Chapter 1

The networked
knowledge
economy

Many terms are used to describe the changing world in which we live and work – the post-industrial economy, information society, knowledge era, and more. My preference, and the term which reflects the orientation of this book, is the ‘networked knowledge economy’ – global is taken as read. Whatever term is used, this new environment has characteristics quite distinctive from the industrial era of the last two centuries.

This chapter describes the networked knowledge economy through the perspective of five major shifts or megatrends. This is followed by a review of technology, the predominant driving force behind these changes. The chapter concludes with an overview of responses that are needed to adapt and thrive in the new economy.

Old certainties no longer exist

Throughout the 1990s we have witnessed change as never before. The demise of the former Soviet Union, the fragmentation of Yugoslavia and the rise then fall of the Asian economies were typical upheavals affecting stability and predictability in our environment. Coincident with closer integration within the European Union (EU), individual regions like Catalonia and Scotland gain more control over their own affairs. Counter-currents, not just in Europe but elsewhere, are simultaneously strengthening the need for local autonomy alongside that for closer cross-border co-operation. Where will it all end? What is the future of the nation state?

As individuals, we witness change at first hand. Life in the late twentieth century seems beset with complexity and uncertainty, resulting in a growing incidence of stress. The prospect of a secure job until pensionable age no longer exists. We live longer, but we face concerns about paying for nursing care in our old age as health services are stretched of resources.

For organizations, ‘business as usual’ is rarely a sustainable option. Barings, that once seemed like a bastion of stability in a flurry of change in financial markets, has collapsed in ignominy. Even apparently powerful multinationals have had to bow to the influence of outside forces, such as Shell’s reversal of plans for the proposed dumping of the redundant Brent Spar oil platform in the light of concerted action by environmentalists. Everywhere you look, the corporate landscape is changing.

The changing corporate landscape

In the new economy value is shifting to service-related and knowledge-intensive industries. Health, education, finance, information systems, media and telecommunications have been growing strongly for over a decade. In the league table of companies by valuation, of the top twenty companies in the UK at the end of 1997, three were pharmaceutical companies, seven were in financial services and two count as old-style industrial companies. Table 1.1 shows a profile of British business in 1998. The story is similar in the USA where General Motors, once virtually unassailable in the top spot has seen companies like Microsoft and IBM overtake it in market capitalization. An analysis shows that during 1997 US household spending on ‘old economy’ items – food, cars, appliances and clothing – increased less than 1 per cent, while that for a cluster of new economy items – telephone, entertainment, cable television, financial services and home computers – rose 12.5 per cent during the same period.¹

Further indication of this shift is evident from the new North American Industry Classification System (NAICS). It recognizes over 300 distinct new industries and has introduced a new information sector that embraces publishing, software, films, broadcasting and telecommunications.²

Table 1.1 New shape of UK industry

Sector	Value %
Resources – oil etc.	8.5
Industrial – chemical, engineering etc.	11.5
Consumer goods – food, telephone	9.0
Pharmaceuticals and health products	9.0
Services – retail, distribution	28.0
Utilities	5.5
Financial services	28.5

Source: FT Actuarial Share Indices, March 1998

Small business is big business

Almost all of the largest companies in the West have downsized in the early 1990s. For example, a loss of nearly 300 000 jobs. Large company downsizing is part of a broader restructuring of industry in general. As organizations focus on their core activities, they outsource more work to specialist companies. While some, like EDS in computer services, are large and so benefit from economies of scale, many are small companies in specialist niches, where such economies do not apply.

The European Commission estimate that companies with less than 500 employees account for 70 per cent of economic activity and employment within the European Union. In the USA between 1980 and 1990, at the same time that 3 million jobs were shed by the Fortune 500 companies, over 19 million new jobs were created by smaller companies. The Organization for Economic Co-operation and Development (OECD) says that small businesses represent the largest potential for economic growth.

The demise of jobs

Another trend associated with dispersion of business activity and the growth of small businesses is that of self-employment. Most employees can no longer rely on organizations to provide them with a job for life. In the USA, it is now estimated that some 25 million people are self-employed or independent contractors. Daniel Pink describes them as free agents: ‘a new movement in the land – as fast-growing as it is invisible’.³ They prefer to work for themselves rather than some large company who drives them hard, fails to give them job or personal satisfaction and has values different from their own.

Research conducted at Durham University Business School confirms a similar trend in the UK: ‘The self-employed are the smallest of small business. They are solitary craftspeople, innovators and suppliers of services, often working from home, with no capital investment beyond a personal computer, a few instruments or a bag of tools.’⁴

A significant trend is the rapid growth of self-employment by professionals, particularly those who have had previous large company experience. Many draw on this experience to create innovative opportunities, often global in nature. In turn, many large organizations contract with these individuals for specialist services.

Employment in the future should be viewed not in terms of full-time jobs, but in terms of work activities that are parcelled out in the most cost-effective way to those with the necessary knowledge and skills. In the networked economy we have the opportunity to create electronic work markets, both within and beyond firms.

Continual reconfiguration

Other patterns of change are also apparent. Industry boundaries are simultaneously blurring and separating. Retailers enter banking, as banks offer property services. At the same time the financial services industry is itself segmenting into a wide variety of specialist service niches, such as credit card issuing and debt rescheduling.

Mergers and demergers are also occurring concurrently. Large companies merge to create even larger behemoths, hoping to gain economies of scale. Examples include BP and Amoco, Chrysler and Daimler-Benz. At the same time companies like Hanson Industries, ICI, Ciba-Geigy are demerging. In addition to full-scale demergers, management buyouts and selling of business units are increasingly common as large organizations reshape and focus their business portfolios. Thus Unichema, the Unilever speciality chemicals division was sold to ICI in 1997. One analysis suggests that some thirty large companies in the UK could potentially be more valuable to their shareholders by demerging distinctive businesses.⁵

Such countervailing trends demonstrate a continual reconfiguration of companies and industries. At any one time, there are kaleidoscopic changing patterns of alliances. Former partners become competitors, whilst former competitors create alliances.

Too frequently many corporate restructuring efforts do not deliver the benefits anticipated. For every merger that is successful, many more disappoint or fail. Following downsizing, the majority of companies see no sustained improvement in business performance. Simply shuffling things around rarely works in the long term. The changes in the corporate landscape are part of a broader and ever changing milieu. But few organizations have realized how fundamental these change are. They are in the middle of a fundamental change – a paradigm shift.

A paradigm shift

A paradigm shift is one that affects not just business but society as a whole. According to Peter Drucker such transformations take place over fifty- to sixty-year periods. In his book Post-Capitalist Society, he outlines three earlier periods of dramatic changes in the Western World:

• thirteenth-century Europe – the rise of medieval craft guilds and urban centres. Long distance trade.

• 1455–1519 – the Renaissance period of Gutenburg’s printing press and Lutheran Reformation.

• 1776–1815 – The Industrial Revolution, starting with Watt’s steam engine.

