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History Table of Contents
1995 Winter Conference
Winter Conference 1995
The Changing Economy and Knowledge-Based Services:
How Will Canada Succeed?

What We Know and What We Don't


I'd like to begin by creating a hypothetical situation.

The situation is that you're running a business that provides car insurance for collision damage and accident coverage. You want to differentiate your service from everybody else's — not just on price, because that won't ultimately be the most successful.

So you think, "what can I do with that will make people want to deal with me?"

The first thing you could do is run a 24-hour help line so that if somebody's had an accident they can get in touch and begin the process of claim and repair and the like.

You teach the people who are on the help line to be sympathetic to the trauma that the person calling has undergone; to recognize that this is a very upsetting and dislocating experience.

But to go a little farther than that, you think, "what else can I do?"

You try and change the mindset of your company.

You try and move from a kind of, "is this a fraudulent claim?" mentality to one where, instead, you think, "this person is a bona fide and important customer."

You think, "how can new technology help you serve the customer?"

You go out and you do a deal with a company that allows you to provide your clients with a transmitter that will go on the frame of their car.

If their car is hit at a speed of more than 18 kilometres an hour, the transmitter sends a signal to a satellite. The signal is sent back to a van that you have driving around, with location software and a map.

Suddenly, a flashing light There's been an accident at such and such a place. The nearest van drives right there. Usually it can get there before police, before ambulances.

It can initiate the 911 call, determine the level of damage, determine whether or not a tow truck is required, and drive the person who has been in the accident wherever they need to go — if they weren't taken away in an ambulance.

The van is equipped with a cellular fax machine and a camera.

The van driver takes a picture of the damage and sends it by cellular fax back to artificial intelligence software at the insurance adjusters, which examines the damage and makes an appraisal on the value of the claim and what needs to be done.

That statement of appraisal and approval is faxed back to the van driver, so the car owner driver can have the vehicle towed to the appropriate repair place.

To me, this sounds like a wonderful company.

In fact, that company exists.

It's not in Toronto, but there's a company today that rethought it's business and offers its collision insurance in exactly that way.

One point of my story is the innovative and intelligent use of what we call business process re-engineering, or thinking about your business and new technology.

A car insurance company is a service company like we all run.

And yet, it was able — in this instance in juxtaposition with EDS (Electronic Data Systems) — to think of an entirely different way of providing its business.

I think it shows you don't need to be a technology company to think about and use technology.

We've been shackled for years by terminology. Remember the expression data processing? Well, it's simply inadequate to express what's really going on.

My company, EDS, is a case in point I don't believe electronic data is at all what we're about

What's happening all around us has little to do with the small and discreet and meaningless things like data, or machines for that matter.

Even the name information management used to describe all kinds of things that were computer-like, but it sheds no light of what the future will be like.

Simply having access to information, or being able to manage it, doesn't convey the magnitude of the changes we currently face.

Instead, let's concentrate on the concept of knowledge.

Knowledge implies data, information and something much more — a healthy dose of wisdom.

Knowledge is cumulative. It's knowledge that enables us to act effectively and with confidence. The argument over knowledge versus information goes back to ancient Greece.

The proponents of the oral culture in ancient Greece said that writing would destroy knowledge, because lesser men would confuse access to written information with possessing knowledge.

Of course, writing has managed to survive and stay relevant Although we might claim that some writers have added little to society, I think we can safely conclude that writing itself has helped accelerate the creation of knowledge.

For instance, a daily newspaper today contains more information than a person living in the 17th century would be exposed to in their entire life.

Similarly, access to the new technology-based media is bound to exponentially increase our exposure to information and allow us to create new knowledge.

In truth, we're caught in the midst of a technology-driven maelstrom of information which often feels chaotic. However, it is the means by which we will move to the next stage of the economic steady-state, the knowledge-based society.

Developing this kind of economy is vitally important to Canada.

I've had first-hand experience watching our company help organizations take advantage of change by applying both knowledge and technology to re-engineer the things that they do. The results have almost always been remarkable.

