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Policy Futures in Education, Volume 1, Number 1, 2003

Knowledge Capitalism:
the new learning economy
Burton-Jones & Associates, Brisbane, Australia

ABSTRACT The increasing economic importance of knowledge is redefining

firmmarket boundaries, work arrangements and the links between education,
work and learning. This article describes a framework for identifying
organisational knowledge assets and learning needs, optimising knowledge
supply and planning knowledge growth. The framework enables firms to
improve their selection and deployment of internal and external knowledge
resources and individuals to improve their career planning. It also assists
learning institutions to tailor their products and services to the needs of
individual and corporate knowledge consumers.

It is now over 30 years since the economist, Daniel Bell, predicted the coming
of a post-industrial economy in which knowledge would become the basis of
economic power, and work and jobs would become increasingly knowledgeintensive and skill-dependent (Bell, 1973). Subsequent events have proven his
predictions to be remarkably accurate. US college graduates reportedly earn
nearly three times the annual salaries of their compatriots with lower
secondary qualifications. Firms with strong intellectual, as distinct from
physical, assets nowadays dominate world stock markets. By the mid-1990s,
the Microsoft Corporation, while possessing a mere 5% of the net tangible
assets of General Motors, had a market capitalisation three times that of the
industrial giant. As Peter Drucker (1993) summed it up, knowledge has
become the only economic resource that matters. We are moving into an era
of knowledge capitalism.
Knowledge contains a mixture of explicit and tacit elements, the latter
implying, as Polanyi reminds us, that we can know more than we can tell
(1967). According to knowledge-based theory of the firm, a firms competitive
advantage lies in its ability to integrate and protect individuals specialised and
tacit knowledge (Grant, 1996). From an economic perspective, other
knowledge characteristics are also important. Knowledge can be general or

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specific to a particular firm. Knowledge can be reflected in organisational

design and embedded in processes. Most importantly, knowledge can only be
developed (and tacit knowledge stored) in the human brain.
In the new, knowledge-intensive economy, individuals and firms must
focus on nurturing and enhancing their biggest asset: their knowledge capital.
To achieve this, they need practical techniques for identifying their knowledge
assets and knowledge gaps (see Figure 1). At present, such techniques are only
beginning to be applied in many organisations. While mapping explicit
knowledge is a relatively simple process, identifying the tacit knowledge
within organisations is notoriously difficult. As a former chief executive officer
of famous computer company HP once remarked, if only we knew what we
know. Corporate downsizing, the pace of scientific and technological growth,
early retirement and increasing workforce mobility are all putting significant
strains on organisations trying to identify, capture and retain valuable
corporate experience. The tacit nature of much of this knowledge, coupled
with the fact that its disclosure and sharing is heavily dependent on the
goodwill of its individual owners, adds to the strain. These problems are
particularly evident in sectors undergoing major restructuring, most notably
the public sector. In the USA, for example, 300,000 public sector jobs have
disappeared in the past seven years.

Figure 1. Mapping organisational knowledge.

In addition to recording what we know we know and identifying what we

dont know we know, both of which can be defined as knowledge assets,
organisations need to identify knowledge gaps. Those gaps that can be defined
and specified fall into the category of what we know we dont know. This
then leaves the area of what we dont know we dont know, which needs to
be addressed by continuous monitoring of the business environment. The
strategic importance of exploring for new knowledge, as well as identifying
and exploiting existing knowledge assets, underscores the importance of
learning in the new economy. The accelerating rate of knowledge growth, and
thus obsolescence, implies that learning speed and a capacity for both



incremental and radical learning will become increasingly critical for individual
and corporate success. Business competition in modern, highly knowledgeintensive sectors such as the bio-pharma industry has been likened to a series
of learning races. The learning imperative is also beginning to reshape older,
physical resource-intensive industries witness the rise of sophisticated
agribusinesses replacing traditional farming enterprises.
Modelling Knowledge Supply
As the acquisition and use of knowledge moves centre stage in the economy, it
becomes increasingly important to be able to explain and predict how
individuals and firms can best identify and attain their learning objectives and
how learning institutions can optimally satisfy the demand for knowledge. The
Knowledge Supply Model (see Figure 2) helps individuals, firms and learning
institutions understand the critical factors influencing demand for knowledge
in different sectors of the new economy (Burton-Jones, 1999). It also helps
identify opportunities for learning institutions to better tailor their products
and services to the dynamically changing needs of knowledge consumers.

