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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.

26 May 2006

Re-engineering government

The next phase of the ICT revolution will centre on (tele)communications and will enable or even force a significant reshaping of all value chains in the economy, particularly in the service sector.

Whole layers of intermediary activities will be reshaped or even removed altogether. This will apply to the public sector as much or even more than in the private sector, given that the business of government is fundamentally about services and relies almost entirely on information and communications.

The effective and comprehensive use of ICT tools will increasingly make it possible to re-engineer business processes so as to focus business processes on delivering end products (or services), rather than intermediate outcomes. At present, each government agency (or "silo") has its own objectives and strategy, which do not always align with those of other agencies that contribute to the eventual achievement of a government outcome.

For example, in Australia as many as seven different government agencies (and some private sector organisations) are part of the process of enabling an unemployed person to remain a viable member of society and of the economy - this is typical in any complex economy. Yet, while they share responsibility for producing a common outcome, their business processes remain separate, sometimes overlapping, sometimes duplicating, sometimes leaving gaps that ought not to exist.

Similarly, when it comes to policy, the process ought to be common across agencies, including gathering data, analysing data, understanding the present and future environment, identifying and quantifying risks and opportunities and generating options that are more likely than not to bring about a desired future position.

Yet, while a common process would deliver greater quality, reliability, and efficiency, each department labours to create its own way of doing it, inventing the wheel over and over again and creating artificial barriers to the transfer of ideas, resources and people.

The public service of the future could be much smaller and more effective. It should retain control of strategy and of the network of data and information it needs, as well as over security of data, information, installations and intellectual capital. It should source externally the hardware and applications it needs to support its activities and programs and most direct service delivery.

It should be focused on outcomes, rather than outputs. It should bring together the best people from within and without its ranks to work on projects to deliver agreed outputs, growing and expanding in size and scope to reflect shifting government priorities. It could be as small as 65% to 70% of its present size in Australia, given current responsibilities - the reduction in other countries may be proportionally greater still.

Government infrastructure has been used for nation building in different ways, with varying success.

Government activities are often of such a scale that they can generate successful patterns of activity or facilitate the emergence of clusters of positive activity. The problem is that there is no direct causal connection that can be mapped and deployed ahead of time. Wisdom comes only after the event and a pattern that has succeeded once may not be amenable to replication later or elsewhere.

The inescapable conclusion is that the infrastructure of government must be made more flexible, more amenable to constant reshaping that is driven by need, rather than by prior intent. The infrastructure of government and the operational infrastructure of business and of our civil society must be made to simultaneously complement and challenge each other, to the benefit of the future.

The boundaries between public and private economic and social activity must become even more blurred than they are now, even at the risk of losing their separate identities. In this convergent world, government would have a very great responsibility, charged with the task of engendering an ideal vision of the future and with fostering cohesive values in a diverse culture.

Business would be responsible for generating wealth for all, within that diverse culture and those cohesive values, and civil society would continue to act as the engine for altruism, the guardian of individuality and the repository of our moral and spiritual values.

This would form a web of accountabilities within which each party, under the rule of law, keeps the others in check while remaining free to pursue its own interests in the way and by the means it considers best.

23 May 2006

Accountable government, part 4

Transparency

It is essential that government focus on creating value, but wealth is a necessary and not sufficient condition of accountable government. Transparency is also essential.

Secrecy is the enemy number one of accountable government, just as it is incompatible with the application of the rule of law. It is imperative that governments and courts act in the open, under the scrutiny of all, at least as a matter of principle.

I would argue that democracy depends more on the rule of law than on the ability to vote to elect parliaments, presidents and so on. Many countries where people can vote are not democratic; every country where the rule of law applies is a democracy. The rule of law, aomng other things, limit the capacity of the state to keep things secret, invisible, inscrutable. The rule of law makes governments accountable.