This to me points out the enormous potential our transition to a knowledge-based society offers. Make no mistake about it, the transition we're talking about today is no longer a theory — it's already well under way

We talk a lot about infrastructure — especially at election time. But what most people mean when they talk about infrastructure is bridges, roads and sewers.

But, there's another important kind of infrastructure which has to be built, maintained and upgraded regularly. You can't see it, you can't touch it You can only metaphorically drive over it It's the electronic highway and that’s the vitally important infrastructure of our future.

The good news is that the knowledge-based society that we're developing in Canada is in pretty fair shape. It's economic importance will continue to grow as new technology improves the communications infrastructure over which other industries can provide information and content

For example, fact sheets that were prepared for last month's G-7 ministerial conference in Brussels on the information society show that Canada has one of the most developed communications infrastructures in the world.

More than 98 per cent of households have telephones; 74 per cent have cable television service and 99 per cent of the population can receive off air broadcasting signals.

Canada's information economy encompasses communications and computer service — producing industries, communications and technology goods-producing industries and cultural industries, including arts and entertainment

Combined, this part of our economy already generates $60 billion in annual revenues and more than 414,000 jobs. It comprises about six per cent of our gross domestic product

It's also worth noting that workers in Canada's information economy have an average annual salary of $45,000, which is 21 per cent higher than the national average.

In other words, we're off to a good start and our various levels of government show every intention of making a proactive effort to help with the transformation.

It's good, but not good enough.

Government, industry, academia and the public at large have to accelerate the pace of building state of the art infrastructure if we are stay successful and to maintain our status as a developed country.

Our national government has made it a priority to develop an advanced economic infrastructure.

The goal is to build the highest-quality, lowest-cost information network in the world, so that all Canadians can have access to employment, education, investment, entertainment, health care and the wealth-creating opportunities already spawned by the information age.

Canada's information and communications infrastructure is expected to create vital links among Canadian businesses and their clients, among industries, governments and universities among artists, cultural organizations and their audiences, among hospitals, clinics and patients, among schools, among communities, large and small, across the country.

The underlying vision is a low-cost, high-performance information network which will act as a catalyst for making Canada a dynamic, competitive knowledge-based society.

There's evidence close to home that suggests this approach will work.

New Brunswick is moving quickly and visibly down the so-called information highway.

It has developed a series of electronic kiosks in malls for arranging government services; a patient care network for linking eight hospitals and a pharma-care system for ordering prescriptions.

The province even has a fully digital telephone network connecting every elementary school to the Internet, so that they can communicate with each other.

Digitizing the provincial infrastructure was a critical part of New Brunswick's strategy to grow and develop its knowledge-based service sector.

The sector now represents more than 70 per cent of the employment and accounts for a large and growing share of the New Brunswick economy.

The most vibrant part of the service sector is based on communications and information technology.

New Brunswick has leading edge telecommunications technology, a core of sophisticated data processing companies and a strong computer science faculty at the university.

These assets, together with a bilingual workforce, provides a basis for new service industries in the computer and telecommunications sectors.

The most vivid and publicized example of how these assets can be brought together to generate new jobs has been the co-op centre. New Brunswick's success in convincing companies from a wide range of industries to set up co-op centres has created over three years close to 2,000 new jobs.

I don't want to sound like I'm encouraging more of our provinces to develop co-op centres, because there's a finite need.

However, this kind of niche strategy does make sense. Whatever niche a particular geographic area or company chooses the niche strategy does make sense.

In fact, a similar integration of our assets at EDS Canada, which has been aimed at highly-specific projects, enabled us to create 500 new jobs last year and probably 700 this year — all requiring skilled knowledge workers.

So, if nothing else, New Brunswick's success shows all of us how important the new technology is to the development of a knowledge-based economy.

Similar strategic infrastructure programs are underway in British Columbia, Manitoba, Ontario and within the federal government — and of course in the United States.

