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Published June 2009

Knowledge: The New Commodity

  Mary Clarke

Knowledge is power in the modern marketplace. Organizations making large-scale cuts to workforce development may want to think again.

In his address to Congress on Feb. 24, 2009, President Obama said in a global economy, "The most valuable skill you can sell is your knowledge." Similarly, the most valuable asset for businesses is the knowledge of their employees. In today's knowledge-based economy, competent and confident employees are a key foundation for a successful business, and a continued focus on the development of employee knowledge is an important step for businesses to take if they hope to stay competitive in the ever-changing global business environment.

However, despite recent trends pushing toward an economy increasingly dominated by knowledge-based activities, many businesses are not making an investment in their employees. "Knowledge: The New Commodity," a study released in April by economist Paul Mizen — professor at the University of Nottingham and fellow at the Centre for Growth and Business Cycle Research at The University of Manchester — found that in the midst of the economic downturn, many of the world's top economies have reduced their focus and monetary investments in knowledge development, coaching, mentoring and other human capital activities.

In fact, in 2008, more firms in those industrialized countries reported a decline in staff development. In the developing markets of Asia, however, fewer firms are planning to decrease their training budgets and staff investments, and are instead coping with the recession by reducing budgets elsewhere.

By maintaining a focus on knowledge development during the recession, emerging market countries are putting themselves in a position to close the gap in market competitiveness and become more of a business threat to industrialized countries come the economic upturn.
If businesses in industrialized countries hope to emerge from the economic downturn in the same competitive positions they were in before the recession started, they should consider re-evaluating their staff investments and where they have reduced their budgets.  

According to Mizen, three global business trends are making it more important for companies to invest in employee knowledge: the increasing globalization of the world economy, the expansion of the knowledge-based economy and a greater reliance on knowledge-based services.

Globalization of the World Economy
During the past 10-20 years, the economy has become increasingly globalized. This is due in large part to improved communication technology, as well as the fact that more firms are taking part in joint ventures, foreign direct investments (FDI) and offshoring, especially in emerging markets such as those of China and India. Mizen reported that globalization is impacting emerging market economies, helping them catch up with industrialized countries and allowing them to adopt competitive technology at a lower cost base.

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