Figure 2. The Knowledge Supply Model (source: Burton-Jones, 1999).

The Knowledge Supply Model identifies three factors as critical in shaping

firms choice of internal or external sources of knowledge supply, and
suppliers fit with particular groups or markets:
Level of Suppliers Knowledge: suppliers relative ability to provide the
required amount/depth of knowledge;
Firm Specificity of Knowledge: the extent to which the required knowledge
is specific to functions or processes that are unique, inimitable, nonsubstitutable or highly systemically integrated within the firm;

Alan Burton-Jones

Value of Knowledge to the Firm: the importance over time of the required
knowledge to the firms strategy and/or operations.
The model provides a typology of knowledge suppliers in the economy and
shows how they are distributed in the firm and in the market. The model
divides knowledge suppliers into seven generic groups, each group
representing a different source of supply, or knowledge market. Three groups
of knowledge suppliers are internal to the firm and four are external to the
Internal Suppliers
The Core group comprises firms most knowledgeable workers, responsible
for high-level knowledge integration and for the overall direction and
coordination of firms activities. Such functions necessitate high levels of
generic specialised knowledge, in-depth understanding and experience relating
to firm-specific activities, plus considerable mission critical knowledge. The
Core groups knowledge is highly valuable in terms of its power to shape
firms strategies and determine its key activities. In a law firm, for example, the
partners would typically represent the Core group. In most industrial
enterprises, the senior management and executive board would represent the
Core group.
The Associate group provides knowledge required for controlling the
specialist operational functions of the firm such as marketing, finance,
production, and research and development. Such functions require
considerable generic, specialised knowledge but this knowledge is typically
more narrowly based than that of the Core group. The Associates firmspecific knowledge also tends to be restricted to their areas of functional
specialisation. An important characteristic of the Associate group is that the
firm normally allows only a small number of them to progress into the core of
the firm. There is thus often a healthy degree of competition between the
Associates. Using the law firm example, the Associates would typically range
from first year lawyers beginning their bar examinations, to senior legal staff
members vying for partnership positions. In other contexts, members of the
Associate group may range from junior management to upper middle
management positions in the firm hierarchy.
The main role of the Peripheral group is to manage the interface to
external suppliers and customers, and to support internal functions where the
level of firm-specific knowledge required prevents them being externalised.
Such functions typically require much firm-specific and tacit knowledge of the
firms day-to-day operations but comparatively low levels of specialised
knowledge. In overall terms, the value of their knowledge to the firm is
generally perceived as lower than those in the Associate and Core groups,
since much of the idiosyncratic and tacit knowledge they possess is capable of
being abstracted, depersonalised and incorporated in standard routines and


operating procedures. In the law firm example, the Peripheral group would
include legal secretaries, filing staff, librarians, caterers, security, information
technology (IT) support staff, and a host of other staff necessary for keeping
the business running, but whose knowledge is not core to the business. In a
manufacturing environment, the Peripheral group would typically include the
production line workers, storekeepers, drivers, clerical staff and other front
line workers supporting the firms manufacturing and logistical operations
External Suppliers
Flexihire workers are part-time, casual and temporary/contingent workers
involved in direct employment relationships with firms and representing a
flexible resource base on which firms can call to support and supplement their
Peripheral workforces. Flexihire workers thus typically support maintenance,
administration, and similar Peripheral group functions requiring moderate to
high levels of firm-specific knowledge, but low levels of specialist knowledge.
Such workers are typically dependent on one, or a few, firms for income.
Firms, on the other hand, usually have a large pool of such workers to call
upon. Extending the law firm example, Flexihire workers may include legal
librarians or filing staff whose knowledge is specific to that firm (or at least the
legal sector) but whom the firm has put on to temporary employment as it
progressively incorporates or replaces their knowledge in new routines, e.g. in
electronic document management systems. In the case of a manufacturing
company, for example, Flexihire workers are likely to include the pool of oncall logistics and clerical support staff used to smooth peaks and troughs in its
Mediated services supplement workers in both the Peripheral and
Flexihire groups and provide similar support functions. A distinguishing
characteristic of Mediated services is that workers services are delivered to the
firm through an independent intermediary agency. Mediated service suppliers
include staffing service agencies as well as providers of full outsourcing
services. Functions handled by staffing services are typically those that require
knowledge that is explicit, non-firm-specific, and based on knowledge of
standardised products or services, such as popular accounting software or
standardised operating procedures. As a result, the firm usually does not need
access to the same individual worker on each hiring occasion. In the context of
our law firm, Mediated service suppliers could include temping agencies from
which the firm hires its secretaries. It could also include IT outsourcing
providers if it decides to outsource its IT function. In the case of a
manufacturing firm, Mediated services may be used to provide standardised
clerical or logistics functions. Rather than directly employ its production line
workers, Ford Motor Corporation in the USA, for example, sources its supply
through contracts with a number of major staffing agencies.
Dependent contractors typically handle functions requiring significant
levels of both generic and firm-specific knowledge that the firm could logically

