Introductory class of the course Knowledge Management - 2014 Roma Tre University Department of Business Studies

1. Knowledge
Management
Prof. Lucia Marchegiani
Roma Tre University

2. CLASS ONE
THE RISE OF THE KNOWLEDGE ECONOMY

3. • Industrial capitalism  Cultural capitalism
• New renaissance: man&technology at the core
• Innovation and creativity: reinventing goods and
services, new businesses
Knowledge Management 2014
• Informatics boom  Heavy impacts on society and
individual lives besides economics
• PC and mobile devices serve multiple purposes:
typewriters, archives, libraries, post
offices, banks, supermarkets, newspapers, weather
forecasting, TV, cinemas, games, financial
markets, videoconferences….
• Technologies that drive information and knowledge
are at the roots of values:
Lucia Marchegiani CLASS ONE
The Internet revolution
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4. • Clients at mouse lenght:
opportunity but also risk
(competition at mouse lenght)
• Closer relation between industry
and finance:
• Expectations drive value
• Value propositions drive
expectations
• ICTs raise total factor productivity
• E.g. P&G savings 20%-30% due to
the intensification of Internet usage
• Debate about sustainability of this
system:
• Security issues
• Privacy issues
• Digital divide
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• Time is key (and no longer
space): speed; real time
• E-commerce: Web revolution =
Railways : Industrial revolution
Lucia Marchegiani CLASS ONE
The Internet Revolution
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5. 10011100101
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Video
Documents
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Global Information Infrastructure
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Voice
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Film
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Digitalization and convergence
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Books
Commercial transactions
Pictures

6. new economy
post-industrial society and economy
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Globalization
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Context

7. organization
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•
•
•
New technologies
New managerial cultures and styles
New organizational principles
New internal relations
culture
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Firms change
Lucia Marchegiani CLASS ONE
Which innovations for firms?
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8. Goods manufacturing
Customers’
lifestyle
Firms’
life
Ideas generation
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Economic
relations
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New economy changes
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9. POST - FORDISM
Intangibles
Intellectual capital
Quality in work
Knowledge Management 2014
FORDISM
Heavy manifacturing
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New economy changes
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10. Knowledge Management 2014
Lucia Marchegiani CLASS ONE
Timeline

11. Lucia Marchegiani CLASS ONE
• The essential difference is that in a knowledge economy, knowledge is a
product, while in a knowledge-based economy, knowledge is a tool. This
difference is not yet well distinguished in the subject matter literature.
They both are strongly interdisciplinary, involving economists, computer
scientists, engineers, mathematicians, librarians, geographers, chemists
and physicists, as well as cognitivists, psychologists and sociologists.
• Various observers describe today’s global economy as one in transition
to a “knowledge economy,” as an extension of an “information society.”
The transition requires that the rules and practices that determined
success in the industrial economy need rewriting in an
interconnected, globalized economy where knowledge resources such as
know-how and expertise are as critical as other economic resources.
According to analysts of the “knowledge economy,” these rules need to
be rewritten at the levels of firms and industries in terms of knowledge
management and at the level of public policy as knowledge policy or
knowledge-related policy.
• Source : http://en.wikipedia.org/wiki/Knowledge_economy
Knowledge Management 2014
Definitions

12. • Productive knowledge, once based on
rationality, starts to be socially distributed
• The knowledge of a single firm sums up with
the one of its suppliers, customers, workers.
They all share the productive chain and
knowledge
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• Crisis of Fordism
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The turning point

13. CLASS TWO
KNOWLDEGE AS A STRATEGIC ASSET

14. • Knowledge as an asset does not obey the traditional economic
laws
Lucia Marchegiani CLASS ONE
• Why has knowledge become the first productive asset?
Knowledge Management 2014
Knowledge as a strategic asset:
characteristics and anomalies

15. Lucia Marchegiani CLASS ONE
• First Anomaly:
• For traditional factor, the cost of re-producing
is similar to that of the first production
• If the product is sold, it is possible to
recombine the factors to produce it again
Knowledge Management 2014
Find the differences

16. Lucia Marchegiani CLASS ONE
• Knowledge does not deteriorate with the use
• Knowledge multiplies when shared
• When the traditional factor (work and capital) have
produced knowledge, they have been radically
transformed
• Irreversible change
• Knowledge re-production (e.g. copy, imitation) is a
completely different process than the one of producing it
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Knowledge economy

