I think the emergence of a knowledge-based economy is the most enormous opportunity that this country has ever been offered.
It will be, indeed, up to us to seize that opportunity and become a leader in the world.
I was once up North in Inuvik sitting around a table with an Inuit hunter and he said:
"Once I took my boat to a new lake. I went real slow down the lake, I was look for rocks, I was looking for logs.
"The second time I went to the lake, I went a Ii faster, you know, but still looking for rocks, still looking for logs.
"Third time I was on the lake I went full speed It's amazing, how fast you can go when you have the knowledge."
I think that one of the most audacious statements I heard this morning was the fact that a newspaper holds more information than a 17th century English person would be associated with in a lifetime.
I think that is a fundamental problem that we must dispense with and that is that knowledge is not necessarily just state of the art technology and financial transactions and so forth.
We must understand that the deep knowledge of personal relations, of values and so forth, have to be built into our knowledge systems of the future.
Sheelagh Whittaker referred to Charles Handy, whose mathematics say that one half times two equals three. He claims that we will have half the workers in the future being paid, or earning twice as much, and they will do three times the amount of output
We also heard that knowledge has always been there, so has information.
But, if we look at the advent of computers and software and the disciplines of information resource management, we can see that while information was always there, the managing of information, the transaction of information has created an enormous number of jobs.
I submit that if we understand what the knowledge-based economy and the knowledge industries are going to be, there will be an incremental job creation opportunity.
I think there are opportunities for entire nations to play a leadership role in this field.
My points of departure will be twofold:
I was with System House and the Halifax Group is indeed a company of people who at one point earned their living with System House.
I also had the good fortune of being in France for three to four years recently and was involved in the founding of this Institute called, Neurope Lab, which played in the knowledge and learning game.
I will refer to some of the experiences we had there.
We're also running a study for Industry Canada, which is trying to create a seamless argument to link the needs for skills upgrading and the knowledge equipment right through to the providers of knowledge-based technology, new media learning material in an effort to build on the current Canadian position in that particular field.
Neurope Lab is located just outside Switzerland, about a kilometre from the Swiss border, comfortably within the European Union, so it can drink from the EC research trough out of Brussels.
It was created in late 1990, early 1991, and was the product of a number of information technology-intellectuals in the French Geneva community. They were from companies which have been enormously competent in managing information.
We saw that IBM might have failed, Digital certainly is still trying to, that they did not necessarily in the handling of information learn very much.
We're looking at challenges that technology was changing so quickly it really is unfair to expect individuals to carry state of the at knowledge of technology in their heads.
All technologies, certainly the educational structures, were not able to move fast enough to reach point of arts knowledge.
The collapse of lead times, production cycles being reduced to one, meant that the rapid mobilization of knowledge was essential in staying ahead of your market
Indeed, those markets were becoming much more complex, they were now global; bringing language difficulties, cultural difficulties, delivery difficulties. Generally, everything was becoming much mere complex
The concept was, at least from the European views, that Europe was indeed moving into the second Renaissance.
Yet, the infrastructure economic, financial, banking, legal and so on is still largely rooted in industrial and, indeed in some cases, agriculture era concepts,
If nothing else, (it was felt) things were going to change and maybe there needed to be a place where people concerned about how things were going to change (could) at least come and debate.
Because we had a lot of computer money there was also the concept that technology would probably play a pretty major role in these changes.
We still run a program looking at how we use networks to activate knowledge transfer in organizations. Our technology was called just-in-time open learning.
We're looking at processes of formalization of knowledge how to use hypertext and various other technologies to formalize knowledge to create a transactable element
We're involved with the Province of Ontario in the trials in Europe.
We're looking at supercomputing as ways of visualizing data and knowledge and we're also looking at aspects of the broader infrastructure and knowledge economy.
We ran workshops looking at the evaluation of knowledge, depreciation of knowledge, knowledge auditing, and so on.
It is not just the service industry, as Hugh has said, that is knowledge-based.
