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31 May 2006

Why governments should value knowledge

The OECD has highlighted the rise of the "knowledge economy", emphasising that the ability to create, distribute and exploit knowledge is increasingly central to competitive advantage, wealth creation and better standards of living.

We, the governments of Denmark, Finland, Japan, the Netherlands, Sweden and the United Kingdom, recognize that in a knowledge based economy "intellectual assets", such as human assets, innovation assets (e.g. intellectual property rights, know-how), and organizational assets (e.g. management of business/technology, employee relationship, customer/supplier network) play a critical role for accelerating both industry's and country's economic performance.

OECD "Value Creation and Intellectual Assets"

This focus on knowledge as a creator of value should not surprise us, because we are social animals, who rely on knowledge to exert mastery over other species, the environment and each other.

Humans, like most primates, are social animals and very little of what we do is done in isolation, away from others. In fact, the world would be both incomprehensible and unmanageable if we did not organise ourselves into larger entities - companies, churches, lodges, counties, provinces, states, nations and so on.

Most of the value in the world, public or private, tangible and intangible, is created by or through organisations. At the beginning of the 21st century, the capacity of organisations to create value is both exploding and, paradoxically, under threat - or so it appears. The fundamental cause for this situation is the explosion in information we have been experiencing for some decades.

Leaving aside the electronic data explosion, ten billion books are produced each year in the world and that number keeps on growing. The global economy is developing beyond the range of international governance structures.

Globalisation is challenging the raison d'etre that has supported nation states over the last couple of centuries. The nature of the nation-state is changing through economic pressure, while the emergence of truly global companies is leading to ever-greater capacity to challenge national governments.

Let us accept that it is beyond our scope to debate whether globalisation is a blight or a boon or merely a feature of the environment, like the weather. For our purposes, it is sufficient to note that we live in a globalised economy. This may be a cliche, but it is nonetheless a useful descriptor of the current state of the world, economically, socially and culturally.

Globalisation is often characterised as an economic phenomenon, involving the increasing interaction, or integration, of national economic systems, especially by means of international trade and capital flows. However, it is not only money that moves freely and quickly across increasingly porous borders.

As recognised by the European Union charter, people and cultural values also are increasingly free to move around the world and to set up home wherever a welcoming environment is found. Globalisation and modern communication technologies enable capital, knowledge and culture to be shared around the world almost simultaneously, with dramatic effects for all of us.

The volume of data and information they are required to manage is challenging organisations in the public sector and in the private sector and it is becoming obvious that in the modern economy value is created by the wise use of data and information, by managing and exploiting knowledge. There is growing recognition of the value of knowledge management as a strategic and organisation design tool.

Everybody gets so much information all day long that they lose their common sense.

Gertrude Stein

Is this how you feel, at least on the bad days? This is not a new phenomenon. As early as 1964, Peter Drucker wrote,

Other resources, money or physical equipment, for instance, do not confer any distinction. What does make a business distinct and what is its peculiar resource is its ability to use knowledge of all kinds - from scientific and technical knowledge to social, economic and managerial knowledge. It is only in respect to knowledge that a business can be distinct, can therefore produce something that has a value in the market place.

I do not know precisely what Drucker meant by the term knowledge. Perhaps he meant this,

Explicit knowledge is formal and codified, e.g., documents, databases, knowledge bases. Tacit knowledge is informal and uncodified, e.g., that found in the heads of employees, customers, vendors. It is experiential, ephemeral, transitory, and difficult to document.

Carla O'Dell and C. Jackson Grayson

It is internalised by the knower over a long period of time, and incorporates so much accrued and embedded learning that its rules may be impossible to separate from how an individual acts.

Thomas Davenport and Laurence Prusak

When I use the term knowledge, I mean information plus belief, as we will see later. Why does that matter? Well, that comes later as well.

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