Rethink the Knowledge Economy and Value Chain

in Knowledge

If you remember when we learn value chain in management classes, textbooks always talk about value creation in a value chain. Many of us are familiar with how values can be created when recourses such as, land, labor and capital are invested to convert raw materials into final products. Companies are responsible to create values to the materials through design and manufacturing processes until they become commercial products that customers are willing to pay for.

You may also heard about people talking about “moving up the value chain”. When a company has successfully moved up a value chain, for example, from manufacturing to Research and Development (R&D), we expect the company to gain higher returns, and become more competitive in the market. However, is R&D the ultimate upstream that we can reach? What are the resources for a design creation? In order to create a new design, we need people, tools and capital, but we think a little bit further “upstream”, we need the knowledge that enables people to become designers and to create tools and processes for design activities. This knowledge is coming from the “knowledge workers” who enable knowledge to be channeled through the designers and tools into the final products.

As we are evolving into the so call “Knowledge Economy”, many gurus have predicted that knowledge will be the dominant factor that brings higher value to the products in the market. In addition to physical products that we are familiar with, we have products in terms of knowledge intensive services that bring even bigger returns to the investors. Dr Peter Ducker believes that “knowledge is the only meaningful recourse” in the new “Post-Capital” era. Traditional factors such as land (natural resources), labor and capital have become secondary due to the evolution of our society.

However, the vision of knowledge as the “raw material” that creates values to the products seems to be very elusive. We are still unable to grasp the concept of knowledge, and how to manage it as the resource for our products. Knowledge is not something we can keep, manipulate and use like other physical things. It moves easily from one point to another and we are not able to control how and where knowledge should “flow”. Hence, even though many people talk about knowledge management and value creation, there is still no viable process that we can use to clearly demonstrate how we can reward the knowledge workers who have created knowledge that eventually creates value to the products. The people who have largely benefited from the value creation are still the capitalists or investors, and not the knowledge workers.

The knowledge workers that I am talking about can be teachers, trainers, lecturers, consultants, supervisors, writers, thinkers, parents and any experienced people who are responsible to transfer their knowledge to researchers, designers and design processes. They are definitely at the “upstream” before any design and development process. If we really value knowledge more than capitals, shouldn’t the profits created through the products been shared with these people too?

In the past, we can argue that we are not able to do that, as there is no way to track the contributors of knowledge in the value stream. However, I think it is time for us to rethink about the possibility. We can see that more and more people are “registered” online, and we have created online identities that track our presence, activities, financial accounts and many more using online technologies (what ever you want to call them). I believe we are approaching the capability (in terms of technological and cultural maturity) to track our knowledge contributions. If we are able to do that, then we are really evolving into the real Knowledge Economy, and Dr Peter Drucker’s vision will become a reality.

If you imagine knowledge flows in the form of an abstract network, you will be able to visualize so many “channels” being connected to you. Your parents, teachers, supervisors and friends could be the channels that provide input knowledge to you, and you are also supplying output knowledge to people around you. If any of the parties uses specific knowledge to work on, or add value to something that enable them to receive monetary returns, certain amount of these returns should be channeled to the people upstream, who have responsible to bring the knowledge to make this value creation activity possible.

You may think this is too ideal, too complicated and it’s an impossible process. How about visualize it the form of a collaborative network? What if your social networking accounts are included as a part of a collaborative network? How about a network that linkages are clearly defined, and we are able to record our transactions with others’ accounts through the network? After all, every single thing of our activities is actually a result of collaborative efforts.

I think it can really impact the way we live and resolve global problems we faced today. We will truly need to work collaboratively for our mutual benefits rather than merely meeting individual desires. The aged communities will be rightfully rewarded with passive incomes due to their past contributions that bring values to our current needs. We can really see rewards being channeled through knowledge networks and everyone can share the benefits of the value creations.

It is my hope that we can work together to create real collaborative networks that bring well-deserved rewards to our knowledge workers and realized the dream of a collaborative world. Then, we can confidently say that we are in the age of Knowledge Economy.

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Rethink the Knowledge Economy and Value Chain

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This article was published on 2011/02/22