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internalise but which, for strategic reasons, it is more valuable to source

externally. Dependent contractors tend to exhibit high levels of skill and the
value of their knowledge to the firm is similarly high. In comparative terms,
the levels of knowledge possessed by this group tend to be higher than
Flexihire workers but less than Independent contractors. From a contractual
perspective, Dependent contractors are characterised by their dependence on a
relationship with one or a few firms for income. From a knowledge
perspective, they are characterised by the combination of generic knowledge
and firm-specific knowledge that typifies, for example, relationships between
franchisees and franchisers, and preferred suppliers and the major firms with
whom they contract.
In the legal industry, Dependent contractors include highly qualified
scientists who mainly work for one or a few law firms to assist them with
examining evidence, but whose expertise is so great that they can operate from
their own consultancy practices. Specialist copy editors similarly often contract
with just one or a few book publishers. The firm-specific knowledge required
of the Dependent contractor may be in depth and tacit, such as the
understanding of a firms cultural norms, unwritten rules and expectations of
quality that can only be learned through long association. Conversely, they
may be surface-level and highly explicit, as in the case of a franchisees
knowledge of the standard operating procedures and methods prescribed by a
In contrast to Dependent contractors, Independent contractors are
characterised by their lack of reliance on any particular firm for their major
source of income. From a knowledge perspective, they provide expert support
to key functions of the firm and other professional services that require high
levels of specialised generic rather than firm-specific knowledge. Independent
contractors are highly skilled and their knowledge is similarly highly valued by
firms. Members of this group are typically sole contractors and microbusinesses who may also band together occasionally in consortia to bid for
major projects. In the case of the legal industry, Independent contractors, for
example, include expert IT consultants whose specialist IT knowledge makes
them attractive not only to legal firms, but also to other firms across a range of
industries. In other contexts, independent contractors may be medical, legal or
other professionals or tradespeople whose skills are in wide demand but
whom individual firms cannot justify employing directly.
Alliances between firms are increasingly used to facilitate acquisition of,
or access to, complementary knowledge resources. The contractual basis of
collaboration ranges from formal joint ventures where knowledge supply is
effectively internalised, to preferred supplier and project-based alliances where
knowledge is supplied through dependent or independent forms of external



Predicting the Direction of Change

In addition to providing a typology of knowledge supply, the Knowledge
Supply Model can be used to explore and predict the direction of change as we
enter the knowledge economy. The model predicts that business activities
reliant on explicit, low-value, non-firm-specific knowledge, unless highly
integrated into a firms operations, will be more effectively and efficiently
sourced outside its borders (externalisation). Conversely, activities reliant on
complex, tacit, high-value and firm-specific knowledge will be more effectively
sourced inside its borders (internalisation).
Abstraction and standardisation of knowledge can be expected to
increase, as firms codify previously tacit knowledge, maximise knowledge
reuse, and develop/acquire industry-standard routines and best practices. This
standardisation and routinisation can be expected to reduce the overall level of
firm-specific knowledge. Asset specificity, which favours the firm as a
governance structure, for example, is reduced by increases in IT and
automation. Human asset specificity reduces as the idiosyncratic knowledge of
particular individuals is superseded or reduced to explicit information that can
be incorporated in organisational routines. Finally, time and location
specificity declines as firms increasingly use just in time production and global
communication networks to trade across industry and geographic boundaries.
These factors imply an overall shift toward relatively greater externalisation
and market-based coordination (Malone et al, 1994). New enterprise-wide
systems such as SAP R/3, for instance, force organisations to adopt standard
processes in replacement for previously firm-specific practices. Similarly, the
worldwide push towards adoption of industry and global best practices is
forcing firms to jettison many idiosyncratic business methods and thus the
knowledge that went with them.
While specificity of physical assets and explicit knowledge will decline in
overall terms, the firms dependency on its tacit knowledge and its capacity to
integrate the disparate specialised knowledge of its key workers will become
even more pronounced. Thus, while many transactions will become less
specific and move out of the firm, others will become more firm-specific and
move closer to the core.
The predicted direction of change, therefore, is likely to involve
progressive optimisation of knowledge resources, characterised by reduction
of the Peripheral group, constant renewal of the Associate group, and gradual
expansion of the Core group. The more knowledge-intensive a firms
activities, the higher will be the percentage of workers in the Associate and
Core groups. It is notable that highly knowledge-intensive organisations, such
as IT and biotechnology firms and professional services firms, already tend to
have a higher proportion of workers in the Associate and Core groups than
firms of a similar size in older, physical resource-dependent industries.
Changes can also be predicted in the knowledge groups beyond the
borders of the firm. Flexihire arrangements can be expected to continue
growing in the short term, as firms continue to shed full-time employees from

