Since the start of civilised society, economic growth has been dependent on the organisation of the means of production and distribution.
In agrarian societies, the means of production were as simple as the shovel and the soil.
In the wake of the Industrial Revolution, however, the instruments and subjects of labour multiplied and became more complex.
Still, the fundamental nature of the economy remained relatively unchanged.
There were tangible inputs — raw materials like crude oil and bauxite — and once they’d been processed you had tangible outputs — goods like plastic buckets and bicycles that could be shipped to almost any market in the world.
Then along came the modern computer, the internet, and globalisation, and, hey presto, the information age was born.
And in the information age, the traditional industrial economy is increasingly being usurped by the knowledge economy.
In a knowledge economy, growth and innovation are driven by the “quantity, quality, and accessibility of the information available”, rather than the means of production.
So what does this mean for your business?
There are two general implications that resonate across most industries and sectors.
First, your business must be prepared for a certain degree of instability. Novel technologies and methods are emerging almost every day, and the potential for at least some of them to disrupt the market is incredibly high.
And second, your workforce is your most important asset when it comes to dealing with this volatility, even more so than any fixed assets that you might have on your books.
Since knowledge is the key input—and in some cases, output—in today’s economy, the businesses that thrive are the ones that invest in their employees to make sure that they have the right skillset.
There are three principal ways of doing this.
One of the most common mistakes that CEOs, directors, and managers make is to assume that a company’s responsibility for training its employees ends once the initial review period is over.
That’s a recipe for disaster.
Successful businesses recognise that the economy is in a constant state of flux, and on that basis, ensure that their workers are always ahead of the curve.
In practical terms, this means encouraging continual employee development, from mentoring initiatives and seminars to one on one tutoring and workshops.
Whatever programme or programmes you end up adopting, the crucial thing is to invest in human capital over the long-term.
This is all very well and good for big firms, but smaller ones might not have the resources to arrange and administer in-house training schemes.
For them, the best course of action can often be to pay for promising employees to enrol on a distance learning course.
This is an attractive option because it doesn’t drain time and money from your core operations. What’s more, it has the potential to produce significant returns, especially in the long-run.
Several well-respected universities offer distance learning courses, with diplomas, undergraduate degrees and Masters degrees (including MBAs) all available.
It is, however, essential to establish some ground rules (in other words, contractual obligations) before going down this route. The last thing you want is to sponsor an employee only for them to jump ship to another firm once they’ve acquired a shiny new certificate.
No businesses would be senseless enough to avoid auditing its inventory and accounts, so why do so many fail to carry out competency audits?
Again, at the risk of sounding like a broke record, human capital is the key aspect of value in the knowledge economy.
It makes sense, then, for every business, whether big or small, to devise a robust framework that establishes what competencies are important, how these competencies can be evaluated in the workforce, and what measures need to be put in place to improve the attainment of these competencies.
This should help decision-makers to recognise what success looks like and, more importantly, how to achieve it.