But what does the new communications infrastructure buy us?

Like building a bridge, building an on-ramp to the electronic highway keeps some people employed — but then what?

Well, unlike a bridge, the communications infrastructure is revolutionary. Access to new technology-based media will exponentially increase our exposure to information and create new knowledge.

New technology-based information media, from Internet to interactive TV, will become significant factors in all aspects of our society. They are as vital to the success of the information age as energy and transportation were to the industrial age.

It is free and unfettered communications that will disseminate knowledge but, more importantly, the communications will help people create knowledge out of the flow of information.

Without question new communications media will have revolutionary effects.

As Neil Postman wrote in Technopoly, a new technology does not add or subtract something. It changes everything.

Fifty years after the printing press was developed, we did not have old Europe, plus the printing press.

We had a different Europe.

After television, the United States was not America, plus television.

Television gave a new coloration to every political campaign, to every home, to every school, to every church, to every industry.

No new medium is added to society — it transforms it.

The new communications infrastructure that we're building — a pipeline of knowledge — will be no different.

This is where most of us get lost

Technology revolution, knowledge-based economy, information infrastructure, total transformation, it all sounds so portentous, or even pretentious.

We still wake up every morning and things seem pretty much the same.

Am I saying that manufacturing, a mainstay of our economy, or mining or forestry, or any of the other traditional industries will suddenly shrivel up and disappear?

No they won't disappear, but they will be altered. They have already been altered.

Look at manufacturing. It's still a strong contributor to our economy, but has almost been completely re-engineered by creatively using new knowledge combined with new technology to become more flexible and innovative.

Even our resource industries, such as mining, are being transformed.

EDS is currently working with one client to test new technology designed to transform mining into a truly integrated mining process. The ultimate goal is the peopleless mine. It will be safer and more productive than traditional methods.

The key to operating this advanced mining operation is the application of knowledge that is derived from a steady flow of information. And that's what a knowledge-based society is all about — the application of knowledge that's gained from distilling information.

But let's not kid ourselves. Revolutionary change is not without consequences. This sometimes subtle, sometimes dramatic shift from one economy to another is reshaping our culture.

Take another look at manufacturing. In 1900, the blue collar worker was part of an economic underclass. Trade unions were either illegal or barely tolerated. There was no job security. There was no eight-hour day, there was no health insurance.

Then, just 50 years later the blue collar worker began to dominate our society. Now, blue collar work that's important to our society is already beginning to fade.

In 1980, U.S. Steel employed 120,000 people to make the same amount of steel that is now made by just 20,000 people. We're not talking about reducing the output; the output is the same.

One prediction is that by the turn of the century the number of people working for the automobile industry will be less than 40 per cent of what it is today.

This shouldn't imply that we're headed for doom and gloom.

In fact, there's compelling evidence that suggests that our economy has already been making the adjustment to the information age by migrating employment from manufacturing to services through the past 25 years.

A paper on the demographic characteristics of employment published by the Institute for Research on Public Policy shows that even in the 15-year period from 1971 to 1986 service employment averaged 3.5 per cent annual growth, compared to an average rate of 2.4 for other industries.

In 1971 service industries accounted for 58 per cent of the employment in Canada. Today, they account for 70 per cent

What is unchallenged is the fact that in order to be competitive, both service and manufacturing sectors are now requiring skilled people. The key to winning — especially in an increasing global economy — is to produce knowledge skills in workers and in managers.

This means building knowledge into workers.

Remember, the term knowledge worker doesn't just apply to engineers and computer scientists. It includes the person on the shop floor who understands key aspects of a process.

That's why when talking about the knowledge-based economy we should take care not to sound elitist

From a public policy point of view, promotion of this concept should be populist in nature. Quite simply, if we build knowledge into our workers we must build knowledge into society.

The criticality of knowledge is hardly a new idea.

Long before the arrival of commercial computers, Peter Drucker forecast a society shaped and altered by information. He predicted that knowledge, not capital, would become the new basis for wealth.