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the Peripheral group. As the size of the Flexihire workforce increases,

however, and firms Peripheral functions become increasingly standardised,
Mediated services are likely to make inroads into the Flexihire market and to a
lesser extent to attract Independent contractors who require assistance in
marketing their personal services. Mediated service suppliers will increasingly
offer firms the advantages of economies of scale, and both firms and workers
the benefit of efficiently matching supply and demand.
On present trends, all forms of contracting can be expected to grow at
the expense of direct employment. Dependent contracting appears likely to
grow faster than Independent contracting in the short term. One reason for
this prediction is that increasing numbers of experienced workers have been
externalised in recent years. Most of these corporate cast-offs, many of them
mature-aged workers, are likely to prefer a dependent relationship to the risks
involved in an independent contracting role. Another reason is that firms,
faced with increasingly competitive markets and uncertain economic
conditions, are more likely to favour relationships that combine contractual
flexibility with a degree of hierarchical control. Longer term, however,
independent contracting can be predicted to catch up, as Dependent
contractors begin to see the benefits of greater autonomy.
Knowledge-based trends away from traditional forms of employment
and towards greater external sourcing may, of course, be modified by political,
social, economic and other factors. Staffing services, for example, have until
recently been banned or restricted in their operations in several EU countries.
Self-employment and independent contracting is more likely to flourish in
societies and economies that have a culture of entrepreneurship and risk
taking, such as the USA. The actions of some EU governments to foster longterm employment by subsidies and tax incentives may also slow the shift
(albeit temporarily) towards externalised work arrangements.
Implications for Firms
In the new economy the smartest firms will survive. Investments in learning,
however, must match firms knowledge needs. The progressive shift within
firms, from dependency on academically acquired knowledge to knowledge
gained on the job is well attested to nowadays and is reflected in the
importance attached to developing firm-specific capabilities, as indicated in the
Knowledge Supply Model. Individual workers, however, will need to maintain
their levels of generic functional knowledge as well as firm-specific knowledge.
Apart from keeping abreast of new knowledge in their particular disciplines in
order to operate effectively in the firm, Associates, in particular, will need to
be equipped to move out as well as up.
An important characteristic of the Associate group in the professional
services industry, for example, is the provision of high-quality generic training
to assist Associates find equivalent employment if they choose to leave the
firm and move into industry. It is generally believed that firms voluntarily


