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Read Finegold’s related article What Do Employees Really Want?

World Economic Forum website

Time Magazine Europe’s coverage of Davos

David Finegold’s homepage

The Center for Effective Organizations (CEO) is based at the University of Southern California’s Marshall School of Business. For over 20 years, the CEO has conducted action research in partnership with its more than 50 global sponsor companies. The CEO’s research covers a wide range of topics related to organizational effectiveness, from the design of firms to their knowledge management and human resource practices.

Corporate Boards: New Strategies for Adding Value at the Top J. Conger, E. Lawler, D. Finegold, (John Wiley & Sons, 2001)

The German Skills Machine: Sustaining Comparative Advantage in a Global Economy P.D. Culpepper, D. Finegold editors. (Berghahn Books, 2000)

Are Skills the Answer? The Political Economy of Skill Creation in Advanced Industrial Countries C. Crouch, D. Finegold, M. Sako. (Oxford University Press, 1999)

The Decline of the U.S. Machine-Tool Industry and Prospects for Its Sustainable Recovery D. Finegold (Rand Corporation, 1994)

Something Borrowed, Something Learned? The Transatlantic Market in Education and Training Reform D. Finegold, L. McFarland, W. Richardson, editors. (Brookings Institute, 1993)

Many of his recent publications can be found at the Center for Effective Organizations web site: www.marshall.usc.edu/ceo.

See also “Individualizing the Organization: Past, Present and Future,” E. Lawler and D. Finegold. Organizational Dynamics, Summer 2000, 1-15.

The World Economic Forum’s 2001 Annual Meeting (WEF) in Davos, Switzerland brought together more than 50 heads of state, 1,000s of top executives from global corporations and dot.coms, leading academic experts and artists from a vast array of fields, plus the odd celebrity who requires only one name (Oprah, Bono). In the news, but not in the conference itself, were a diverse group of protestors disenchanted with the path globalization is taking. After the riots at the World Trade Organization’s recent meetings, the Swiss took no chances, surrounding Davos with roadblocks that kept protestors away from the meeting and ski slopes with a combination of small arms, riot cannons, and some odd craft-looking rattan riot shields.

When LiNE Zine learned I’d be attending Davos, they asked me to record my personal impressions of the most interesting new ideas shared there relating to learning in the new economy. Given the theme of this year’s WEF meeting, “Bridging the Digital Divide,” and the consensus summarized by HP CEO Carly Fiorina, that knowledge workers would be the most important resource for the “21st Century Corporation,” there was surprisingly little attention devoted directly to learning. Thus, my comments will concentrate on key trends in technology, the new economy, and the implications for learning that I saw a hint of there.

The New Economy

Unlike last year’s WEF Meeting, where the Net was virtually synonymous with the “new economy,” this year’s sessions had a far healthier balance among different sectors and new technologies. The Net was a still a major topic, with a particular focus on business-to-business, broadband, and wireless. (All attendees received a first-hand taste of the wireless revolution when they were given a free iPaq handheld PC that enabled them to exchange emails with other participants and access the Web for selected news sites during the meeting). But at least equal attention was devoted to the genetic revolution, which is likely to make the Life Sciences—ranging from biotechnology to pharmaceuticals to agriculture—the largest sector of the global economy by 2020.

In addition, a panel that included Xerox Parc’s Retiring Chief Scientist John Seely Brown, Carnegie Mellon’s Raj Reddy, and Cal Tech’s Nate Lewis cited and demonstrated other exciting technologies already under development that we can look forward to as we move into an age that, according to Brown, will be marked by “fusing bits and atoms.” These exciting technologies include:

    Miniature handheld devices that will use voice input and be powered by tiny fuel cells or “gastrobots” that eat for energy (e.g., a jelly donut contains more energy than most batteries).

    A digital nose that can identify an odor and send its signature over the Net.

    Smart materials able to self-organize in response to their environment, including digital clay that can be used for anything from kids’ toys to self-repairing objects, or rapid prototyping.

    Smart car transmissions that can eliminate the vast energy wasted when cars are idling.

    Walking wheelchairs that can climb stairs.

    Re-writable, flexible e-paper onto which we can download a book or daily newspaper.

