The knowledge economy the main culprit
The knowledge economy has transformed business processes by elevating the role of innovation as the core production process and the main enabler of business success. As a result, the role of the employee also changed. Employees in the knowledge economy are required to do brainwork most of the time to incorporate knowledge into new applications and innovate new products, processes, and services. To a great extent the knowledge intensity of business processes and the workforce is brought about by an increased demand in the market for knowledge. The customers of the knowledge economy are knowledge thirsty, creating more demand for knowledge intensive products. Knowledge gets cycled and recycled through the innovation process to make new products, which in turn increase the body of knowledge that gets fed again into the production process as illustrated in Exhibit 1.1.
Business Processes and the Fast Lane of Innovation Join It or Pull Off the Highway
In the industrial economy, organizations were able to secure a strong competitive position for a greater number of years. Once a competitive position was secured, organizations then created and maximized value through a process of optimization (or economizing). Organizations that performed well were those that optimized their production process by shortening the time of production, improving the quality of the end product, and reducing the number of employees assigned to any single task (read also more about opportunity IT Asset Management). Value creation then was dependent more on an organization's industrial capability and capital budgetingits tangible and financial assets.
In the knowledge economy this is not the case anymore. For one thing, to maintain a competitive position, regardless of its strength, for a long period of time is not possible with the short life cycles of knowledge and the high rate of innovation. Though optimization, as a process, is equally important in the knowledge economy, it alone cannot create or maximize value. The only way to create value in the knowledge economy is by adopting innovation as the core business process. An organization's ability to create value depends on its innovation process, its intellectual resources, and the creativity of its workforce its intellectual assets.
Innovation has been an important driver since the dawn of humanity, but now it is the main driver of business performance. The knowledge economy is all about the speed with which markets and business embrace and create change.16 It is about the creation and production of new knowledge and new applications of old knowledge to deal with short or much shorter compared to that under the industrial economy product life cycles. Knowledge and intellectual resources are not only the raw materials for production, but once developed into defined methods become the main process of production as well (hence the innovation process).
A new computer game, for example, has the same tangible material used in older products. The tangible material is abundant and is not critical to the product. The most important and valuable raw material that goes into the production of the computer game, however, is intangible. Artwork, graphics, ideas, and the technology are what makes it all happen and distinguish one game from another.
The extensive use of intangibles as raw resources is not limited to the high-tech, chemical, and consumer products industries. Organizations in traditional industries found it hard to succeed without a strong commitment to innovation as well. Organizations in traditional industries are continually pushed into this fast lane of innovation. While new technological applications have presented them with new challenges, they have also opened a world of opportunities.
In one of the most traditional industries, oil, British Petroleum was able to use technological advances to innovate its drilling activities. As a result, the company invented the smart drill, which in turn reduced the company's production costs and enabled it to produce new products that emit fewer pollutants into the atmosphere.
In the steel industry, organizations that innovate are able to excel, while others just struggle to survive. Faced with the danger of extinction, Norton Steel innovated the way it makes and sells steel. The company survived tough economic times by incorporating its customers' input into the composition of the steel it produces. Coming from its customers, knowledge, like iron, became a raw material and, like steel, became a product.
With intellectual resources forming the majority of the required raw materials for production, the knowledge economy has created a demand for new ideas that can be processed through innovation into new products and services. But machines do not produce ideas. Even artificial intelligence computer engineers have not been able to create a computer that can think like a human brain. Until they succeed, if ever, the human mind is the primary machine that organizations need to generate new knowledge and innovation.
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