choose to fund the training of their Associates because it ensures high-quality,

consistent education across staff, some of whom will one day be admitted to
the Core group. It also guarantees loyalty by the Associate to the firm over the
training period (normally one or more years), over which time the firm can
evaluate whether the Associate is suitable for promotion to the Core group.
Firm support for generic professional qualifications is standard, for instance, in
the legal and accountancy professions.
According to knowledge-based theory of the firm, competitive advantage
comes from the integration of disparate specialised tacit and firm-specific
knowledge (Grant, 1996). Based on this theory, it can be argued that providing
generic knowledge to the Core and Associate groups is a competitive
necessity, but will not provide a competitive advantage. For the Associate
group, and particularly the Core group, it will be critical for firms to ensure
their staff are trained in firm-specific knowledge and that they are provided
with learning experiences conducive to the acquisition and transfer of tacit
knowledge. A further important implication of knowledge integration is the
need for specialists to become more conversant with each others disciplines in
order to be able to transfer knowledge effectively between each other. Cohen
& Levinthal (1990), for example, have shown the importance of adequate prior
domain knowledge in individuals ability to absorb new knowledge. This puts
a further onus on firms to ensure that their workers receive training not only
in their own functional areas but also acquire a better understanding of each
others disciplines.
These various issues raise the question of how firms should develop an
optimal education and training programme. For the provision of generic
knowledge, it appears that educational institutions such as universities or
professional training institutes are the most appropriate source. This does not
mean that the delivery of this training is dependent on these institutions.
Firms, for example, could arrange for staff to complete distance-based or elearning programmes.
For the provision of tacit and firm-specific knowledge, however, it is not
clear that external learning institutions will be capable of providing the
necessary training. For this type of training, other methods must be
investigated. One option is for firms to develop collaborative relationships
with educational institutions that enable the institutions to provide, if not fully
firm-specific, at least more industry-specific training. Ford, GM and Chrysler,
for example, in conjunction with industry and union representatives and a
local university, have established the Michigan Virtual Automotive College, to
raise levels of industry-specific education among automotive industry workers
(Burton-Jones, 1999).
Other methods are for firms to implement their own internal learning
programmes designed to foster the transfer and development of specialised
tacit knowledge. Such initiatives could include formal mentoring, coaching,
storytelling, simulation of on-the-job tasks, and encouraging the development
of communities of interest and practice. Firms could, for example, designate

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each member of the Core group as a mentor for one or more members of the
Associate group. In addition, firms could establish storytelling sessions where
experienced staff assemble to discuss assignments and lessons learned on the
job. The management consulting firm, McKinsey, for example, formed
internal groups of experts called practices to collect and distil experience
gained in particular fields, such as manufacturing and energy, and to
communicate industry- and project-specific knowledge to others in the firm
(Probst et al, 2000). Xerox Corporation, having discovered its reps habit of
exchanging information about issues discovered while maintaining
photocopiers, facilitated the practice by providing network infrastructure and
tools for recording and disseminating their experiences. The payback from
nurturing these informal exchanges of tacit, on-the-job knowledge across the
corporation has reportedly saved Xerox $100 million a year in maintenance
costs (Seely Brown & Duguid, 2000).
Other stakeholders in the firm must also see the benefit of firm-specific
training. Trade unions, for instance, if they are to remain viable, are likely to
have vastly different roles in the future than today. To ensure their members
are valuable to the firm, unions should ensure that their members in the
Associate and Core groups gain the appropriate mix of generic and firmspecific knowledge. Conversely, for staff in the periphery, it would be more
appropriate for the union to facilitate access to generic, non-firm-specific
training, so as to ensure that when staff are externalised, their knowledge and
skills will be valued in the external market.
Developing a Knowledge Growth Model
By using frameworks such as the Knowledge Supply Model, organisations can
better predict their future knowledge needs and develop appropriate
knowledge growth strategies.
The Knowledge Growth Model (see Figure 3) defines a number of
generic stages through which organisations must typically progress on the
path to optimal development and exploitation of their intellectual capabilities.
The model provides a framework for organisations to plan long-term learning
and knowledge management strategies and to evaluate and benchmark their
progress along the way by comparison with their peers and competitors.
Stage 1 represents an initial scanning and positioning phase during which
organisations acquire an insight into their current intellectual capabilities and
begin to evaluate and link these capabilities to their strategic and operational
goals and performance factors. These processes typically involve knowledge
mapping, gap analysis and identification of critical learning and management
issues in each of the four quadrants of the model shown in Figure 1.
Stage 2 involves using the data from Stage 1 to assess the strategic relevancy of
different categories of human and structural knowledge assets and to create a


forecast of strategic knowledge demand and supply. Using this information,

management can begin to predict the configuration of internal and external
knowledge resources they are likely to require for optimal organisational and
business performance. During this stage, internal job requirements, workforce
competencies and relationships with internal and external knowledge suppliers
will need to be reviewed and strategies developed to improve supplier
selection and job matching.

Figure 3. Knowledge Growth Model (source: Burton-Jones, 1999).