Drucker describes the current shift, which he reckons started around 1960 and will continue until around 2010 or 2020, as follows: ‘We are entering the knowledge society in which the basic economic resource is no longer capital, or natural resources, or labour, but is and will be knowledge and where knowledge workers will play a central role.’⁶

The OECD estimates that in advanced industrial societies eight out of every ten new jobs are for knowledge workers. For many years economists have been writing about the evolution of economies from agriculture to manufacturing and services. But a more fundamental shift is not that to services but one to information and knowledge-based industries and activities. Even in manufacturing industries it is estimated that three-quarters of the value-added comes from knowledge work.

Interestingly, knowledge was a feature of the earlier revolutions and there are lessons that can still be drawn from studying them. Jean Gimpel in her study of technological change in medieval Europe showed how the Cistercians were very efficient at diffusing their technical knowledge of water power and other developments that helped improve the productivity of their monasteries.⁷ Studies by some of her followers have also shown a very close similarity in the organizational arrangements and patterns of industrial evolution of today’s high-tech industry in Silicon Valley and the medieval cloth industry in France.

Five megatrends

The term megatrend was used by John Naisbitt to describe a fundamental underlying trend shaping the future. In his 1982 book Megatrends he identified ten key shifts that were reshaping the world.⁸ Among these were:

• industrial society → information society

• national economy → world economy

• hierarchies → networking.

In a later book, he and co-author Patricia Aburdene describe ten megatrends for the new millennium.⁹ These have a more human emphasis and include global lifestyles, the decade of women in leadership, the age of biology and religious revival. However, many of the 1982 transitions are still far from complete. I have therefore taken the three noted above, relabelled them slightly, and have added ‘virtualization’ and the evolution of the Internet to derive the five megatrends that are shaping the networked knowledge economy.

Information and knowledge based

Information and knowledge are pervading all sectors of industry as well as creating new industries based around them. There are several distinctive characteristics of this new economy.

1  Every industry is becoming more knowledge intensive. Even in agriculture, knowledge adds value. By combining knowledge about the effect of a fertilizer, soil condition, the state of plant growth (using information from satellite photographs), and the forecast weather conditions, farmers can use 40 per cent less fertilizer on their crops, yet achieve the same results. A new generation of combine harvesters automatically measures the weight and moisture content of the corn and calculates yields per acre. Every industry has comparable examples.

2  Smart products. Another manifestation of knowledge intensity comes in so-called ‘smart products’. These use information or knowledge to provide better functionality or service that can command premium prices. There is a smart tyre that senses the load it has to carry and adjusts its pressure accordingly. Services can be enhanced through better customer knowledge. Marriott Hotels, for example, keeps track of individual preferences so that it can offer superior service when their customers check in.

3  Higher information to weight ratios. The value of electronics in cars now exceeds that of the value of the metal chassis, which itself, through better knowledge of structures, is significantly lighter than that of its predecessors. An indication of this trend at the macroeconomic level is the trend in weight and value of US exports. At the start of the twentieth century the ratio was roughly 1:1 (1 lb avoirdupois in weight for £1 sterling in value). Today the financial value is twenty times higher, while the physical weight of goods exported is about the same.¹⁰

4  Value in intangibles. The market value of most companies is several times higher than the value of their physical assets as recorded in their balance sheets. In June 1997, the average of market to book value for companies in the Dow Jones industrial index was over five. For more knowledge intensive businesses, such as software and pharmaceutical companies, this ratio is often more than ten. This difference is largely accounted for by intangibles, such as know-how, information systems, patents and brands, whose value is not recorded by traditional accounting methods.

5  Trade in intangibles. The ultimate in information to weight ratios is the weightless product or service. There is a growing range of these intangibles that are traded in their own right. For example, the value of licences from patents in the US has increased from $3 billion in 1980 to over $100 billion today. Financial markets are almost wholly intangible. Futures options and complex derivatives are perhaps the ultimate intangible knowledge product, having been created through human ingenuity.

These are just some of the trends observable in the knowledge economy. A more in-depth analysis by Jan Wyllie identifies thirty-three distinctive trends, each of which has potential ramifications for individuals, organizations and governments.¹¹

Table 1.2 Quaternary industries as defined by Masuda (1980)

Information industries	Printing and publishing
	News and advertising
	Information services – on-line
	Analysis
	Information processing – software services
Knowledge industries	Legal, accountancy, consultancy, design
	Research and development
	Education
Arts industries	Creators – authors, composers, artists, singers etc.
	Performers – orchestras, actors, singers
	Infrastructure – theatres, television, broadcasting, museums
Ethics industries	Philosophers
	Religion and spiritual – churches, groups
	Environment

New knowledge industries

A consequence of these trends is the creation of industries that are almost wholly information and knowledge based. Yoneji Masuda describes a whole set of quaternary industries, as distinct from primary (agricultural), secondary (manufacturing) and tertiary (services) industries (Table 1.2). While we are now starting to recognize these as distinct and valuable industries in the late 1990s, it must have taken some foresight to envisage these in 1980, when Masuda’s book was first published.¹² He also described the ‘information utility’, in which he envisaged many of the features that we now see in the Internet and on-line communities.

New knowledge-intensive industries are being created all the time. The biotechnology industry is only fifteen years old but has more than 2000 companies and is expected to have annual revenues in excess of $100 billion by the year 2000. Other industries are emerging around the trading of information and knowledge using the Internet, as we shall see later.

Networking and interdependence

In the knowledge economy connections and collaboration add value. Connect several people together and you have multiple pathways for the creation and flow of knowledge. Combine knowledge from different perspectives and you can create new opportunities and respond to challenges in innovative ways. Networking gives organizations flexibility and responsiveness. In seeking out factors that determine organizational success, Craig Hickman and Michael Silva in their book The Future 500 (1987) identified the ‘network organization’ as one of its core ingredients.

Nodes and links

The experts who have most systematically articulated the concepts and practices of networking are Jessica Lipnack and Jeremy Stamps, founders of the Networking Institute in Needham, Massachusetts. They define a networked organization as one: ‘where independent people and groups act as independent nodes, link across boundaries, to work together for a common purpose; it has multiple leaders, lots of voluntary links and interacting levels’. ¹³

Such organizations are informal, peer based, and horizontally structured. They have permeable boundaries, and most communications is point to point, not up and down management hierarchies. Other names used to describe organizations with these or similar characteristics include lattice organization, spider’s web and holonic enterprise. For example, Samsung describes its structure as ‘clustered nodes’ with teams linked through networks. All these terms describe new ways of organizing in which the structure is flexible, where knowledge flows across traditional organizational boundaries and where multidisciplinary teams can be formed or disbanded quickly according to circumstances.

The notion of a network implies nodes and links. Nodes can be individuals, teams or, even, organizations. Networks operate at many levels. They act as the sources and repositories of knowledge. The links are various connecting and co-ordinating mechanisms, such as workflow procedures or meetings. As information flows across the links, new knowledge is created at the nodes, which can then be applied to meet the needs of the organization.

Networking – hard and soft

There are two defining characteristics that are fundamental in practice:

1 Networked organizations are less about organizational structures per se, and more about informal human networking processes.

