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Knowledge and Wisdom:


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Title: Knowledge and Wisdom:

Knowledge and Wisdom Towards A Globally
Competitive City
Sapientia et doctrina
Milan Zeleny Fordham University in New York, USA
Four types of Capital
  • Man-made capital, produced physical assets of
    infrastructures, technologies, buildings and
    means of transportation. This is the manufactured
    hardware of nations. This national hardware
    must be continually maintained, renewed and
    modernized to assure its continued productivity,
    efficiency and effectiveness.
  • Natural capital, i.e., nature-produced, renewed
    and reproduced inputs of land, water, air, raw
    materials, biomass and organisms. Natural capital
    is subject to both renewable and non-renewable
    depletion, degradation, cultivation, recycling
    and reuse.
  • Human capital (or human resources) refers to the
    continued investment in peoples skills,
    knowledge, education, health nutrition,
    abilities, motivation and effort. This is the
    software and brainware of a nation, perhaps
    the most important form of capital for rapidly
    developing nations.
  • Social capital is the enabling infrastructure of
    institutions, civic communities, cultural and
    national cohesion, collective and family values,
    trust, traditions, respect and the sense of
    belonging. This is the voluntary, spontaneous
    social order which cannot be engineered, but
    its self-production (autopoiesis) can be
    nurtured, supported and cultivated.

Portfolio of national capitalRich countries
  • Italy (373,000 82, 15, 3)
  • Belgium (384,000 83, 16, 2)
  • Netherlands (379,000 80, 18, 2)
  • Japan (565,000 81, 18, 2)
  • Switzerland (647,000 78, 19, 3)
  • Luxembourg (658,000 83, 12, 4)

Portfolio of national capitalPoor countries
  • Ethiopia (1,400 40, 21, 39)
  • Sierra Leone (2, 900 14, 18, 68)
  • Bhutan (6,500 8, 7, 85)
  • Zambia (13,000 9, 18, 73)

Moving From Or Strategy to And Strategy
  • Global Producer Global Customer
  • Cost Cost
  • OR Quality AND Quality
  • OR Speed AND Speed
  • OR Reliability AND Reliability
  • OR AND

Human and Social Capital are most importantHow
to create Knowledge/Innovation City or Region?
  • The Innovation strategy is created bottom-up as
    an outcome of collective entrepreneurship
    through cooperation among Business, Government
    and University the BGU Triad.
  • The key event is the creation of an
    Entrepreneurial University (EU), which takes
    initiatives together with government and industry
    to create a support structure for firm formation
    and regional growth.
  • The common objective of knowledge-based economic
    development efforts everywhere in the world is
    the creation of an Innovating Region. An
    Innovating Region (Or Knowledge-Wisdom City)
    has the capability to periodically renew itself
    through new technologies and firms generated from
    its BGU Triad cooperation.

BGU Triad
  • Business driving sphere wealth producer,
    source of added value and competitiveness of the
    region, creation of employment opportunities,
    development of human capital in cooperation with
    the university sphere
  • Government enabling sphere, supporting factor
    creates the optimal conditions for both driving
    spheres, i.e. physical, institutional and social
    infrastructure, for effective functioning of
    cooperation between university and business
  • University driving sphere creation of human
    capital, production and transfer of information,
    knowledge and wisdom in cooperation with business
  • Socio-Cultural Environment creates the social
    capital through cultural traditions, social
    institutions, values and preferences, behavior
    and habits, trust and cooperation. It evolves
    relatively slowly and cannot be changed

Linköping, Sweden
  • Linköping, Sweden - Innovating Region
  • Traditional dyads of universitygovernment or
    governmentindustry are insufficient in Global
    era must be transformed into BGU Triad
  • Transition to Knowledge-based society is basic
    premise of the Triad model
  • The Triad model
  • More prominent role for the university in
    innovation, on a par with industry and government
    in a knowledgebased society
  • Cooperative relationships among the three major
    institutional spheres innovation policy is
    outcome of interaction, not a prescription from
  • Each institutional sphere also takes the role of
    the other. Entrepreneurial university, taking
    some of the traditional roles of industry and
    government, is the core institution of Innovating
  • A region with a traditional cluster of SME firms,
    rooted in a particular technological paradigm is
    in danger of decline once that paradigm runs out.

