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Knowledge Management and Competitiveness

Originally published December 11, 2007

The World Economic Forum (WEF) in Davos, Switzerland, recently issued its annual ranking of the world’s most competitive countries. The U.S. regained its number one position, having lost it to Switzerland in the 2006 listing. The release of the WEF study was met with huge interest by multinational companies as well as the heads of state of just about every country. What is this all about?

In a global economy, competitiveness has become increasingly important to enterprises. Not only that, the attention that nations must give to competitiveness seems to also be in crescendo as the countries vie to attract firms to establish themselves or invest in their territory. But, interestingly enough, competitiveness seems to have less to do these days with the traditional economic factors tied to land, capital or labor and more to do with knowledge – the new organizing principle for society.

In effect, we hear a lot about the knowledge economy as the goal that individual nations must seek. The World Bank defines it as “an economy that creates, acquires and uses knowledge effectively for its economic and social development.” But what are the links between a knowledge economy and a competitive one? How does knowledge impact the ability of a firm, or of a nation, to compete?

First, at the level of the firm, competitiveness has to do with the identification and development of competitive advantage, anything that will allow an enterprise to perform better than the competition. This applies just as well to an army in the battlefield as to a company in the marketplace. For firms, increasingly they need to look at their data and transform it into intelligence and knowledge in order to find competitive advantages. Nations must go one step further and find a way of facilitating this process for the enterprises operating under their flags.

Most self-respecting nations have set up competitiveness councils or advisory bodies over the last few decades. The U.S. has a private Council on Competitiveness that attempts to lead the drive on U.S. productivity and global leadership. It is an organization that was founded by private sector, academic and labor leaders to address the economic challenges of the mid-1980s.

Nations as diverse as Bahrain, Croatia, the Dominican Republic, Greece, Guyana, Ireland and the Philippines are just some examples of countries that have established some entity to address national competitiveness issues.

Competitiveness, in turn, is measured by a number of organizations that conduct international comparisons of how well nations are doing in this arena. The two most prominent entities engaged in this are the aforementioned World Economic Forum (Davos, Switzerland) and the Institute for Management Development in Lausanne. The former publishes national rankings in its Global Competitiveness Report, and the latter in its World Competitiveness Yearbook.

The WEF measures competitiveness through 90 variables in 12 different categories which it groups under the titles of Basic Requirements, Efficiency Enhancers, and Innovation and Sophistication factors. The variables are further classified into clusters that are referred to as the “Pillars of Competitiveness” and they include: institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market efficiency, technological readiness, market size, business sophistication, and innovation.

The top ten countries in the 2007 WEF report are, in order:

  1. United States
  2. Switzerland
  3. Denmark
  4. Sweden
  5. Germany
  6. Finland
  7. Singapore
  8. Japan
  9. United Kingdom
  10. Netherlands

Now let’s turn our attention to the knowledge economy. It’s the World Bank through its Knowledge for Development (K4D) Program that has become the principal source of expertise in comparing how well (or badly) countries are faring in their journey toward a knowledge economy. If you go to the Bank’s website, you will find the top ten countries in their computations. They are:

  1. Sweden
  2. Denmark
  3. Norway
  4. Finland
  5. Netherlands
  6. Switzerland
  7. Canada
  8. Australia
  9. United Kingdom
  10. United States

While Tony Blair is on record as saying that "the success of the economy will be determined by knowledge, skills and education,” the World Bank’s K4D measures a large number of different variables under their version of “The Four Pillars” in a Knowledge Economy Framework:

  1. Economic and Institutional Regime

  2. Education

  3. Innovation

  4. Information Infrastructure

If the two lists of countries seem similar, it’s because they are. There are seven countries that are common in both lists. And if we were to expand the analysis to the top twenty, we would see the percentage of commonality increase to over 80%.  The reasons are important to note. Competitiveness today depends on knowledge. Specifically, we acknowledge today that competitiveness depends on collaboration and knowledge sharing through cyberspace.

If we were to compare the list of common countries we culled from the competitiveness and knowledge economy rankings, we would also find a significant overlap with that of the top dozen countries as percent of population online. Clearly, there is a phenomenon at work here. As we rely more and more on the Internet to find, capture and transfer knowledge, all these factors converge. We need knowledge to be more competitive; we need knowledge management to get maximum return from our knowledge; and we must do this in the new medium: cyberspace.

The handwriting has been on the wall for companies for some time. Now it is also clear that governments have to do their part to make sure that their private sector has all the necessary tools to compete.

  • Dr. Ramon BarquinDr. Ramon Barquin

    Dr. Barquin is the President of Barquin International, a consulting firm, since 1994. He specializes in developing information systems strategies, particularly data warehousing, customer relationship management, business intelligence and knowledge management, for public and private sector enterprises. He has consulted for the U.S. Military, many government agencies and international governments and corporations.

    He had a long career in IBM with over 20 years covering both technical assignments and corporate management, including overseas postings and responsibilities. Afterwards he served as president of the Washington Consulting Group, where he had direct oversight for major U.S. Federal Government contracts.

    Dr. Barquin was elected a National Academy of Public Administration (NAPA) Fellow in 2012. He serves on the Cybersecurity Subcommittee of the Department of Homeland Security’s Data Privacy and Integrity Advisory Committee; is a Board Member of the Center for Internet Security and a member of the Steering Committee for the American Council for Technology-Industry Advisory Council’s (ACT-IAC) Quadrennial Government Technology Review Committee. He was also the co-founder and first president of The Data Warehousing Institute, and president of the Computer Ethics Institute. His PhD is from MIT. 

    Dr. Barquin can be reached at rbarquin@barquin.com.

    Editor's note: More articles from Dr. Barquin are available in the BeyeNETWORK's Government Channel

     

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