|
The Challenge Network www.chforum.org |
|
|
|
|
This summary is divided into two sections. The first considers the forces that are driving change, or which will create the need to change. The second section considers the scenarios that we have developed for 2020, based upon these considerations
There are a number of major, impersonal, forces which are created by our individual aspirations. We vote for them, we see each as an inalienable part of our lives. We want, for example, choice, quality and value for money. We want access to information and the education to make use of it. We want liberty, safety and a voice in the affairs of our community. We seek control over nature, and the technologies which we have created offer us extraordinary powers. We will not voluntarily turn away from any of these aspirations and, indeed, our societies are structured in order to pursue them.
Each of these aspirations translate in more mouths and more voices, more minds and more criteria, into more complexity. These forces have three primary affects. They couple things together that were hitherto separate, and they tighten the coupling between things that were formerly weakly linked. Second, they increase the complexity, in part by increasing the pace and scale of events, and in part through increases in connectivity. Third, a wide range of factors increase the options which are open to us, and the choices which we must make. The role of analysis - and of the means for effective 'navigation' through such complexity - must become of increasing importance in such an environment.
These pressures play themselves out in a world in which there will be around four billion poor people, two billion aspirants and something over a billion citizens of the wealthy nations. The first group current create less than 1% of world product, the last over 85% of it. Much of the wealth generated in the wealthy world comes from cities. Virtually all populations are set to become increasingly urban. How these potentially immense conurbations are to operate in the poor nations, where institutions are relatively weak, is an open issue.
In addition, the world of 2020 will face some resource shortages, with fresh water a prime issue in some areas. The loss of biodiversity will continue. However, the central environmental concern will be the management of pollutant sinks with local and trans-national implications.
These forces places new demands on individuals, management teams in both commerce and the public sector and on political structures. Transnational criteria have developed very quickly, for no-one wants a second best pension or to hold shares in a second-rate company. Expert perspectives on major issues - health, energy, governance, social policy - sprawl across frontiers, creating common views and placing local options into a tight set of boxes. Dissenting voices may, however, block the complex networks through which many activities necessarily flow.
In commerce, there is both immense potential and also a general, much-accelerated erosion of established positions. Infomration flows between previously-separate domains both increases competitive pressures and, in potential, deploys the world's skill base to outflank existing, established positions. In such a world, access to capital tends to be less of a limiting factor than does clarity of outlook, proven track record in seizing options. Taking action is a public business, making use of the immense tool kit of capabilities innate to the modern economy, weaving a path through regulatory, legal and stakeholder-generated obstacles, making use of the full potential that is accessible to the firm.
Delivering this purposeful agility is the essence of the knowledge economy. In th eorder of half of all business output in the industrial world consists of patterns of organised understanding. Knowledge management is the term applied to a growing body of techniques by which understanding is generated and action taken. It is likely that set of skills will be central importance in areas well beyond commerce.
One implication of the knowledge economy is that there is a stylistic and managerial divide between activities which are fully specified - where the knoweldge that is needed has been won and deployed - and those which are not, and where the understanding that is needed has yet to be generated. Clear, defined things are often out-sourced to specialised organisations, often in remote locations and, in prospect, perhaps in the low wage areas of the world. These agencies represent a huge, expanding tool kit of capabilities, open to deployment by those with clear ideas. Getting from the recognition of potential to clarity is a costly, profitable activity. Fulfilling specified tasks seems to be easily commoditised and hard to defend from competitive erosion.
The wealthy world will retain its economic strength to the extent that it retains its capacity to renew these. The processes which create renewal from vague options are, however, deeply 'social'. They are rooted in 'place'. They are, for the most part, open to very considerable improvement. By contrast, the highly-specified activities that result from the knowledge economy are not fixed to any one locale or skill base. The 'e'-economy, for example, which deals very largely with specified goods and projects, has offered a one-off gain due to the formalisation of outsourcing, otherwise known as B2B. Hereafter, it will offer efficiencies, but also the means by which activities can be handled elsewhere, such as low wage economies.
Consider the contrast between this specified, e-econony with the knowledge (or "k") economy. The focus of an aspect of the 'k'-economy is often very localised, even within a single city, consisting of clusters of firms and other capabilities. Such a network becomes stronger as it is used. As it is used, so it draws upon a widening cadre of participants. As a result, it constructs and renews a network, woven from social connections, trust and contracts. Existing centres of excellence have a considerable advantage when faced by rivals elsewhere, and they are likely to be able to retain their strong position. Cities are the primary hosts to these knowledge milieux. Their government may well set out build conditions in which these clusters may thrive. Many mid-sized cities may, therefore, become more specialised than hitherto.
