MCA REPORT: KNOWLEDGE SOCIETY – Visions of the future.

MCA REPORT: KNOWLEDGE SOCIETY - Visions of the future.

In Globalisation and the Knowledge Society, Will White and Mike Sedgley of the MCA take a look at business in the next century. Here they highlight some of their findings on the impact of new technology.

Frances Cairncross, writing in The Death of Distance, is one among many who have highlighted how the next decade will see technology as the driver for change in business as the cost of communication falls. Cairncross explains: “The death of distance as a determinant of the cost of communication will probably be the single most important force shaping society in the first half of next century.” His argument concludes that the boundaries between nation states, between companies and even between individuals will fade away. It is clear that technology will have a greater and greater impact on our lives, so that how companies handle that technology will become the key business differentiator. As Bill Gates recently said: “The technology itself is available to everyone. So it’s how you use these tools inside the company that’s going to provide the competitive differentiation.” Roger Camrass of Ernst & Young comments on how every aspect of our lives will be influenced by IT over the next decade. “The important driver in the next 20 to 30 years will be connectivity, because that’s the most valuable benefit IT gives us. It gives us the ability to connect across the world, across communities, across society, in a way that could never have been imagined a hundred years ago,” he says. One of the key themes that business is now facing up to is how to manage that connectivity and the vast amount of information that it produces. As David Ogram of American Management Systems points out: “In the future we will be transferring vast quantities of information for almost insignificant costs. The result is that we will have constant access to an almost infinite amount of information at almost no cost. A key problem will be information overload.” Organisations are beginning to appreciate that the control of information overload and the management of the knowledge inside an organisation are crucial for business success, but the relatively low number of UK companies which directly link the boardroom to knowledge management remains worrying. Each organisation should prioritise the issue and become what Robin Wood of Ernst & Young calls “a learning organisation” rather than one that simply “data mines”. As Friederich Bock of Arthur D Little explains: “The ability to manage knowledge as a third critical asset – together with labour and capital – will increasingly determine an organisation’s competitive ability.” Business is beginning to appreciate the power of this information as it accesses it via Internet and intranet technology. Our earlier report into the Internet and e-commerce featured several leading exponents in the field who talked about the potential for e-commerce and e-business. They said that it is not only technology in the workplace that presents a challenge for business, but technology in the marketplace. As consumers increasingly switch on to the opportunities available to them through the Internet and e-commerce, this will alter the balance of power between business and consumer and allow the latter a previously unthinkable scope for comparing and contrasting services and prices. Many commentators recognise that the successful businesses of the next few decades will be those that respond to this change and turn the challenge into an opportunity. Already, the restructuring of many sectors is being driven by the realisation that customers and information about customers will be an important new resource in the hi-tech economy. John Oliver of CMG says: “The real issue that is emerging is how to build a profitable, loyal customer base, through the effective use of knowledge management.” The scramble for consumer information can be seen in the recent rush to offer free Internet access, as well as in the proliferation of so-called loyalty cards. Internet access is a way of tapping into information about the growing numbers of consumers who trade online. The recent Boston Consulting Group report, The State of Online Retailing, estimated a growth of 190 percent in e-commerce in 1998 and predicts a further rise of 140 percent in 1999. By the end of this year the online market will exceed $36bn. Digital TV sets that can access the Web, which many contributors concluded to be the key driver for Internet use, are now on sale. Even if we are hearing warning voices complaining that the Internet is after all just another means of distribution, it is hard to argue with the BCG figures. Some bold statements were made in our report; Robin Wood of Ernst & Young, amongst others, suggested: “We are now on the cusp of as big a change in human development as the introduction of the printing press in the late 15th century.” Nevertheless, some commentators begged to differ. Rob Bier of Monitor Group says: “There will be some profound questions raised as a result of technology, but on balance the world is not speeding up; in terms of the impact technology is having on our lives, it’s actually slowing down.” Bier believes that our lives, at least for the majority of us, are not so different from those of twenty years ago, and that the really dramatic changes in our society that resulted from technological innovation were at the beginning of this century. “I think if you compared an individual looking back from 1920 to 1900 there would be more differences than today. After all, he would have seen the establishment of the motor car, the beginnings of long distance air flight, the development of the radio and the arrival of cinema,” he says. In this country we could also add the arrival of a popular press and the ability to make international telephone calls. Much has been made of the increasing numbers of individuals and businesses with access to the Web (around 700 million) and the mass global audiences for such television events as the opening of the Olympic Games (around two billion). We often discuss the concept that we are living in a ‘CNN world’ where transparency of information is absolute and it’s available to all. It should always be remembered that the total population of the planet now exceeds six billion. India alone has a population of over one