Opportunities and challenges in global knowledge economy

oxford mushroom SG

Ngiam Tong Dow's book gives us a good idea of the future shape of our nation's economy:

"THE knowledge-based economy brings the greatest opportunity for Singapore. It also poses the greatest challenge. Classical economics says that the factors of production are land, labour and capital and Singapore has very little of each. Therefore our potential GNP or GDP cannot grow beyond a certain size. But in the knowledge-based economy, you can use knowledge to leverage on all three factors of production. So you can grow beyond your land, labour and capital. Your potential is far, far greater.

However, the other side of the coin is this: it's a global economy. Knowledge is available to everyone, all over the world. It is very mobile. And therefore we must be globally competitive. Our doctors can be paid only as much as the next-best doctor in the world. And so on. The price is a global one. So all these pay increases have to be thought about. In the global economy, information is freely available. And Singapore is a price-taker, we cannot overprice ourselves, even for one day. I have friends who are business people and they are very sharp. They said to me: 'You think the barber is protected from international market forces?' I thought: 'Yes, of course, he's a local service.' But I was wrong. Anyone can go to Johor Baru and have a haircut. This is the real meaning of the knowledge-based global economy."

(Excerpt from Half a dollar note - to buy 100 tons of gold, Straits Times, July 16)

ShutterBug SG

It looks exactly like what SIA is doing; overpricing themself when all around them are budget airlines and other airlines offering lower prices.

Atobe SG

It is fine and grand to dabble in the "Opportunities and challenges" that a Global Knowledge Economy brings.

The problem is how does one (the Government, or the Business Leaders) create a Master Plan - for want of a better term - to bring the entire population to transcend from its present respective economic levels to this Globalised Level ?

Knowing that in a population with different Age Groups, different Expertise and Skills - a result of being trained in different disciplines and to different degree of development - how can the National Leadership bring forth the benefits of 'Globalisation' to a population of diverse enterprise, experience, and objectives ?

What is the implications to Singapore in responding to the "Global Knowledge Economy" ?

The Global Knowledge Economy : and its implication for markets

No. 21
Insights Overview

List of Titles

* Contents

* Drivers

* Features

* Policy

* Business

* Challenges

* Resources

Various observers describe todays global economy as one in transition to a knowledge economy, or an information society. But the rules and practices that determined success in the industrial economy of the 20th century need rewriting in an interconnected world where resources such as know-how are more critical than other economic resources. This briefing highlights recent thinking and developments and offers guidance on developing appropriate organizational strategies to succeed into the new millennium. It summarizes key conclusions from our trends database and research analysis.

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Growing Interest

Various management writers have for several years highlighted the role of knowledge or intellectual capital in business. The value of high-tech companies such as software and biotechnology companies, is not in physical assets as measured by accountants, but in their intangibles such as knowledge and patents. The last few years have a growing recognition by accounting bodies and international agencies that knowledge is a crucial factor of production. For example, the OECD has groups investigating human capital and also the role of knowledge in international competitiveness. Several conferences in 1997, including one sponsored by the World Bank, have placed knowledge firmly at the heart of the economic agenda.

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Driving Forces

Our analysis suggests three interlocking driving forces are changing the rules of business and national competitiveness:

Globalization - markets and products are more global. Products by Nike and Virgin are known the world over. Today, even resourcing is becoming global. Thus many companies outsource manufacturing and software development to distant locations.

Information/Knowledge Intensity - efficient production relies on information and know-how; over 70 per cent of workers in developed economies are information workers; many factory workers use their heads more than their hands.

Networking and Connectivity - developments such as the Internet bring the 'global village' ever nearer.

The net result is that goods and services can be developed, bought, sold, and in many cases even delivered over electronic networks. Electronic commerce offers many advantages in terms of costs savings, efficiencies and market reach over traditional physical methods

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continued below:

Atobe SG

continuation:

Characteristics

The knowledge economy differs from the traditional economy in several key respects:

The economics is not of scarcity, but rather of abundance. Unlike most resources that deplete when used, information and knowledge can be shared, and actually grow through application.

The effect of location is diminished. Using appropriate technology and methods, virtual marketplaces and virtual organizations can be created that offer benefits of speed and agility, of round the clock operation and of global reach.

Laws, barriers and taxes are difficult to apply on solely a national basis. Knowledge and information leak to where demand is highest and the barriers are lowest.

Knowledge enhanced products or services can command price premiums over comparable products with low embedded knowledge or knowledge intensity.

Pricing and value depends heavily on context. Thus the same information or knowledge can have vastly different value to different people at different times.

Knowledge when locked into systems or processes has higher inherent value than when it can walk out of the door in peoples heads.

Human capital - competencies - are a key component of value in a knowledge-based company, yet few companies report competency levels in annual reports. In contrast, downsizing is often seen as a positive cost cutting measure.