Active University Role
  • Active role for the university in economic and
    social development, rather than merely playing a
    supporting role providing human capital and
    research resources, is the defining
    characteristic of the Entrepreneurial university.
  • The university is especially suitable site for
  • 1. High rate of flow through of human capital in
    the form of students who are a source of
    potential inventors. The university is a natural
  • 2. Potential source of new interdisciplinary
    scientific fields and new industrial sectors,
    each cross-fertilizing the other.
  • 3. Overlapping network of academic research
    groups and start-up firms, with alliances among
    large firms.
  • People representing the Triad functions science
    park and incubator directors, the university, the
    municipality, the regional county, council,
    private firms, and small business support

The Entrepreneurial University
  • The entrepreneurial model based on action,
    producing new firms
  • Business is a profession and business schools are
    professional schools
  • Professions 1. accepted body of knowledge, 2.
    certified practice, 3. code of ethics, 4. serving
    the public, focusing on clients needs.
  • Education in business must involve history, moral
    reasoning, theology, logic and most importantly
    practical knowledge, wisdom and ethics.
  • Bennis and OToole The problem is not that
    business schools have embraced scientific rigor
    but that they have forsaken other forms of
  • The entrepreneurial university based on the
    Triad of cooperation

Digital City Shanghai Digital City Strategy
Waitakere, New Zealand
  • Shanghai Municipal Government announced in 2000
    the Digital City Shanghai strategy
  • Digital City Strategy Waitakere, New Zealand
  • To deliver the Digital City - Four core concepts
  • 1. Actions need focus
  • coordinate the delivery of solutions that add
    most value through rigorous measurement and
    prioritization of projects
  • 2. Work smarter
  • By working together maximize the efficient use
    of time, people and money.
  • 3. Mobilize support for change
  • Ownership of the Digital City Strategy by City
    council, businesses and universities to ensure
    words are turned into actions and actions into
  • 4. Stakeholders
  • Digital City Strategy will involve many
  • ? Business
  • ? Government
  • ? Community agencies and groups
  • ? City Council
  • ? Education and University
  • ? Individual citizens

São Paulo, Brazil
  • Knowledge City
  • approved by the University of São Paulo, now
    under construction with the support of banks,
    high tech companies (IBM), NGOs, important media
    groups in Brazil as well as developing a global
    network of knowledge cities.
  • Only if organizational culture and knowledge
    producing cycles follow creative, innovative
    paths can evolution take place.
  • Four main themes
  • 1. Relation of global and local
  • 2. Transformation of educational systems,
    problems of governing and governability
  • 3. Relation of intellectuals and knowledge in the
    problem of educational change
  • 4. Relation of knowledge management methods and
    educational reform
  • In other words
  • Knowledge Creation
  • Continuous Innovation
  • Competitive Advantage
  • Traditional observers view the organization as a
    machine for information processing tradition
  • Needed is a biological view of organization as a
    knowledge producing organism
  • win/win solutions can be created
  • learn from failures and setbacks of others

Manchester Ideopolis, Knowledge City-Region
  • Manchester City Council Ideopolis Knowledge
  • 1. National priorities create a framework for
    local priorities in a way that best meets local
  • 2. Government policy needs to be more local
  • 3. Regional institutions provide a framework that
    encourages Ideopolises to work together within
    the region.
  • 4. Regional Development Agencies ensure that
    Regional Economic Strategies reflect the local
  • 5. Government Offices should help local
    institutions conncet their policies
  • 6. More decision-making powers need to exist at a
    local level
  • 7. City-region should have earned more autonomy
    where local leadership has proved effective
  • 8. The creation of city-region institutions
    should be relevant to the local context not a
    one-size fits all or best practices approach

Information is not knowledgeAlbert Einstein
  • There can be information overload, but never
    knowledge overload
  • There is plenty of data and information, yet
    knowledge remains (and will remain) in short
  • Knowledge management is not (and can not be)
    Information management
  • Information technology is not Knowledge

Taxonomy of Knowledge
  • Knowledge is the purposeful coordination of
  • All doing is knowing, and all knowing is doing
  • Bringing forth a world of coordinated action is
    human knowledge
  • Data ? Information ? Knowledge ? Wisdom
  • (? Enlightenment)

Where is the Life we have lost in living?Where
is the wisdom we have lost in knowledge?Where is
the knowledge we have lost in information?

