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Knowledge Based Economy

Knowledge Based Economy

 

 

For the last two hundred years, neo-classical economics has recognised only two factors of production: labour and capital. This is now changing. Information and knowledge are replacing capital and energy as the primary wealth-creating assets, just as the latter two replaced land and labor 200 years ago. In addition, technological developments in the 20th century have transformed the majority of wealth-creating work from physically-based to “knowledge-based.” Technology and knowledge are now the key factors of production. With increased mobility of information and the global work force, knowledge and expertise can be transported instantaneously around the world, and any advantage gained by one company can be eliminated by competitive improvements overnight. The only comparative advantage a company will enjoy will be its process of innovation–combining market and technology know-how with the creative talents of knowledge workers to solve a constant stream of competitive problems–and its ability to derive value from information. We are now an information society in a knowledge economy where knowledge management is essential. This page lists and rates Internet resources related to the field of knowledge based economy and knowledge management in the new information society.

 

 

“We are living through a period of profound change and transformation of the shape of society and its underlying economic base … The nature of production, trade, employment and work in the coming decades will be very different from what it is today.”

 

In an agricultural economy land is the key resource. In an industrial economy natural resources, such as coal and iron ore, and labour are the main resources. A knowledge economy is one in which knowledge is the key resource. It is not a new idea that knowledge plays an important role in the economy, nor is it a new fact. All economies, however simple, are based on knowledge about how, for example, to farm, to mine and to build; and this use of knowledge has been increasing since the Industrial Revolution. But the degree of incorporation of knowledge and information into economic activity is now so great that it is inducing quite profound structural and qualitative changes in the operation of the economy and transforming the basis of competitive advantage. The rising knowledge intensity of the world economy and our increasing ability to distribute that knowledge have increased its value to all participants in the economic system. The implications of this are profound, not only for the strategies of firms and for the policies of government but also for the institutions and systems used to regulate economic behaviour.

 

 

“Capitalism is undergoing an epochal transformation from a mass production system where the principal source of value was human labour to a new era of ‘innovation mediated production’ where the principal component of value creation, productivity and economic growth is knowledge.”

 

 

Defining the knowledge economy is challenging precisely because the commodity it rests on “knowledge” is itself hard to pin down with any precision. Perhaps for this reason there are few definitions that go much beyond the general and hardly any that describe the knowledge economy in ways that might allow it to be measured and quantified.
# The knowledge economy is a vague term that refers either to an economy of knowledge focused on the production and management of knowledge, or a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge to produce economic benefits.

 

# The knowledge economy is the story of how new technologies have combined with intellectual and knowledge assets – the “intangibles” of research, design, development, creativity, education, brand equity and human capital – to transform our economy.
The Knowledge Economy is emerging from two defining forces: the rise in knowledge intensity of economic activities, and the increasing globalisation of economic affairs.

 

The rise in knowledge intensity is being driven by the combined forces of the information technology revolution and the increasing pace of technological change. Globalisation is being driven by national and international deregulation, and by the IT related communications revolution.

 

However, it is important to note that the term ‘Knowledge Economy’ refers to the overall economic structure that is emerging, not to any one, or combination of these phenomena. Various observers describe today’s global economy as one in transition to a “knowledge economy”, as an extension of “information society”. The transition requires that the rules and practices that determined success in the industrial economy need rewriting in an interconnected, globalised economy where knowledge resources such as know-how, expertise, and intellectual property are more critical than other economic resources such as land, natural resources, or even manpower.

 

According to analysts of the “knowledge economy,” these rules need to be rewritten at the levels of firms and industries in terms of knowledge management and at the level of public policy as knowledge policy or knowledge-related policy.

 

 

A key concept of this sector of economic activity is that knowledge and education (often referred to as “human capital”) can be treated as:
• A business product, as educational and innovative intellectual products and services can be exported for a high value return.
• A productive asset.

 

The initial foundation for the Knowledge Economy was first introduced in 1966 in a book by Peter Drucker. The Effective Executive described the difference between the Manual worker and the knowledge worker. A manual worker works with his hands and produces “stuff”. A knowledge worker works with his or her head not hands, and produces ideas, knowledge, and information.

 

 

It can be argued that the knowledge economy differs from the traditional economy in several key respects:

 

• The economics is not of scarcity, but rather of abundance. Unlike most resources that deplete when used, information and knowledge can be shared, and actually grow through application.

•The effect of location is either diminished, in some economic activities: using appropriate technology and methods, virtual marketplaces and virtual organizations that offer benefits of speed, agility, round the clock operation and global reach can be created . or, on the contrary, reinforced in some other economic fields, by the creation of business clusters around centres of knowledge, such as universities and research centres having reached world-wide excellence.

 

• Laws, barriers and taxes are difficult to apply on solely a national basis. Knowledge and information “leak” to where demand is highest and the barriers are lowest.

 

• Knowledge enhanced products or services can command price premiums over comparable products with low embedded knowledge or knowledge intensity.