Stage 3 involves progressive implementation of the strategies developed in

preceding stages and in developing knowledge transfer and sharing through
internal and external supplier communities. Knowledge elicitation and
maintenance techniques can be used to expand and enrich the organisational
knowledge base, and knowledge fairs and forums convened to encourage
cross-functional and cross-hierarchical interchange. Learning strategies during
this stage can be formalised to improve the flow of knowledge and to facilitate
tacitexplicit interchange, as suggested in Nonakas SECI Model (Nonaka &
Takeuchi, 1995).
Stage 4 involves further refinements to the internal organisational structure
and culture to improve supplier alignment with organisational knowledge
goals. During this stage, internal incentives and rewards will need to be
reviewed and if necessary adjusted to reflect the differing needs of
organisational members in the Peripheral, Associate and Core groups.
Contractual relationships with external suppliers may need to be adjusted to
improve knowledge flows and to ensure that learning and knowledge transfer
is consistent with organisational goals and priorities.


Alan Burton-Jones

Stages 5 and 6 involve a progressive refinement and extension of the strategies

implemented in preceding stages. By this time, organisational structure,
culture and behaviour should have become internally well aligned with
knowledge goals and the effects on operational performance of investments in
learning and knowledge management well understood and effectively
Implications for Individuals
Individuals must first decide to which knowledge sector they wish to belong.
Most externalised workers are currently in the Flexihire market. In the United
Kingdom, two-thirds of all new jobs created in 1995 were classified as parttime. Nine out of ten recently created jobs in the Netherlands have been parttime (Visser, 1998).The Flexihire market can be particularly unattractive,
therefore individuals in that group should decide whether they wish to move
back into the firm or whether they would prefer a more secure position in the
market. Once longer-term goals are established, Flexihire may be used as a
bridge, providing time and income to facilitate a strategic programme of skills
To move back into the firm, individuals will need to obtain more firmspecific training. Firm or industry tailored training programmes would be
most beneficial in this instance. If they wish to move into the market,
however, they would need to deepen their non-firm-specific knowledge.
Joining Mediated service suppliers such as staffing services agencies, for
instance, could provide increased stability to their career and less dependence
on their former employer. Staffing agencies such as Manpower, Adecco and
Kelly Services are nowadays multibillion dollar global players and staffing
services is one of the fastest growth industries in the world (Burton-Jones,
1999). There is a great opportunity for education and training institutions to
partner with Mediated service suppliers to train individuals in generic skills
demanded by the market.
As with individuals in the Flexihire group, those working via Mediated
services providers must determine whether they wish to remain in the market
or whether they wish to gain more firm-specific knowledge and return to
regular employment. If they decide to remain in Mediated services, these
individuals must ensure that they remain up to date with the generic
knowledge demanded by the market. It will be necessary for them to
continually upgrade their skills. IT contract staff, for instance, must ensure that
they keep up with new versions of programs and computer environments to
ensure that their knowledge is still current. Fortunately, it is likely that most
Mediated service suppliers will realise the demand for continual training
among their workforces and will either develop or align with educational
providers capable of delivering the required training and qualifications.
Unlike individuals in the Mediated services sector, Dependent
contractors must continue to develop firm- and industry-specific skills.


Preferred learning institutions for this market will be those that can tailor their
programmes to these firms and industries. For many Dependent contractors,
firms will see that it is in their best interests to fund training for these
individuals. In the legal firm cited earlier, for example, law firms may provide
short courses in legal evidence for the scientists whom they rely on to provide
them with expert opinions in relation to evidence. In the case of McDonalds,
its Dependent contractors are its franchisees. McDonalds has realised that
providing detailed training in its unique business methods and processes
provides a benefit for both itself and its franchisees through its famous
Hamburger Universities. Unfortunately, such win-win situations do not
always exist in the Dependent contracting market. In some instances,
particularly where there is competition among Dependent contractors for
supplying the same firm, the firm may not need to invest in training for those
contractors. In these instances, the contractors may have to fund their own
training or else move back into the firm.
While Dependent contractors require firm- or industry-specific training,
Independent contractors require to keep their generic skills at the cutting
edge. This involves frequent interaction with learning institutions to deepen
their area of specialisation. As a result, Independent contractors may choose to
undergo ongoing training from several educational institutions over their
working lives. The Internet and advances in e-learning now allow Independent
contractors to search more widely than before to find the educational
institution that best meets their requirements.
To maintain their positions in the market, Dependent and Independent
contractors must also increase their tacit knowledge. While e-learning
programs provide a flexible and potentially tailored training environment, they
are generally not considered as effective as face-to-face teaching in imparting
tacit knowledge. Given the predicted growth in demand for such knowledge,
particularly among contractors, there would appear to be a parallel market
emerging alongside e-learning, for more personalised, face-to-face learning.
Where specialist tacit knowledge is required, an expanding role can be
envisaged, for instance, for retired professionals to provide mentoring services
to contractors and to staff in the firm. Work experience acquired over a
lifetime can thus be reused on a cost effective and flexible basis to the benefit
of all parties. Other methods of acquiring tacit knowledge are through social
networks and communities of individuals with common professional interests.
The Learning Business
The accelerating rate of knowledge growth and replacement in the modern
economy implies that individuals can no longer rely on the knowledge they
acquired during their formal education and prior to entering the workplace.
The changes that are occurring to the relationship between work and learning
are typified in the concepts of Mode 1 and Mode 2 knowledge suggested by
Gibbons et al (Gibbons et al, 1994). Typical characteristics of Mode 1

