The 4th Knowledge Revolution

By John Hobday

Did you know that we are living in the middle of the 4th Knowledge Revolution? A lot of businesses don't, and are paying the price for this. They are using outdated knowledge systems that are failing t

• Language: English
• Publisher: Known Publishing
• Release date: May 29, 2020
• ISBN: 9781913717018

Book preview

CHAPTER ONE

REVOLUTION

Fundamental Change

‘You say you want a revolution

Well, you know

We all want to change the world’

Revolution, Lennon and McCartney

WE’RE IN THE midst of a revolution: a knowledge revolution. Unfortunately it is losing its way. This book has been written to get it back on track.

The 1st Knowledge Revolution

The 1st Knowledge Revolution was physiological. It allowed humans to share knowledge using verbal and non-verbal communication. When this began is open to conjecture, but currently it is held that anatomically modern humans (Homo sapiens sapiens¹ a subspecies of Homo sapien; from the latin homo, man and sapiens, wise or discerning) appeared in Africa about 200,000 years ago.² By 80,000–50,000 years ago humans developed behavioural modernity³, including language and sophisticated cognition.

The 2nd Knowledge Revolution

The 2nd Knowledge Revolution took place when humans added manual knowledge recording to verbal knowledge sharing. Manual Technology allowed knowledge that could previously only be stored in an individuals head to be captured, accessed and shared without the knowledgable person being present.

Knowledge started to be preserved in buildings. Standing stones recorded important solar and lunar events for posterity. Later, temples, churches and cathedrals had religious knowledge built into them. New technologies allowed drawings to be preserved, leading to pictograms, hieroglyphics and then writing.

It was only a few thousand years ago that humans started to write. The first writing appeared in Mesopotamia and Egypt between 3300 and 3200BC⁴ using clay tablets and a reed stylus. Later, parchment, pen and ink allowed the production of manuscripts and books. For the first time knowledge could be stored and transported. Art flourished, often illustrating stories, religious knowledge and notable events. This led to the building of libraries and museums to hold the manually recorded knowledge.

A by-product of this revolution was enhanced verbal and non-verbal communication with the building of theatres and writing of scripts for plays.

The 3rd Knowledge Revolution

The 3rd Knowledge Revolution was driven by mechanical and electrical technology. In the West it was set in motion in 1450 with Johannes Gutenberg’s first commercial printing press. Printing supercharged knowledge recording and dissemination. The revolution took a major step forward with mass book production (c 1500), newspapers in 1605 and printed pamphlets. The printed pamphlet, used to spread ideas and opinions, helped to ferment the English Civil War of 1642.

There were further dramatic improvements in the transmission of knowledge with the telegraph between 1816–33, Alexander Graham Bell’s telephone in 1876, Marconi’s radio in 1896, and John Logie Baird’s television (1925–28). And recorded knowledge was enhanced when photography became practical in 1839⁵, sound was be recorded using the phonograph of 1877 and motion pictures arrived in 1895.

The 3rd Knowledge Revolution was powered by water, steam and then electricity, and enabled by science, mechanical engineering and electrical engineering.

The 4th Knowledge Revolution

We are in the midst of the 4th Knowledge Revolution (4KR), the Digital Knowledge Revolution. It started in 1943 with Colossus, the world’s first programmable, electronic, digital computer⁶. The rise of the computer has enabled the digital storage, transmission and processing of knowledge. The Information age and the Knowledge Worker were predicted in the 1960s. The military precursor to the Internet went live with four networked computers in 1969. Twenty years later in 1989 the Internet was born when Tim Berners-Lee invented the World Wide Web (WWW) protocols, which are still in use today. The first web page was available the next year and the Internet became available to the public in 1991. Suddenly there were relatively cheap computers able to store documents and communicate with each other via the Internet. Digital Internet based technologies were developed to enable the creation, contribution, finding and sharing of knowledge. Businesses realised they could use the same technologies internally to share knowledge, Knowledge Management (KM) - knowledge systems and the Knowledge Manager - came of age. The development of digital technologies that change the way we interact with knowledge continues at a ferocious pace. Facebook went public in 2006. The first smartphones arrived in 2007. The Blockchain (distributed ledger) in the form of the crypto currency Bitcoin⁷ appeared in 2009.

In parallel we have been experiencing the 4th Industrial Revolution (4IR)⁸ also driven by digital technology. Industry’s fourth revolution is being energised by Artificial Intelligence (AI), Machine Learning and the Internet of Things (IoT).

Billions in Lost Revenue

Knowledge is fundamental to progress in all spheres of human activity, especially business. Knowledge underpins creativity and innovation. Let’s face it, those human attributes are our main advantages over the machine. But the 4th Knowledge Revolution seems to be flagging. Business is becoming disillusioned. Companies are quietly distancing themselves from an idea and a discipline that, for the most part, has not delivered on its promise.

However, this is not the case for a small percentage of organisations. This select group of companies manage knowledge very effectively. They are effective in exploiting the knowledge they have and derive significant business benefit. And it is easy to see who some of these organisations are: simply compare knowledge based company performance in terms of revenue generated per person. Some can bring in up to 249 per cent more revenue per employee than their competitors. Instrumental in this are their knowledge systems.