 

• Pricing and value depends heavily on context. Thus the same information or knowledge can have vastly different value to different people, or even to the same person at different times.

 

• Knowledge when locked into systems or processes has higher inherent value than when it can “walk out of the door” in people’s heads.

 

• Human capital — competencies — are a key component of value in a knowledge-based company, yet few companies report competency levels in annual reports. In contrast, downsizing is often seen as a positive “cost cutting” measure.

 

• Communication is increasingly being seen as fundamental to knowledge flows. Social structures, cultural context and other factors influencing social relations are therefore of fundamental importance to knowledge economies.
These characteristics require new ideas and approaches from policy makers, managers and knowledge workers.

 

 

Commentators suggest that at least three interlocking driving forces are changing the rules of business and national competitiveness:

 

• Globalization — markets and products are more global.

 

• Information/Knowledge Intensity — efficient production relies on information and know-how; over 70 per cent of workers in developed economies are information workers; many factory workers use their heads more than their hands.

 

• Computer networking and Connectivity developments such as the Internet bring the “global village” ever nearer.

 

As concerns the applications of any new technology, it depends how it meets economic demand. It can stay dormant or get a commercial breakthrough.

 

 

The other main driver of the emerging knowledge economy is the rapid globalisation of economic activities. While there have been other periods of relative openness in the world economy, the pace and extent of the current phase of globalisation is without precedent.
The global communications revolution has been accompanied by a widespread movement to economic deregulation, including

 

# the reduction of tariff and non-tariff barriers on trade in both goods and services; the floating of currencies and deregulation of financial markets more generally;

 

# the reduction of barriers to foreign direct investment and other international capital flows, and of barriers to technology transfers; and

 

# the deregulation of product markets in many countries, particularly in terms of the reduction in the power of national monopolies in areas such as telecommunications, air transport and the finance and insurance industries.
Together these changes have led to rapid globalisation. As a result, goods and services can be developed, bought, sold, and in many cases even delivered over electronic networks.

 

 

The last twenty years have seen an explosion in the application of computing and communications technologies in all areas of business and community life. This explosion has been driven by sharp falls in the cost of computing and communications per unit of performance, and by the rapid development of applications relevant to the needs of users. Digitalization, open systems standards, and the development software and supporting technologies for the application of new computing and communications systems – including scanning and imaging technologies, memory and storage technologies, display systems and copying technologies – are now helping users realise the potential of the IT revolution. It is in the Internet that these technologies come together, and it is the Internet phenomenon that exemplifies the IT revolution. Over the first decade of its development the Internet remained a specialist research network. By 1989 there were 159,000 Internet hosts worldwide. Now, just 10 years later, there are more than 43 million.

 

In economic terms, the central feature of the IT revolution is the ability to manipulate, store and transmit large quantities of information at very low cost. An equally important feature of these technologies is their pervasiveness. While earlier episodes of technical change have centered on particular products or industrial sectors, information technology is generic. It impacts on every element of the economy, on both goods and services; and on every element of the business chain, from research and development to production, marketing and distribution.

 

Because the marginal cost of manipulating, storing and transmitting information is virtually zero, the application of knowledge to all aspects of the economy is being greatly facilitated, and the knowledge intensity of economic activities greatly increased. This increasing knowledge intensity involves both the increasing knowledge intensity of individual goods and services, and the growing importance of those goods and services in the economy.

 

 

It is virtually impossible to separate technology from the act of living in today¹s world. We are all connected to our work, to our product and service providers, and to each other in myriad ways that could never have been predicted just ten years ago. Out of this vast degree of interconnectivity spring networks – and nodes of contact within networks – that add momentum to the pace of still more technological opportunities and developments. It is an undeniable fact that ICTs play a very important role in the development of every nation these days. This is because growth is induced by the flow of information and this realization has led most economies into knowledge based ones. Developing countries have realized this and are rigorously pursuing the use of ICTs as a platform for socio-economic development.

 

Electronic commerce (e-commerce) is a rapidly growing segment of the economy, which is expected to increase yet more rapidly over the next few years. Current internet commercial transactions are estimated at hundreds of millions and are projected for billions within the decade. The growth of net transacted revenues will be energized with Visa and MasterCard’s release of secure software standards for their card members’ internet transactions, and the acceptance of standards for micropricing. All in all, it is reasonable to project that, in a decade’s time, the vast majority of economic transactions will involve a significant electronic component. Business is experiencing a significant transition. This transition is based on the fact that we are now in a networked environment. ICT can bring business transformation, changing work environments and global economy. Advent of the “new economy”, embodied by the expansion of the internet, would be the signal of the end of geography and space. Distances are reportedly abolished as markets are from now on at a click away.

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Various management writers have for several years highlighted the role of knowledge or intellectual capital in business. The value of high-tech companies such as software and biotechnology companies, is not in physical assets as measured by accountants, but in their intangibles such as knowledge and patents. The last few years have a growing recognition by accounting bodies and international agencies that knowledge is a crucial factor of production. For example, the OECD has groups investigating ‘human capital’ and also the role of knowledge in international competitiveness.