Management within the firms that make up 'specified' economy has learned to rely upon a set of measures and tools. These have served it well, and will continue to do so. Motivation revolves around relatively unabiguous targets and rewards. The advantages to be won from specialisation and division of labour makes 'silo' management techniques sensible. All of this is much less appropriate to the 'k'-economy, however.
The key concerns for those seeking renewal in the 'k'-economy are, of course, less tangible. Indeed, markets appear to value firms which show knowledge-managing skills far more highly than conventional accounting machinery should permit. Up to or more than two thirds of their market value has to be attributed to 'intangible' potential, whereby knowledge and the knowledgeable are to be configured to deliver new things which nobody has yet been abe to define. One cannot measure what one cannot define, and one cannot issue orders to loose affiliations and teams, many menmbers of which may work for other organisations, may defect if offended and who wil only give of their best if they are creatively stimulated to do so. Blending conventional and these new, less-conventional imperatives is of deep importance. As an example of this - but by no means a prescription - remuneration policy can be re-organised along distinctive lines. Employees are then paid in proportion to their capacity to engage with internal fund-holders. This automatically creates team play, because without teams one is not employed. As most will work in several teams, at the same time or serially, ideas are poooled. The approach can generate innovation if the fund-holders are so minded. However, the need to be useful and valuable to the aims of the organisation as a whole continues to assert commercial disciplines.
Three major changes are underway in most organisations. These will increase the relative significnance of the 'k' versus the 'e'-related issues. Organisations are more cross-linked with outside interests than hitherto, and the people dealing with these partners, suppliers, regulators or customers are more junior than used to be the case. Second, firms are staffed with a much greater proportion of experts and professionals than hitherto. Third, firms are tightly focused, and operate to much more clearly-defined targets than used to be the case. As a result of this, a far wider range of staff needs to act 'strategically', needs to both contribute to and approve of the goals of the organisation and, perhaps above all, needs to be able to spot a good thing when they see it.
The weigth given to these changes depends on the orientation of the firm towards the 'e' or the 'k' end of the axis that we have described. In "e"-firms, the able are often organised into 'silos' where they do not communicate with their peers, where they are focused on immediate tasks and in which they are out of contact with senior staff save in stereotyped situations. The demands of the knowledge economy require an environment in which the capable contribute outside of their immediate sphere and help to form thought about 'what next'. Senior staff, in such a world, have quite distinct roles from hitherto. Almost all silos will become temporary residences.
A curious mixture of partnership and competition often establishes itself between organisations. It is in these milieux - in clusters, often in cities - from which the sweeping answers to the perenniall questions of 'wherever next' are often formed. Membership of such milieux has to be won, and has to be maintained by contribution to the debate as well as drawing upon it.
In the public sector, pressure on resources will grow. The ageing populations of some of the industrial nations will hugely exacerbate this trend. Hard choices will have to be made, not least as the tax base becomes more elusive and more prone to 'up sticks' if pressures become intense in any one nation. Countries cannot afford to miss out on waves of innovation, however, as once they have beenn bypassed by events, they will have lost access tot knowledge milieux. A national skill set may be impossible to regain once it is lost, and rivalry about these issues may become strong at a local as well as at a national level. This is particularly the case where the newer technologies offend major parts of a society.
Hard choices will, therefore, need to be made. The democratic urge is everywhere apparent, but the democratic machinery has never been in greater disrepute.
There are perhaps two basic reasons for this in the established democracies. The first is connected with the machinery of representation, and specifically with political parties. The second is more subtle, being concerned with the policy machinery.
First, after several hundred years of service, it may be that political parties have outlived their usefulness. Parties were representative when great polarising issues distinguished two ot three groups in society, or the electoral elite. However, people have become too complex to assign to two or three attitudinal camps, and neither can the issues be coherently bundled into two or three clusters.
This is, of course, a happy outcome, as our societies are relatively settled internally and thus able to focus on distinctiveness and detail. However, a given policy on, for example, the environment may or may not appeal to a given voter. If it does, then there is no correlation between their stance on this and on another set of policies concerned with, let us say, education. Policies, therefore, do not 'bundle' in any electorally-meaningful manner.