Would you rather be the company that attracts $470,000 revenue per person per year or just $189,000? Taking the heavily knowledge-based ‘Big Four’ auditing and consultancy firms as an example, that difference in performance equates to billions of Dollars of missed revenue. A relatively small 10 per cent improvement in their performance would bring in billions of extra revenue a year. And that 10 per cent could be achieved just by making their existing knowledge systems work better.

If knowledge is such a key part of an organisation’s success why are the vast majority still struggling to use it effectively?

A Million Lives

And it’s not just billions of dollars at stake. It may also be a shock to you to learn that over 1 million lives could be saved each year by improving the use of knowledge during surgery. Some hospitals have halved surgical death rates simply because they use knowledge more effectively. Yet for some reason, in both the commercial and medical worlds, knowledge systems remain second-rate, wasting lives and money.

In this book I explain why the 4th Knowledge Revolution has stalled. Why the vast majority of organisations fail to get knowledge systems to work effectively. I will show how to move from second-rate to first-class knowledge systems and how you, and your organisation, can really benefit from the 4th Knowledge Revolution and produce a successful knowledge-based business.

CHAPTER TWO

Money and Lives

How First-class Knowledge Systems Save Millions of Lives and Make Billions in Profits

‘Today knowledge has power. It controls access to opportunity and advancement.’

⁹

Peter Drucker

WHY IS KNOWLEDGE such a key factor in our development and prosperity? There are many reasons. Chief among them is that without new knowledge there is no progress. We create new knowledge through experimentation. In Hayek and Hamowy’s classic book The Constitution of Liberty they identify people who experiment and pass on their findings as pivotal to human progress. Others can then benefit from their findings:

‘…the achievements of those who have gone before facilitate the advance of those who follow.’

¹⁰

This is as true within organisations as it is in wider society. Leading organisations are the ones that are able to acquire new knowledge and then enable and empower their people to use it. So knowledge systems, when working to their full potential, can provide huge benefits to organisations. But if they are not working as they should they cost companies and economies billions of dollars. They also claim hundreds of thousands of lives in hospitals each year.

Now it is often said that it is difficult to calculate the return on any investment an organisation may make in knowledge systems. From my experience, this is not the case. Far from it. Providing you know what you want to change, and you have a means of measuring performance, and you set up a baseline for comparison, you can quantify what you achieve. For example, let’s say you want to increase your sales. Just put in place your new knowledge system and look for the change in sales this produces, using your company’s sales history as a benchmark.

That is the easy bit. The big challenge is building a knowledge system that works for you. In the chapters that follow, I will explain how to do this. But first, to set the scene, here are some examples that show what can be achieved, both in monetary and human terms, with knowledge systems that work.

Example 1: The Cost to Organisations of New Joiners

In today’s knowledge-based companies it can take new staff up to six months, or more, to become fully productive employees. Often such costly delays occur despite a significant investment in getting them integrated as swiftly as possible. When new joiners start in a post they have to learn about the organisation, its procedures and even its culture. They must build a network of useful connections both inside and outside the organisation. They have to make their presence felt and make known what they can contribute.

In 2014 Unum, one of the UK’s leading financial protection insurers, commissioned Oxford Economics to carry out a study¹¹ to give employers a better understanding of the financial impact of staff turnover. Their survey looked at the legal, accountancy, retail, IT and media sectors in which employees earned over £25,000 (~$32,500) a year. They found that, on average, it took 28 weeks (almost 6.5 months) to bring employees up to full productivity.

So what part does knowledge play in this? If it is working properly a company’s knowledge system provides a new employee with easy access to all the knowledge they need to help them integrate into their new company. It will support them in their new role. A good knowledge system gives the new joiner personalised (or tailored) access to induction training, to information about company and departmental strategy, to goals and targets, and company policies and procedures. It also provides role-specific knowledge. This will cover things like processes and methodologies; use of company systems; sales and marketing support material. It should also give them access to key people, networks and communities.

When a knowledge system, designed to include support for new joiners, works properly, it can dramatically reduce the time a new employee takes to integrate and become fully productive. This can fall from 6 months to just 1 month, which represents a major saving in both time and money. So let’s look at the money.

The Oxford Economics study found that on average it cost £30,614 (approximately $40,000) to replace an employee. Of this, some £25,182 was needed to bring the employee up to optimum productivity, having spent £5,433 on the recruitment process (including hiring temporary workers before the replacement started work).

Let’s say you run a knowledge-based company of 100,000 people and your staff turnover is 10 per cent. Despite your best efforts it still takes your new employees 6 months before they are productive and paying for themselves. Using the Oxford Economics figures that would cost your company $40,000 x 10,000 = $400m a year.

However, if your Knowledge Management was good enough you could make all new staff productive in 1 month. The costs would fall to one-sixth of their previous figure: $400m / 6 = $66.7m. You would save your company $333.3m per year ($400m - $66.7m). Even if it took 3 months to make them productive rather than 6, that would still save you $166.7m.

Let’s look at this another way. Among the Big Four annual staff turnover ranges between 18 and 30 per cent. This influx of new joiners is very expensive both in terms of recruitment and training. But rather than work out the direct costs let’s look at revenue (gross income) generated per person per year. For example, in financial year 2013–14, some 54,000 new staff joined KPMG. I have used data from 2013–14 because in recent years the