 

 

The evolving knowledge economy has important implications for policy makers of local, regional and national government as well as international agencies and institutions e.g.:
• Traditional measures of economic success must be supplemented by new ones
• Economic Development policy should focus not on ‘jobs created’ but rather on infrastructure for sustainable ‘knowledge enhancement’ that acts as a magnet for knowledge-based companies.
• Develop regulation and taxation for information and knowledge trading at international level, looking to future knowledge-based industries rather than traditional industries.
• Stimulate market development through new forms of collaboration.

 

 

The main challenges facing policy makers and business leaders are the following:
• It is difficult to ‘go it alone’. Stakeholders, especially employees and business partners must share similar views for your own initiatives to succeed
• alone recognition and reward systems usually do not sufficiently recognise recognizee contributions. They are linked to performance measures of the traditional economy.
• Measures of return on investment are done using traditional accounting methods, thus investments in knowledge enhancing activities need strong advocates at senior levels.

 

 

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.
• There is an enormous increase in the codification of knowledge, which together with networks and the digitalisation of information, is leading to its increasing commodification.
• Increasing codification of knowledge is leading to a shift in the balance of the stock of knowledge – leading to a relative shortage of tacit knowledge.

 

• Codification is promoting a shift in the organisation and structure of production.

 

• Information and communication technologies increasingly favour the diffusion of information over re-invention, reducing the investment required for a given quantum of knowledge.

 

• The increasing rate of accumulation of knowledge stocks is positive for economic growth (raising the speed limit to growth). Knowledge is not necessarily exhausted in consumption.

 

• Codification is producing a convergence, bridging different areas of competence, reducing knowledge dispersion, and increasing the speed of turnover of the stock of knowledge.

 

• The innovation system and its ‘knowledge distribution power’ are critically important.

 

• The increased rate of codification and collection of information are leading to a shift in focus towards tacit (‘handling’) skills.

 

• Learning is increasingly central for both people and organisations.

 

• Learning involves both education and learning-by-doing, learning-by-using and learning-by-interacting.

 

• Learning organisations are increasingly networked organisations.

 

• Initiative, creativity, problem solving and openness to change are increasingly important skills.

 

• The transition to a knowledge-based system may make market failure systemic.

 

• A knowledge-based economy is so fundamentally different from the resource based system of the last century that conventional economic understanding must be re-examined.

 

 

“In the 21st century, comparative advantage will become much less a function of natural resource endowments and capital-labour ratios and much more a function of technology and skills. Mother nature and history will play a much smaller role, while human ingenuity will play a much bigger role.”

 

What makes the emergence of the knowledge economy important is that it is, in some significant respects, different from the industrial economy we have known for most of the last 200 years. Those differences include the following:

 

 

The IT revolution has intensified the move towards knowledge codification, and increased the share of codified knowledge in the knowledge stock of advanced economies. All knowledge that can be codified and reduced to information can now be transmitted around the world at relatively little cost. Hence, knowledge is acquiring more of the properties of a commodity. Market transactions are facilitated by codification, and the diffusion of knowledge is accelerated. Codification is also reducing the importance of additional, duplicative investments in acquiring knowledge. It is creating bridges between fields and areas of competence and reducing the ‘dispersion’ of knowledge. These developments promise an acceleration of the rate of growth of stocks of accessible knowledge, with positive implications for economic growth.

 

 

Information and communication technologies have greatly reduced the cost and increased the capacity of organisations to codify knowledge, process and communicate information. In doing so they have radically altered the ‘balance’ between codified and tacit knowledge in the overall stock of knowledge. In essence, creating a shortage of tacit knowledge. As access to information becomes easier and less expensive, the skills and competencies relating to the selection and efficient use of information become more crucial, and tacit knowledge in the form of the skills needed to handle codified knowledge becomes more important than ever.

 

Information and communication technology investments are complementary with investment in human resources and skills. The skills required of humans will increasingly be those that are complementary with information and communication technology; not those that are substitutes. Whereas machines replaced labour in the industrial era, information technology will be the locus of codified knowledge in the knowledge economy, and work in the knowledge economy will increasingly demand uniquely human (tacit) skills – such as conceptual and inter-personal management and communication skills.

 

 

The knowledge economy increasingly relies on the diffusion and use of knowledge, as well as its creation. Hence the success of enterprises, and of national economies as a whole, will become more reliant upon their effectiveness in gathering, absorbing and utilising knowledge, as well as in its creation.
A knowledge economy is, in effect, a hierarchy of networks, driven by the acceleration of the rate of change and the rate of learning, where the opportunity and capability to get access to and join knowledge-intensive and learning-intensive relations determines the socio-economic position of individuals and firms.13 Firms must become learning organisations, continuously adapting management, organisation and skills to accommodate new technologies and grasp new opportunities. They will be increasingly joined in networks, where interactive learning involving creators, producers and users in
experimentation and exchange of information drives innovation.