Accountability is linked to the concept of public trust. It is an essential element of any governance framework in the public sector - and increasingly in the private sector. Networks and federated governance structures tend to take the form of representative committee structures that operate outside traditional accountability mechanisms.

The result may be an accountability vacuum and diminished transparency or at least a perception that this is so.

As a result these structures are susceptible to conflict of interest issues (lazy procurement by government, where the interests of the staff are put before the interests of the public, for the sake of convenience, or patronage, in its many forms) and "pass the buck" attitudes, where government agencies tend towards inaction or a minimalist approach because roles and esponsibilities are not delineated clearly.

If conflict of interest issues are left unscrutinised, unmanaged, unresolved, then fertile ground is created for corruption and for the corrupt.

At the operational level, there is a need to ensure that any given governance framework should provide strong and clear lines of accountability, by supporting cross-agency funding and reporting on shared outcomes - collective accountability.

When networks are formed, the network needs to agree on a clearly articulated role and purpose for the network, the roles of those involved, and their responsibilities and reporting mechanisms and processes.

Access to quality, timely information is essential to the workings of government. Its availability, exchange, quality and timeliness are essential within any network or federated governance structure.

Networks and federated systems depend on their information flows between stakeholders and their capacity to analyse and interpret information. The underpinning infrastructure, the information flows and the willingness and motivations of stakeholders raise risks that will impact upon the benefits that can be gained from a networked environment.

The "protect your patch” behaviour evident in some agencies may affect the information provided by advancing certain interests. Capacity to interpret and undertake sound analysis and arrive at good policy decisions may be lessened due to a lack of expertise, knowledge of the context, history, stakeholders and so on.

Where networks are closed (or perceived to be closed) and the decision making process is not transparent, decisions may be based on misinformation or flawed analysis.

Accountable government, part 3

Public value for public money

In the public sector, as in the private sector, the function of an organisation is to create wealth (or value) by using the factors of production to best advantage. The material difference is that the private sector is primarily concerned with creating private value, while the public sector is primarily concerned with creating public value.

The objectives of private sector organisations ("the firm") and of non-commercial public sector organisations ("the department") are indistinguishable in their nature, though they may differ in form and in presentation. It is possible to start from the assumption that both private and public sector organisations are about creating value for buyers, an approach reflected in the purchaser/provider model.

Apart from government business enterprises, the value created in the public sector is not always measurable by reference to a monetary yardstick or by a measure such as return on investment. The wealth created by a department of state is defined by reference to the meaning and importance attributed by a significant observer to a particular activity, set of activities, outcome(s), process(es) or, sometimes, input.

Elected representatives (for example, Parliament) may consider that adherence to a particular process (compliance) is of greater value than the achievement of a specific result at a particular cost (outcome). Until recently, spending the allocated budget (input) - and no more or less - was considered inherently valuable.

This kind of analysis complicates the process of value creation and of decision making beyond the classical model of the firm, which requires of the firm that it be profitable; that is that it meet its costs and generate a return to its owners that is commensurable with their investment.

In reality, the interests of different stakeholders are neither equal nor equivalent, as we will see shortly. It is accepted by economists that the firm operates under several constraints, related to resources (e.g. availability of essential inputs), output quantity or quality (e.g. delivery requirements or customer service standards or industry quality standards) or legal matters (e.g. environmental law, trade practices legislation).

If the firm remains profitable within the existing constraints (and adapts as they change) it can be reasonably expected that it will meet the legitimate expectations of the shareholders (or owners).

Accountable government, part 2

Objectives and a strategy for government

From the assumption(s) discussed in the previous post, objectives at three levels can be derived for government, applicable at any level of government. Indeed, these principles - with minor modifications - are applicable to any form of social organisation, including business enterprises.
  1. First level objective: increase economic and social wellbeing, by improving the competitiveness of industry, as measured by return on investment ("ROI").
  2. Second level objective: maximise the potential of information and communication technologies to transform the economy, by increasing productivity, productive capacity and quality.
  3. Third level objective: optimise use of information and communication technologies, transforming the operations of government, at all levels, so as to enable a broader, faster and deeper process of transformation of the economy.