T.S. Eliot, "The
Rock", Faber Faber 1934
Taxonomy of Knowledge (Zeleny, M. (1987)
Management Support Systems Towards Integrated
Knowledge Management, Human Systems Management,
Vol. 7, No. 1, pp. 59-70.)
Philosophers on knowledge, wisdom and
  • G. Ryle the capacity to act, to live, more or
    less successfully in the world, is more
    fundamental than (propositional) knowledge.
    Knowing how' is more fundamental than 'knowing
    that'. All our knowledge is but a development of
    our capacity to act. Dissociated from life, from
    action, knowledge stored in libraries is just
    paper and ink, devoid of meaning.
  • N. Maxwell The primary task of academic inquiry
    is to help humanity solve its problems of living
    in increasingly rational, cooperative,
    enlightened ways, thus helping humanity become
    more civilized. The basic aim of academic inquiry
    becomes to promote the growth of wisdom -
    wisdom being defined as the capacity to realize
    what is of value in life (and thus including
    knowledge and technological know-how). Those
    parts of academic inquiry devoted to improving
    knowledge, understanding and technological
    know-how contribute to the growth of wisdom.
  • N. Maxwell The basic idea of enlightenment is to
    learn from scientific progress how to make social
    progress towards an enlightened world. Putting
    this idea into practice involves getting
    appropriately generalized progress-achieving
    methods of science into social life itself. But
    in sharp contrast to all this, the traditional
    Enlightenment has sought to apply generalized
    scientific method, not to social life, but merely
    to social science. Instead of helping humanity
    learn how to become more civilized by rational
    means, the traditional Enlightenment has sought
    merely to help social scientists improve
    knowledge of social phenomena.

Knowledge vs. Information
  • Knowledge is action, the manifested capacity to
  • Information is symbolic description of action
  • Any description that can be digitized text,
    numbers, picture, sound is information
  • There is no explicit knowledge, only
  • All knowledge is tacit (M. Polanyi)
  • There is a difference between what you say
    (describe) and what you do (The Knowing-Doing
  • It does not matter what they customers say
    the only thing that matters is what they do!

The Talking-Doing Gap
  • Pfeffer and Sutton (The Knowing-Doing Gap, 2000)
    have explored the phenomenon of talking replacing
    action in managerial activities and
    decision-making. Why knowledge of what needs to
    be done frequently fails to result in action or
    behavior consistent with that knowledge? they
  • There is some evidence that competitive advantage
    comes only from doing something (preferably what
    others cannot do), not from talking about it.
    Anybody can read a book, attend a seminar or
    prepare a ppt presentation.
  • The Talking Doing equivalency is a disturbing and
    continually increasing phenomenon. New
    generations of managers, the ppt digital ones,
    behave as if talking about what they or others in
    the organization ought to do is as good and as
    important as actually getting it done.

Strategy is what you do, not what you say
  • Mission statements are among the most blatant
    and common means that organizations use to
    substitute talk for action. (Pfeffer-Sutton,

Knowledge-Information Cycle
  • The Knowledge Portfolio
  • Information (I) ? Information (I)
  • Information (I) ? Knowledge (K)
  • Knowledge (K) ? Knowledge (K) (Socialization)
  • Knowledge (K) ? Information (I)
  • The Knowledge Improvement Cycle (E-C-I-S Cycle)

New Information
Upgraded Knowledge
Upgraded Information
Components of the K-I Cycle
  • Externalization transformation (knowledge ?
    information) is designed to describe, record, and
    preserve the acquired, tested and proven-only,
    effective knowledge and experience in a symbolic
    form of description. All such symbolic
    descriptions, like records, manuals, recipes,
    databases, graphs, diagrams, digital captures and
    expert systems, and also books, cookbooks and
    procedures, help to create the symbolic memory of
    the enterprise. This phase creates the
    information necessary for its subsequent
    combination and recombination into forms suitable
    for a new and more effective action.
  • Combination transformation (information ?
    information) is the simplest as it is the only
    one taking place entirely within the symbolic
    domain. This is the content of the traditional
    information management and technology (IT). It
    transforms one symbolic description into another,
    more suitable (more actionable?) symbolic
    description. It involves data and information
    processing, data mining, data warehousing,
    documentation, databases and other combinations.
    The purpose is to make information actionable a
    useful input into the process of coordination of
  • Internalization transformation (information ?
    knowledge) is the most important and demanding
    phase of the cycle how to use information for
    effective action and for useful knowledge.
    Symbolic memory should not be passive
    information, just lying about in libraries,
    databases, computers and networks. Information
    has to be actively internalized in human
    abilities, coordination, activities, operations
    and decisions in human action. Only through
    action does information attain value, gain
    context and interpretation and integrated with
    the experience of the actor become reflected in
    the quality of the achieved results.
  • Socialization transformation (knowledge ?
    knowledge) is related to sharing, propagating,
    learning and transferring the knowledge among
    various actors, coordinators and decision makers.
    Without such sharing through the community of
    action, knowledge loses its social dimension and
    becomes ineffective. Through intra- and
    inter-company communities, markets, fairs and
    incubators, we connect experts with novices,
    customers with specialists, and employees with
    management for the purpose of learning through
    example, practice, training, instruction and
    conversation. The learning organization can
    emerge and become effective only through the
    socialization of knowledge.