 

 

In a knowledge economy, firms search for linkages to promote inter-firm interactive learning, and for outside partners and networks to provide complementary assets. These relationships help firms spread the costs and risks associated with innovation, gain access to new research results, acquire key technological components, and share assets in manufacturing, marketing and distribution. As they develop new products and processes, firms determine which activities they will undertake individually, which in collaboration with other firms, which in collaboration with universities or research institutions, and which with the support of government. Innovation is thus the result of numerous interactions between actors and institutions, which together form an innovation system.

 

Those innovation systems consist of the flows and relationships, which exist among industry, government and academia in the development of science and technology. And the interactions within these systems influence the innovative performance of firms and ultimately of the economy. The ‘knowledge distribution power’ of the system, or its capability to ensure timely access by innovators to relevant stocks of knowledge, is therefore a major determinant of prosperity.

 

 

The Indian vision of a knowledge-based economy will be realised only when it is based on the foundation of a robust industrial economy. To be truly beneficial, the rain of IT must fall at the right place, in the right quantity, at the right time and for the right purpose.

 

THE Indian software industry has compiled an impressive track record over the past decade. Entrepreneurs, bureaucrats and politicians are now advancing views about how India can transform itself into a knowledge-based economy by riding the information technology (IT) bandwagon. Isolated instances of villagers using e-mail are cited as examples of such transformation. Likewise, e-governance is being projected as the way of the future.

 

There is no dearth of fascinating stories about IT-enabled changes. But, there is little discussion about whether such changes are sustainable and effective when other areas of the economy continue to lag. For example, 79 per cent of India’s population lives in villages with limited basic infrastructure. Over 60 per cent of the population is considered literate, but with literacy being defined as the ability to read and write simple words in any language, acquired with or without formal schooling. This criterion is so basic, that it is almost irrelevant in the context of a knowledge economy. Yet, Central and State governments have projected IT as a vehicle for social and economic transformation. Are we putting the cart before the horse here? Even if the focus on IT is justifiable, how must IT policy be designed so that the nation is benefited in a balanced way?

 

In this commentary, we discuss the implications of India’s intensive focus on the IT sector. We argue that India should aggressively pursue manufacturing- and agriculture-based industries to build a robust industrial economy that can be made more efficient with IT. IT projects can certainly be pursued within the private sector. However, government policy should not be heavily skewed in favour of the IT industry when its benefits to society are unclear and when its role within the broader framework of national development has not been adequately articulated. Further, policy-makers should moderate their obsession with IT as a panacea for India’s socio-economic problems.

 

 

The value of IT depends greatly on the existing level of economic development. IT can make existing assets and processes more effective and efficient, but cannot compensate for the lack of a basic infrastructure. What is appropriate for a developed economy is not necessarily appropriate for India, where basic elements of infrastructure including quality education, healthcare, electricity and drinking water remain in short supply.

 

The impact of IT is best understood when the differences between industrial and knowledge-intensive ventures are recognised. Industrial growth derives from investments in large-scale infrastructure (such as railways, roadways, power grids and dams). Such infrastructure supports the growth of physical-asset intensive industries (such as the steel and transportation industries) that create and move physical entities (such as goods, water and people). These ventures employ numerous workers with limited education and skills, and can uplift large sections of society.

 

In contrast, ventures in the knowledge economy usually involve the production of knowledge-intensive goods (like software), and the large-scale capture, movement and utilization of information using sophisticated network infrastructure (such as computers, cable, fibre and routers). Beyond the physical labour required for initial construction, building and maintaining such infrastructure requires specialized knowledge.

 

Despite the hype of the “new economy”, the fact is that economic development is cumulative. The industrial economy made agriculture more productive. The productivity of agricultural labour skyrocketed with the use of industrial and biological innovations including tractors, irrigation systems, fertilizers, pesticides and genetically engineered seeds. Historically, industrial innovation in developed economies has created great wealth and improved living standards across societal divides. This progress has set them up in an ideal position to create and exploit knowledge as they transform into knowledge-based economies. Crucially, the greatest source of productivity and growth attributed to the knowledge economy derives not from the knowledge economy itself, but from its effects on the industrial economy. For example, IT can enable supply chains and factories to work more efficiently.

 

The “leapfrogging” argument, whereby India skips heavy infrastructure building and transforms directly into a knowledge economy, is therefore suspect. Proponents of leapfrogging describe how isolated villages without conventional telephones have directly adopted cellular phones. The example provides excellent symbolism. However, the underlying principle is not scalable to the level of the national economy where many complex sub-systems work together. Consider the transportation sub-system. The laws of physics do not allow IT to substitute the physical movement of goods by a “virtual” movement. A lightning-fast information network will not in itself help achieve faster and cheaper transport. Better roadways and railways will.

 

 

Indian IT firms have focussed on developing and delivering IT services to advanced economies. Even if India became the world’s software factory and the most optimistic projections of IT-related jobs (including jobs in call centres and design centres) were upheld, this industry will employ at most a few million people. In a nation with over a billion people, this constitutes but a dent in the employment statistics.

