Peter Drucker, the great guru of management, famously observed that "the basic economic resource is no longer capital, nor natural resources nor 'labor.' It is and will be knowledge." Drucker died on November 11 at age 95, leaving behind a body of work that will inspire business and IT innovators to apply this often enigmatic resource to enable "knowledge workers" — a term he coined — to improve both business and society.
Drucker also wrote, in 1993, that we didn't fully understand "how knowledge behaves as an economic resource." With the entertainment industry battling consumers over digital rights and with other industries searching for how to protect intellectual property, it's clear that we still don't grasp the economics of knowledge. And it won't get any easier: the fusion of computing and communications is producing a distributed, dynamic world in which knowledge assets don't stay put. Unlike most forms of property, knowledge delivers its highest value when shared and available for enrichment with more knowledge.
Risk managers, particularly those in the financial services industry, may understand the reality and dangers of the knowledge economy better than most. Our cover package details the expansion of risk management and analysis into business scenarios where information and what people do with it exposes organizations to danger.
The sheer size and complexity of some risk management, security and regulatory compliance problems cries out for smart software that can apply rules, business intelligence and automation. "We don't have rubber stampers anymore," reports Jayne Gibbon, manager of Internal Audit at Kimberly-Clark Corp. Authorization for access to every one of Kimberly-Clark's 70,000 transaction codes is now properly evaluated against the company's security and information risk policies using tools from Virsa Systems.
Risk management concerns will push organizations toward real-time monitoring and analysis of events and transactions, especially for compliance with regulations that demand exception reporting. Supply chains and global, outsourced software production will also push smarter monitoring via dashboards to mitigate risk. The virtual, on-demand world currently articulated by IBM, Intel and other leading technology providers will free businesses to concentrate on core competitive advantages only if risk-oriented management software can fill the void.
Online services are increasingly looking like the most appropriate way to guard and manage knowledge assets and use the "network effect" to increase their value and relevance. To be effective, services must break through information silos — including the gazillion silos created by personal computing. We now know through public memos by CTO Ray Ozzie and Chairman Bill Gates that Microsoft, the long-time champion and benefactor of personal computing, is worried that it's on the wrong side of history. "The next sea change is upon us," writes Gates. Struggling to understand the economics of knowledge, Ozzie declares that a "new business model has emerged in the form of advertising-supported services and software."
Fortunately for Microsoft, the move from personal computing to shared services may come more slowly than we think. Former Microsoft COO Robert J. Herbold, author of The Fiefdom Syndrome, writes eloquently about why humans (including those at Microsoft) tend to guard their ability to "do things their own way." Today's fiefdoms hoard knowledge especially closely. Businesses balancing risk and reward must remember to look past technology to consider the right mix of personal and shared knowledge — that most human of economic resources.
David Stodder is the editorial director and editor in chief of Intelligent Enterprise. Write to him at [email protected].