2 The technology of computer networking both underpins and enhances human networking.

The first is illustrated by the remarks of Colin Hastings:

No longer can we rely on the false comfort of the neat and tidy relationships between functional and hierarchical roles displayed on an organization chart, because this has shown itself to be too rigid, too slow and insufficiently innovative. When we start instead seeing an organization as a constantly hanging kaleidoscope of relationships between people, we begin to get a better flavour of what might be involved.¹⁴

The second characteristic was powerfully articulated by Ken Olsen, founder of Digital, a company often described in the mid-late 1980s as an exemplar of the networked organization. He writes in Digital’s 1987 second quarter report:

The companies that will survive are going to move from an environment of management control to one that allows a large number of people, all using their creative ability, their education, and their motivation to take part. Now this change won’t be easy. But it has to come. And we’re convinced that computer networking will be at the heart of these changes … and the vehicle through which these changes will be carried out.¹⁵

Now, in the 1990s, the ubiquitous nature of peer-to-peer computer networking, such as the Internet and intranets, means that many more companies are following Olsen’s vision of the networked organization.

Innovation networks

The process of innovation illustrates the growth and contribution of networking. In the 1980s the standard model of innovation was of a linear process from research through to design, development and then manufacturing. Now, many of these processes are carried out concurrently and collaboratively through networks. For example, in an investigation of medical equipment development in Holland, Biemans found that all innovations relied on user-manufacturer collaboration. Furthermore, 76 per cent of innovations were developed within networks that also contained multiple relationships including distributors or other partners.¹⁶

In another investigation, Wissema and Euser determined that the secret of Compaq’s success was its collaboration with dealers, component manufacturers and software developers. Their analysis of twelve innovation networks in Holland found six main reasons for collaborating: sharing costs, sharing risks, gaining additional market knowledge, complementing technical and market knowledge, serving international markets and joint development of industry standards.¹⁷ Collaborative networks will be found at the heart of most successful innovations.

Globalization

Although brands such as Coca-Cola, Toyota and Philips are globally recognized, many industries and many companies are far from global. Even if its marketing is global, a company’s manufacturing may be centralized. In retail, for every Toys ‘R’ Us that have expanded successfully overseas, otherwise successful retailers like Marks & Spencer have struggled hard in their overseas ambitions, or like Wal-Mart have remained largely in their home country.

Nevertheless, globalization is steadily increasing. Many large multinational companies design and manufacture at several locations around the world. They choose locations based on access to skills, markets and infrastructure. Many consumer and electronic products formerly manufactured in the USA and Europe are now manufactured in the Far East. Even there manufacturing has migrated from higher wage countries such as Taiwan and Malaysia to lower wage countries, such as China.

One company that epitomizes the globalization trend is Federal Express (FedEx). Every day it delivers around 3 million packages into 210 countries. Over two-thirds of its customers now place their orders and track their shipments through its on-line information system. FedEx regards it as equally important as its transport network. Through this network it creates global logistics networks for its customers who come to rely on FedEx for speedy delivery of components and completed goods in their supply chain. According to Jeffrey Garten of Yale School of Management: ‘The marriage of information technology and transportation is a major reason that links among national economies have become so much tighter. In fact, what FedEx illustrates is not only that today’s globalization is qualitatively different from its predecessors but also that it is now truly irreversible.’¹⁸

Global knowledge

In the industrial economy two reasons for going global were economies of scale and the need to reduce physical transportation costs by manufacturing close to key markets. Now globalization is as much a response to regional specialization and expansion of long-distance relationships and markets. Through the Internet firms can reach distant markets at a price little different from customers in their locality. Furthermore, higher value to weight ratios and networks like that of FedEx mean that global distribution is cost-effective.

You do not have to be large to be a global player. COMTECH, a small translation services company in Leamington Spa has clients all over the world, with whom it deals over the Internet. My own small consultancy company has customers in Korea, South Africa and the USA, some of whom I have never met. It is your specialized knowledge that matters in addressing global market niches.

A global enterprise takes advantage of unique skills and resources, wherever they are located. It may be the software expertise of India or the artistic weaving skills of villagers in Africa or Bangladesh. This opportunity to harness knowledge on a scale hitherto unimaginable before the Internet makes globalization attractive and exciting.

The Internet (r)evolution

From the media hype, you might believe that the Internet is relatively new and revolutionary. It is not. Its origins can be traced to ARPAnet, a 1960s USA Department of Defense (DoD) experimental network that worked on a peer-to-peer basis with no central control. It has evolved steadily from that time. What is new is that during the last few years the Internet has reached a critical mass of users in all walks of life. In turn this has fuelled significant investment in new products, services and commercial applications.

Figure 1.1 Evolution of the Internet

Evolution of the Internet

The Internet, as we know it today, has evolved through four distinct phases (Figure 1.1).

Phase 1. Initially the Internet was a tool of the research community. Academic researchers and government laboratories communicated using electronic mail (email). They could also log into a remote computer to run specialized applications.

Phase 2. Due to growth of traffic and interaction between publicly and privately funded users, it became more difficult to maintain the US Government’s policy of non-commercial use. This led in 1993 to the development of a separate commercial telecommunications infrastructure.

Phase 3. The big surge in commercial use came with the arrival of the World Wide Web (WWW), followed shortly afterwards by a graphical user interface, the Mosaic browser. Developed by Tim Berners-Lee and colleagues at CERN, the Web’s aim is to make it easier to share information in a distributed environment. Users can ‘point and click’ a computer mouse to move from page to page of information, without needing to know on which computer it is stored.

Phase 4. The Internet is now well into its fourth phase of development as a universal computer platform. The Web has evolved from a passive read-only environment, to one where users interact with a wide range of remote applications through their browsers. They can complete order forms and pay for goods electronically. Other developments are the growing use of multimedia (voice and video image) and access through low cost ‘appliances’, such as set-top boxes for televisions, and personal communicators (combined mobile phones and palm-top computers).

Statistics about the Internet are often mind-blowing, open to interpretation, and change rapidly. Almost every figure doubles within a year (see box). Future predictions vary widely, another indication of the dynamic nature of the evolving Internet marketplace.

Two specific forms of Internet have recently emerged – intranets and extranets. An intranet is a computer network, specific to an organization, that uses Internet technologies. Organizations gain the advantages of a common and easy to use interface, low cost software, and simple tools for publishing. An extranet connects selected parts of an organization’s intranet to the external world. They use ‘firewalls’ that permit access only to authorized users, such as customers or business partners. Each user is also limited to specific areas of the intranet, according to their privileges.

The strategic importance of the Internet has taken many businesses by surprise. It opens up many new business opportunities, as is demonstrated in Chapter 4. But as with many other new developments, it is the entrepreneurial and start-up companies that are the innovators who are exploiting these. With continued high levels of supplier investment, we can expect the Internet to continue to evolve rapidly over the next few years, changing established patterns of business and communications as it does so. It will have a profound effect on knowledge work, knowledge-based products and services, and core business processes.