 

Further, a social planner should be concerned not just with the creation of wealth, but also with its distribution across social divides. The IT industry holds limited potential for wealth to trickle down to the poorer sections of society. Unlike a steel plant, IT engenders few opportunities for the uneducated. Any transfer of wealth from the IT sector (for example, by taxing the IT sector to fund social spending) would be achieved through the heavy hand of government.. In fact, the rapid growth of IT will likely lead to a digital divide in the short term, where the rich and educated are empowered and enriched by IT and the poor are oblivious to its impact.
Before embracing IT, Indian policy planners must carefully evaluate whether investments in other areas would yield higher, and more equitable, returns. For example, consider the jute industry.

 

The country needs to be particularly careful not to give short shrift to the manufacturing sector. China is not known for its strengths in IT, although it now has some presence in the area. But, what China has accomplished in terms of its core industrial base is striking. Foreign direct investment (FDI) in China was of the order of billion in 2000 despite all the noise about alleged labour and human rights abuses. Chinese exports exceeded 0 billion in 2000, with the United States alone accounting for 0 billion of these exports. In fact, the value of “footwear” exported annually by China to the U.S. (worth about .2 billion) itself compares with or even exceeds the total value of India’s annual IT exports.

 

Why are these numbers relevant? Exporting footwear creates millions of jobs for citizens who lack sophisticated skills. According to some reports, a total of 34 million export-related jobs have been created in China, with exports to the U.S. alone accounting for over 20 million jobs in the last decade. These jobs have improved living standards for a substantial fraction of Chinese society. There is much we need to learn from China about how the manufacturing sector can deliver robust and equitable economic growth. Taiwan, Malaysia and South Korea have also flourished using similar approaches.

 

In contrast with manufacturing, the direct benefits to IT (such as employment in IT jobs) are likely to flow to the few who already have the benefits of education. The trickle-down effects of IT (such as cleaning and maintenance staff for IT firms) are likely to be modest or non-existent outside the large cities. It is also time to discard the notion that the manufacturing sector is inherently less appealing because it may involve some physical labour.

 

In the more advanced economies, a skilled factory floor worker is frequently paid more than a call-centre employee. Empowered with technology, the factory worker can add value at a remarkable rate. In India, the reverse often holds. Mundane call-centre jobs, often outsourced from more developed economies, absorb well-educated, English-speaking workers whose abilities could be employed much more productively elsewhere.

 

The actions of governments in India tend to be biased in favour of the IT sector.. The government needs a more balanced policy, one that ensures that the core industrial sector is not ignored in the rush toward IT.

 

 

IT is fashionable to say that India’s population constitutes its greatest asset. This viewpoint is misleading. People are assets only when they participate meaningfully in the cycle of value creation and consumption by exercising buying power, or creating products and services of value, or by creating and harnessing knowledge. A large fraction of India’s population does not meet, or even come close to, this asset standard. To transform such a situation, a renewed focus is required on the two pillars that have supported the growth of every successful economy – a strong infrastructure core and widespread access to education. Now to discuss the IT-education interface.

 

 

Distance learning and e-learning are already being flaunted in some quarters as solutions to India’s education challenges. The argument proffered is that IT can enable the cheap and widespread delivery of education. This reasoning ignores the key challenge – how can the children of the poor and the uneducated be provided with the incentives to come to school, stay in school, and progress to higher institutions of learning? The answer lies in understanding physiology, psychology and economics, rather than in implementing technology. For all its drawbacks and implementation problems, the mid-day meal programme launched by the late Chief Minister M.G. Ramachandran in Tamil Nadu addressed this challenge head on. The programme recognised a simple, but fundamental, fact – the brain cannot feed when the stomach itself is unfed. It provided parents with the incentive to send their children to schools, rather than to the fields. For the children to whom the benefits of education seemed like a distant, hazy mirage, it provided an immediate, tangible reason to stay in school.

 

There is little reason to believe that IT-based learning will advance meaningfully the cause of Indian education. Problems that are enmeshed in the social and economic fabric of Indian society need to be addressed primarily with solutions that are of a social and economic nature. Throwing technology at these problems will not make them go away.

 

In addition, creating the infrastructure and content to support effective e-learning is very expensive. A rush into e-learning at this stage will only lead to squandered resources.

 

 

A Knowledge Economy is characterised by a culture of innovation. For such a culture to take root, innovation must be rewarded and intellectual property must be protected.

 

A culture that truly enhances innovation supports the view that to try hard and fail is perfectly fine. Yet, the Indian psyche has historically been averse to blessing the risky venture. This attitude transcends into the corporate arena. Consider how static the Indian automobile industry was for three decades before the refreshing winds of competition brought about rapid change. Competition breeds innovation.

 

While one side of the cultural coin pertains to the incentives for innovation, the flip side pertains to its protection. Ideas, unlike property, cannot be protected by building a fence around them. Intellectual property protection is not a purely economic issue; it also has important cultural dimensions. The economic angle can be addressed with stronger patent laws and punitive procedures. However, the cultural angle will decide whether such protection can be enforced meaningfully. Addressing the cultural angle is a challenge.