This is not a happy outcome for parties. There is no safe polar position in which parties can settle and from which they can say assertive things. Virtually any concrete position is likely to alienate an otherwise core supporter. As a consequence, parties must differentiate themselves on generics, on brand and by appeal to personality. They must try to subvert the brand, credibility and personal authority of the other parties. The result is bland policy and personalised debate, heavily engaged with the media in a dance of mutual necessity. The human qualities which parties develop in response to these imperatives are not necessarily those best suited to governence. Parties have become machines for becoming elected, not representative structures. People do not feel represented by them. Electorates are fed up with this. Much more money now goes to single issue pressure groups than to political parties.
The second reason flows from both the above issues and from the expert nature of the modern state. States manage half of the value added in most industrial societies. They act through many expert agencies and regulators. The law that they enact is challenged and modified. Increasingly, all of these processes occur at several levels and from several angles. Good policy emerges when expert opinion is tapped through these networks: it is expert, it recognises the time frames and scale that is involved, it convinces a community of interest. Bad policy is imposed from outside such a milieu, ignoring expert and stakeholder opinions. It is created and enacted at the wrong level. Good policy creates adaptation to fast change, bad policy opposes or misdirects adaptation. Nations which have excellent structures are shown to grow well over long periods, whilst those with inappropriate systems grow slower than their potential would suggest. Electorates and interested bodies are far less deferential to the policy ideas put forward by the semi-expert, semi-amateur policy processes of traditional party-based democracy. They expect continuity, openness to contemporary best practice and the absnce of surprises. A part of the electorate expects solutions 'out of the hat', on demand, but most want a backdrop of competence that they can trust.
Renewal in this area will be a complex business. We discuss what is entailed in depth in the Chapter One and in the introduction to the scenarios.
Private lives will face more options and more demands. Navigating through this complexity depends on accurate "maps". Such maps are generally accessible in a world which has a strong, slowly-changing consensus view of how the world works, of how people should behave and about what constitutes fairness and social limits. People who lack such maps have at least some chance of acquiring one from the majority. However, where there are many parallel or partial maps, this may be difficult to achieve. Obsolete maps may persist. We have begun to build ourselves an almost completely artificial environment in which to live. In this, each part of the whole is continually changing. The tendency for indivual maps to be out of date, or simply to be wrong, will naturally increase. "Education" consists of acquiring basic skills and of 'learning to learn'. It is the second component that will be increasing important. There has always been and will continue to be a fusion of thes sources from which we learn, whether from other people, from art and literature, from popular entertainment and from formal sources. These founts of misguidance and insight will become richer, stronger, more inclined to market themselves as time progresses. The average individual in the industrial world receives around 17,000 discrete advertising messages a week. We recall, perhaps, three of these.
The knowledge economy will reward those who can perform in it. It seeks multiple skills - social and technical, practical and conceptual - from the same person. The less able have, for the past two or three decades, earned wages which have either fallen in real terms of grown much less rapidly than national income. Further increase in inequality are almost built into the knowledge economy.
However, we have shown that societies fall into three basic attitude clusters, explored in detail in Chapter One. These groups do not agree on what would constitute a satisfactory answer to questions such as the 'rightness' of new technologies, such as human applications of biotechnology. They have distinct kinds of map. One group, whom we call systems rationalists, see policies and answers as the product of evidence and rationality. Other groups see this as a re-statement of the problem. At issue - and at the base of a potential new form of political polarity - is how trust is to be extended to the many expert communities that are needed to make the complex modern economy work.
There were two scenarios in 2001: Pushing the Edge and Renewed Foundations.
Pushing the Edge.
The explosive growth of knowledge, of trained people and of connectivity create a period in which all of the aspirations expressed by capital markets in the Nineties are fulfilled. A glow of prosperity settles over, in particular, the USA. Science performs astonishing feats, and commerce is not far behind in making a technical reality of this potential. There is a view that government is a matter of competent administration, that most issues will settle themselves if exposed to a proper incentive structure and the fashion is, therefore, increasingly laisse faire. However, by 2010, cracks are appearing in this structure. They stem from two centres.