An interesting aspect of the Internet is the way that it has evolved with little central management. Based on a few core principles it has been largely self-organizing and has become a universal standard despite competition at one time from several proprietary networking protocols, such as IBM’s SNA (Synchronous Network Access) or the formal OSI (Open Standards Interface) standard.¹⁹ The Internet development community therefore provides a good illustration of a purposeful and successful knowledge network.

Virtualization

A key effect of information and communications technologies such as the Internet is an increase of virtualization in business activities and ways of working. Virtualization overcomes constraints of time and distance. The term ‘virtual’ is now appearing in many guises. Thus one view of a virtual corporation is: ‘a temporary network of independent companies that co-ordinate activities to meet a common objective, such as a new product development or to meet a customer need.’ This view relates to the dimension of time. However, another view relates to an organization not having a clear physical locus. Here a typical definition is: ‘an organization distributed geographically and whose work is co-ordinated through electronic communications.’

Virtualness can also operate at several levels, from individual to interorganizational. These variations give rise to many types of virtuality, ranging from workers communicating with colleagues globally via phone or email, or the creation of consortia to work on a specific project. Figure 1.2 illustrates some of these types in the form of a nested hierarchy where there is a large degree of inclusivity between the levels, although not necessarily so.

Making a virtue of virtuality

Some of the common types of virtuality are the following.

Figure 1.2 Nest of virtualness

1 Virtual products and services. The cost of an electronic transaction is typically a tenth of that of the corresponding traditional transaction. Dell generates over $5 million of business a day via the Internet. Bookseller Amazon.com sells exclusively this way. Electronic markets that match buyers and sellers are now emerging in everything from Dutch flowers to second-hand cars.

2 Virtual working or telework. Several million people in Europe now telework for some or part of their working week. They may work from home, from telecottages, from client premises, or indeed anywhere that has telephone access, which with cellular phones is now virtually everywhere! With the ubiquitous notebook computer, it has been said that ‘my office is where I hang my modem’.

3 Virtual offices. A related type of virtualization is the virtual office, where the physical office is replaced by office services. IBM is one of many companies that have adopted ‘hot-desking’. At several of its premises, employees do not have personal workspaces, but are allocated desks whenever they are in the office. One company, Loud-n-Bow, closed its office and went completely virtual, with significant savings in office overheads.

4 Virtual teams. To give flexibility and to avoid relocation, many companies simply create virtual teams, where employees work at locations more convenient to them. Other examples are where several teams working in conventional office settings at different locations co-operate virtually, such as engineering teams at Ford in locations across Europe and the USA.

5 Virtual organizations. These can range from a stable supply network that works as a single organization, to a loose federation of independent firms that come together temporarily for specific activities. An example of the latter is OMNI, which connects 186 global relocation firms to share information and matches removal needs with truck availability.

6 Virtual communities. Instead of a local community a virtual community is one of shared interests, whatever the location. They are found on Internet newsgroups and discussion lists, or on an organization’s intranet.

Whatever form virtualization takes, there are some common features that distinguish it from traditional forms:

• Information and communications technology allows operations to be dispersed.

• The barriers of time and space are reduced (or even disappear completely).

• Organizational structures are network-like, and more dynamic.

• The interface with customers and markets is different.

• Employees and associates (business partners, suppliers, customers etc.) adopt new patterns of work.

• The locus of knowledge is diffused. It is not necessarily in a specific place.

As a result, the geography of knowledge is quite different to physical geography. Organizations must completely rethink their geographic strategies, if they are not to be confined to a backwater of knowledge space. The topic of virtualization is addressed in more detail in Chapter 4.

Technology – a fundamental driving force

Underpinning each megatrend is the fundamental driving force of technology. Technology amplifies human capabilities. In the industrial revolution, the core technology was steam power that gave humans a 15 times improvement in price-performance over manual methods. In the knowledge era it is ICT that is boosting our ability to process information. However, the pace of improvement in the information revolution is much faster.

The rate of improvement in microchips, the fundamental component of computers, has been fairly constant over several decades. In 1965 Intel’s co-founder, Gordon Moore, projected that performance doubles and costs halve roughly every eighteen months, an observation now enshrined as Moore’s Law. Such improvements are almost unparalleled in the world of science and technology. The Massachusetts Institute of Technology’s (MIT) landmark study, Management in the 1990s²⁰ indicated that over a ten-year period, IT showed a 25 times price-performance improvement, compared to 1.4 times for the six other most improved product groups. This rate of improvement equates to an industrial revolution every seven years!

The revolution continues

Moore’s Law seems set to continue, at least through to the year 2010 (Table 1.3), although there are likely to be changes in the specific technologies used. Thus X-ray lithography should replace optical lithography, leading to the development of circuits only 0.01 microns (millionths of an inch) wide by 2010, compared to around .25 microns today, and processors that are 1000 times more powerful. Thereafter, provided new applications become economic and sustain demand, investments in a variety of new technologies, such as holographic memory and molecular computers, should maintain the fundamental trend.

Table 1.3 IT trends: decade on decade improvements

	1988	1998	2008
Components:
Processor speeds	10 MHz	400 MHz	10 000 MHz
Transistors per chip	275 000	7.5 million	250 million
Memory chips	64 Kbits	64 Mbits	16 Gbit
Basic disk capacity	20 MB	1 GB	250 GB
Personal computer (typical)	PC-386 (8 MHz) 256 KB RAM 60 MB disk 14” CRT Desk-top £2500/$2500	Pentium 32 MB SDRAM 4 GB disk CD-ROM (32X) 17” CRT Desk-top and/or portable notebook £1250/$1500	10 GHz 4 GB memory 500 GB disk £000-£2000 20” flat panel Desk-top plus palm-held integrated PC and communicators £500/$2500
Software and applications	Basic Office Suite (word processing, spreadsheet). Profession specific	Adds database, email, Internet	Integrated voice and data messaging. Visual knowledge navigation
Users	Professionals, clerical staff have access in office	Most staff including unskilled. Professionals have several (office, home, mobile)	Everybody. Computers are consumer appliances (often for specific applications)
Typical functions	Calculations; procedures; transactions	Information retrieval; communications; decision support	Knowledge development; learning; symbiotic decision-making

Note: 8 bits = 1 byte; 1024 bytes = 1 Kilobyte (KB); 1024 KB = 1 Megabyte (MB); 1024 MB = 1 Gigabyte (GB)

Sustainable trends

New products are being developed all the time. In storage today’s CD-ROMs, which hold the equivalent of over 300 000 pages of typed text, will be surpassed by devices containing the equivalent of a town library. Today’s bulky CRT monitors will eventually be largely replaced by slimline flat panels. There are also several underlying trends that are shaping the way that technology is used.

1 Wider choice of formats and packaging. Computers come in many more shapes and sizes and can even be sewed into clothing, such as training shoes and jackets. Peter Cochrane, head of BT Laboratories, frequently shows off the signet ring on his finger. It contains a microchip holding personal details, driving licence, passport and credit card. He envisages that in future, a simple handshake will transfer personal contact details. He sees the ultimate as chips embedded under a person’s skin.