Indeed, all of our members were realizing that they, through their process and transition, had to go into a kind of knowledge-mining process from within; that it wasn't so important to look at what they were doing, but more what they were learning and what they knew and how that could be applied to creating new businesses.
For instance, the company which had a monopoly in France to deliver kilowatts to your receptacles lost that monopoly with the open trading within the European Union.
They had 300,000 employees and not one sales person.
They very rapidly had to change and they were looking at some of the things they knew how to do.
For instance, they know how to run copper to houses, they know how to count kilowatts and so forth. They are now looking at the cable television business, which has never been successful in Franc. and are running trials in rural France.
They also turned to facilities management They knew how to stick another nuclear plant on the Rhone River and are now involved with several South American companies in providing facilities management for their power utilities.
I think this the sort of thing in Canada that we have to start looking at
Look at our forestry industry. It takes us 35 years to grow a pulp tree. In South America they grow a pulp tree in 12 years.
Things are going to change.
We have to now create a knowledge business around that and, perhaps, be out there with knowledge-based organizations, facilities-managing forestry industries in other countries, so the movement of organizations into knowledge-based organizations is happening to everyone and that the dichotomy of specialized knowledge being required is juxtaposed to the educational needs.
And we're finding the same observations in Canada.
The key things we want in our knowledge workers are core competencies, the ability to work in groups, the ability to change, to use a computer, to find knowledge and to do research.
The business schools in Europe and indeed here are now focused on formalizing those core competencies. And industry at least our members were focused heavily on that
The concept is to create in the knowledge worker the knowledge adept, as opposed to the knowledge deep, or the knowledge navigator.
We also felt when one is looking at knowledge-based economy and knowledge-based businesses it is easy to talk, but it's always difficult to go through that threshold from plans or issues to action.
And we're working with organizations to create a discipline for Iong4ange knowledge planning: things you can actually do.
We rooted that process in four major kind of buckets.
And that is knowledge engineering, so organizations can:
I'm struck by a couple of things that you talked about. One being the knowledge worker being the front line worker. That's who owns the knowledge; that's who delivers on the knowledge. On the other side, we're doing balance sheets within companies of knowledge. Who owns knowledge? How do you finance knowledge? How do you build a company? On the other hand, what happens to that worker who has the knowledge? How does he or she capitalize themselves on their own knowledge? Where does the loyalty lie? Now do you maintain a work force? You mentioned how a company that had been a huge bureaucracy was now going to be going to work teams, another form of contracting out of what had been internal labour. Can you address the relationship between labour and capital?
Arnold: The issue of who owns and how do you finance it is a deep question. If you go down to the bank and say I've got some knowledge I'd like a loan to start a business, you probably won't get too far. You'd have to translate that into a business plan and some way in which you plan to operationalize that knowledge.
The language of goodwill, of market value exceeds book, is common language in the financial community and part of what l think that's getting at is, in fact, what we talked about as organizational knowledge, or learning.
Some of it is reputation and brand knowledge and loyalty, but a great deal of its relates to the knowledge, both the product or service knowledge, as well as the organizational knowledge that's been developed that puts a premium to book value on an organization, or that creates the value inherent in organizations for whom the book value is notional.
I think there are some ways markets have some capacity to try and get at those notions, albeit I don't think there's a very sophisticated methodology or understanding of how to do that
The issue of how does the worker capitalize him or herself raises for me if it's the person at the front line or people throughout the organization that are possessing this knowledge there's to me some very important questions that exist today within organizations regarding how do we define ourselves.
Who is us?
As we see collaborative arrangements existing between competitive firms, as we see within organizations the need for collaborative working relationships across boundaries that used by characterized by animosity, lack of trust, lack of communication, s9me of the old assumptions that have existed the mindsets that have existed about who do we co-operate with and who do we compete with, become much greater and much fuzzier.
I think there's some real fundamental challenges for organizations to break out of those mindsets and also to understand who are our competitors and who are cooperating team members, both internally and externally to the organization.
