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Knowledge and Economy

By Fred Blaire


There’s business to be mined in knowledge fields. The economy exerts a powerful influence on all of our behaviour. The convergence of the way we communicate and compute is the cutting edge that embeds explicit knowledge in the economy. But the wedge that provides the heft behind the edge and shapes the future is human capital "worker knowhow" that is largely tacit and experiential. Rich nation and poor aspire to become societies based on knowledge work.

The informational feedback loops are becoming faster. For example, not only are electronic financial transactions executed instantaneously, but so are the linkages of each transaction to the rest of the financial system. But the value of such economic information is a function both of what is being measured and how well the measurement contributes to an understanding of the system being explored. The mental model comes first. The measurement comes after.

The emergence of the knowledge economy challenges the model of the economy that has been in vogue for most of this century. As The Economist’s survey of the world economy noted last fall, "Economic theory has a problem with knowledge: it seems to defy the basic economic principle of scarcity, the more you use it and pass it on, the more it proliferates. What is scarce in the economy is the ability to understand and use knowledge". This poses a problem for an economist who wants to measure aggregate growth and productivity. Managers need to focus on knowledge as content and innovation as process to be competitive. According to Peter Drucker, this is precisely the competence needed for the millennium: "the ability to innovate and to measure the performance thereof."

The Society of Management Accountants of Canada has taken up this challenge recently on behalf of its members and their clients. A draft of SMA’s paper entitled Collaborative innovation and the knowledge economy was discussed in April at a conference in San Diego. The foreword draws an interesting distinction between an organization’s ability to learn and its ability to apply learning efficiently and effectively:

"A good idea is a long way from a profitable product or service. Understanding the innovation process, and the concurrent role of individual and organizational learning, is fundamental to advising the strategic direction of a company. This paper recognizes the increasing importance of knowledge as both a driver of innovation and a product in its own right, to be sold or shared for competitive advantage."

The author of the SMA issue paper, Debra Amidon, is founder and chief strategist of Entovation International. She outlines a number of practical challenges in managing knowledge, including facilitation of access to knowledge; corporate memory loss; information overload and relevant knowledge scarcity; protection of knowledge assets and intellectual property; the volatility inherent in the rapid diffusion of new technology enablers; openness to the contributions of alternative ways of knowing; and the need to develop appropriate standards, policies, and metrics. She sees a shift in the role of management accountants from information provision to strategic-resource management. They can contribute to the knowledge innovation agenda by:

  • understanding and communicating the business drivers related to the knowledge innovation process
  • stimulating continuous knowledge creation
  • managing knowledge as a resource and learning as a means to the end
  • facilitating the process of innovation
  • supporting the development of virtual and networked organization structures;
  • balancing both the short and long term objectives in strategic, operating and tactical goals
  • creating appropriate performance indicators related to knowledge management
  • reporting the impact of knowledge management strategies

From:
Issue 3-10 Ottawa, July 98 (3-10p10-ott) Silvan Communications Inc.


Updated September 03, 1999