2 Improved functionality. Computer functions that today require elaborate software will become standard functions or even part of the hardware. Voice recognition technologies are maturing, making it easier to talk into word processors and other computer applications. Language translation is improving in leaps and bounds. Various biometric technologies such as retina recognition, where the computer identifies you by your eye, could well replace password protected access to computers by 2005.

3 Multimedia and virtual reality. Computers will touch more of people’s senses through moving images, sound, etc. These can be packaged, recalled and sent to others quickly through networks. Virtual reality will move from the experimental and entertainment phase into practical business applications. Already analysts are talking virtual world maps of complex financial data. Today’s cumbersome headsets will be replaced by spectacles or camera sensors that monitor eye movement.

4 Portability and mobility. Every year more functions are integrated into smaller sized packages. An example of this trend is the hand-held or palm-sized computer. Wireless connectivity will also replace the spaghetti of wires seen around many workplaces. Through infrared sensors, portable computers can be linked to devices such as printers or to your main desk computer.

These ongoing developments mean that computers will encroach even more into our work and home lives. Within the decade computers and the information they hold will be on tap, even more so than electricity and water. This pervasiveness presents us with many challenges on how to assimilate computing into our daily lives, without being dominated by it or overly dependent on it.

Telecommunications

Unlike computers, the average cost of telephone services has reduced only slightly year on year during the last few decades. However, there have been more dramatic reductions recently, stimulated by privatization of national monopolies, deregulation, and global competition. In February 1997 sixty-nine nations, accounting for 93 per cent of global telecommunications, signed a World Trade Organization agreement to liberalize their telecommunications regimes. From January 1998, the EU opened its domestic markets to competition. These changes are leading to improved services and reduced prices. Transatlantic telephony prices are falling 30 per cent annually, and it is now cheaper to call the USA from the UK than it is to call Italy.

Once used predominantly for voice traffic (telephone conversations), data traffic generated by computers is growing much faster, fuelled by the fast growth in the Internet. Soon the world’s telephone lines will carry more data than voices. Other significant trends that affect users are:

1 Waves complement wires. Mobile telephony, made possible by radio waves, is the fastest growing sector in telecommunications. Price differentials with fixed lines have reduced from a factor of ten or more to only two or three. Over half of the world’s phones will be wireless by 2010 and the 150 million subscribers at the end of 1997 are expected to grow to nearly 1.5 billion. New digital cordless (DECT – Digital Enhanced Cordless Telecommunications) phones will increase mobility both outside and inside buildings, as they seamlessly switch from an office base station to a cellular network.

2 Continual enhancement of global connectivity and bandwidth. High-speed fibre optic networks now span the globe. Recent additions are cables linking the USA to Brazil and Venezuela, and a new network in the Far East. Sophisticated terminal equipment also squeezes more capacity from a given line.

3 New satellite systems. In the next decade, some ?700 new communications satellite launches are planned. Billions of dollars are being invested in low orbit satellite networks. The Motorola-led Iridium initiative plans to place sixty-six satellites to give global phone coverage. Teledesic, a joint venture of Bill Gates, Craig McCaw and Boeing will circle the globe with 288 Internet satellites.

4 Digitalization. Telecommunications equipment is becoming increasingly digitalized. This allows it to take advantage of computer components to drive down prices, while at the same time adding more intelligence in both the network and the telephone. In the future networks will handle communications with many more devices, from photocopiers to vending machines.

One of the problems that has plagued more rapid uptake of new services is the proliferation of different standards. Thus, whereas Europe has standardized on GSM (general services mobile) for its digital cellular networks, it is much less popular than two rival systems (TDMA – time division multiple access; and CDMA – code division multiple access) in the USA. This creates the need for multiple standard handsets to maintain global mobility. However, new standards, such as UMTS (universal mobile telephone system) means that the current barriers to global operation should diminish in future. Increasing mobility is also leading to the acceptance of personal telephone numbers, that an individual or business can retain for life, without the need to obtain new phone numbers when they relocate.

The bandwidth bonanza

In line with many other industries, price reductions stimulate demand, which in turn stimulates increased investment in networks and services. The growing demand for networked multimedia applications over the Internet, such as real-time video, is one stimulus for increased bandwidth. Today’s trunk telephone networks are nearly all fibre optic cables, and while transmission speeds of 2.4 Gigabits per second are common place, speeds of 1000 Gigabits per second have already been demonstrated. This means that a single fibre cable can carry more than all the world’s 1995 telephone traffic.

The challenge is to deliver high bandwidth and the content it contains to the end-user, especially when on the move or at home. High bandwidths achievable on an office network drop rapidly as service operators have to reach ‘the last half mile’ to people’s homes, or go via wireless. The first problem could be solved, for those homes without a cable service, by DSL (digital subscriber line), that promises transmission rates of several megabits per second through twisted-pair copper wires. It is also expected that within five years cost-effective mobile bandwidth will increase by a factor of fifty or more.²¹ Table 1.4 shows some of the alternative technologies and how they affect the speed of delivery of information to the user.

As well as higher speed connections, digital compression techniques increase the effective bandwidth by compressing signal information into a fraction of its original size. We are therefore on the verge of seeing order of magnitude improvements in telecommunications functionality and price, similar to those historically associated with computers.

Table 1.4 Effects of bandwidth

Connection	Speed	Time to down load 10Mbytes	Comments
Modem	56 Kbps	23 minutes	Universally available through standard telephone lines; low cost. In practice continuous speeds are lower at around 40 Kbps, so download times are higher
ISDN (Integrated Services Digital Network)	128 Kbps	10 minutes	Not universal. More popular in Europe. Line rentals cost more as does required computer expensive terminal adaptors. Good for bulk files
Tl leased line	1.5 Mbps	52 seconds	Dedicated line into telephone network
Cable modem	4 Mbps	20 seconds	Needs two-way cable systems. Widely available in urban areas. Cable passes 90 per cent of US homes
ADSL (Asynchronous Digital Subscriber Line)	8 Mbps	10 seconds	Works through standard telephone copper wires. Speeds drop to 1.5 Mbps when more than l km from the local exchange

Note: 10 Mbytes is approximately the equivalent of a 3.5-minute video or five books. It must be realized that in practice download speeds are much slower due to network delays, or more typically overloaded computer servers on the Internet.

Convergence and connectivity

After many years when convergence of telecommunications and computing did not happen as fast as many analysts expected, it now appears to be doing so. Computer Telephony Integration (CTI) allows computer systems to perform telephone functions such as automatic dialling or recording incoming voice messages. Nokia’s 9000 communicator provides a mobile phone and small computer in a single device, complete with email and web browsing. There is also convergence in services, with boundaries blurring between broadcasting, publishing, on-line services and voice telephony. From a computer on the Internet you can read newspapers, see video clips and have voice conversations by Internet phone. Conversely suitable digital televisions can access the World Wide Web and on-line information services.