Innovation and Knowledge
  • Innovation is a value adding cycle.
  • Notice the learning and knowledge cycles within
    the larger innovation cycle.

Money Invested
I ? I
Money Maintenance And Implementation
I ? K
K ? I
K ? K
Learning Cycle
Knowledge Cycle
Wisdom On the Art of Asking Why
  • Wisdom is knowing why things should or should
    not be done locally, regionally and globally
  • Asking Why vs. asking How
  • How implicitly conserves the process
  • Why explicitly challenges towards change
  • On the Global Economy
  • THE KEY Differentiation
  • do things differently (not just better)
  • do different things, not just the same ones

Wisdom and Ethics
  • Relationship between wisdom and ethics
  • An unethical person is not considered wise
  • Relationship to strategy and strategic action
  • Ethics is about doing, not just mastering the
  • Problem with corporate ethics
  • Not with knowing but with doing what is right
  • It is clear that teaching ethics, i.e.,
    providing descriptions, does not necessarily lead
    to ethical behavior and deeds, to being good and

Strategy and Strategic Action
  • The 4Es, the Spine of business education and
  • Efficiency (Doing things right) ? Effectiveness
    (Doing the right things) ? Explicability (Knowing
    Why) ? Ethics (Being right)
  • The Spine of 4Es and the taxonomy of knowledge
    are about action and doing
  • The Wisdom Project brings forth a new era of
    corporate strategy action-based, global,
  • Strategy is not about statements or descriptions,
    but about action
  • Your strategy is what you are doing. What you are
    doing is your strategy.

All About Adding Value
  • Knowledge is real and tangible
  • Knowledge, wisdom, and ethics are measurable
  • Relationship between knowledge and value creation
    is tangible
  • Knowledge, wisdom and ethics MUST ADD VALUE
  • (Data and information are only inputs into the
    value-adding processes)
  • Process of creating new value
  • Adding value to the business
  • Adding value to the customer

Stan Shihs Smiling Curve
Adding Value for the Customer
Maximum price
Value for customer
Price paid
Value Created
Value for business
Wages and salaries
Direct and indirect materials and services
Adding value
  • First, the customer pays for the service or
    product the price paid.
  • The producer subtracts the cost incurred.
  • The difference is the added value for the
  • This added value can also be interpreted as the
    value of knowledge.
  • In order to pay wages and salaries, the
    production process and its coordination must
    generate this added value. Added value is the
    only source of corporate wages and salaries and
    profits. If the added value does not cover the
    wages and salaries, then these must be
    correspondingly lowered. If no value has been
    added, then the value of knowledge is zero and no
    payment can be due to it. The business must add
    enough value in order to cover at least its
    workers and managers, their salaries and wages.
    If even more value has been created, then profits
    can be realized, up to the price received.
  • A business which does not generate sufficient
    added value cannot cover its wages and salaries,
    has no profits, and cannot function over an
    extended period of time. Added value is the key
    to assessing the quality of human knowledge in
  • The customer, of course, must be willing and
    ready to pay more for the service/product than he
    actually paid. The maximum price the customer
    would be willing to pay must exceed the price the
    producer has asked for. The difference is the
    added value for the customer.

