India as Knowledge Superpower

India should aim to have entrepreneurial skills, efficient social organization, and education that encourage creativity and curiosity, as the building blocks to develop itself into a knowledge superpower.

Little knowledge is indeed a dangerous thing. More so in today’s information age where knowledge plays an integral part in the development of an economy. Today, no economy can remain competitive without applying knowledge and, currently, the most technologically advanced economies are truly knowledge-based. Lester C Thurow, noted MIT economist, writes in his book Building Wealth: The New Rules for Individuals, Companies and Nations, “Knowledge is the new basis for wealth. This has never before been true. In the past, when capitalists mentioned about their wealth, they were talking about their ownership of plant and equipment or natural resources. In the future when capitalists talk about their wealth, they will be talking about their control of knowledge.”

Therefore, in the coming years, it is just knowledge, knowledge and more knowledge that will rule the world! Tangible or physical resources are passé and knowledge is the “in thing”. India too has realized this, and is gradually and successfully transforming into a knowledge-based economy.

Taking a cue from other knowledge-based economies that are progressing and doing well globally, India is surely catching up with the trend and gradually transforming into a knowledge superpower. The country is well on its way to harnessing novel as well as existing knowledge to improve the productivity in agriculture, industry, and services for the overall economic and social welfare.

The availability of skilled, English-speaking knowledge workers, a well-functioning democracy, and its large domestic market are providing the country with the much required advantage to evolve into a knowledge economy. The consistent and remarkable development of Information and Communications Technology (ICT), a free-market economy, and an efficient private sector are the strengths the country can rely upon. However, Indian culture has always valued knowledge very highly, and these cultural values too are responsible for driving the country towards being a knowledge economy.

Towards the Knowledge-based Economy

The world is witnessing the dawn of the information age in which knowledge is the standard of measurement. More than 50% of the Gross Domestic Product (GDP) in the major OECD economies now depends on the production and distribution of knowledge. Countries like the US, Canada, Australia, Ireland, and Singapore have embraced the knowledge economy and are experiencing strong GDP growth as a result. But what exactly do we mean by a knowledge economy?

According to the United Kingdom Department of Trade and Industry, “A knowledge-driven economy is one in which the generation and exploitation of knowledge play the predominant part in the creation of wealth”. All in all, knowledge economy is based on human ingenuity and skill, and an exclusive dedication to innovation through research and development.

The Knowledge-Based Economy (KBE) emerges from two crucial forces: the rise in knowledge intensity of economic activities and the increasing globalization  of economic affairs. While the former is being driven by combined forces of Information Technology (IT) revolution and the changing face of technology, the latter is being driven by national deregulation and by IT-related communications revolution. Unlike the traditional factors of production, the source of wealth is not finite. The knowledge economy produces goods and services effectively at lower costs to a greater number of people. Research indicates that a KBE comprises four main elements. These four structural forces driving the economic transformation are: revolutionary changes in Information and Communications Technology (ICT), rapid scientific and technological advancement, global competition, and shifting consumer demand.

India’s inherent strengths are the pillars of support for its transformation into a knowledge economy. The key ingredients include a critical mass of skilled, English-speaking knowledge workers, and of course a well-functioning political system. Rapid advances in important knowledge-based sectors like ICT, pharma, R&D, health care and nanotechnology are fast turning India into a force to reckon with. According to R A Mashelkar, director general, Council of Scientific and Industrial Research of India, “India is already gaining international repute for its innovations in areas ranging from pharmaceuticals to software.

Information Technology will achieve even more as it improves the efficiency of public R&D, increases private R&D, and encourages greater university-industry linkages. It is leveraging traditional knowledge with modern science and exploiting public-private partnerships to support grass roots innovations, which can improve the quality of life for the poor. An example is the Computer-based Functional Literacy Program, initiated by Tata Group to overcome illiteracy through innovative use of IT”.

The time is very favorable for India to make its transition to a knowledge economy. However, it is not new to the idea of knowledge being central to the development and progress of a country. A 2005 World Bank report titled “India and the Knowledge Economy – Leveraging Strengths and Opportunities” by Carl Dahlman and Anuja Utz says, “The notion of a new knowledge economy is not new or foreign to India. India’s past achievements in science, philosophy, mathematics, and astronomy reinforce the notion that the country has, for millennia, been a leading knowledge society”.