In the future, it will be difficult to tell the difference between what is a phone and what is a computer. The end result is that every intelligent electronic device, as well as humans, will be connected to a growing information and knowledge utility. Here, another law comes into place to complement Moore’s Law. This is Metcalfe’s Law (named after Bob Metcalfe, one of the inventors of Ethernet) that says that the utility of a network is proportional to the square of the number of users. Connectivity and convergence make information and knowledge available at any place, at any time. They significantly boost the capability for knowledge networking.

From computation to cognition

The role of computers has evolved continuously as improved affordability and functionality has made them more widely accessible and increased the range of viable applications. Figure 1.3 shows how the role has broadened in two dimensions – users and functions. From an early base of data processing (computation) at the organizational level, computers now handle many forms of data (text, image, sound) and are used by individuals as well as in interorganizational networks.

Figure 1.3 The evolving applications of computing

The next phase of this evolution of role is now unfolding. It is the development of the computer’s role in support of knowledge and team working. Over the last decade we have seen the growth of its role in supporting person-to-person communications through email. Now it is increasingly supporting knowledge networking through computer conferencing and other collaborative technologies. It will also become more of a tool for augmenting human cognition. The different technologies that contribute to knowledge development and processing are the subject of Chapter 3.

New economy, new rules

The traditional economy operates on the basis of limited resources that deplete when used. In contrast, the information and knowledge continue to grow, even more so when used. For example, if I have a physical resource like a bottle of beer, and give you half, there is only half left for me. On the other hand, if I send you an electronic copy of a document, you can annotate it, add notes, return it to me, and we both have the original information – two for the price of one! Furthermore, the annotations and discussions enrich and add to our knowledge.

Knowledge is diffusable. It ‘leaks’ and often defies barriers and laws that try to contain it. Knowledge is intangible, yet it can have high value. How much would you be prepared to pay for the experience of Red Adair’s people to stop a fire in one of your oil wells? The value of knowledge depends heavily on context. Thus the same information or knowledge can have vastly different values to different people at different times. It also has different properties and values when in different formats. When embedded in a business process it is more easily shared than knowledge in people’s heads, that might be much more valuable if you can access it.

The characteristics of the networked knowledge economy, so different from those of the physical economy, demand new thinking and approaches by policy-makers, senior executives and knowledge workers alike. However, everywhere you look, you see organizations blindly following old rules and coming unstuck.

Figure 1.4 Scale of intelligence

The unintelligent organization

On a scale of intelligence, it often seems that organizations are less intelligent than the humans within them (Figure 1.4). They make costly mistakes and few survive beyond what in human terms is adolescence. Yet, according to the saying, ‘more heads are better than one’. So what goes wrong?

The scales on Figure 1.4 are logarithmic. A slug (with around 1000 neurons) has hundreds of times more thinking capability than most computers. However, neural networks of computers have reasoning capability that starts to approach those of human beings in highly specific problem domains.

One problem is that of ‘group think’, where a herd instinct takes over from individual common sense. In the 1980s acquisition mania was in fashion. How many organizations came out with a profit on those ‘strategic investments’? Another problem is that risk is shared. If a decision goes wrong then one individual is not wholly to blame. What about today’s fashions? Will organizations handle these intelligently? Not if recent examples are anything to go by.

Outsourcing and downsizing

Logically, both seem a great idea. You focus on your core activities and subcontract activities to specialists who do it better and cheaper than you. However, by doing so you may lose some in-house knowledge and expertise.

Regular surveys by the American Management Association show that more than two-thirds of companies who downsize do not show any improvement in their bottom-line results. A typical example is an oil company who after bringing on stream a new oil well made many people redundant. Less than a year later, they realized that similar knowledge was needed in another part of the world. But by then this knowledge had been lost from the company. In another company a team of specialists was made redundant. Now it is spending twice what it was before to buy in similar expertise.

Outsourcing presents similar problems. Holiday Inns lost some vital information when it outsourced some software development to India. When team leaders changed, deadlines were missed. Researchers Kumar and Willcocks attributed the change to the different approaches to software development:

The work style of Indian programmers and analysts was very different from that of their American counterparts. Compared to most US professionals who had acquired their expertise on the job, most of the Indian professionals had formal graduate level training in development methodologies. Thus, while the work style of the Americans relied upon informal learnt practices and improvisation, the Indian workstyle reflected a greater degree of methodology formalism.²²

The original team leaders of each party had such good implicit knowledge of these differences that they could work through them together. After they moved on, the US people had to become much more explicit about what was needed. Several of the original Indian team had to go to the USA for six weeks to learn about the systems. When an organization outsources its IT, how much of its implicit knowledge is crucial but unknown to the new providers?

Millennium myopia

The problems created for computer systems when the date changes from 1999 to 2000, has turned out to be the blind spot of the century. It was known, at least to some people, that many computer programmes, those which stored dates as two numbers (e.g. 88 for 1988), could not cope with the transition of date from 31 December 1999 to 1 January 2000. Yet senior managers ignored the impact of this until it was almost too late. Estimates of the size of the problem and the costs to fix it have doubled regularly every six months, as it becomes more apparent how widespread the problem is. Even as this is written, it is predicted that a significant number of crucial computer systems will not be modified by the time of this immovable deadline, severely impacting business operations and quite likely putting many smaller companies out of business.

Fragmented knowledge

A common problem in many situations is that the knowledge needed to solve a problem actually exists, but is elsewhere. When Mercedes Benz introduced its new A-class small car in 1997, they overlooked a simple test routinely carried out in Sweden on new cars. In the so-called Elk test, a Swedish journalist swerved to avoid an imaginary elk. The car overturned and injured the journalist. Mercedes Benz had performed over 8 million kilometres of road test, but had overlooked this one. After launching the cars with great fanfare, it had to recall the car for major modifications, a costly oversight of something already known. It is even said that there were people in other parts of the organization that were aware of the Elk test.

In many organizations, knowledge is dispersed. Part of the solution to a customer problem may already be known in the engineering department and another part in the marketing department, but is not available to customer service. Important information is often held on the disk drives of individuals’ personal computers (PCs). A survey in one company a few years ago found that 80 per cent of all its electronic information was held in this way, and was not readily accessible to others in the organization. Unintelligent organizations harbour fragmented knowledge. They do not know what they know.

Dangerous denials

Even where knowledge exists, as the millennium example shows, many people do not face up to the inevitable. A similar situation was true until recently in the case of the first megatrend, that of the Internet. It was only a couple of years ago that I talked to a group of MIS (management information systems) managers about the impact of the Internet. I recounted the situation in the mid-1980s when most central MIS departments had dismissed the importance of the PC, and said it would not affect them, then belatedly panicked and sought to control the inevitable. I simply substituted on an old slide the word Internet in place of PC and said the information system (IS) world was going through a comparable transition again. A senior MIS manager in the audience said: ‘The Internet goes into my company over my dead body.’ Interestingly, I have not seen or heard of him since! Another MIS director was widely quoted in the press as calling the Internet a ‘Mickey Mouse’ technology. Yet, as we now know, the Internet is rapidly becoming mainstream MIS.

Look around you. Are there dangerous denials about your environment by you or your organization? How sustainable is the environment under threat of human activities? Has your company got a blind spot like the millennium bug? Is your organization geared to the different rules of the knowledge economy? Consider your own position. Are you equipped with the skills needed to adapt and thrive in the event of redundancy or a life-changing event?

