The Knowledge Economy

The Emperor’s New Clothes

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Everyone is talking about the Knowledge economy; and it seems that no-one wants to be left out of this exciting new development in how we do business. But while we all seem to agree that it is something important, there seems to be little agreement as to what it actually is. Indeed, there are those, like the little boy in the fable of ‘The Emperor’s New Clothes’, who are not afraid to tell it like it is. Professor Phil Brown and Dr Anthony Hesketh in a book entitled ‘The Mismanagement of Talent’ argue there has in fact been little growth in the number of jobs requiring knowledge workers. And Kim Howells MP, Foreign Office Minister, once trenchantly commented: “When wasn’t there a knowledge economy? Are you telling me the mining industry didn’t need knowledge to get coal out of the ground?” So, is talk of the knowledge economy and one of its latest siblings, ‘thought leadership’ part of just another fad?

What might we understand by the knowledge economy? Some talk about knowledge as the discovery of new insights into the physical world and ways of acting on it. This is the sort of knowledge for which we might take out patents, to secure and protect commercial intellectual property rights that might then be exploited. But arguably this is the stuff of classic R&D, which has been at the heart of business activity since industrialization first got under way.

Taking a more strategic perspective, knowledge of the environment in which business operates is regarded – and guarded – as crucial to securing a strong competitive position: charting changes in the political environment, spotting the implications of changing social priorities, assessing the potential of emerging technologies. Knowledge as competitive intelligence focuses on developing an understanding of what your competitors are doing, of potential substitute products and new potential competitors. While we might now be more sophisticated in our approach, this again is something that has long been a key aspect of business activity.

Others view knowledge as a focus on developing insights into the market; understanding what turns customers on – and off. Developing links for sharing knowledge across the supply chain are increasingly crucial for creating insights into the market that can be quickly acted upon. Similarly, organisational knowledge is about finding and implementing the means and processes for sharing and making all these varieties of knowledge ‘actionable’, of creating a learning organisation.

But there is a problem: on the one hand there is a view of knowledge as a commodity that has to be guarded, protected and exploited, while on the other there is the contradictory view that knowledge is something to be shared.

Perhaps the key to success in a knowledge economy is finding a way of overcoming the conflicts that arise when trying to get people to share information that is a potential source of power and esteem. As Sir Francis Bacon recognized four centuries ago, ‘Knowledge is power’. The way this conflict has usually been overcome is to provide some incentive, some form of reward, be it a financial bonus, new company car or a weekend break.

Arguably the knowledge economy is nothing new; its just that ideas – which have always been the lifeblood of enterprise – are being cycled and recycled at ever increasing speed. But this is not likely to detract from the fact that the premium on knowledge will become ever greater nor that the incentives to share will also need to be greater.

In many ways this is likely to become part of the mind-shift that is necessary for developing a more dynamic, enterprise economy. Those who come up with new, innovative ideas and ways of doing things are no longer likely to be content with the incentive of a weekend in Tenby, when they can have the opportunity to set up their own business. It has long been the case that no organization is keen to share the knowledge that could ultimately lead to an employee setting up in competition. Similarly, an employee who has come up with a way of better developing a business proposition will want to take advantage of that as an opportunity for him or herself. It is a situation that will only intensify the contradiction at the heart of the knowledge economy; unless of course both parties form a ‘partnership’ or association in which the power and rewards are more equally shared. But to achieve this I suspect we will need to get away from the large, corporatist framework within which so much of the debate on the knowledge economy currently takes place. Unless, of course we are simply looking at a modern version of the ‘emperor’s new clothes’ and the knowledge economy really is nothing new. Maybe putting their knowledge to good use to come up with new ideas for business and new ways of doing things is what people setting up businesses have always been good at.

Glyn Fry

(An earlier version of this article first appeared in Issue 3 of bottomline, 2005)