The Net Economy

Even among these cool advances, the Net was still recognized as a major enabling technology that will transform virtually all aspects of our lives and work. Indeed, the Net is likely to be so pervasive that most argued for dropping the distinction between old and new economy firms. Net-enabling the key processes of the organization will become table stakes for firms that want to succeed in the global economy. Sustainable competitive advantage will require going beyond automating transactions to building a network of partners who can come together to deliver a distinctive set of products and services that creates real value for customers.

The CEO of large firms that filled the conference saw the decline in dot.coms making it much easier for existing organizations to attract the talent needed to transform their businesses. If these organizations are to succeed, however, they will need to use the Net to reinvent their organizations and how they relate to their employees. I was fortunate to be able to present the new results of a multi-year research project (see accompanying article), in which we found individuals have very different objectives from work and that the Net can be a powerful tool for individualizing the employment relationship.

The greatest near-term prospects for the Net appear to be in the business-to-business sector. The existing business-to-business exchanges being formed by consortia of the largest buyers in different sectors, however, were judged unlikely to succeed. Their unwieldy governance arrangements and the reluctance of the key players to share vital business information with competitors makes it hard for them to operate with the speed and flexibility needed in these rapidly evolving markets. Rather, Net experts such as John Hagel, author of Net Gain and Net Worth, and Masayoshi Son, founder and CEO of Softbank, saw more promise in private networks, such as Dell’s and Cisco’s, where companies create deep, long-term alliances with strategic partners to enable them to share information seamlessly across a virtual value chain. Sustaining such alliances is difficult, noted Son, and thus creates a potential competitive edge for those firms that can make them work: “It is hard to share the benefits 50:50 in each joint venture. So, we seek out partners, like Cisco and Microsoft, where we can do a series of things over time. On some they may get 70% of the benefits, on others we will, but the overall goal of the partnership is that we both benefit equally.”

Son also noted dramatic shifts underway in the global Net population likely to have a profound impact on the U.S.’s dominance of this new technology. Currently, there are roughly 300 million Net users worldwide, with about half based in the U.S. (down from 60% last year). By 2005 he expects there to be 1 billion Net users, with the U.S. and Europe each accounting for just 20% compared with 500 million users in Asia. (Note: I think this significantly underestimates the number of users likely to be in other parts of the world, particularly Latin America.) As a result, the locus of innovation and Net activity will shift significantly toward Asia.

These shifts are already underway. Japan has pioneered the use of the wireless Net, which DoCoMo is now extending worldwide through strategic investments and partnerships. South Korea, which last year had only 250,000 broadband users, now has 4 million thanks to major state investment and deregulation of the telecommunications market. This compares with approximately 6 million current broadband users in the U.S. Korea’s infrastructure has already led to the growth of major new application industries, with the most popular being movies on demand, video chatrooms and collaborative on-line video games. Son’s confidence in the growth of the Asian market was signaled during the WEF meeting, when Softbank announced the creation of a strategic partnership with Cisco to invest over $1 billion in companies that will be building the next generation Net for Asia.

Like optical and broadband technology, memory technology has been progressing even more quickly than Moore’s law, according to Reddy. With the capacity of $1 worth of memory doubling every year, it may soon be possible for individuals to wear a small device that records all their sensory experiences.

This device may be one means to help us deal with the vast explosion of information that the Net and other digital technologies have spurred. Michael Lynch, founder and CEO of Autonomy, estimated that the total amount of recorded digital information is being doubled every three months. His firm is a leader in another Net-related technology—smart agents—that may be even more useful in coping with the information explosion. While he concludes that the potential of smart agents to fully automate on-line transactions has been greatly exaggerated, his firm is already using them to help employees in a majority of the Fortune 1,000 with tasks such as automatic searching of key external information sources and prioritization of email.

Learning in the New Economy

According to Cisco’s John Chambers: “Elearning will be the application of the 3rd wave of the Internet. The first wave of the Net was about automating transactions and key processes. We saved $1.4 billion by putting six key processes on-line. When we put customer support on-line, we got a 200 percent increase in productivity, and even better, now our customers would rather use the Net than speak with a person to solve their problems. We’re now in the second wave of the Net, where things like virtual manufacturing and the virtual close are transforming the organization. When you can close your books each day, it takes empowerment to an entirely new level, since everyone in the organization has the information they need to assess how we’re doing, how the environment is changing, and what we need to do to respond.”