17. • Ex: use of work and capital in R&D activities produces
knowledge and skills that can be applied to a new
product/process
• This would make knowledge comparable to other
factor
• Traditional economy = Knowledge Economy
Lucia Marchegiani CLASS ONE
• Hyp: Knowledge is an intermediate factor
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Knowledge as a strategic asset 2

18. Lucia Marchegiani CLASS ONE
• 2nd anomaly
• For traditional factor, the diminishing return
law applies
• Knowledge is not “consumed” with the single
use, it is renewable at very limited costs
Knowledge Management 2014
Find the differences 2

19. • The laws of supply and demand dictate at
what price and quantity the economy
operates most efficiently – the point of
equilibrium.
• In a true knowledge
economy, knowledge and information
are demanded and supplied. The
economic system finds equilibrium.
• The shape of the knowledge demand
curve follows the same path as the
manufacturing demand curve. The more
one piece of information is
demanded, the more value the market
will place on that knowledge asset
(directly proportional).
Knowledge Management 2014
• The quantity of goods or services
demanded and subsequently supplied
determine the price of goods or
services.
Lucia Marchegiani CLASS ONE
Supply and demand
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20. Equilibrium in the knowledge
economy is achieved when
the supply curve perfectly
overlays the demand curve.
As a result, an infinite number
of equilibrium points occur
Knowledge Management 2014
• The shape of the knowledge supply curve, on the other hand, does
not follow the same principles as the manufacturing supply curve.
• For a manufacturing supply curve, the price of a physical asset
decreases as its supply increases (inversely proportional).
• For a knowledge supply curve, the price, or value, of a knowledge
asset increases as its supply increases (directly proportional).
Lucia Marchegiani CLASS ONE
Supply and demand 2
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21. • Entertainment/business value
• Knowledge
• Cost structure of information providers
• High fixed costs, low marginal costs
• Value-based pricing -> differential pricing
• Versioning
• Delay
Lucia Marchegiani CLASS ONE
• Information
• Information goods
• Value of information to different customers
Knowledge Management 2014
Basic concepts

22. Lucia Marchegiani CLASS ONE
• Information as experience good
• The economics of attention
• Simon “a wealth of information creates a
poverty of attention”
Knowledge Management 2014
Information

23. • Side note: In physics, this law is known as the conservation of
information. There also exists the information paradox which some
physicists have argued exists at the singularity of a black hole. As
matter collapses in a field of infinite gravity, does the information
stored in atoms disappear?
• As knowledge is utilized, more knowledge is
generated. Two pieces of knowledge come together to
form new knowledge. The production of knowledge is an
infinite, self-perpetuating process.
Knowledge Management 2014
• The more information on a subject that exists, the more it
is valued.
• Knowledge follows a law of conservation. As knowledge is
consumed, it does not disappear as a physical asset does.
Rather, knowledge has infinite duration.
Lucia Marchegiani CLASS ONE
Knowledge
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24. • Different production and business models
• Complementary produts -> complementors
Lucia Marchegiani CLASS ONE
• Infrastructure is to information as a bottle is to wine
• Store, search, retrieve, copy, filter, manipulate, view, tr
ansmit, receive
• Systems competition
• Different components are madeby diffeent
manufacturers
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Technology

25. • Once you have chosen a technology, or a format for keeping
information, switching can be very expensive
• Own experience?
• Positive feedback, network externalities, and
Standards
• Positive feedback makes large networks get larger
• Demand-side economies of scale: the key challenge is to
obtain critical mass
• Self-fulfilling expectations
• Timing of strategic moves
Lucia Marchegiani CLASS ONE
• Lock-in and switching costs
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Technology and barriers to enter

26. Lucia Marchegiani CLASS ONE
• The Digital Divide refers to the gap between
those who “have” access to the Information and
Communication Technology (ICT) and those who
“have not”
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The Digital Divide

27. Knowledge Management 2014
Lucia Marchegiani CLASS ONE
Digital Divide

28. Knowledge Management 2014
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Digital Divide

29. • Quality of information
• Interactivity, cost, relevance, security, accuracy…
• Reach:
• Dimension of the population of users that can
be reached by the information
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• Richness:
Lucia Marchegiani CLASS ONE
The Digital Divide

30. Knowledge Management 2014
Lucia Marchegiani CLASS ONE
Digital Divide
The Richness-Reach Tradeoff

31. Knowledge Management 2014
Lucia Marchegiani CLASS ONE
Digital Divide
IBC_DD

32. • Epic fail
Lucia Marchegiani CLASS ONE
• Not always good for companies
Knowledge Management 2014
Usage of social media