Changes In The Global Business Economy


A number of significant changes have occurred in the global business economy, and in society more generally over the past couple of decades (Castells, 1989; Allen, 1992). Allen (1992) points out how a ‘. . . sense of economic transformation within the western industrial economies has been present for some time, at least since the 1970s.’ While there are differing views as to what type of economy we are moving from there seems to be some converging views that information and knowledge are becoming the primary source of economic value.

Castells argues that a series of scientific and technological innovations have converged to constitute a new technological paradigm and that what differentiates the current process of technological change is that its raw material is information, as is is its outcome. He refers to this new paradigm as the ‘ informational technological paradigm’, which is characterised by two fundamental features: (a) the core new technologies are focused on information processing, so its raw material is information, and (b) the main effects of these technological innovations are on processes, rather than products.

The ‘informational technological’ paradigm is having a fundamental effect on businesses since processes, as Castells points out, enter into the domain of human activity; something that affects social structures and organisational structures. Under the ‘ informational technological’ paradigm information and knowledge become the primary source of economic value and competitive advantage (Castells, 1989; Drucker 1993). As Thomas Stewart points out, the old economy was about ‘congealed resources’, i.e. a lot of material held together by a bit of knowledge, but the new economy is about ‘congealed knowledge’, i.e. a lot of intellectual content in a physical slipcase[1].

Knowledge is a source of sustainable advantage given that, unlike other assets, knowledge assets grow with use:

Ideas breed new ideas, and shared knowledge stays with the giver while it enriches the receiver. (Davenport and Prusak, 1998:17)

and

Ideas are the instructions that let us combine limited physical resources in arrangements that are ever more valuable. (Paul Romer, cited in Davenport and Prusak, 1998:17)

and

Through knowledge creation, firms [and people] are able to revitalize themselves and set themselves apart from their competitors. (Bird, 1994: 328).

Other leading management writers, such as George Stonehouse et al. (2001), argue that there are three factors that influence why one business outperforms another. These are competitive positioning, resource or competitive-based positioning and a knowledge-based approach, i.e. having a focus on knowledge building and organisational learning. Sustainability, according to Stonehouse et al., comes from the level of importance that is placed on information and knowledge within the organisation. They suggest that competitive advantage only arises when an organisation is able to generate new knowledge, something that is heavily dependent on an organisation’s learning environment.

The combined effects of globalisation, influenced by new technologies, and better communication and transport facilities means that consumers now have more choice over the goods and services available to them. They are constantly being inundated with new product offerings from global companies. For organisations this means that they cannot afford to be complacent about how they conduct business. They cannot assume that the products and processes that made them successful in the past will continue to do so in the future.

Davenport and Prusak argue that companies now require quality, value, service, innovation and speed to market, in order to remain successful in business; the business imperative then is one of knowing how to do new things well and do them quickly.

But businesses have also got to keep an eye on their cost base and seek new ways of managing this. One of the ways in which many organisations have done this is through reviewing their core competence, and outsourcing business activities that do not map directly onto their core competence. Over recent years we have seen an increase in the number of organisations that have outsourced their manufacturing, and in some case part of their service function, to countries where labour costs are lower than in their native country. The area around Bangalore in India, for example, is now a world centre for software production; an example of where the globalisation of knowledge is unaffected by traditional boundaries. Of course by shifting production to different continents, organisations can take advantage of different time zones, which means that they can offer a twenty-four hour service to customers in a cost-effective way.

[1]Stewart reference was cited in F. Horibe, Managing Knowledge Workers.




Managing the Knowledge - HR's Strategic Role
Managing for Knowledge: HRs Strategic Role
ISBN: 0750655666
EAN: 2147483647
Year: 2003
Pages: 175

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