And that to me relates to the need to integrate knowledge in many cases, whether its marketing knowledge from the marketing department and production knowledge form the manufacturing department and product design knowledge.
There are these encapsulated bits of knowledge within organizations and that's where part of my argument 'with regards to what characterizes effective organizations, whether you call it knowledge-based or resource-based, is the need to find ways of integrating this knowledge.
It doesn't get to your issue of who owns it.
But the question of who owns it, whether it's the individual, the department, the particular sub unit of the organization, it's a deep question.
I don't have a simple answer to it.
Thomas: From a capital perspective, one thing that hasn't been mentioned is that knowledge-based companies aren't necessarily capital intensive.
To create business and jobs' with consulting capability with knowledge products does not require a lot of capital.
I think things are changing.
The banks are coming to the table. We're learned how to value brands and copyrights and so forth.
We can learn from the music industry.
In terms of the value of an individual, we have ways of valuing consultants when we look at the knowledge content that's being brought to the table.
I think that in terms of ownership of knowledge, most corporations have certain policies in place with respect to ownership of inventions and whatever is else is made.
The issue is, when the employee leaves is there a way of formalizing that knowledge, or cashing it, retaining it, contracting back for it. I think that's where the infrastructure we're talking about will come into play.
Are we redefining organizations? As information technology allows the work force to move out of the head office how do organizations have to change? What are the implications of having a work force that doesn't come in, in the morning, but still provides work a product? The cultural industries have had a raft of freelancers for eons, yet they have also had challenges of how to tie in these people, how to provide them with benefits and all sorts of other things. Now others in the knowledge based industries are facing these challenges. Do you have any comments on the changing nature of the work force decentralization of the work force?
Thomas: Yes, it's going to happen. We have a company with no employees.
If we see them in the office It's a problem, because they should be out working, they're connected through networks and so forth.
Technology is not the only answer. Technology is one of the answers, but we will be connecting people through these networks.
The opportunities to deliver the collaborative work capabilities, to allow course ware to be co-authored, to allow cultural artifacts to be prepared at a distance, to allow an artist in Canada to link and think with an artist in Italythis is the way it's going to work.
We're going to have to learn as businesses and as technologists we're going to have to look into the cultural industries and start to create the hybrid thinking groups to ensure that lessons in other areas are applied.
I think that all companies in the future are going to have a component that will be employee-based that will have a geographic centre, that will certainly be supported by project-oriented, short-term duration so-called experts or contributors to specific goals with specific periods of time.
And those will be into the academic community, which is increasingly bridging into business, so that if you have a project here you will have a professor in such and such participating some of the time, connected either by the telephone or dropping into the office.
You will also have a company in another country being involved. You'll have several consulting resources and then you'll have your core team that may be employee based.
Arnold: The question brings to mind for me the comments I made a moment ago about the fuzziness, the greying of boundaries.
In this case what constitutes membership in the organization, who are the members, who's in and who's out, with whom are we co-operating and 'with whom are we competing.
Grant's given some examples from a variety of sectors in what today gets called a virtual organization and what used to be called a team, or a task force in less sophisticated terminology.
There have been examples for a long time.
I'm often struck when we talk about the new knowledge-based sector. I've spent my career in a sector that's been around for 700 years and it's knowledge-based.
Some can argue whether we're well managed or not, or whether we've got anything to demonstrate, but we've been dealing with some of the challenges of temporary membership in teams, the creation of virtual organizations.
We do it today through things like the Canadian Institute for Advance Research, through networks of centres of excellence, so we formalize these things and we label them in some different ways and we fund them in some ways that hasn't been the case in the past
But, researchers in universities have been doing collaborative research for as long as these institutions have existed.
They come together around issues of interest
There's some interesting questions that exist today in the university sector, certainly in the business school sector, regarding when you co-operate and when you compete.
