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November 02, 2005

The Importance of Knowledge Workers in a Global Economy

Peter Drucker, who was the first person to describe knowledge workers to any substantial degree (in his 1959 book Landmarks of Tomorrow), said as far back as 1968 that:

To make knowledge work productive will be the great management task of this century, just as to make manual work productive was the great management task of the last century.

Then in 1997 Drucker went even further out along the knowledge worker limb:

The productivity of knowledge and knowledge workers will not be the only competitive factor in the world economy. It is, however, likely to become the decisive factor, at least for most industries in the developed

Why did Drucker-and why should we-believe that knowledge workers and their productivity were so important to the world economy? There are a variety of reasons.

First, they are a large and growing category of workers. If we can't figure out how to make more than a quarter of the labor force more productive, we're going to have problems with our economy overall. They are also the most expensive type of worker that organizations employ, so it's doubly shameful if they're not as productive as they could be.

Secondly, they are key to the growth of many economies. Agricultural and manufacturing work have generally become commoditized, and are moving to the economies where it can be performed at the lowest cost. The only forms of agricultural or industrial work that survive in sophisticated economies are those in which a high degree of knowledge has been injected-for example, in biotechnology manufacturing, or in "precision farming," where the amount of fertilizer and pesticides administered to a given crop are carefully monitored using GPS devices in tractors. If agriculture and manufacturing are moving to countries with low labor costs (China is a particularly
good example), the jobs that remain in the so-called knowledge-based economies are particularly critical to countries' economic survival.

It's not clear exactly what workers in the US, Western Europe, and Japan are going to do for a living in the future (other than providing local services), but it is clear that if these economies are to prosper, the jobs of many of the workers must be particularly knowledge-intensive.

It's already apparent that the firms with the highest degree and quality of knowledge work tend to be the fastest-growing and most profitable.

Microsoft, for example, is among the most profitable organizations in the history of the planet.

Pharmaceutical firms not only save peoples' lives with their drug treatments, they also tend to have high profit margins.

"Growth industries" generally tend to be those with a high proportion of knowledge workers.

Within organizations, knowledge workers tend to be closely aligned with the organization's growth prospects. Knowledge workers in management roles come up with new strategies. Knowledge workers in R&D and engineering create new products. Knowledge workers in marketing package up products and services in ways that appeal to customers. Without knowledge workers there would be no new products and services, and no growth.

Posted by Tom Davenport on November 2, 2005 04:34 PM | Permalink

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"It's not clear exactly what workers in the US, Western Europe, and Japan are going to do for a living in the future (other than providing local services)."

This is true and frightening. As we automate more and more, computers/robots are producing more and more. The resulting abundance of goods (and even services, like ATM machines and legal, accounting and tax software) is, everything else equal, a good thing. However, everything else is not equal. The benefits of automation are flowing disproportionately to those who own patents on the computers and robots (and even patents on the computerization of normal business processes with "...on the Internet" appended to the patent applications), the most talented programmers and the energy firms that control the fuel that runs them. The abundance of automation-produced goods lowers the value of everyone else's labor and exacerbates inequality. Thanks to automation, overzealous patent rights protections (including patents on human genes) and network effects that effectively make many technologies (e.g., operating systems and word processors) quasi-monopolies, the benefits of automation are being concentrated in the hands of the few, not shared widely.

I don't know whether there's a solution, but it's clear the inequality problem is real and worsening. Even "knowledge workers" are losing their jobs. Every knowledge worker must find a niche that gives her/him a SUSTAINABLE advantage in the face of the increasing automation of the world economy. And that's easier said than done.

Posted by: James Lavin | November 10, 2005 12:21 AM

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