 

 

A society that is deeply divided by social and economic fissures must think carefully about how it achieves economic and technological advance. The path, in some ways, is more important than the outcome itself.

 

In the Indian context, particular attention needs to be paid to when, where, and in what form IT and other technological advances are encouraged. There are, indeed, many low-hanging fruits to be harvested. For example, a recent article in The New York Times described how a fisherman working off the coasts of Kerala used a cellphone on the seas to obtain information about spot market prices for fish at Kochi and Kollam. The fisherman netted the equivalent of an additional ,000 in annual income merely by deciding to deliver his catch to the more remunerative market each time his boat came in. This striking example of how simple information flows can enhance market efficiency can be replicated in many ways, and in many markets. However, the stakes are quite different when it comes to the formulation of a national IT policy. Any national policy requires some trade-offs between the benefits to industrial sectors, regions and classes of people. In formulating a national IT policy, the quest for superior technology must be moderated by an understanding of its implications at the social level – what might be good for a private company or an entrepreneur may not always be good for society and vice-versa

 

Successful technology adoption will move in measured steps, at a pace and in a direction that are in harmony with changes in the socio-economic fabric. The role of the government in ensuring such harmony should not be underestimated. This is especially true in India where the government remains responsible for a significant fraction of the economic output, and where it is actively reshaping rules and regulations as the country integrates into the global economy.

 

Information technology can change the way a society communicates, collaborates, lives, works and plays. The growth of the IT sector in India symbolises the potential of Indian industry to perform at world-class standards. This success demonstrates much of what can go right when the spirit of human enterprise is given free rein.

 

However, the success of IT at the corporate level in India cannot solve its myriad economic and social challenges. Just as copious rainfall can lead to dramatic floods, an obsession with IT and the knowledge economy is not useful. To be truly beneficial, the rain of IT must fall at the right place in the right quantity, at the right time and for the right purpose. Neither does the aggressive pursuit of IT represent the sole, or even an obvious, pathway to a first class economy despite the glowing success of high-profile IT companies.

 

 

For the last two hundred years, neo-classical economics has recognised only two factors of production: labour and capital. This is now changing. Information and knowledge are replacing capital and energy as the primary wealth-creating assets, just as the latter two replaced land and labor 200 years ago. In addition, technological developments in the 20th century have transformed the majority of wealth-creating work from physically-based to “knowledge-based.” Technology and knowledge are now the key factors of production. With increased mobility of information and the global work force, knowledge and expertise can be transported instantaneously around the world, and any advantage gained by one company can be eliminated by competitive improvements overnight. The only comparative advantage a company will enjoy will be its process of innovation–combining market and technology know-how with the creative talents of knowledge workers to solve a constant stream of competitive problems–and its ability to derive value from information. We are now an information society in a knowledge economy where knowledge management is essential. This page lists and rates Internet resources related to the field of knowledge based economy and knowledge management in the new information society.

Source: ArticlesBase.com

Knowledge Process Management?

Knowledge Process Management?

© Copyright 2006 Maxil Technology Solutions Inc. All Rights Reserved.www.maxiltechnology.com

Whitepaper

Knowledge Process Management—addresses specific client needsthrough customized domain expertise

Raj Kosaraju

The US, the UK, and other Western European countries are facing a shortage of highly trained and specialized professionals in various knowledge-intensive high-skill sectors. And, the problem is only expected to worsen.During the last decade, an increasing number of North American and European companies have successfully outsourced select Business Process Operations,allowing them to save on capital and operational expenses. This success in costreduction, while improving quality has encouraged many firms to start off-shoring their high-end knowledge work.However, as companies evolve, not only do their IT strategies change but theirbusiness processes also evolve in the quest for operational excellence. Such companieswill look for vendors who provide an integrated outsourcing model specific to a particular domain to achieve continuous improvements. It is in this area, that Knowledge Process Management (KPM) will play a critical role. KnowledgeProcess Management (KPM) is a structured set of knowledge, related tothe organizational experience in a given domain or set of domains.What Is KPO?Knowledge Process Outsourcing (KPO) is the trend of off shoring high-end knowledge intensive businessprocesses to low wage destinations that require significant domain expertise. The central theme of KPOis to create value for the client by providing business expertise.What Is KPM?Information Week describes Knowledge Management as “the process of capturing a company’scollective expertise wherever it resides—in databases, on paper, or in people’s heads—and distributing it to wherever it can help produce the biggest payoff.”Socio-Cultural and Organizational ComponentsTechnology