One of these is the European societies with high levels of elderly people, notably those with poor pension provisions, such as Italy, Austria, Germany and France. Japan has similar problems and not dissimilar responses. Here, the golden glow of economic success is far from evenly distributed. The prevalent view of technological astonishment is highly negative. The politics of these regions are polarised between those who see the need to accommodate to fast change and a rejectionist, traditionalist group. These nations find themselves increasingly out of step with the cutting edge nations.
The second set of crack stem from the inadequacy of institutions to deal with what is being thrust upon them. Regulation is put in place to deal with complex, interconnected issues which appears in retrospect to have been increasing clumsy and, where appropriate, rapidly superseded. Litigation increases, a plethora of complex regulation is enacted, growth slows.
In the period after 2010, the major powers find themselves both at odds with each other politically and unable to cope with the stresses of change that are generated internally. Little attention is given to the emergent world and the poor world, save as partners in commerce. International institutions do not develop. However, the use of uncontained but dangerous technologies, the theft of intellectual property - the bane of the knowledge economy - and remote criminality all make the world a difficult place; and the widespread possession of offensive software, biological and other capabilities make it a dangerous one. Environmental issues are both the cause of much distress and, in places of conflict, but also something which the machinery is inadequate to address in an international arena.
Renewed Foundations
Capital market expectations are thwarted in the period after 2000 and growth is historically slow. The problem that lies behind this depression is twofold. The 'old' economy is in trouble. In some areas, a flood of low cost goods emanating from the low wage areas have commoditised whole industries. Process innovations that are made to heighten efficiency seem to be exported very swiftly. Productivity drives throw the least able into direct competition with low wage areas.
The 'new' industries are, however, failing to deliver on their promise. An innovative treadmill generates new products but not much profit, and incidentally take all firms into what the public see as alarming areas.
The second source of failure is in the public sector. States are consuming in the order of half of all added value, and directing four-fifths of this into welfare. The squeeze lessens investment in the public sector.
An elderly population views all of this with alarm. Their assets are not growing, state-funded systems of age care are evidently failing and politicians seem able to do nothing about this. Companies seem unable to find their way out of the impasse, yet they engage in frightening activities, many of them doing so in the poor nations, away from regulatory oversight. Activism growth through networks and across nations, demanding action.
Some nations are doing rather well for themselves. Despite modest demographic problems, these are building their economies from skilled people doing skilled jobs, operating in collaboration across all manner of boundaries.
This approach plays poorly with the nations which have evolved a more confrontational, impersonal or pragmatic style. Nevertheless, economic figures show that this approach is proving effective. The parallel success of knowledge management techniques in some parts of commerce is noted. It is seen that the approach can be lifted entire and placed into the public domain.
Once the implications of this linkage are understood, the application of these techniques spreads quickly. The successes which are scored are impressive. A cadre of several hundred million practitioners develops across the industrial world, inter-linked and sharing a common viewpoint on the world.
This is, however, a world in which relatively few feel that they have a 'place'. Communities have faded. Austere and impersonal systems confront people whenever they touch the public sector, and do so particularly in areas of claimancy and dependency. By contrast, a rich and focused 'alternative' exists in the electronic media, where interest groups and enthusiasms emerge and blossom. Mass activism, activism as a hobby and hobby politics grow as an educated cadre vents its frustrations. It finds an ideal structure with which to interact in the network of knowledge managing expertise to which we have already referred.
What was once difficult, therefore, can become knotted into tangled thickets of the impossible. Complexity management demands delegation, collaboration, networks, knowledge, a systems view, plans, regulatory permissions, mutual consultation. All of this essential equipment, however, creates openings which are exploited by activism. The clean, rational world of expert knowledge-users is increasing required to justify itself. Getting permission to act is central to success in a world where veto can block any step in a fragile chain of regulation and legal process.
Where this is adequately managed, however, all see that this is micro-democracy at work. Its expansion offers positive engagement to many and excludes only those with nothing useful to say. It has power, in that the strategic insights which it tables define the options which will be followed. It ties together industry and consumer, state and the private sector, knowledge holders and knowledge users. Most of all, it generates a means to break away from commoditisation, creating a skill pool that only the industrial nations can deploy.
The process of full bottom-up integration is, however, by no means complete in every industrial country by 2020. Some nations have taken huge strides, whilst others - still battling demographics and state deficits, still suffering rejectionist fits from their disappointed elderly - have hardly taken the first steps.
| To top |