The country has always valued knowledge highly and it is this culture that is driving the country towards a knowledge base. John Daly, a US-based freelance consultant working on issues of technology and science for developing countries opines, “I see India’s growth in knowledge-intensive fields continuing. And that growth is yielding substantial long-term economic and social benefits to India.” India’s consistent economic progress on the back of its services-led growth has the world mesmerized.

Commenting on India’s almost magical growth and progress Thomas L Friedman, author of The World is Flat, said, “You’re seeing an explosion of 10 years of pent-up aspirations. If you want to know what India feels like today, it’s very simple. Pull out a champagne bottle, shake it for an hour, and take the cork off. You don’t want to get in the way of that cork.” This quote perhaps sums up the kind of perception that India is currently viewed with.

Sectors Already Thriving

India is doing exceptionally well and is showing great promise in the realms of pharmaceuticals, IT, nanotechnology, biotechnology, R&D, and animation. John Daly opines, “Clearly, software and ICT-enabled services are important industrial drivers. I expect to see areas such as pharmaceuticals increasingly important, and India benefit economically from nanotechnology-based industries.” Indianpharmaceutical companies are successfully discovering new chemical entities for diseases.

In the domain of nanotechnology, the country has 154 research centers, mainly focusing on new drug delivery systems. India has also tied up with the US in the area of nanotechnology, which is anticipated to produce new vistas. In biotechnology, India takes the credit for discovering an alternative fuel—Jatropha, which is changing the oil dependency pattern of modern civilization. India is also making swift progress in the area of stem cell research. Three major Indian institutions are finding the cure for glaucoma, eye ulcers and chemical incidences through the application of stem cell research.

Information Technology and offshoring services have been major contributors to India’s economic growth in the recent past. According to McKinsey, share of IT Software and Services Industry in India’s GDP is expected to reach 7% of GDP in 2008 from 4.1% of GDP during 2004-05. R&D, too, has gained significant momentum and is attracting multinationals to invest in the country.

A host of international IT bigwigs made a beeline to India recently, and announced huge investments in R&D. Foreign IT giants like Intel, Cisco Systems, Microsoft have announced billion dollar investments in India and a large chunk of these amounts is assigned to the R&D sector. The increasing importance given to the R&D activities by domestic companies across various sectors is also attracting foreign players to invest in India. For instance, according to a study of 25 domestic drug companies, the R&D expenditure of these companies went up sharply by 42% to Rs.1814.65 cr during the fiscal year 2004-05 from Rs.1278.08 cr in the previous year.

Leveraging the Opportunities

India needs to seize the opportunities provided by the knowledge economy, and according to experts, innovation is the key to development and progress. A significant part of India’s innovation system is the dispersion of modern and more efficient technologies in all sectors of the economy. As John Daly avers, “I don’t think India will progress as much as it should without a policy environment that encourages investment and innovation. And I think it is important to strengthen institutions including India’s participation in international markets, legal institutions, governance institutions, intellectual property rights institutions, etc.”

India has a vast pool of highly educated and talented people. However, they relatively represent a small fraction of the total population. The country has a majority of the labor working in sectors like agriculture, informal industry, and informal service activities. To increase the overall productivity of the country, workers should be moved from these low productivity and subsistence activities to more contemporary sectors and to new knowledge-based activities, which are more productive and will also help in bridging the economical divide.

John Daly opines, “In the sense of using improved knowledge as a driving force behind all aspects of Indian development, I think the development of the knowledge economy is central to the overall development. The experience in Western nations is that improved technology and improved organization drive the productivity improvement that in turn drives long-term growth. Thus, modern knowledge institutions are critical to improving agricultural productivity, providing good health services, etc.” Economic success in today’s KBE increasingly depends upon the effective utilization of intellectual capital such as employees’ knowledge, skills, innovative potential, as well as their ability to continuously improve those processes.