Today, he say's, we've arrived. He contends that international economic theory is obsolete and argues that the traditional factors of production — land, labour and capital — are becoming restraints, rather than driving forces.

Drucker believes that knowledge is becoming the one critical factor of production. It has, he says, two incarnations: knowledge applied to existing processes, services and products is productivity — knowledge applied to the new is innovation.

In looking at things this way, the last 40 years of economic history start making some sense.

The Japanese suddenly shot to world economic prominence by concentrating on productivity. In North America, we've rebounded by focusing on innovation and are now catching up on productivity. Because they have largely ignored innovation, the Japanese, at least in economic terms, are beginning to falter.

Unlike North America, which used innovation to develop whole new industries — such as software that drive the economy forward — Japan still has to rely on finding ways to make its traditional industries ever more productive in the global arena where the competition is increasingly harsh.

In a world economy being fundamentally reshaped, we have to stop thinking about the infrastructure of physical things and, instead, focus on logical things, like information and learning conduits.

That's why new technology-based tools and resources hold such importance. They enable any of us to gain access to the information we need, as we need it, to develop unique knowledge. In turn, that knowledge contributes to the growth and development of ourselves as both individuals and as a society.

To bring things into sharper focus, let's look at the major economic transformations that have brought us to where we are today.

According to such prominent social thinkers as Alvin Toffler, George Gilder, Esther Dyson and George Keyworth we have been through three distinct waves of economic change.

In the first wave economy, land and farm labour were the main factors of production.

In the second wave economy, the land remained valuable, but labour became clustered around machines and larger industries.

In the third wave economy, which both Toffler and Dyson agree is now emerging, the central resource broadly encompasses data, information, images, symbols, culture, ideology and values. It's what they're calling actionable knowledge.

The industrial age is not fully over.

In fact, classic second wave sectors, such as steel and auto production, have learned how to benefit from third wave technological breakthroughs just as the first wave agricultural productivity benefited exponentially from the second wave's farm mechanization.

It's easy for me and others to stand in a forum like this and say here's what's happening, here's where it's likely to lead — hope you like it, have a nice day.

However, I think you would be better served if we also talked about implications and choices.

So watch me go out here on a long limb.

We're at the electronic frontier and like the Western frontier or the space frontier "we" doesn't mean a valiant adventurous you, it means all of us.

However, just like the first two frontier experiences, the electronic frontier means a whole new set of rules and experiences.

As we cross this invisible boundary into the knowledge age we need to be aware that the transition must address inevitable social, political and cultural consequences, not just the economic foundations of our society.

In many cases we will have to repeal second wave laws and revise second wave attitudes and the leaders of the advanced democracies have the unenviable task of facilitating, hastening and explaining this transition.

In exploring the new electronic frontier of knowledge, we must confront once again the most profound questions of how to organize ourselves for the common good.

The meaning of freedom, structures of self-government, definition of property, nature of competition, conditions for cooperation, sense of community and the nature of progress will each need to be redefined in the knowledge age — just as they were redefined for a new age of industry some 250 years ago.

The process toward this re-definition has already started and it’s encouraging to note that world wide the leaders of industrialized countries are taking their role in this process seriously.

The recent G-7 ministerial conference on the information society offers evidence of this.

In Brussels, Cabinet officials from the world's major democracies met specifically to agree on a strategy for developing a global information infrastructure.

Goals set by the ministers include ensuring universal provision and access to information services, promoting the equality of opportunity to each global citizen, promoting a wide range of content that includes cultural and linguistic diversity and using the growing global information infrastructure to help developing countries.

They also agreed to quality policy principles that include:

  • Promoting inter-connectivity and inter-operability of networks;
  • Developing global markets for networks, services and applications;
  • Ensuring privacy in data securities;
  • Protecting intellectual properly rights;
  • Co-operating and operating on research and development, the development of new applications; and,
  • Both monitoring and sharing knowledge about the social implications of the global information society.