KPM focuses on and building strengths in specializeddomains such as pharmaceuticals, biotechnology, finance, engineering design, etc.KPM builds on KPO, taking process management astep further. KPM offers the client a completely integrated solution by using specialized domain expertise.What Does KPM Offer Beyond KPODomain Experts—Companies are realizing the importanceof having specialized professionals such as accountants,scientists, economists etc., spanning various verticals, toensure continued quality enhancements. Technologies suchas databases, can store all the data imaginable, but theycannot store the logic and analytics needed to make sense of that data.Identification of Knowledge Gaps—KPM companies utilize domain experts across multiple verticals, which allow themto identify pain areas within their specialized industry, through constant interaction with customers and industry experts.Knowledge Repository—KPM organizations possess domain experts who build libraries, containing information of present and past projects relating to that area of specialization. This enables clients to access a rich repository of knowledge that would takes years to build.Centralized Place for all Project Data—Companies cannot treat project management as isolated, linear plans. Underestimatingthe importance of collaboration among all resources,a centralized project management information site andintegrated project components can result in staggering budget overruns. KPM offers a single business management solution in one centralized place for all project data.Retention and Reusability of Knowledge—Since all knowledgeis retained in a repository, clients find it easier to work with a KPM partner when looking for a customized solution, or when implementing an internal solution.Continuous Improvement—KPO involves delegating aspecific high-end process or task to a third party. However, with a KPM partner, the domain experts close the loopbetween the client and the vendor by providing recommendationsfor improvement, identify debilitating bugs, providingideas on architectural improvements, as well as helping the client foresee future needs, thus allowing the company to maintain a competitive edge.Knowledge Assets—Intangibles such as cross platformvertical exposures and industry standard quality paradigms such as Six Sigma are indispensable if a company is tomaintain its competitive advantage. Information technologies cannot distribute human intelligence. A central repository of data is useless unless people utilize and access the information.Even then, the static data loses its relevance unless the right people update and add to the existing knowledge base.Supply Chain Management—Domain expertise is the differentiating factor in solving supply-chain problems because you need to understand industry-specific business processes and practices. Organizations want solutions to address their business problems and they want the people who walk in the door to know their business.Knowledge Transfer and Process Diversification—KPM enables an organization to align the right people with the right job, at the right time, at a fraction of a cost.Identify gaps and domain knowledge needsThe KPM Framework ©Library repository Acquire domain knowledgeStore and organizationdomain knowlegeShare domain knowlegeCreate new domain knowledgeDiscovery of existing domain knowledge Use application domain knowledgeKPM MethodologyKPM combines domain expertise across several verticals to create industry-specific knowledge basesand repositories. This sharing, reuse and retention of knowledge leads to continuous improvement andexpansion of the organization’s products and services as well as accelerated project implementation.Central to the KPM methodology is the assessment and the process-based knowledge map. Thesetechniques help organizations identify their strengths, weaknesses, knowledge gaps and critical business functions. This helps the organization improve resource allocation, while identifying priorities.KPM AssessmentThe KPM assessment evaluates the strengths and weaknesses of an enterprise’s knowledge processesto create a KPM-driven solution.The intent of this assessment is to identify opportunities for performance improvements across the enterprise.Opportunities for improvement extend across organizational lines and cover managerial, operational, social, and technological issues that are interrelated.Through a KPM assessment, an unbiased understanding of the company’s business, vision, strategies, operation, and strengths and weaknesses are developed.Two critical components to a KPM assessment are:• Involvement of key senior resources• Reuse of corporate assetsThe rapid pace of a KPM project and its short duration mandates reuse. Reusable assets (listed here)expedite the delivery of KPM while minimizing risk.• Reuse of knowledge assets, such as technical templates, business templates, process templates, and package software• Reuse of skills with an industry and a technology focus• Reuse of process assets, including methodology, task structure and work plans, metrics, techniques and iterative deliveryHow the operational aspects, social systems and technological aspects of KPM are bound together and leveraged to achieve maximum customer satisfaction is the true focus of KPM.