These characteristics, so different from those of the physical economy, require new thinking and approaches by policy makers, senior executives and knowledge workers alike. To do so, though, requires leadership and risk taking, against the prevailing and slow changing attitudes and practices of existing institutions and business practice

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Policy Implications

The evolving knowledge economy has important implications for policy makers of local, regional and national government as well as international agencies and institutions e.g.:

Traditional measures of economic success must be supplemented by new ones
Example: Nova Scotia has developed Knowledge Quotients for their economy

Economic Development policy should focus not on 'jobs created' but rather on infrastructure for sustainable 'knowledge enhancement' that acts as a magnet for knowledge-based companies
Example: Sophia Antipolis in France is a hub for many knowledge-based businesses

Develop regulation and taxation for information and knowledge trading at international level, looking to future knowledge-based industries rather than traditional industries.
Example: WIPO is seeking harmonization of copyright legislation for online markets

Stimulate market development through new forms of collaboration
Example: Several EU programmes now focus on market development (rather than product development) and encourage participation by collaboration across national boundaries using electronic knowledge networking methods.

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Implications for Business

Many businesses are now realizing the role of knowledge and are creating knowledge management programmes and appointing CKOs (Chief Knowledge Officers). Such responses should be part of a coordinated effort that:

Recognizes the importance of knowledge to their business bottom line.
Example: Buckman Laboratories Buck man the value of solving customer problems by enhancing knowledge flows from their chemical experts direct to the customer interface.

Develops new measures of corporate performance based on knowledge:
Example: Skandias supplements annual reports with intellectual capital reports using measures from the Skandia Navigator.

Systematically enhances Stadia learning and knowledge, through new organisaStadiaments and processes.
Example: Price Waterhouse has created knowledge centers to improve the capture, codification and dissemination of 'best practice' knowledge.

Provides a technology infrastructure to enhance knowledge creation and sharing:
Example: Hewlett-Packards uses an intranet for knowledge sharing throughout the company on a global basis.

Encourages the sharing of knowledge through effective Internet settings and business practices:
Example: Steelcase designs 'smart' working environments and has developed a culture of knowledge sharing.

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Issues and Challenges

The main challenges facing policy makers and business leaders are the following:

It is difficult to 'go it alone'. Stakeholders, especially employees and business partners must share similar views for your own initiatives to succeed

alone recognition and reward systems usually do not sufficiently recognise recognizee contributions. They are linked to performance measures of the traditional economy.

Measures of return on investment are done using traditional accounting methods, thus investments in knowledge enhancing activities need strong advocates at senior levels.

dragg SG

but they still make billions.

oxford mushroom SG

Exactly...they have been successful and profitable.

oxford mushroom SG

SIA remains very profitable, unlike MAS, although the latter charges less. The government and in particular, the MM has been very concerned with the running of SIA. Its profitability attests to the success of its management.

BillyBong SG

Yes, they have been...for now.

But stagnation and arrogance is slowly creeping in. The recent closure of Air NZ flights to their homeland, leaving SIA the sole owner of direct flights leaves a big question mark on competition. In essence, SIA has effectively monopolised this route, bringing to light the fears of Quantas and the Australian govt if SIA were granted exclusive rights for the kangaroo route.

While others like MAS has nosedived, mostly due to poor management and possible corruption, many others have also picked up, notebly Luthansa Techniks and Cathay Pacific. SIA is at the moment impressively consistent rather than consistently impressive.

With the mainstay competition weakening and re-focused onto budget travelling, this has effectively left SIA out in the open as one of the primary profit-making comfort airlines, not necessarily because they were better in most areas, but simply because the competition died out.

A la microsoft style industry.

Building onto this by expanding more direct flight coverage and providing quality service and more value-added packages should benefit the changing economy, where people look for more freebies and value for money. Our raffles and first class tickets are the highest in the world and need to be market-driven and justified. Frequent advertising alone isn't going to sell cows.

ndmmxiaomayi SG

I don't really get how MAS is related with SIA. MAS is Monetary Authority of Singapore right? If yes, does this mean how strong our currency is that makes us profitable?

pikamaster SG

I guess they were referring to Malaysian Airlines?

claudetnt SG

Knowledge-based global economy sounds up-market, in actuality i do not think many of our ministers and policy makers really know what this term actually means! Our govt just went on and implemented wholesale the policy of throwing open the job market some years ago and are now fine tuning it after realising the blunder it had created for some of our citizens.

Its not as simple as getting a cheaper hair cut in JB if the price in singapore is more expensive. There are many businesses that can survive in Singapore although there are better and cheaper alternatives here and abroad simply because of connections. To these businesses knowledge-based global economy means nothing!