To achieve these objectives, the overall strategic aim is for the government to enable innovation by providing leadership and by acting as a catalyst for positive change, focusing on the creation of public value and on facilitating the creation of private value.

Accountable government, part 1

We live in a globalised economy, characterised by the growing importance of information as the raw material for value creation and by the diminishing importance of distance as a barrier to market. The speed of change is increasing and the rules governing value creation and competitiveness are under challenge.

These challenges are especially great for small to medium economies outside powerful trading blocs, but similar levels of threat may arise for regional economies within larger economies or trading blocs.

Over the next twenty-five years, the internet (mark 1 and the incipient mark 2) and the accompanying communications revolution will aggregate economic and intellectual capital to levels of concentration that will surpass our already high concentrations.

Moreover, economic cycles and product (and services) lifecycles will continue to shorten, placing ever-greater demands on a country's capacity to innovate and to commercialise.

If a country or a region cannot compete, it will lose jobs, export markets and our best brains, to the point that it may become a consumer market supported by primary industries and tourism - and no more - prey to transnational interests and at risk of destroying its environment by over-exploitation.

The corresponding and equally great threat is that, if country or a region is unable to compete, then its people may want to again withdraw into an isolationist, protectionist shell, within which a long lingering decline would surely ensue.

The example of Argentina is there for us as a salutary lesson. At the dawn of the 20th century, Argentina was one of the wealthiest countries on the planet; at the end of the 20th century, it was a stagnant economy, with a continuing risk of losing its grip on democratic, civilian government.

However, there is a way forward for small to medium economies, to a prosperous, fair, sustainable and exciting century of achievement, realising the potential inherent to economies that are participating in a globalised information-based economy.

This is fundamental to the issue of government accountability. The first accountability of government is to enable the creation of the future the people want and expect - and to be seen to be doing so. That means that government must establish, explain and act on explicit strategic objectives.

19 May 2006

Confidence, trust and security

Confidence, trust and security are powerful online enablers. Government should build public trust and confidence in going online and address barriers to consumer confidence in ecommerce and other areas of online content and activity.

Society must have the confidence to go about its business without fear, fear of terrorism, of deficient infrastructure, of breakdowns of major components of the financial system, of the weakening of the rule of law.

If communities, enterprises and individuals perceive that the globalised information economy is not serving their particular needs or if they perceive that the benefits flowing from that economy are distributed in a grossly unfair manner, the acceptance and trust in the new technologies will wither.

And the national economy and community life will also wither.

To avoid this, we need to know what communities, enterprises and individuals need, what they want, and what they expect. If there is congruence of needs, wants and expectations, it is more likely that there will be greater confidence in the information economy and in its tools. We need a level of confidence such that people and enterprises will feel safe in making investment decisions and in using those tools.

Developing a successful and sustainable information economy requires a social as well as a political consensus as a prerequisite. Then, a mechanism to integrate private and public interests is essential for the maintenance of that consensus. The problems that emerged in the dairy industry deregulation process - and that may emerge with the introduction of the Government "access card" - illustrate how a painfully constructed consensus for change can quickly dissipate when the pain of change starts to affect private interests.

The value to the public interest can easily be lost among the multiple private interests that exist in such circumstances. The challenge is to bring about change that satisfies both public and private (or regional or sectoral) objectives and, most importantly, to do it in a way that is perceived to be fair to all those interests.

This is where culture intrudes and its influence cannot be ignored. Managing a range of complex factors over time to maintain a consensus for change and to retain control over direction requires the capacity to integrate the needs of many and a high degree of flexibility.