It's important to me that at the G-7 meeting in Brussels they warned about the social implications as well as the technological implications of change.

Politicians at all levels and all jurisdictions are saying similar things about the third wave which is sweeping us away.

However, as someone once observed: politicians and bureaucrats are most adept at managing inertia. That holds true both inside and outside government.

While governments are getting their heads around the impact of technology, there is some technological anarchy going on.

We've all heard about the Internet, the mother of all networks, which gives everyone who has a computer and a modern access to a bewildering amount of information.

Please note, I said information, not knowledge.

I think the Internet shows one face of the future. It has 30 million users and is growing at a rate of 10 or 15 per cent It is only a tiny part of the environment being called cyberspace.

The Internet provides a series of gateways into the various galaxies of cyberspace and is rapidly evolving its own universal laws without any discernible guiding hand. There's no Adam Smith in cyberspace.

What's referred to as cyberspace is an electronic environment that is virtually universal. It exists everywhere that there are telephone lines, coaxial cable and fibre optic lines or electromagnetic waves.

This environment is inhabited by knowledge, including incorrect ideas existing in electronic form. It is connected to this physical environment by portals which allow people to see what's inside, to put knowledge in, to alter it and to take knowledge out

Some of these portals are one-way, such as television receivers and transmitters. Others are two-way, such as telephones and computer modems.

Most of the knowledge in the information environment lives the most temporary, or so we think, existence.

Your voice on a telephone wire or microwave travels at the speed of light, reaches the ear of your listener and is gone forever.

But, people are increasingly building virtual warehouses of information and misinformation in digital form. The storehouses themselves sometimes display a physical form, such as discs, tapes or CD roms.

But what they contain is accessible only to those with the right kind of portal or the right kind of key.

With that key in hand, we can open the door to a treasure trove of human knowledge and experience. We can also find some terrifying things.

Recently we all heard about how the Internet was being used to disseminate hate mail. In one U.S. case, for carrying electronic stalking.

I suspect there are a lot more scary things going on out there in cyberspace.

Am I advocating a crackdown on the Internet? No. I’m advocating awareness of the fact that while we talk about the transition to a knowledge-based society it's already happening for good or ill.

The evolution of the Internet is a populist phenomena which will not go away.

People are adding to our information environment, creating it, defining it, expanding it at a rate that is already explosive and getting faster.

Faster computers, cheaper means of electronic storage, improved software and more capable communications channels such as satellites or fibre optic lines, means this environment is becoming ever more pervasive.

But the real explosion comes from the combination of them all working together in ways we still do not yet understand.

If this is the knowledge frontier its exploration will bring both greater opportunities and, in some ways, more difficult challenges than any previous human adventure.

The opportunity is now before us to empower every person to pursue that quality in his or her own way. The challenge is as daunting as the opportunity is great

This third wave economy has profound implications for the nature and meaning of property, of the marketplace, of community and of individual freedom.

As it emerges it shapes new codes of behaviour that move each organism and institution, family, neighbourhood, church groups, company, government, nation inexorably beyond standardization and centralization, as well as beyond material obsession with money and control.

Turning the economics of mass production inside out, new information technologies are driving the financial costs of diversity, both personal and product, down towards zero; demassifying our institutions and our culture.

Accelerating this demassification creates a potential for vastly increased human freedom. It also spells the death of the central institutional paradigm of modern life, the bureaucratic organization.

Governments, including ours in Canada, are the last great repositories of bureaucratic power on the face of the planet. For them, as we've already begun to witness, the coming change will be profound and it will be traumatic.

However, they will continue to have a critical role to play.

One aspect of that role is as the negotiator and custodian of properly rights.

As we know, clear and enforceable properly rights are essential for markets to work Defining them is a central function of government, but to create the new information environment is to create new property; that is new means of creating goods, including ideas, to serve people.

The property that makes up the information economy comes in several forms: wires, coaxial cable, computers and other hardware, the electromagnetic spectrum, intellectual properly, such as software and patents. This is the knowledge that dwells in and defines the electronic frontier.