Mass customization
Poor fit
Mass Production
Low cost
Mass Customization
Good fit
Custom Made
High cost
Mass customization
  • Mass customization is a good example of
    delivering value for the customer as a guide to
    the innovation process.
  • Mass Customization (MC) represents a new way of
    understanding (eliciting customer preferences),
    designing, implementing (producing and
    distributing) and operating (selling and using)
    processes, products and services fitted,
    individualized and customized for specific
    customers, yet provided at the cost of
    mass-produced, standardized, off-the-shelf items.
  • MC emerges from a special fusion of two
    traditional approaches mass production and
    custom made modes. MC retains the best features
    of both low cost and good fit for use.
  • MC creates innovative advantages for the business
    and customer
  • First sell, then produce cash at the start of
  • No finished products inventory
  • No retail outlets, no unsold or returned goods
  • No anonymous customer
  • No intermediaries

Conflict dissolution
Profile Map of the Environment
Our profile
Their profile
Desired profile
Profile Map of the Environment
  • Any product or process can be analyzed according
    to at least the key dimensions of price, quality,
    and speed, but possibly to many others, like
    service, image, etc.
  • Our product can be compared with their product
    and both with what the customer wants. Our, Their
    and Desired value profiles can be created and
  • The map shows the gaps or spaces to enter.

Example of Introducing Innovative Service
Performance Level
Formule 1
Eating Facilities
Architectural Esthetics
Room Size
24-Hour Receptionist
Room Furniture
Bed Quality
Service Attribute
An Example of Introducing Innovative Service
  • Observe that comparing two kinds of hotels with
    respect to ten service attributes leads to
    virtually parallel value lines, adding little to
    the customer.
  • It is extremely difficult to enter such a
    competitive and well covered market at any
    interesting environment level, other than
    strictly local.
  • Formule 1 hotels is an example of a successful
    innovation which created its own new space and
    a significant new value for customers. They chose
    not to compete along traditional hotel
    dimensions (got rid of the piano music in the
    lobby) and focused on bed quality, hygiene,
    silence and price. In these four key
    customer-driven areas they easily surpass their
    industry standards. Their innovation adds

Activity Map of Ikea
Suburban locations with ample parking
Explanatory catalogues, informative displays
and labels
More impulse buying
Self-transport by customers
High-traffic Store layout
Limited customer service
Self-selection by customers
Most items in inventory
Ease of transport and assembly
Limited sales staffing
Ample inventory on site
Year-round stocking
knock-down kit packaging
Self-assembly cy customers
Increased likelihood of future purchase
Modular furniture design
Low manufacturing cost
100 sourcing from long-term suppliers
Wide variety with ease of manufacturing
In-house design focused on cost of manufacturing
Activity Maps A Different View
  • In the activity maps, the higher order strategic
    themes are represented by the black circles,
    while the tightly linked activities are
    represented by the grey circles
  • Activity maps represent a companys strategic
    position through the use of activity organization
  • Activity maps are useful when redesigning on
    realigning strategy
  • Useful questions to ask when reevaluating
  • Is each activity consistent with the overall
  • Are there ways to strengthen how activities and
    groups of activities reinforce one another?
  • Could changes in one activity eliminate the need
    to perform others?

Related Authors References
  • Zeleny, M. (1987) Management Support Systems
    Towards Integrated Knowledge Management, Human
    Systems Management, Vol. 7, No. 1, pp. 59-70.
  • Zeleny, M. (2005) Knowledge of Enterprise
    Knowledge Management or Knowledge Technology?
    in Governing and Managing Knowledge in Asia,
    edited by T. Menkhoff, H-D. Evers, Y.W. Chay,
    World Scientific, pp. 23-57.
  • Zeleny, M. (2005) Human Systems Management
    Integrating Knowledge, Management and Systems,
    World Scientific Publishers.
  • Zeleny, M. (2006) Knowledge-information
    autopoietic cycle towards the wisdom
    systems, Int. J. Management and Decision Making,
    Vol. 7, No. 1, pp. 318.
  • Zeleny, M. (2007) The mobile society effects of
    global sourcing and network organisation, Int.
    J. Mobile Learning and Organisation, Vol. 1, No.
    1, pp.3040.
  • Zeleny, M. (to appear) Strategy and strategic
    action in the global era overcoming the
    knowing-doing gap, Int. J. Technology Management
  • Zeleny, M. (to appear) From Knowledge to Wisdom
    On Being Informed and Knowledgeable, Becoming
    Wise and Ethical, International Journal of
    Information Technology Decision Making

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