Dynamic environments, new responses

As well as the five megatrends described earlier, most organizations face a number of recurring challenges:

• an ongoing need to reduce costs and increase productivity

• new competitors, often from unexpected quarters outside of their industry

• the changing needs and higher expectations of customers

• the need to add value and create differentiation as many traditional products become commodities and price sensitive

• demands for ever higher product and service quality

• the need to minimize risk – from new ventures, unexpected market shifts, supply chain disruption, natural disasters such as earthquakes etc.

• gaining better returns on investments, particularly in areas such as information technology

• the need for speed – faster responses to customer problems, shorter time to market for new products and services.

Most organizations are operating in a business environment that is in a state of constant flux. Change, unpredictability and uncertainty prevail.

Organizations have developed a number of responses to these challenges. Initiatives such as TQM and BPR have helped. But they do not go far enough to address many of these challenges. Generally, organizations need to be more adaptive and develop new responses (Figure 1.5).

New strategies, new structures

Successful strategies will exploit the developments in technology described earlier in this chapter. They will take advantage of the Internet and electronic commerce to create global markets for new products and services.

Value to customers will be enhanced through information and knowledge. Information products, such as databases, and knowledge-based services, such as consultancy, will become important ways of generating revenues. Technology will be used to tailor services to individual customer needs and develop closer customer relationships.

In terms of structure, responsive organizations will be those that are more networked. Virtual teams and organizations will allow them to create value through unique combinations of skills that are flexibly combined as needed. The future organization is most likely to consist of networks of self-managed teams that rapidly reconfigure to adapt to opportunity and change. Teams, not functions or departments, will become the core productive units within organizations.

Figure 1.5 Responses to environmental change and technology drivers

In addition, success will come through wider and deeper relationships. The RSA (The Royal Society for the encouragement of Arts, Manufacture and Commerce) Tomorrow’s Company Inquiry found that inclusive relationships with all stakeholders – including the wider community, employees, and customers is the key to sustained future success.²³ This is also born out by the market. In an analysis of 350 large companies, investment house Kleinwort Benson found that those companies adopting an inclusive approach outperformed the others 16 per cent in the short term and 38 per cent in the long term.²⁴ Furthermore these relationships will extend to those who are currently regarded as competitors. Strategies based on competitive advantage – conventional wisdom in the 1980s – may have done many organizations more harm than good. Sustainable wealth comes through creating and growing new markets, not competing in existing ones. Thus competing IT manufacturers increasingly co-operate on matters of standards, while car-makers collaborate on safety.

The innovation imperative

One of the main challenges for any organization is survival. The average life expectancy of most firms is low, around twenty years. One-third of all businesses in 1970 had disappeared thirteen years later. Today the environment is more turbulent and dynamic, so survival becomes even harder. Yet there are companies, like Shell (founded 1907), Siemens (1847), Du Pont (1802) and 3M (1902) that survive and thrive. How do they do this? They adapt and innovate.

Every year Fortune does an analysis of the world’s most admired companies. In 1997 it polled 13 000 business executives for this survey. Fortune described the top rated company, Coca-Cola, as ‘ruthlessly innovative’. Other companies in the top ten include Merck, Microsoft and Intel, none of them newcomers to the list. Fortune notes: ‘Innovation is the ingredient that all top companies embrace passionately. It abounds at ever fertile 3M; its the force behind Pfizer and galvanizes Intel.’²⁵

Innovative 3M introduced 500 new products in 1996. A 1997 survey by Arthur D. Little of 700 companies in twenty-three countries showed that 84 per cent of companies believed that innovation was more crucial for their business success than it was in a similar survey carried out in 1991. They seek innovation for gaining new customers and creating new markets with innovative products, services and processes.

Of all the responses to the challenges, the most important can be summarized in two words – fast innovation. Continuous improvement initiatives give incremental benefits. What is needed in the new economy is radical innovation. It is not uncommon to find organizations succeeding in creating improvements of not just a few per cent but a factor of ten. Remember when it took days or weeks to get prescription spectacles. Now you can get them in one or two hours. It used to take BP 100 days with an expensive ship to drill a new deep-sea oil well. Now, by applying learning gained elsewhere this can be reduced to five days or less. Research at Rensselaer Polytechnic in New York State found that a key characteristic of organizations who make such breakthroughs is a free flow of ideas, in and out. In every case networking played a big role: ‘the most successful researchers have wide-ranging networks of people’.²⁶ They have discovered knowledge networking.

Knowledge networking

Knowledge networking is not easy to define or describe. It is a rich and dynamic phenomenon in which knowledge is shared, developed and evolved. It is a process of human and computer networking where people share information, knowledge and experiences to develop new knowledge for handling new situations. Charles Savage, author of Fifth Generation Management, first brought the term ‘knowledge networking’ to my attention. It is a powerful juxtaposition of two important concepts that of the strategic resource of knowledge, and that of the human act of networking. Savage defines it as: ‘the process of combining and recombining one another’s knowledge, experiences, talents, skills, capabilities, and aspirations in ever-changing profitable patterns’.²⁷

The key characteristics of knowledge networking are:

• structural components: the network’s nodes and links

• links provide paths for communications, knowledge flows and developing of personal relationships

• nodes in networks can be individuals or teams

• the nodes are the focal points for activity or formal organizational processes

• the pattern of nodes and links continually changes

• density of connections exhibits many forms – some may be more circular with obvious hubs; others may be more diffuse

• individuals belong to several networks – in some they are more central than in others

• there is often no discernible boundary to a network

• networks connect to each other; links strengthen and weaken

• one-to-one and multiple conversations take place; asynchronously or synchronously

• knowledge flows in both deliberate and unanticipated ways.

In many respects knowledge networks are like biological organisms. The nodes (teams) are energized by nutrients, such as knowledge, motivation and challenge. They process knowledge, and add to their experience to develop and grow. They sense and respond to their environment through their external interactions. Connections that extend beyond their immediate neighbours gives them more sensitivity and influence. It takes only a small number of links (four to six) to connect two people anywhere in the world. Research into the so called ‘small world effect’ shows that just 1 per cent of long-range connections dramatically reduces the number of steps to connect two people anywhere in the world.²⁸ With the Internet, connectedness increases and the pipeline of knowledge is wider.

Knowledge networks take a variety of forms, and vary in how static or dynamic they are. As Lipnack and Stamps comment: ‘they ebb and flow as the needs of their participants change’.²⁹ Because of this dynamic complexity, one might wonder how they work at all. Yet they do and bring many benefits. Networking allows rapid access to the best available knowledge, for example to solve problems or share best practice. Knowledge flows around the network and is enriched and refined by passing through many minds. New knowledge is created. This knowledge can be developed to develop better products or innovative solutions to problems. Additionally valuable working and social relationships are developed.