In each of these areas two questions must be asked:

First, what does ownership mean? What is nature of the property itself and what does it mean to own it?

Second, once we understand what ownership means, who is the owner?

At the level of first principles should the ownership be public; for example, the government, or should it be private — the individual?

The answers to these two questions will set the basic terms on which the world will enter the third wave.

For the most part, however, these questions are now just beginning to be asked. For example, a great deal of attention has been focused recently on the nature of intellectual property. The fact that knowledge is what individuals call a public good and, thus, requires special treatment in the form of copyright and patent protection.

Major changes in copyright and patent laws during the past two decades have broadened these protections to incorporate electronic property.

However, these new laws are still likely to fall short, because the dominant form of new knowledge in the information economy is likely to be perishable, transient customized knowledge, the right information combined with the right software and presentation at precisely the right time.

Customized knowledge in our growing information economy is more likely to be by its nature a private good.

Copyright, patent and intellectual property represent only a few of the rights issues now at hand.

There's a whole set of issues, like the right to privacy, security of personal information.

In an environment that promises ultimate access to all manner of information, who speaks for the individual’s rights to a reasonable degree of privacy?

The knowledge-based society — this new frontier — is not about technology; its all about shifting tectonic plates.

The ground beneath our feet is trembling and we have to learn to keep our balance while we adapt to a new set of rules. Most of the old rules won't work much longer.

A good example is that fundamental of capitalism, wealth.

Tangible capital — as well as intangible — is likely to depreciate in real value much faster than industrial age capital, driven if nothing else by Moore's law, which states that the processing power of a micro chip doubles at least every 18 months.

Yet, accounting and tax regulations still require that property be depreciated over periods as long as 30 years. The result is a bias in favour of heavy industry and against nimble, fast-moving micro businesses.

This is an example of the conflict between second wave rules and third wave needs.. And it's really right now one of the emerging central political tensions that's cutting into our society today.

The real question is not who controls the last days of industrial society, but who shapes the new civilization that's rising rapidly to replace it.

Who, in other words, will shape the nature of a growing information society and its impact on our lives and institutions?

As we live on the edge of an emerging new social structure, we are witnessing a struggle not over the nature of the future — for the knowledge-based economy we're talking about will inevitably arrive — but over the nature of the transition.

The answer I think is to understand the challenges we face, to embrace the opportunity, to grasp the future and pull ourselves forward. If we can manage this, we will renew our national dream and enhance the promise of Canadian life.

Or, as Graham Greene pointed out in The Age of Unreason: "There always comes a moment in time when a door opens and lets the future in."

I believe that moment is now.


Of the jobs EDS has created over the past year or so, how well have you found the people you choose to fill those jobs are prepared for what EDS has to do? How well educated are they. or how flexible are they in picking up the new knowledge and needs that your company requires?

We hired 500 new employees last year. And they were for a various array of knowledge-based tasks, but at the first instance we required people who were well trained in their area of specialty.

For example, we're automating the land titles registration in the Province of Ontario, so people had to be trained as title searchers and then we would teach them the new technology.

Because people are our most vital resource, we constantly have to invest in training or retraining.

I recently asked CBC Metro Morning for a copy of a Gordon Pape commentary after they announced you could receive a copy on the Internet I received it in 10 minutes. Within 20 minutes, I had distributed it to directors and ADMs within my ministry. I then e-mailed back thanking the person at CBC who sent it to me and mentioned what I'd done with it He queried my right to share this information. There was no copyright on it Now would you comment on it?

It always intrigues me when people make distinctions in mediums.

For example, if you'd taped it off air while you were listening you would have then believed, and not wrongly so, that it was broadcast (and) that it was something you could disseminate.

So, what is the distinction between receiving it by Internet? How do you make a distinction in the inherent ownership of copyright?

Like yourself, I would have assumed that I could distribute it widely and I would have.