But despite these dramatic pronouncements, in most organizations, elearning does not appear to have reached its full potential. A few leading firms, such as Dell, Qualcomm, and IBM now deliver a high percentage of their training totally on-line or supported with net-based material and exercises. Many other WEF participants have experimented with a few elearning applications, but elearning is still a rarity in most organizations. Among the most important factors hampering the diffusion of elearning in firms appear to be the lack of broadband infrastructure and the substantial costs of developing high quality, engaging courses.

In the education sector, some countries have made substantial strides in overcoming the pipeline problem. Singapore already has broadband connections in all of its educational institutions and Britain hopes to have finished wiring all of its schools by 2002. It is not the technology, but people and organizational issues that appear to be slowing the effective use of the Net to raise the quality of education in the developed countries.

Among the barriers identified during the WEF meeting were:

    Trying to deliver the skills for the digital economy with an industrial model of education delivery operating on an agricultural society’s timetable;

    A teaching workforce that often knows less about the Net and computers than their young pupils;

    An educating budgeting process that allocates 85% of salaries for staffing, and less than 1% of resources for new product development.

For the developing nations, the problem is far more severe, but some interesting projects are underway. Cisco has built Networking Academies in all of the main countries where it does business, including China and India as well as U.S. inner cities, often increasing achievement scores by 50% or more over prior levels through a combination of web-enabled learning and high standards. Reddy is heading the Universal Library effort to put most of the world’s great books and art on line so individuals all over the world will have access to the information. And Ayisi Makatiani, is attempting to provide an entire continent, which has fewer phones than New York City, with access to this knowledge through Africa Online. He noted, however, some of the problems with this high tech vision of access: “When we had a book, we could duplicate it for all of the children. But with limited wireless access, it is much harder to share the information among students.”

Indian software entrepreneur, Vinay Deshpande, observed that one of the reasons for the lack of access was that PC and device makers were targeting high-end products to the West’s wealthy consumers, instead of using existing technologies to build an inexpensive appliance that a much higher percentage of the world’s population could afford. What is needed is the equivalent of the recent introduction of hand-cranked radios, which have enabled remote users without reliable sources of power to listen to news and music from around the world.

Despite these obstacles, the wonderful potential of the Net for enabling self-learning among even the most deprived children, such as those wandering the streets of India, was demonstrated at Davos with a short video. It showed an experiment where a computer and keyboard hooked up to the Net were placed in the wall of a building on an Indian street, with no written instructions. Within a few minutes, children had gathered and not only figured out how to operate it, but had logged onto the Disney channel.

A very different film by Oliviero Toscani, however, officially opened the 2001 WEF meeting, illustrating that even if it were possible to bridge the Digital Divide, it would not solve many of the developing world’s greatest problems. His film juxtaposed images of malnourished children and war refugees with pictures of the some of the great technological achievements of the 20th century. The not so subtle sub-text was that while we’d invested in putting a man on the moon, we were unwilling to devote similar resources to providing the necessities of life (food, clean water, vaccines) to the world’s children.

The Gift

Of all the wonderful sessions at Davos, for me the most rewarding and unusual learning experience came on the final evening, courtesy of England’s Medici String Quartet. These four talented musicians had worked for several months with Hugh Pidgeon of Ashridge Management College to explore the factors that had helped make them a creative team. This prolonged individual and group therapy session culminated in the production of “The Gift,” which received its world debut at Davos. The Gift combined short excerpts from many of the world’s most famous music for string quartets with commentary from each of the four on the unique balance of talent and personalities and the interactions among them that contributed to their distinctive sound and success over the last 30 years. I learned more about music in that hour than I had in my whole life to that point. A video of their performance, simulcast by broadband to schools throughout the world with the Quartet available by email to answer questions, might be the most lasting contribution to elearning that the 2001 WEF meeting could make.

David Finegold is an Associate Research Professor at the Center for Effective Organizations. He is the author or editor of many articles and books on topics ranging from the changing employment relationship and international comparisons of skill development to corporate governance and high-skill ecosystems. These include: The German Skills Machine: Sustaining Comparative Advantage in a Global Economy,Are Skills the Answer?, Net-Enabled: Designing Organizations for the Internet Economy and Corporate Boards: Adding Value at the Top.

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