Knowledge networks aggregate disparate knowledge to give new insights and solve intractable problems. The El Niño phenomenon received its name since it was an apparently periodic local ocean-warming phenomenon observed by Peruvian fishermen. It was only when scientists collated their knowledge and recognized that other climatic effects occurred at the same time elsewhere in the world that El Niño was recognized as a global phenomenon. Now scientists around the world aggregate data and use modelling to predict its effects and mitigate its $6 billion impact.

Knowledge networking is a different way of working. It is about openness and collaboration across departmental, organizational and national boundaries. It’s about building multiple relationships for mutual benefit. It defies traditional methods of management. There are organizational challenges in harnessing and exploiting the knowledge that is generated.

Throughout this book are many examples of knowledge networking, and especially virtual teamworking over electronic networks. Part B explores the opportunities while Part C gives practical guidelines to make it successful.

Summary

This chapter has examined some of the key trends and influences that are impacting organizations, individuals and society as a whole – knowledge, globalization, networking, virtualization and technology, especially the Internet (Figure 1.6).

Figure 1.6 Shapers and responses in the networked knowledge economy

Many of the observations are not new. Alvin Toffler writing in the 1973 book Future Shock had already foreseen some of these trends and their consequences. He wrote of the pace of change and uncertainty of jobs: ‘the death of permanence’. He wrote of the collapse of hierarchy and project based organizations.³⁰ Subsequently these things are happening, though perhaps not as fast as Toffler had envisaged. Another visionary is Douglas Engelbart. Decades ago he foresaw the possibility of interconnecting people to hyperlinked documents of information, in a global information repository that he called a ‘docuverse’ (document universe). It would have hypertext links (where words in one document can be linked to other documents) so users could retrieve information and navigate around information space. Now we have such a docuverse in the form of the World Wide Web. All the trends in this chapter are interrelated, but it is the Internet that has brought global knowledge networking to the fore.

Points to ponder

1 What major changes has your organization gone through in the last five years? Were they predicted and planned for?

2 Which are the main companies competing in your markets today? How different are they from five years ago? Are there competitors from other industries or other countries?

3 What major changes have taken place in your life over the last five years? How well did you cope? Think about what might happen in the next five years. How certain are you of the outcomes?

4 What megatrends, other than the five covered, do you see shaping the world around you?

5 What knowledge do you need to succeed in your goals? How has it changed over the last few years? What do you need to do to keep it current?

6 Who do you network with? What benefits do you get from your networking?

7 If you are an Internet user, what proportion of communications takes place with people from other countries? How does this alter your perspective? If you are not an Internet user, what is preventing you from being one?

8 What products or services do you buy over the phone or via the Internet? What are the advantages and disadvantages compared to buying using conventional face-to-face methods? What would you like to be able to do or buy virtually but cannot?

9 Consider what technologies you use today compared to ten years ago, e.g. mobile phone and personal computer. What can you now do better or more easily than you could previously? How would you like technology to help you more in future?

10 Develop a blank template of Figure 1.5 (drivers and responses). Insert the key drivers and responses that you see affecting your life and work.

Notes

1 Business Week (1998). The new economy starts to hit home, 23 March, 36.

2 Business Week (1997). Vital statistics for the real-life economy, 29 December, 34.

3 Pink, D. (1997). Free agent nation’. FastCompany, (12), 131.

4 Durham University Business School (1997). Realising the potential of self-employment. Small Business Foresight Bulletin No 7, http://www.dir.ac.uk/~dbr0www/bulletin/bull_97/b7_97.html

5 Sadtler, D., Campbell, A. and Koch, R. (1997). Breakup!: When Companies are Worth More Dead than Alive. Capstone.

6 Drucker, P. F. (1993). Post Capitalist Society. Butterworth-Heinemann.

7 Gimpel, J. (1992). The Medieval Machine: The Industrial Revolution of the Middle Ages. Pimlico.

8 Naisbitt, J. (1982). Megatrends: Ten New Directions Transforming our Lives. Warner Books.

9 Naisbitt, J. and Aburdene, P. (1990). Megatrends 2000: Ten New Directions for the 1990s. Warner Books.

10 Stewart, T. A. (1997). Intellectual Capital. Nicholas Brealey Publishing.

11 Wyllie, J. (1998).The economics of intangible value. In Collaborative Innovation and the Knowledge Economy. The Society of Management Accountants of Canada.

12 Masuda, Y. (1990). Managing in the Information Society. Basil Blackwell, English; translated from the original Japanese publication, Masuda, Y. (1980). The Information Society as a Post-Industrial Society. Institute for the Information Society, Tokyo.

13 Lipnack, J. and Stamps, J. (1986) The Networking Book: People Connecting with People. Routledge & Kegan Paul; and more recently Lipnack, J. and Stamps, J. (1993) The Team Net Factor: Bringing the Power of Boundary-Crossing into the Heart of Your Business. John Wiley & Sons; and Lipnack, J. and Stamps, J. (1994) The Age of the Network: Operating Principles for the 21st Century. John Wiley & Sons.

14 Hastings, C. (1993). The New Organization: Growing the Culture of Organizational Networking. McGraw-Hill, p. 7.

15 (1987). Digital Equipment Corporation Second Quarter Report. Digital Equipment Corporation, Maynard, MA.

16 Biemans, W. G. (1992). Managing Innovation with Networks. Routledge.

17 Wissema, J. G. and Euser, L. (1991). Successful innovation through intercompany networks. Long Range Planning, 24(6), 33-9.

18 Garten, J. E. (1998). Why the global economy is here to stay. Cited in Business Week, 23 March, 9.

19 Gillett, S. E. and Kapor, M. (1997). The self-governing Internet: coordination by design. In Coordination of the Internet (B. Kahin and J. Keller, eds) MIT Press.

20 Scott Morton, M. S. (ed.) (1991). The Corporation of the 1990s. Oxford University Press.

21 The European ACTS programme (see http://www.infowin.org) has several projects that have demonstrated broadmand wireless applications at 34 Mbit/sec and has demonstrated 155 Mbits/second, although only over small distances.

22 Kumar, K. and Willcocks, L. (1996). Offshore outsourcing: a country too far? RDP96/1, Templeton College, Oxford.

23 RSA (1995). Tomorrows Company: The Role of Business in a Changing World: Inquiry Final Report. RSA, John Adam Street, London. The Inquiry’s work now continues under the aegis of the Centre for Tomorrow’s Company, London.

24 Smith, G. (1997). Intangible assets in corporate valuation: an investor’s view. At Business Intelligence Conference, Turning Knowledge into a Corporate Asset, London, October.

25 Fortune (1997). Most admired companies, 3 March.

26 Business Week (1997). Getting to eureka, 10 November.

27 Savage, C. M. (1996). 5th Generation Management: Cocreating through Virtual Enterprising, Dynamic Teaming, and Knowledge Networking. Butterworth-Heinemann.

28 Business Week (1998). Do the math – it is a small world, 17 August, 77-8.

29 Lipnack, J. and Stamps, J. (1993). The Team Net Factor: Bringing the Power of Boundary-Crossing into the Heart of Your Business. John Wiley & Sons.

30 Toffler, A. (1973). Future Shock. Pan.