I exist within a very competitive environment for students who are in MBA programs, executive education and so on. I just hired a person as our first ever assistant dean for marketing and communications. We have to market ourselves as we never did in the past
He spent the last 10 years at the Stanford Business School and he's incredulous at the levels of investment in print advertising in the Southern Ontario market
You open your paper and there's Western, there's Queen's and the University of Toronto.
He said he's never seen anything like it in the United States.
So, we're in a very competitive environment for students and for business, but we're also researchers and we collaborate with one another.
There are people eon my faculty who collaborate with people at the University of Western. I voluntarily give my time to do tenure and promotional evaluations for faculty' members at Western, at Queen's and elsewhere.
We're constantly dealing with some of these challenges of when are we competing, when are we co-operating.
In one sense, it's not that difficult if you step back from it and say the purpose of our industry is to enhance the quality of management
If we define the industry in that way, then I've got an investment in Queen's being successful and Western being successful. If they're more successful than we are, I'm not doing my job very well.
If we're thinking ourselves in terms of social role and the social responsibility that we have, the competition and the cooperation can co-exist quite well.
Those kinds of dynamics are becoming increasingly prevalent in other types of organizations today.
I'd like to ask al two-part question about the preparation of people to take their roles in this knowledge-based services economy. First, what do each of you see as the public policy issues related to the preparation of the work force in this new economy? And what happens to the people who fall to make the cut, who don? fit into that new parity?
Arnold: The public policy issues for the preparation of people go to the heart of what we in the university sector spend a lot of time thinking about right now.
From a public policy perspective, I've made an argument for continued, if not enhanced, investment in research.
From an educational perspective think it inevitable over the coming years that we already see some of the boundaries between universities, polytechnic, community colleges blurring or breaking down.
I think we will see an inevitable consolidation and some increased specialization, certainly in the university sector in Ontario and I don't see that as unhealthy.
We'll see higher levels of tuition, I think accompanied by some form of income contingency re-payment plan.
We've got to have the levels of investment in that research and educational infrastructure, if we're going to be successful. But, we're going to have to find ways to do that in a world of more constrained resources. So, it will mean greater specialization.
Society won't tolerate the maintenance of the status quo and the statement, we want to remain in splendid isolation because we're important to society.
We're going to have to find ways to adjust and do more with less.
In terms of what happens to those that don't make it, it's almost trite now to talk about learning to learn, about the characterization of the effective knowledge-based organization is one that's finding ways of re-inventing itself strategically.
And that applies at the level of individuals, as well.
It seems to me there are important challenges that will be faced as we find ways, either through the university sector, through the colleges, or others, to find ways, both in education earlier in people's lives to help the learning to learn process begin and then to have mechanisms for the retooling of individuals, as both individual organizations and sectors go out of existence.
We're trying to find ways to offer our program to people in their mid 205 and early and late 305. We've got ways of doing that now. We're trying to find more ways to innovate in that regard.
Thomas: In terms of public policy, there are enormous challenges and issues around educational access to the technologies that are going on deliver on the core competencies and specialized areas that will create and support the knowledge worker.
I don't think we've debated those at all.
Research is another area that needs to be continually reinforced in the country; research into education, and the social policy aspects of these changes. It needs to be not just continued, but to be accelerated.
As Charles Handy says, we're going to have half the workers tomorrow.
The consequence of that is that it's going to be a struggle for full employment rates to be retained.
When you look at employment projections the fastest growing employment sectors are in terms of health care workers, child care, cleaners, retail sales clerks.
It appears there's going to be more job creation in that mode the sort of McDonald's worker, but they're going to be relatively low paid and there will be an enormous division between the knowledge working community and the physical labour community.
Hugh, you talked about the need for resource-based industries really need to become more efficient in the way the knowledge-based industries are. I wonder to what extent the concept of full cost accounting comes crossed up the efficiency of operation, either for the resource-based industries or knowledge-based industries. Ever since the Bhopal disaster there 's been a lot of discussion on considering the social consequences, whether it's to the environment, to the people who get killed, people who are displaced and so on from economic decision-making. Can you respond to the notion of full-cost accounting and how important a concept it is in efficiency planning, either for resource-based or knowledge-based industries?
