Blueprint for the 21st Century
Innovation Management

The World Economic Survey

There are many world economic surveys. Here are a few future perspectives. Perhaps the most succinct and comprehensive overview is contained in the 1996 survey produced by The Economist. It describes how the future prosperity of rich economies will depend increasingly upon their ability to innovate and capacity to adjust to change. It surveys the numerous books on the topic and concludes that there are two ways of interpreting the future; one optimistic about future opportunities and the other more cynical.

The rich economies are coming to depend increasingly on the creation, distribution and use of information and knowledge, involving both technology and human capital. The most distinctive feature of the knowledge-based economy is not that it churns out information for consumers – it does that too – but that it uses knowledge pervasively as both an input and an output throughout the economy ("Survey of the World Economy," 1996, p. 23).

As economies become increasingly knowledge-based, the well-educated will enjoy an ever-stronger advantage. The chances are that harvesting knowledge will always pay more than harvesting cabbages ("Survey of the World Economy," 1996, p. 17).

Knowledge is more difficult to measure than traditional inputs such as steel or labor, and the lack of reliable figures means that important areas such as the link between knowledge and growth are ill-understood… One of the problems number crunchers face is that intangible products wreak havoc with the old statistical boundaries between manufacturing and services ("Survey of the World Economy," 1996, p. 24).

The survey describes the disruptive, inevitable nature of change and outlines how the shift to the knowledge-based economy has enabled more productive use of human talent. It defines all the reasons why these human, intangible assets are so difficult to manage, given the constraints of the financial accounting and statistics. However, the link between knowledge and growth is precisely the relationship that must be understood to be managed effectively.

Connecting with the movement on organizational learning is a parallel study. The Economist Intelligence Unit produced a research report in co-operation with the IBM Consulting Group, entitled The Learning Organization: Managing Knowledge for Business Success. (The Economist Intelligence Unit and IBM Consulting Group 1996.) It involved a questionnaire sent to 3,000 executives in 26 countries and 50 in-depth interview with 37 companies. The study was not a focus on innovation, nor did it examine the role of knowledge in the economy; however, the interview findings do reveal implications germane to this paper:

  • Learning enhances a company’s speed, innovativeness, and adaptability.
  • Formal business procedures must be balanced with the freedom to create.
  • Every company has a different approach.
  • Work is personal.
  • Culture is key.
  • Individuals must commit to personal change.
  • Day-to-day operating demands conflict with learning.
  • Business performance measures do not value knowledge assets.
  • Learning builds shareholder value for the long term.
  • Effective information systems meet both business and human needs; and with economies of thinking, bigger and better ideas emerge.

Interviews were conducted in several different functions described as the community of knowledge practice (e.g., human resources, strategic planning, quality, manufacturing, R&D, information systems, corporate communications and Knowledge Management). It did not appear that the financial community was a target of the study, although the findings concluded that there was real difficulty in measuring bottom-line results. "The challenge of measuring learning and knowledge creation’s contribution to the bottom line will continue to be an obstacle until non-financial standards of performance gain both wider use and acceptance."