Employment in the KBE is characterized by increasing demand for more highly skilled workers, also called “knowledge workers”. In advanced economies such as the US, more than 60% of workers are knowledge workers. Knowledge workers are termed as “symbolic analysts”—people who manipulate symbols rather than machines. Anuja Utz, co-author of the report says, “To create a sustained cadre of knowledge workers, India needs to make its education system more demand driven to meet the emerging needs of the economy and to keep its highly qualified people in the country.” She further adds, “This means raising the quality of all higher education institutions, not just a few world-class ones, such as the Indian Institutes of Technology.”

The ICT sector in India is progressing swiftly and is responsible for dramatically changing the face of economic and social activities, and the acquisition, creation, dissemination and use of knowledge. The World Bank report titled “India and the Knowledge Economy” says, “India’s IT companies are moving up the value chain, and India is now undertaking new and innovative work, such as the management for clients of IT-related business processes”. India should leverage this opportunity as it has already proved its prowess in IT and IT-enabled services.

Challenges to Overcome

India is currently facing a slew of problems, and manpower shortage is one of them. It needs to maintain a constant flow of skilled manpower to sustain the high rate of growth in various sectors. According to the Nasscom-McKinsey Report 2005, India will need a 2.3 million strong IT and BPO workforce by 2010 to sustain its share in the global market. If the quality of education is not upgraded immediately, a shortfall of nearly 0.5 million qualified employees is estimated, of which 70% will be concentrated in the BPO industry alone.

The biotech industry, which is worth Rs.4,745 cr and growing at a rate of 37%, is also facing a huge demand-supply gap for experienced technical and marketing professionals. Another high action-packed area, i.e., the retail industry, which accounts for 11% of India’s GDP, is facing a serious talent crunch. Not only is the number of educated unemployed increasing, but also the demand for skilled professionals is growing day by day in the country. India produces around 200,000 scientists, engineers and technicians annually. However, the country fails to derive full economic benefit from this talent base, because of the mismatch between education and the labor market. A growing gap is emerging between the knowledge that they possess and the real practice. The low wages in India lead to brain drain, which is also a major hurdle to a country growing as a knowledge economy. Immediate efforts should be made to advance policy and institutional reforms in scientific and technical education to improve the quality of India’s existing and future talent pool.

Apart from the talent crunch, there are a few more fronts that India needs to work on for a smoother transition to a knowledge-based economy. The country lacks an efficient information infrastructure, which is one of the most important factors for the nurturing of knowledge. India also needs to rev up its efforts to tap the swiftly growing stock of global knowledge through channels such as FDI, technology licensing, importation of capital goods that embody knowledge, and also advanced products, components, and services. When compared to other countries like China, India relatively lags behind in effectively using these resources.

Considering the pace with which knowledge is being globalized, it would be logical to seek knowledge beyond borders. Also, the fact that India has the largest number of illiterates in the world cannot be forgotten. As John Daly concurs, “I would suggest that educational excellence must be spread much more widely if India as a whole is to enter the knowledge economy. It would be very unfortunate if a dual society is institutionalized with an educated elite participating fully in globalization, and an uneducated majority left behind.”

A Knowledgeable Future

Currently, India is undergoing a gradual transition towards a knowledge-based economy. The dramatic increase in the number of global companies outsourcing their knowledge processes to India is also proof enough that India is no longer perceived just as the “back office” of the world. While a majority of India’s population still consists of rural and illiterate people, the scenario gradually seems to be changing. Even in slums of Delhi or Mumbai, children are being educated and becoming aware of IT from a very young age, and this is certainly going to help India in the long run. As C K Prahalad, an Indian-born American and renowned business consultant said, “Every kid here who is walking around is getting trained to be an entrepreneur, to hustle, and to get a little bit more than he or she has.”

However, for the country to have an effectual transformation into a knowledge economy, it needs to act in different policy domains, “deepening, complementing, or reorienting” ongoing reforms to use knowledge efficiently and to sustain development in the long run. India needs to understand that policy reforms of any kind would not yield results overnight. Consistent and collaborative efforts from the government, industry and academia are necessary to make India a knowledge-based society. More and more R&D activities are the need of the hour. Kiran Karnik, former president, NASSCOM, opines, “The future lies in knowledge and technology, for economic strength, poverty eradication and military security.