Arnold: The concept of full-cost accounting, you're getting at issues related to things like the chemical industry and social liability and all the potential implications of products and services.
I guess Im of two minds about that
On the one hand, there obviously are social pressures in the direction of full-cost accounting, of taking into account all types of liability'.
On the other hand, those are costs that can't be measured. They can only be estimated. They're probabilistic, they're uncertain, they're in the future. So, I don't really have a strong sense of where the balance is going to come out in terms of the social pressures towards pushing those costs onto the products and services as they're generated and saying that the producers and consumers of them today have to bear those, as opposed to the difficulties of accurately assessing those and whether well get caught in a bit of quagmire of the inability of measuring those.
I think the social pressures will be pushing in the direction of folding them in
And as they, it will create additional pressures on the resource-based sector to become increasingly effective and efficient in their management the more those pressures are there, the more demands that will be placed on those organizations to find more value as they have to bear more costs.
We've seen new technology, such as the Internet, having a decentralizing effect, where essentially smaller communities can almost play on the same level playing field as the larger communities have. in addition, a lot of workers can do their work at home. what is going to be impact on large cities in terms of urban development. office towers, shopping malls cities that are built on a different paradigm than what we are into now?
Arnold: There are some examples. The New Brunswick investment in the communications infrastructure was referred to earlier by Sheelagh.
I think she also correctly pointed out that these are some niche opportunities that exist, finite in size.
I may be the information society sceptic, but I happen to believe there are some fundamental values to the face-to-face interaction that goes on among people, whether it's in an educational environment or in many other forms of organizations.
There is an increasingly appearance of video conference MBA programs, where you can sit in Yellowknife, Vancouver or Calgary and participate via video conference.
I think there's a market for those. I think there's some value for them. but I happen to believe there's some fundamental value to the face-to-face interaction that goes on in classroom between a faculty' member and student, among students with one another.
I don't think that can be re-created.
Even when we talk about examples of the virtual organization, whether it's the temporary task force, the group of people that comes together to complete a project, whether it's a movie, a TV show, or the launch of a new product, there are fundamental dynamics that go on in the face-to-face human dynamic in organizations that are not going to disappear quickly.
I don't think they're going to disappear ever.
What does that imply in coming back to the question. I feel quite optimistic with regard to the implications of the evolution of the knowledge-based economy for a large metropolitan area like Toronto.
Take the quintessential example.
A front page article in The New York Times earlier this week reported on the resurgence of New York University and on the importance of the environment of the City of New York to the resurgence and the growth in quality of that institution.
They're now drawing 70 to 75 per cent of their students from outside New York City, whereas 10 years ago it was 15 per cent The city is a magnet. It offers things to people via the cultural environment and so on that aren't offered elsewhere. I'm from Lethbridge, Alberta, and I'm bullish on Toronto.
Thomas: I'd agree. We've got three speakers up here. Nobody used a computer to print out the key bullet points and so forth.
Things change, but they don't change. I think there's an opportunity to smooth things a little bit.
There's no question within our company that as we started to use computers and networks more, people were able to spend more time outside of the City of Ottawa. People bought houses outside of Ottawa, there was a movement
My preference is still to be in groups like this, to deal face to face and so forth. But, it does allow the annex of alternative methods.
There could be a model, however, where those knowledge workers who are able to work in more rural environments can do so and those workers who cannot are clustered in the cities.
I would suspect we're going to see the concentrations around the knowledge centres where the universities are, where research is taking place and they will continue to need the mass of group behaviour in cities.
Can you address your theory around resource versus knowledge-based organizations. The examples you were using as your reasoning that this is more of the same and the reason we thought resource-based organizations were different was because they were being badly-managed and well-managed organizations all look like this. I have a sense that there is a line you cross when an organization is different. We've crossed a line economically, organizations individually and as individuals about what we expect and do not expect. Is this a significant revolution, or just transition just an evolution?