Alan Burton-Jones

knowledge production are that it occurs in an academic context, has a single

disciplinary focus, reflects a homogeneity of skills, is constructed and used
within hierarchies, and has narrowly (and rigorously) defined quality control.
Mode 2 knowledge production is characterised by its occurrence largely in the
context of its use and typically in a quasi-social context, having a
multidisciplinary focus, demanding heterogeneous skills and diverse
organisational structures and being subject to more broadly based quality
This typology is consistent with the direction of change predicted by the
Knowledge Supply Model, towards firms achieving competitive differentiation
through constant development of firm-specific and strategically valuable
capabilities. On the other hand, as noted earlier, both individuals and firms
require to maintain and enhance their generic skills. The challenge for
education and training providers is to develop and facilitate programmes that
match and where possible combine solutions to these divergent requirements.
While traditional learning institutions may not have a direct role in
providing internal firm-specific training, there are great opportunities to assist
firms in creating their own programmes. Organisations will increasingly need
expert assistance, for example, in learning how to establish, maintain, and
monitor coaching schemes, conduct storytelling sessions, abstract and
disseminate lessons learned on the job, and create learning and knowledge
sharing communities.
One approach to resolving firm-specific educational needs has been to
establish corporate universities. Firms as diverse as Motorola, Disney
Corporation, Pfizer and BT have, for example, followed this route. Where the
training is naturally highly firm-specific, there is less need for external
involvement. In other cases, however, where a mix of generic and firm-specific
training is involved and external accreditation is important, then collaboration
between firms and educational institutions is likely to be a better route. British
Aerospace, for example, chose this approach in linking with a number of
United Kingdom universities to both deliver and accredit training from its
virtual university (Burton-Jones, 1999). Such approaches also offer
opportunities to improve cross-disciplinary and multidisciplinary training for
existing firm staff, by communal enrolment in particular courses.
One of the main implications of the knowledge economy for individuals
in all knowledge sectors will be choosing among the many educational
offerings available. There is an opportunity, therefore, for specialist Mediated
service suppliers to provide new services, to assist individuals in the tasks
necessary for finding, choosing, enrolling, and completing educational courses.
Such organisations could perform comprehensive searches (potentially global
searches) of training options available, analysis and (potentially) ranking of
training programmes (e.g. in terms of quality and cost), matching of
programmes to individual requirements, and services to reduce the
administrative overhead for individuals in enrolling and completing their
courses. Another area of demand in the new economy will be for funding for