India’s government and industry must wake up to this reality and invest more in R&D.” The masses and all the stakeholders in the government, private sector and industry need to be made well aware of the plans and the needs to transform India into a knowledge-based economy, because the future lies in “Brain, not brawn”. Success of countries, companies and individuals will directly depend on the knowledge they possess, and how effectively and efficiently they put it to use.

N Janardhan Rao, Lead Economist.

Effective Knowledge Management - Emerging Trends

Knowledge management is increasingly seen, not as the latest management fad, but as an organic and holistic way of understanding and exploiting the role of knowledge in the processes of managing and doing work.

As business environment is increasingly becoming competitive and complex, companies find it difficult to survive. And as they struggle to find competitive edge, the one thing that is increasingly becoming clear is what differentiates a winner from a loser or laggard, is the asset called knowledge. True, knowledge is the key to success in these turbulent times. However, in today’s borderless world, knowledge becomes obsolete as soon as it is created; new knowledge has to be created constantly in all functions. If we closely watch the factors that are attributed to the long-term survival and competitive success of companies, it becomes evident that it is not their financial muscles and size, but the manner in which they consciously attempt to learn, codify, create, and utilize knowledge.

Against this backdrop, many of the organizations have begun focusing more and more on managing their organizational knowledge. However, organizations should not just manage knowledge but also enable creation of new knowledge. Accordingly, business enterprises are no longer labeling their workforce as workers but as intellectual capital. It facilitates organizations in responding quickly and effectively to rapid changes in their business environment. Experts opine that learning is at the core of these activities, be it learning a new skill or learning to manage existing knowledge or creating organizational improvement and structure that supports continuous learning.

Today, the real driver of business is knowledge as information becomes a key input. Organizations have emerged from command-and-control, manual and clerical workers to knowledge workers. It helps organizations to learn faster than the competitor. Knowledge is an asset for organizations and they present opportunities and ultimately help organizations derive the most value from intellectual rather than physical assets. In this environment, knowledge is the only certainty and is one sure source of lasting competitive advantage. And hence knowledge management becomes a key imperative for organizations today.

                                                 Dimensions of KM

However, there is little agreement over the exact definition of Knowledge Management among practitioners. A generic definition of Knowledge Management is “It is the process of capture, refinement, aggregation and sharing of data and information between employees, departments, subsidiaries and partner organizations to achieve a position of knowledge-based competitive advantage.” Simply put, it is the process through which organizations generate value from their intellectual and knowledge-based assets. It helps organizations to respond to rapid changes in a systematic manner.

According to the global management and technology consulting firm, Accenture, the knowledge of how manufacturing goods are built and how they work accounts for 70% of their development costs. In service businesses, the knowledge component of development cost may be as high as 90%. Going by this, it is not surprising that organizations are increasingly realizing the virtue of intellectual capital. To manage their intellectual assets competently, top companies are introducing knowledge management activities in their corporate strategy. According to a study by research and consulting firm Best Practices, LLC, identifying and sharing internal best practices enables organizations to gain market position and drive long-term growth. While some companies lay off employees to cut costs in a slow economy, leading companies utilize employees’ valuable knowledge to reduce expenses. In this global knowledge-based economy, knowledge has become a competitive weapon and it is gaining momentum as value is found more in intangibles than tangibles. So the vital assets of this economy are not factories and equipments, but accumulated knowledge and the people who possess it.

In the past, most knowledge management initiatives were viewed primarily as information systems projects. Accordingly, a majority of the managers intuitively considered that strategic advantage could be gained from knowing more than their competitors. However, with this mindset they were unable to explicitly articulate the link between knowledge and strategy. That experience endorses the view that today knowledge is the most strategically important capability for business organizations. According to a research done by Michael H Zack, College of Business Administration, Northeastern University, US, the most important context for guiding knowledge management is the company’s strategy. An organization’s strategic context helps to identify knowledge management initiatives that support its purpose or mission, strengthen its competitive position, and create shareholder value. Zack suggests that competing successfully in knowledge requires either aligning strategy to what the organization knows, or developing the knowledge and capabilities needed to support a desired strategy. At the outset, it becomes clear that the firm that knows more about its customers, products, technologies, markets and their linkages should perform better.

