Complexity and Knowledge Management Navigators…
Today’s blog has emerged from presentations that I am about to do in Finland and the US, and an article to be published in the Indiana CPA magazine; but first, a little context; by ‘We’, I am referring to traditional Western economic power houses of the US, EU and UK.
The Knowledge Economy drives the need for better products/services, while also eating away at their life-cycle – the consumer expects instant gratification, which stresses all aspects of the organisation architecture. Dip your toe into the environment and you begin to feel the pain; today’s economy has traumatised the psyche of today’s business leaders and, in my opinion, it is a pain so deep that its impact will be felt in the decision-making of tomorrow’s generation as well. The bravado of the turn of the century has been lost, almost vilified, and there is a return to old values of prudence and risk-adversity. With this comes a return to efficiency as a form of competitive advantage and hard return on investment a foundation for the decision-making process. The result is seeing a rise in automated, technology driven processes, or a greater focus on cost effective (at least in the short term) offshore service, design and development solutions.
The problem is that we seem to be throwing the baby out with the bath water, selling our future offshore or to automation/technology; even here, with automation/technology, the design and development is all too often to be found offshore. So, what; organisations are saving money, becoming leaner, more competitive today in preparation for tomorrow? The questions I have is whether organisations are trading profit today for tomorrow’s competitive advantage or even their existence? Have organisations taken their eye off the Horizon and, in doing so, allowed a new threat to fly in under the radar?
The environment organisations operate in, the Knowledge Economy, is complex and demands variety. Ashby in his Law of Requisite Variety, stated that “only variety can destroy variety”. Ultimately, the Knowledge Economy is fed by innovation; its hunger pangs demand that organisations become more dynamic, adaptive and agile; it requires people who are creative, problem-solvers, collaborators, and communicators (person-to-person and through social media). The message, it requires a variety of people. People can act like Cold War ‘Sleeper Agents’, Strange Attractors in complexity speak, becoming active as the demands of the environment change; they also inform the advantage of an agile, adaptive or dynamic organisation. Tomorrow’s competitive advantage will not be built upon efficiency processes, it will be built on the dynamic capability of people; tomorrow’s competitive advantage will be a knowledge advantage. The problem is that people are free thinking, exactly what we need to combat variety, but they are difficult to quantify as a resource on the balance sheet; they act as a firewall, making it difficult, and expensive, for the organisation to access the knowledge and expertise they need; and, unlike objects, they don’t listen and answer back – again, perhaps exactly what we need in combating variety.
Deloitte published their, “Talent Edge 2020: Redrafting talent strategies for the uneven recovery” in January this year, which is complemented by a similar ACCA report; both reported that organisations need ‘quality’ knowledge resource in the areas of Risk Management, strategic scenario planning, project modelling and consulting, relationship building; intellectual capital accounting and management, and using data and knowledge to improve business intelligence and decision-making processes. These are knowledge intensive roles that require people with high levels of knowledge and expertise, but, my argument, returning to the metaphor of the Sleeper Agent, is that we need the variety in the system in order to activate it as the environment demands. If the informants for that variety are not available, or are of insufficient quality, then what? It opens the door for offshoring or automation, which, while being used as a replacement for non-physical service driven roles (the office cleaner), or low knowledge intensity roles, such as a receptionist, are sucking variety out of the system. Expertise is gained through knowing, the application of knowledge, how will that be impacted if the door to gaining that experience is now situated overseas? How will the emerging workforce become a valuable workforce, through value adding knowledge, knowing and expertise if the entry level roles are now based offshore? How will they gain the problem-solving skills if they are not provided the opportunities in the first place?
The problem is that knowledge can go, and come from, anywhere. How many traditional Western organisations will maintain those foundations over the coming years; how many will even survive at all? My argument is that we could be in the process of selling our future advantage, our knowledge advantage, offshore. These jobs requiring low knowledge intensity, these IT design and development jobs, where have they gone? They haven’t just perished, they have moved offshore. Look at the emergence of the BRIC nations; has the Western appetite for lean processes and cost reduction measures, low cost HR solutions, driven variety offshore; are we fuelling the knowledge advantage of other nations? In 2007 Professor Blinder at Princeton University, a former Deputy Chairman of the Federal Reserve, suggested that the US could lose 30-40 million jobs to offshore alternatives in the next generation. This is punctuated by the fact that 49% of respondents in the Deloitte report stated that offshore hires were one of their most pressing talent management priorities over the coming twelve months.
How many organisations have assessed the threat of today’s critical decisions upon their own resilience and sustainability? Is there too much focus on greater immediate profit margins over sustainable profit? For example, a recently retired Managing Director of a UK pharmaceutical company said that the biggest cost saving contribution developed by the company during his tenure was brought about by a suggestion from a receptionist. There is a need to recognise that as low knowledge intensity positions migrate offshore, or are replaced by technology, in the case of this UK pharmaceutical company by an automated answering service, there is a consequence to the internal variety of ideas available to the company.
The impact will not be felt by single organisations; it will be felt throughout families of organisations, the tighter the coupling between organisations, the greater the impact. More than this, the impact will be on whole societies. Demand requires supply and when demand is greater than supply societies start haemorrhaging advantage to offshore alternatives.
Surely that is worth a threat assessment… ?