit Knowledge
• ICT investments complementary with investments in
  human resources and skills

• TacitKnowledge
• Know-how
• Know-who

• Codified Knowledge
• Know-what
• Know-why

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Innovation

• Obsolete your own products. If you dont, 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
• Inter company interactive learning
• Partner networks
• 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

• 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

• 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

• Agents
• Wholesalers
• Distributors
• Retailers
• Brokers
• ..

Producer
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 ? 1967 ?
1995 Horn Hardart Self Service
Self-pumped Barkleys Alaska Air Automat Grocery
Store gas ATM internet ticket
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Identifying Consumer behaviour patterns

• Supermarkets
• Bar Code cash registers
• Real time inventory monitoring and control
• Demand forecasting
• Data mining to detect consumer buying habits
• Internet Sales
• Consumer preferences
• Low cost promotion and advertising

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Old Questions New answers

• The Airlines pricing model
• Same Economic law, but IT allows for real time
  dynamic pricing models

Price Pm Price Pn Price P1
S D
S D
Price Po
Seats Qgt72 Revenues ?
Seats Q72
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Supply Chain Management in KE
2nd-tier suppliers
1st -tier suppliers
ProjectOrganization
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 or client Users in client firm
Consulting firm on improving customer relationships Providers of knowledge, e.g. research firm, regulatory bodies Contracted consultants Consulting firm Immediate client wishing to improve C.S. Customers of immediate 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
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
Nethlands 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

• 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

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What does it mean?Europes Knowledge Industries
EU15 in 2005

• Tech based manufacturing 6.9
• High-tech manufacturing 1.1
• Medium tech manufacturing 5.8
• Market services 15.3
• High tech services 3.5
• Financial services 3.2
• Business/Communications 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