education and training. One of the services offered by intermediaries, for

instance, could be a specialist finance package to assist individuals pay for their
education and training.
In a market where the number and variety of training programmes and
qualifications are rapidly increasing, another valuable role for intermediaries is
to assist with accreditation of qualifications. Many countries have now
developed National Qualifications Frameworks that allow learners to
accumulate credits towards achievement of qualifications over time and at
their own pace. Learners are assessed against nationally agreed standards. The
standards are typically prepared by expert groups in consultation with relevant
stakeholders from different learning areas, industries and government. Credits
can be accumulated from different educational centres or in the workplace and
contribute to a single qualification. Only accredited organisations are able to
assess learners performance against standards and to award qualifications.
The growth in both volume and diversity of demand for learning
suggests major opportunities for both existing and new educational service
providers. As education shifts from being teacher to learner driven, costeffective and flexible access for individuals to learning resources becomes
paramount. This means being able to access such resources from home, in the
office and while mobile. The United Kingdom Open University remains one of
the surprisingly few educational institutions specifically created and equipped
technologically to meet this type of learning demand. Technologies to achieve
these flexible modes of access and delivery are, however, daily becoming more
widely available and cost-effective. Traditional educational institutions can
borrow from the more successful media businesses to deliver training and
learning resources that satisfy market needs for flexible low-cost learning.
Likewise, there is an opportunity for the media industry to exploit the learning
market as a relatively untapped major business opportunity at least equal in
size to that for infotainment.
There is, however, a dark side as well as a bright side to the new
economy. The trends noted earlier towards progressive automation or
externalisation of Peripheral jobs means that an increasing percentage of those
workers will become unemployable or reduced to low-paid and mentally
unchallenging jobs in a permanent Flexihire limbo. As firms increasingly
compete on the basis of their intellectual capabilities, the bar to entrance is
likely to get higher, further worsening the position of both the Peripheral and
Flexihire groups. Meantime, earning differentials between the knowledge rich
and knowledge poor continue to widen, leading to the spectre of a burgeoning
knowledge underclass with all the social and political consequences potentially
entailed. Efforts by government to promote apprenticeships and work sharing
schemes in affected areas of the economy need to be linked to strong
incentives for both firms and workers to commit to long-term learning
programmes. Firms cannot be artificially induced to retain staff they do not
need, however; the problem can only ultimately be solved by helping people
to help themselves. Complementary policies must therefore include massively

Alan Burton-Jones

improving public awareness of the need for lifelong learning, reducing rather
than increasing the cost of access to academic training, and encouraging new
entrants into educational service provision.
The Knowledge Supply Model and associated models outlined in this article
provide a methodological framework to help firms and individuals determine
how best to achieve their learning and knowledge management objectives. A
range of policies and strategies is also suggested that may be usefully pursued
by policy-makers and educational service providers to meet learning demand.
By systematically modelling and identifying knowledge assets and
knowledge gaps, firms will be better able to identify their core competencies
and improve their perception of learning needs. By developing a model of
strategic knowledge demand and supply, they can optimise their investments
in both acquiring and developing knowledge internally, and accessing it
externally. Similarly, understanding the growing importance of firm-specific
and tacit knowledge, as well as cross-disciplinary knowledge transfer, can help
firms predict and plan knowledge growth strategies, design more effective
learning programmes and make better choices regarding educational suppliers
and use of technologies.
For individuals, understanding the nature of knowledge demand from
particular industries and firms should help them to plan their careers. Workers
will be able to decide whether they intend to stay within a particular firm or
chart a more independent course in the market. Given the trend to shorter job
tenures and multiple careers in a workers lifetime, this type of assessment will
need to be conducted continuously rather than merely prior to joining the
workforce, as in the past. Understanding the characteristics of different
knowledge markets will suggest, in turn, the type of education and training
likely to benefit workers most in the long term. For those in the Peripheral and
Flexihire Groups, engaging in appropriate learning programmes will be critical
to expanding their career options. Mediated service providers can play an
increasingly important role in assisting with both career counselling and
training for members of these groups. Dependent and Independent
Contractors will also need to engage in continuous learning in order to
maintain their market appeal. As well as e-learning for generic subjects,
personal mentoring, coaching and community development will be
increasingly used to transfer tacit skills.
The Knowledge Supply model also helps learning institutions understand
the differences in demand among market sectors, and highlights opportunities
for further expansion and growth of these enterprises. It is particularly useful
for identifying where mechanisms may be required to smooth the transitions
between formal education, informal learning and work. Such mechanisms
may range from collaborating with industry groups to develop tailored
educational programmes, to partnering Mediated service providers, and to


providing expert assistance to firms on specialised aspects of learning and

knowledge transfer.
As working and learning become synonymous, firms, workers, educators
and intermediaries will all have to adopt new roles and develop new strategies.
Understanding the dynamics of knowledge demand and supply should assist all
the actors in navigating the knowledge markets of the new economy.
Alan Burton-Jones, 20/26 Lower River Terrace, South Brisbane, Queensland
4101, Australia (;
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