The marriage of integration and flexibility enables an organisation or a country to be responsive to the developing environment and to the changing needs of its constituent parts. Also, security and predictability are essential if a country is to attract and retain the level of foreign investment it is likely to need. The need for investment in a growing economy can rarely be satisfied by domestic sources alone, especially in a medium size economy like Australia, which needs to spend big on infrastructure for the future.

18 May 2006

eGovernment - sources of information

eGovMonitor is a good online source of information on e-government. Another good source is kablenet, which is an excellent source of information and commentary on e-government and many matters related to it. The Europa portal provides useful resources on information management issues and on e-government, here. The US Federal Communication Weekly contains articles covering isssues of importance to public service CIOs. Obviously specific to the US but some general lessons can be learnt.

Managing Information Strategically (MIS) web is an Australian monthly magazine covering issues of interest to information managers. There is a paper equivalent available from larger newsagents or by subscription. It has longer articles than ComputerWorld about issues or managerial developments.

AGIMO, the Australian Government Management Office, provides a comprehensive range of e-government resources, including many better practice checklists, here. Multimedia Victoria hosts an online e-government resource centre.

At a more general level, Information Age is the professional magazine for the Australian Computer Society. Business 2.0 contains articles covering entrepreneurial uses of technology in support of business. CIO Weblog is also a useful resource - go here.

ComputerWorld Australia provide weekly articles of interest to Chief Information Officers. There are paper equivalents available from newsagents or by subscription. The main focus is on who is buying whom but there are also articles about key issues (such as outsourcing or ERP) or managerial developments (IT staffing, performance measurement). Also see its US counterpart.

16 May 2006

Predcitability and the role of government

Predictability is essential to give industry, communities, families and individuals the level of confidence needed to plan, to invest, to commit to long-term priorities. History suggests that commerce depends on a range of externalities before it takes holds and develops in a particular society.

For example, without insurance and the law of contract (whether the common law or the Napoleonic version), the mercantilist societies of Europe, on which modern capitalism is built, would not have been possible. This is true of the information economy also.

Without the trust that is placed in contractual instruments, large transactions would be possible, but would remain infrequent or would be hedged with such caution that entrepreneurial activity would be stifled. If individuals and enterprises lack trust in a system, that system will remain unused or underused or even be stillborn.

There are signs that this is what is happening with e-commerce today. Individuals and enterprises have not developed the level of trust in existing systems and processes that is required to unleash the full force of commercial initiative that exists in any modern economy.

Government has a unique role in developing an efficient, flexible and adaptive regulatory framework, where significant reliance is placed on appropriate standards to guide behaviour. Government also has a role in aligning education and training with future needs. In such an environment, the complex web of factors required for e-commerce to take hold may crystallise more easily and take hold and grow.

Uncertainty is the enemy of business and of enterprise.

15 May 2006

The importance of connectivity

Connectivity is of vital importance in an information economy, to enable speed and ease of connection, to create a space for entrepreneurship and the ingredients for social cohesion – and to overcome disadvantages due to lack of scale. In a globalised information economy size (or scale) is important, but not determinative, as the number of connections and the ease of connectivity provide an alternative route to success.

This is a significant observation, as, given these parameters, Australia may be able to compete with any economy, regardless of its size. Then, a successful information economy needs content appropriate to its economic and cultural needs; content that is dynamic and responsive.

It has been estimated that next generation broadband could produce economic benefits of $12 billion to $30 billion per annum to Australia (see here). This assumes that broadband is adopted as universally as the telephone over the next 25 years. A policy of encouraging widespread broadband adoption could deliver accelerated economic value within years rather than decades.

In the United States, studies have estimated that widespread, high-speed broadband access could increase US GDP by US$500 billion by 2006 and that building and using a robust, nationwide network will expand US employment by an estimated 1.2 million new and permanent jobs.

Broadband technologies make a range of networked communications possible, many of which are not apparent using first generation internet technologies. The ‘always-on’ network effect will also change business and user behaviour and revolutionise the way content and services are delivered and managed. Innovative use of broadband connectivity will be critical to Australia’s ability to participate and compete in the global economy.