Over the years, organizations have used many tools to create and sustain competitive advantage. In the process, the organizations are now focusing on the methods of creating new knowledge and harnessing existing knowledge to gain sustainable competitive advantage. During the 1990s, the initial emphasis in knowledge management was on information systems. Then the focus shifted towards organizational development, intellectual capital management, and competence management. However, to gain and maintain competitive advantage, knowledge sharing among individuals or groups within organization is one of the most important processes. Without sharing, new knowledge cannot be created. Thus over the years, knowledge management has evolved from a buzzword to become apart of today’s business language. Knowledge management is a powerful tool and if implemented in the right way, it has the potential to make the future both exciting and rewarding.

The importance of knowledge management is increasing on account of increased competition, and rapid change. Understanding and applying knowledge management is becoming an increasing competitive imperative for companies around the world. In fact, in the new economy, a company’s success depends on its ability to acquire, codify and transfer knowledge more effectively and with greater speed than the competition. Knowledge management is increasingly seen, not as the latest management fad, but as an organic and holistic way of understanding and exploiting the role of knowledge in the processes of managing and doing work. Over the years, the availability of a strong knowledge base in many corporations played a significant role in their success.

It’s time now for business organizations to understand the potential scope of knowledge management and the need to implement it as creatively and broadly as possible. Remember, this is not a process that meets the criteria of “one size fits all” but must be adopted to fit the constant changing information needs and the changing access patterns to information. The future of any company and its ability to compete in the global economy would, to a great extent, depend on how well it understands and uses knowledge.

N Janardhan Rao, Lead Economist.

Knowledge Audit: An Effective KM Tool

In today’s knowledge-driven era, K-Audit is an imperative tool to enhance effective knowledge management.

“By completing the knowledge audit, the auditors can determine the organization’s ability in keeping abreast of relevant information, and have an awareness of where to go for expertise in a specific area.”

– Karl Wiig, Author, People-Focused Knowledge Management.

In today’s knowledge-driven economy, organizations are increasingly dealing with intangible assets and intellectual properties like human capital, customer capital, patents and brands. Accounting these issues has become a daunting task for organizations and must be properly included in the corporate financial accounts. Unlike in the past, these intangibles are now contributing maximum to a firm’s bottom line. Innovation and knowledge have become the key imperatives from automobiles to aircraft, from mobile phones to office equipment and computers to sports equipment. Accordingly, these intangible, knowledge assets are dominating the corporate balance sheets and revealing their value of knowledge by demonstrating how it is, or how it can be converted into purchasable goods and services. Against this backdrop, knowledge is recognized as the most important strategic asset in any organization across the globe.

However, in many organizations knowledge is invisibly created, captured, distributed and shared throughout the organization. And most importantly, intangible assets are not easy to quantify, measure and value. Organizations are universally acknowledging the difficulties they encountered in attempting to quantify and measure these intangibles. These developments offer a strong case for Knowledge Audit or K-Audit. It is the first major stage in effective knowledge management and corporate knowledge valuation. Moreover, with the help of knowledge audit, organizational knowledge can be quantified, measured and assessed.

K-Audit focuses on the core information and knowledge needs in an organization by identifying the gaps, duplications, flows and their contribution to business goals. With sound investigation, it provides an organization knowledge health. In short, it provides an evidence-based assessment of where the organization is required to focus on in its Knowledge Management (KM) efforts. K-Audit may refer to identifying specific knowledge assets such as patents and the degree to which these assets are based, enforced and safeguarded. Dr. Ann Hylton, a leading knowledge auditor defines, “The KAudit is a systematic and scientific examination and evaluation of the explicit and tacit knowledge resources in the company. It investigates and analyses the current knowledge-environment and culminates, in a diagnostic and prognostic report on the current corporate ‘knowledge health’. The report provides evidence as to whether corporate knowledge value potential is being maximized. In this respect, the K-Audit measures the risk and opportunities faced by the organization with respect to corporate knowledge.” By using K-Audit tool, any organization can reveal its KM needs, strengths, weakness, opportunities, threats and risks.