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Business Process Activity 1Activity 2Activity 3Activity 4Knowledge Outputs Knowledge InputsTacit knowledge: individual knowledge=a best practice from an expertTacit knowledge: team knowledge=expert advice on performing a business process activity Explicit knowledge: report=results of business process performance Explicit knowledge: knowledge in a document=a website article© Copyright 2006 Maxil Technology Solutions Inc. All Rights Reserved. www.maxiltechnology.comwhitepaper†Source: Deborah Plumley, Process Based Knowledge Mapping, Destinationkm.comProcess-Based Knowledge MapOne of the integral tools used within the KPM methodology is the process-based knowledge map, which is a diagram that visually displays knowledge within the context of a business process. In other words, the map shows how knowledge should be used within the process and sources of this knowledge.†Any type of knowledge that drives the process or results from execution can be mapped. This could include tacit knowledge (knowledge in people such as expertise, experience, and intuition) and explicit knowledge (codified knowledge such as that in documents).The knowledge map becomes the basis for a knowledge management program, a set of knowledge managementactivities within a business initiative, or a knowledge management project (such as a community of practice or a collaborative workspace). Needed competencies can be captured on a knowledge map, which are used for a competency/ skill development plan.The mapping technique has several advantages.• First, the knowledge map represents a simple, clear visual that is easy to understand, update, evolve, and use. The map becomes a valuable tool during the life of the project.• Second, the mapping methodology forces participants to identify key knowledge areas that arestrategic and/or critical to their business.• Third, the analysis of the knowledge map generates ideas that are most suited to the organization and the business context.†The Maxil AdvantageInstitutions that have spent millions of dollars to attract and retain world-class experts find specific expertise difficult to locate.Take the example Cummins Engine Inc., a world leader in providing diesel and natural gas engines forvarious applications.”CARB and EPA have imposed very strict 2007 emission levels on the Heavy Duty diesel industry. We want to be the first to launch 2007 EPA compliant engines in the market, before Caterpillar or Detroit Diesel. We utilized all our resources to find engineers who specialize in controls and mechanical design using ProE to help us make our engine module software 2007 ready, while developing new engine prototypes, but we met will little success. We started believing that the expertise did not exist. Luckily, we found a vendor in India with access to a rich pool of engineers and designers who had specific domain experience. Today, most of our controls software and new engine designs are being developed by our vendor and we are confident of meeting our deadline.”clientDomain ExpertiseTechnologySolutionsMaxil ekpm©© Copyright 2006 Maxil Technology Solutions Inc. All Rights Reserved. www.maxiltechnology.comwhitepaperAdded Value of KPMKPM delivers higher value to organizations that outsourcetheir domain-based processes, thereby enhancing KPO’s traditional cost-quality paradigm.KPM creates value for the client by providing businessexpertise combined with process expertise.KPM necessitates shifting from simple delivery of ‘standardizedprocesses’ to implementations that demand advanced analytical and technical skills, as well as critical judgment.KPM enables enterprises to:• reduce design-to-market lead times• manage critical hardware efficiently• provide research on markets, competition, productsand services• enhance organizational effectiveness in businessadministration• help in dealing with rapidly evolving business scenariosMaxil Technologies Solutions Inc. provides KPM consulting that has a proven record of:• Transferring and implementing large volumes of work for clients in multiple specialized domains• Sustaining major projects sent offshore• Leveraging experience in an international environment• Providing clients with zero risk services and solutionsMaxil offers some inherent benefits to the client:• Low investment• Low commitment level• Low risk• Quick start• Flexible approach• Quick Implementation• Healthy ROICompanies with their captive units offshore, face major risks and drawbacks:• Large and long-term investment requiring considerable management time• Once committed, it’s not easy to withdraw• Challenges of starting and running an operation in aforeign countryMaxil has invested in establishing dedicated domain groups for its lines of business:• Insurance• Finance• HealthcareMaxil understands the importance of a dedicated vertical team to address a specific business line. For example, our InsuranceDomain Group comprises of 15 internationally certified insurance consultants, each with an average of more than a decade experience in specific areas of the insurance industry such as life, property and casualty, reinsurance and broking.There are five compelling reasons for choosing Maxil as your KPM partner:• Intangible assets• Domain competence• Scalability• Bundling of KPO and IT• Multi-site/Multi-country presence© Copyright 2006 Maxil Technology Solutions Inc. All Rights Reserved. www.maxiltechnology.comwhitepaperThe Maxil KPM Value PropositionStrategic LevelsDomain KnowledgeTechnology PlatformCultural AlignmentMethodology & ToolsProcessesReusabilityEnergyCostQualitySpeedReliabilityFlexibilitySpeed to marketLower total cost of OwnershipFlexibilityReliable Solutions Competitive Advantage Improved Efficiency & EffectivenessValue AreasBenefits to the clientMaxil KPM OfferingsMaxil’s KPM solutions provide clients with a synergistic combination of deep domain expertise and strong operational excellence in:• Knowledge Strategy• Business Strategy• Knowledge Mapping• Practice Communities• Intellectual Capital and KPMSummaryVertical specialization is becoming a market requirement and crucial to market success. More companies are facing an acute shortage of workers with specialized expertise and deep knowledge in specificfields. Consequently, KPM consultants, leveraging their experience and capabilities in particular industry segments, are invaluable.KPM consultants start with a solid grasp of processes and workflows. Since 70 to 80 percent of acompany’s business rules are representational of all businesses operating within a vertical, your KPMpartner focuses all his energy and time on adding functionality or customization specific to your needs.The Future of the IT Professional and KPMThe IT professional of the future will adopt to the KPM model. No longer will it be sufficient to say “I workin IT.” Instead, a new breed of IT professionals will have technical aptitude, local knowledge, industry expertise and leadership ability.Gartner predicts that by 2010, six out of ten IT professionals will assume business-facing roles.The new IT professionals are people whose numerous roles, assignments and experiences enable themto synthesize knowledge and context to fuel business value. They are applying their skills and experiences to situations and challenges, while implementing cross-organizational insight to supplement teams and fill competency gaps.Your KPM partners with broad insight, deep process knowledge and industry orientated competencieswill help companies incorporate innovation and multiple perspectives into IT-based processes, products, services and technologies.The KPM model is fast becoming an integral component of any organizations planning process. Those that ignore it will do so at their own peril

© Copyright 2006 Maxil Technology Solutions Inc. All Rights Reserved. www.maxiltechnology.com

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