As Thomas Friedman has said:Jobs, knowledge use and economic growth will gravitate to those societies that are the most connected, with the most networks and the broadest amount of bandwidth - because these countries find it easiest to amass, deploy and share knowledge in order to design, invent, manufacture, sell, provide services, communicate, educate and entertain. Connectivity is now productivity.

12 May 2006

Fcous on eGovernment

There is a pervasive view that while Australians are early adopters of new technologies, Australia is not a new economy. Australia is generally regarded as an old economy, relying on primary industries or manufacturing to support its relatively high standard of living.

This is not helped by the images Australians project abroad. From Paul Hogan to our golden beaches, to the Outback to selling its wines and lamb and so on, promotion of Australia abroad is in line with the view that it is a land of milk and honey, the proverbial lucky country, not a go-getting, entrepreneurial, knowledge-based society. A factual example might help us to understand what is actually going on.

In Australia ten years ago or so, mining, agriculture and manufacturing stock made up 74% of the stock market's value, with finance and services stock adding up to only 26%. Those proportions have reversed in the last decade, with mining, agriculture and manufacturing making up one third, and finance and services stock two-thirds.

Another pertinent fact: Australia is one of the leading countries in the world in terms of internet infrastructure, penetration and use. Australia regularly ranks among the top five countries in international (for e-government ranking, see here).

Don't misunderstand me, it would be foolish not to sell Australia as a great tourist destination (check out Floriade) and exports of primary - especially mining - or manufactured products will continue to be very important economically and socially, even in the 21st century.

However, if Australia wants to attract the level of interest and investment required to build its future, it needs to project a more complex, sophisticated image.

Australia needs to establish itself as a unique tourist destination, as a producer of resources for the world, and as an innovator in technology and its useseconomic and social uses.

In the words of Michael Krokenberger, the 21st century will require us to build a "cool, light and dry economy", based on"innovation, knowledge, doing more with less, value adding, being clever".

This is not a new challenge for Australians. Building on old virtues. Since Europeans arrived and before Europeans arrived, Australians have pioneered many imaginative solutions to social, cultural, political and technological problems.

The Australian bent for innovation is due to many causes, including the circumstances of the original settlement by Europeans. The harshness of the natural environment, the fragility of the soil and the scarcity of water, together with the blend of many cultures that have settled in Australia, have demanded creative problem solving.

Australians have a talent for crafting ingenious solutions to complex problems. Some solutions responded to uniquely Australian problems, like the stump-jump plough for agriculture. Other great Australian ideas had more universal application, like the black-box flight recorder for aircraft.

Many of these innovations have been widely adopted in other countries, often in societies that are larger, wealthier and more powerful, such as the USA. Australians do not innovate for the sake of novelty or in an effort to be different or to impose their preferences on others. They take a hardnosed and pragmatic approach, focused on realising the undoubted social and economic benefits technology makes possible.

The School of the Air and the Royal Flying Doctor Service are good examples of the positive results that can be obtained by marrying technological solutions to social needs.

The extent of Australian innovation, creating new solutions and new ways of using old solutions, is highlighted by events such as CeBIT, in Sydney - just take a look at Future Parc, for example, or at the presentations at the eGovernment Forum - and check out the winners of the inaugural eGovernment awards.

Of course, it is not government's responsibility to drive innovation - it is a shared responsiblity across all sectors of society and the economy. However, government has a unique and fundamental role - to create the preconditions, the soft and hard infrastructure for success, at national and firm levels.

This blog will serve as a vehicle to illustrate what Australia is doing and is capable of doing in the realm of eGovernment, marrying people and technology to produce both innovation and innovative solutions, to old and new problems.

During the next few weeks, others will join me here, producing a growing range of diverse and sometimes challenging views on the problems and opportunities of eGovernment. Make sure you put us on your RSS list, by using the URL given here.