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Did Someone Press The Reset Button On Drucker’s Knowledge Economy?

Feature Article | July 1, 2016 by Dinesh Sharma

“Every few hundred years throughout Western history, a sharp transformation has occurred,” observed Peter Drucker in his 1992 Harvard Business Review (HBR) essay.

“In a matter of decades, society altogether rearranges itself – its worldview, its basic values, its social and political structures, its arts, its key institutions. Fifty years later a new world exists. And the people born into that world cannot even imagine the world in which their grandparents lived and into which their own parents were born. Our age is such a period of transformation.”

For Drucker, the newest “new world” was marked, above all, by one dominant factor: “The shift to a knowledge society.” In his HBR piece, Drucker suggested that our great transformation would be complete by 2010 or 2020.

It’s 2016 and the world described by Drucker still hasn’t completely manifested itself – and I propose that his described end-state never will. Previously, I mentioned that we are all entering a new era of hyperconnectivity. What we see is a pattern emerging: Hyperconnectivity driving down the cost of knowledge work. This is a profound change for businesses in every sector.

Real-Time Data Availability Changes Everything

Hyperconnectivity is part of a new era in which the traditional rules of Peter Drucker’s knowledge economy are being replaced by the latest thinking around the digital economy. Instead of being the cornerstone and accelerating to become the basis for the new world described in Drucker’s 1992 essay, the knowledge economy is being undercut – especially traditional approaches such as gathering, processing, and moving data while spending time building reports passed along to other parts of the organization. In the end, this means a digital economy that emphasizes predictive-, scenario-, and prognosis-based decision making based on the central concept of real-time data availability.

Take Rio Tinto, for example. The company operates a remote monitoring center in Brisbane, Australia, that has real-time connections to mines in Mongolia and the United States, as well as its native Australia. By using this process center of excellence approach to manage its copper and thermal coal mines, its experts can provide real-time feedback and suggestions for improvement, which can be implemented in real-time by the teams at the mining site.

Enabling the mining equipment to coordinate mine management through the remote monitoring center has been a true game changer. First of all, truck operating costs are lower, both in terms of reduced fuel consumption, less tire wear, and longer gaps between maintenance. These benefits are driven by enabling more consistent driving patterns, including measured braking and acceleration resulting from algorithms embedded in the system. Plus, logistics planners are creating and implementing genuine, best-in-class trips through algorithms that combine the knowledge and experience of all previous trips. This is very tough for human beings to replicate, since a human driver cannot be expected to deliver and use the most-efficient route on every section of each trip.

This new application of data is a marked contrast to the knowledge economy approach, which emphasized information gathering from the trucks, analysis of the data to determine consistent patterns, and dissemination of updated best-practice instructions that would probably not be followed due to real-world situations. Nevertheless, you can see how hyperconnectivity has absorbed some of the advantages typically assigned to the knowledge economy.

For more on the digital economy and its impact, check out the research paper “Live Business: The Digitization of Everything” on Digitalist Magazine. 

Dinesh Sharma is vice president, Marketing, Internet of Things, at SAP.

This story originally appeared on The Digitalist as part of the 10 Weeks of Live Business series.

Top image via Shutterstock

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