The need of K-Audit

Organization’s experience with KM initiatives reveals they fail dismally as with only at best 15% success rate. The unsuccessful KM initiatives over the past decade have caught the attention of KM

professionals and business analysts and have been the focus of their discussion. Industry analysts estimated that Fortune 500 companies alone would have lost $31.5 bn as a result of failed KM initiatives in the recent past. Then KM experts started questioning what has gone wrong, and will continue to go wrong? Why are KM initiatives failing? Thomas A Stewart, a KM Guru pointed out that “Companies waste billions on KM because they fail to figure out what knowledge they need, or how to manage it.  It takes little imagination to work out that a knowledge audit would provide researched evidence to help companies or organizations ‘figure out what knowledge they need, and how to manage it’.”

Experts say that the failure to incorporate the K-Audit in each and every KM initiative-program is the single most important reason for poor KM outcomes. K-Audit provides the structural overview of an organization’s knowledge in a target area. It gives a qualitative and quantitative view of the individual chunks of knowledge stored in repositories, which could be databases, paper-based or individuals’

experts.

Information audit vs. K-Audit

In the corporate world, auditing is an accepted management technique. Currently, there are different types of audits exist such as financial audits, communication audits, technical audits, employment audits, and also more recently, information audits along with K-Audit. Information audit focuses on the identification of users’ information needs as well as how well these needs are met by the information services. While both information audit and K-Audit focuses on documented knowledge. More importantly, K-Audit focuses on non-documented (tacit) knowledge which people carry along with them.

Unlike the information audit, the required information for K-Audit cannot be found in the corporate system and is totally depend on people. Information knowledge can be found within the corporate systems whereas a knowledge audit has a wider scope to include both corporate documents and people-based knowledge. For the effective utilization of expertise in the organizations, K-Audit identifies where it can find the expertise and how this expertise is accessed.

Leveraging customer knowledge through K-Audit

In today’s knowledge-based economy, knowledge is the most important asset that companies and organizations own. For any organization, core knowledge assets include employees, partners, suppliers, customers and competitors. However, customer knowledge is equally important in any of these core knowledge assets. In fact, customer knowledge is more vital to business success than ever before. To build and sustain their competitive advantage, organizations are focusing more and more on customer knowledge.

To get maximum inputs from customer knowledge, an organization must get to know and understand its existing customers and learn about its potential ones. If it does not know its customers

12 Key ways in which a knowledge audit helps CRM

These 12 points serve only to give a brief indication of the direct benefits that will result from a carefully  planned and well-conducted knowledge audit.

To discover and know:

1. Critical knowledge about its customers.

2. Existing and untapped customer knowledge sources.

3. Who really has what knowledge about customers.

4. How well customer knowledge is processed, used and shared.

5. How customer knowledge flows inside and outside the company.

6. Customer knowledge gaps, bottlenecks and barriers.

7. The value of different types of customer knowledge.

8. What customers expect from the company.

9. Where the company has failed to meet customer needs/expectations.

10. Main or real reasons customers shift to competitors.

11. How efficiently customer feedback and complaints are acted on.

12. The value of customers’ suggestions and feedback.

Source: CRM Today

well, it cannot put their valuable knowledge to best use. Dr. Ann Hylton suggests, “Integral and intrinsically aligned to customer knowledge awareness is employee knowledge. Employees throughout the company, in different roles and with varying interests, have a wealth of knowledge about customers, their preferences, their attitudes, behaviors, moods and most of all, what is likely to make them shift their loyalties to a competitor.” However, there is nothing like asking the customer directly. But employees’ knowledge about customers’ understanding and appreciation will take the company to new heights. According to KM experts, once organizations capture and harness such employees’ knowledge, it will indeed help the company to know the best way to reach out to its customers.

Dr. Ann Hylton opines, “One sure way to truly begin good customer knowledge management is by auditing customer knowledge, directly (from the customers) and indirectly, via the knowledgeable employees, and indeed suppliers and partners. This is achieved through the K-Audit, which is a scientific investigation, analysis and review of corporate knowledge assets, internal (employee knowledge) and external (customers, suppliers, partners knowledge).”

In the age of information world, K-Audit is becoming day-by-day a popular tool among management consultant to check the health status of knowledge assets and their utilization in the organization.

There is no doubt that K-Audit is unquestionably the first step in any kind of KM initiative and has been considerably recognized as a must for any kind of organizational efforts towards effective knowledge management.

N Janardhan Rao, Senior Economist.