Arnold: I think there are profound differences today, as opposed to 20 years ago.
My position was and still is that the profoundness of the difference relates to the competitive pressures that organizations are facing today.
We see that almost without exception in the knowledge-based sector, but we're seeing it increasingly in other sectors that used to be more protected and less subjected to the type of competitive pressures that exist today within our much more open economy.
So, I think it is qualitatively different the needs for speed in decision-making, the ability to tolerate and manage within ambiguity, to form relationships quickly, whether within or acorns organizations, to break down some of those barriers I spoke of earlier, to forge the working relationships that are necessary, to create a new product or service, or whatever it is your about
I'm not sure we're in disagreement I think the demands and the challenges today are profound and significantly different
But, I would stick to my earlier position that that simply characterizes the knowledge-based sector.
I think that the world we're facing and the non-knowledge-based sector organizations that cant catch up, can't operate in the kinds of ways that the competitive environment has demanded of knowledge-based organizations, aren't going to be around for long.
Thomas: I think the whole thing is going to be turned on its ear.
When I see young companies with kids in their 2Os, nobody has a title, the responsibility shifts.
Somebody's making the decisions to run things one day, it's the other person the next day. They may carry portfolios, but those responsibilities are transferred.
They've got an accountant on contract to run their books. That's all they need in terms of financial, they buy the advice as they need it.
It's an egoless environment and it's totally focused on the projects of the day; very much a projected structure.
People who've been consultants, where one day your a project manager and the next day your a functionary underneath the person that was working for you. This is the type of dynamics that'. going to exist
Certainly this is what was being debated with some of the schools when we over in Europe and the business schools are going to have to adjust to that framework, too.
Some of the corporations that were coming into Lausanne were saying:
'We're not as interested in putting people into a formal one month or three-week program anymore.
"What we want you guys to do is get on the network because we want to ask you questions and solve problems with us. We want to learn interactively.
'We can't go through this cam pus-based process as we used to. It doesn't mean we're not going to continue to do it, but we'd rather have a retainer relationship with you stick somebody on the campus every now and then but get you guys into our campus, solving our problems."
Again It's the electronic citizen, the individual will be the addressable unit and therefore everything is going to be chunked down.
Management as we know it, in pure knowledge-based, knowledge-driven, knowledge product organizations is going to be real different
Just look at the graduates. They're running businesses, which was unthinkable when I graduated.
As you grow there will be requirements for more structure.
But, the experiences in terms of dynamic management structures and shifting management structures is going to influence the type of formal structures that are put in at a certain size and whether it is 50 or 200 (employees) it isn't going to be the same as it is today.
Arnold: The example cited this morning of the organization using satellite dispatched vans is one I teach a case on regularly.
They are an extremely interesting organization.
There's a quote by someone describing Peter Lewis, who is still the CEO of the organization, saying at the particular phase in the evolution of the organization at which the case was written, that Peter's uncomfortable because he used know how everybody in the organization felt and then he got to know how the important people felt and now he knows the important people.
It's the liabilities of success growth, success and grown are inner qualities.
You don't stay small and be successful. You either grow, or die.
As you get larger, I think the really profound and interesting challenges related to organizations from my perspective is how you try to capture and maintain those values of smallness as you get larger.
The organizations that have been most successful over long periods of time have tended to find ways to do that
I think of an organization like Johnson and Johnson that continues to grow. Today, it has almost 200 separate operating companies.
If you're a cost accountant, you'd say look at all the wasted overhead, we could eliminate 199 presidents overnight and save millions of dollars.
But it's an organization that's tried to find ways to maintain market focus, to maintain smallness.
To me, these are the really profound challenges as organizations go.
You can't organize and co-ordinate the activities of 50,000 people in 50 countries the way you and your friend can when you start a business in your garage and get together every morning and every evening and talk about what you did and what you're going to do tomorrow.