The basis for fast high-quality innovation and commercial development is found in the organization’s knowledge management and building of intellectual capital. This can be viewed at a high level by looking at the three eras through which society has passed. The first was the agricultural era where the possession of land and labor to work the land wasking. This gave way to the industrial era were financial capital in machines took center stage. As shown in the “Basis for Three Eras” figure the knowledge era strongly depends upon knowledge management, with labor and capital still significant. Just as labor was a constraint resource in the agricultural era, in capital a constraint resource in the industrial era, knowledge is a constraint resource in the knowledge era. Finding ways to make knowledge ever more productive will create large increases in corporate value is implied in the “Transformation of Knowledge to Corporate Value” figure.
The challenge for the knowledge era is the unprecedented speed of change impacting society and businesses. The globalization of the economy, automation robotics,artificial intelligence, and the global sharing of data are all causing the business windows of opportunity become shorter and shorter. The half-life of corporations’participation in the S&P 500 index has dropped from 60 years in the last century to under 18 years today. The dynamics of competing in the knowledge era requires increasing sophistication of understanding customer requirements,patterns of disintermediation, fast-changing customer preferences, faster competitive counteraction tactics and strategies, and increased value of partnering and networking.
What this means is that in the knowledge era, the creation of corporate value has to result from acceleration of organizational learning and the generation of knowledge capital as shown in the “How to Transform Knowledge into Corporate Value” figure. This means the objectives are to build knowledge infra structures that allow the systematic sharing of knowledge, thus enabling faster learning. At the next level it requires enhancement of business competencies that relate to enhanced learning at all levels, so that a superior ability to reach the customer results. The next step is to accelerate the organizational capability through increased innovation methods so that at the highest level of growth opportunities are generated, which in turn requires the skill to transfer and build new opportunities in expanded worldwide markets. All of these requirements and abilities create the highest corporate value.
The takeaway from this line of thought is that learning is a requisite response to change. Learning must equal or exceed the level of change if an organization is to be successful.
The Learning Versus Change Matrix figure shows how the environment’s rate of change and the organization’s rate of learning can create one of four generalized outcomes. If the rate of change of the environment is low and the rate of learning in an organization is also low that organization is in a stagnant stable state awaiting a crisis. The crisis occurs when the rate of change of the environment increases and the company does not respond by increasing its rate of learning. In this case it experiences a paralyzing chaotic situation typically causing bankruptcy the organization. On the other hand if the rate of the learning of an organization is high it can either be doing well in a low rate of change environment or evolving and adapting with other high-performance organizations if the rate of change is high. It is pretty straight forward that the rate of learning has to be high in the Knowledge Era’s high change environment. Thus there is a need for the systematic creation and value through knowledge because fundamentally ideas drive competitiveness,innovation is cheaper than competition, clients are changing and demand integrated solutions, a larger number of competencies are required to compete,speed must be provided to match the pace of the environment, and businesses must constantly be reinvented by redefining the boundaries.
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