billion, and vast areas of the globe remain pretty much unaffected by the technology of the late 20th century. Technology is, after all, only an enabler, and throughout our report interviewees stressed that it was important we kept focused on the need for personal interaction. As Keiron Brennan of Gemini puts it: “It’s still going to be terribly important to be close.” And much has been written of the importance of clusters in the development of the knowledge economy. Our contributors confirmed why closeness is important. “Ideas start in an incoherent form,” comments John Browning. “When you’re at the ‘I don’t know if this is interesting, it’s kind of a mess but could be an interesting problem to work on’ stage, it’s hard to put in an email, but if you bump into someone in the corridor you can start to throw it around.” So physical proximity remains central to most industries and company cultures. As yet, little has been written on why, despite the developing power of technology, personal touch and chemistry is still important for more structured meetings. Even so, it’s obvious to many that video and telephone conference calls are not particularly effective at encouraging debate. The majority of individuals prefer face-to-face meetings, even if there is an added cost. To a youngish, educated Westerner there seems little difficulty in picking up new technologies and having at least a reasonable idea of how and why they work. Other groups in the global village may not be so receptive. As we discuss in our report, many people are put off by the implications of new technology, particularly in sensitive areas, such as money. Over 40 percent of interviewees in a recent survey said they would never use PCs or Digital TV as a means of banking. This seems worryingly high; but then we discovered that, even though they were introduced over thirty years ago, 25 percent of people still refuse to use an ATM. Equally, despite the opportunities created by new technologies, many consumers are likely to choose to stick to traditional brands and suppliers they know and feel they can trust, leaving space for traditional forms of shopping. Given this conservatism, there is a real worry in some quarters that, even in a reasonably well-educated country like the UK, we may see the rise of a technologically disadvantaged underclass, whose distance from new technologies is not from choice but because of exclusion. As Alastair Bruce of Bruce, Naughton Wade says: “It is possible that technology could exacerbate the development of an underclass, and it may also undermine the community because it allows the possibility of living in a more isolated way.” Others are more optimistic, David Mercer explaining that just as “the illiterate farm workers driven off the land in the Industrial Revolution soon became the literate workers in the new factories”, so the vast majority of the population will become technologically literate. Technology in the workplace is driving changes in the relationship between employers and employees – at least at the knowledge-rich end of the economy. Combined with cultural changes that have made the current generation of employees less loyal to their companies this means that employers will have to pay greater attention to the retention of key knowledge-rich staff. Roland Berger estimates that currently 17 percent of UK jobs are “knowledge-intensive”, a figure that is set to grow rapidly as hi-tech sectors of the economy expand. This follows the trend towards the decreasing importance of physical assets – some of the most dynamic companies of the next decade will be largely valued according to the knowledge and ideas of a relatively small number of key employees. As Terry Finnerty of Arthur Andersen Business Consulting notes: “Management systems are organised as if employees are conscripts, but they are volunteers, and in the knowledge economy more effort is going to have to be put into getting them to stay.” The difficulty investors have with assigning values to Internet and biotechnology stocks are the most obvious manifestation of this shift away from physical to intellectual and knowledge assets in the knowledge society. For many people, technology will be the route to a more prosperous life. Paul Heald of ADL makes the point that there will be “untold opportunities to create wealth and the opportunity to add value will be limitless. There will be much more opportunity to become quite wealthy, with far more people able to tap into the value they create, rather than simply working for a wage.” However this may not be true for a substantial minority. Heald says: “There will be a large percentage of people that just don’t understand that and who continue in the same way as today.” So technology will not solve all our problems or define all of our business landscape, although it will be the control and utilisation of technology that will define the winners and losers. But technology will be a powerful servant of business by 2010 – so long as we are careful to remember that it is not a dictator. Globalisation and the Knowledge Society, by Will White and Mike Sedgley, is available from the MCA, price £20. Contact or telephone 0171 235 3897 for a copy.

Related Articles

5 tips for SMEs to protect cash flow

Accounting Software 5 tips for SMEs to protect cash flow

11m Alia Shoaib, Reporter
Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

Consulting Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

1y Stephanie Wix, Writer
Managing partner Q&A - the year ahead: Richard Toone, CVR Global

Accounting Firms Managing partner Q&A - the year ahead: Richard Toone, CVR Global

1y Kevin Reed, Writer
Deloitte 'self-imposes exile' on government contracts to defuse PM row

Accounting Firms Deloitte 'self-imposes exile' on government contracts to defuse PM row

1y Kevin Reed, Writer
Managing partner Q&A - the year ahead: Julie Adams, Menzies

Accounting Firms Managing partner Q&A - the year ahead: Julie Adams, Menzies

1y Kevin Reed, Writer
Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

Business Regulation Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

2y Kevin Reed, Writer
Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

Audit Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

2y Kevin Reed, Writer
New head of equity capital markets for KPMG

Accounting Firms New head of equity capital markets for KPMG

2y Stephanie Wix, Writer