flowing motion

Turn the business models in knowledge network industries the right way up again

Posted on: March 13, 2010

Business models in knowledge network industries

Earlier today, I commented on a post by Jon Husband and it released for me an understanding about university business models that has lain around in the back of my mind for a number of years.

Most of us see one side of universities – the extension of high school. We arrive as undergraduates and we can be forgiven for thinking the university is about us.  After all, we only see what we are involved with.

Universities don’t care all that much about undergraduates though.  Oh, yes, students are there.  And they must be taught properly.

But universities care about research.  And they care about research for a good reason.  Because when undergraduates are taught by someone who is actively developing the discipline, then students learn to think about where the discipline is going and how it will get there.

The ‘knowledge’ they acquire is very different from the ‘knowledge’ acquired from someone who knows the current state of the field but who sees it as a static subject.

Herein lies the difficulty for universties.  Knoweledge isn’t created within universities. It is created between them.  It is created in the give-and-take between active researchers in the discipline.

To be a ‘player’, a university must be able to fund a researcher. This means a salary, pension & insurances,  office space, computers, libraries, laboratories and international travel to conferences and meetings.  For all this, a lecturer (professor) normally delivers 4 lectures a week for about 25 weeks and hosts a handful of tutorials or labs.

In so far as money comes from government, clearly the amount provided must allow this level of activity and the quality of a university  is dependent on providing this funding.  A university can be a player in the great game of knowledge development if it has a lot of money.

Turning business models on their heads

Universities have tried to reverse this model where research activity brings in revenue.  This is all very well, but value is not created within the university.   It is created by having the “table stakes” to take part in the supply chain (or network)  that is cutting edge research.  Turning things on its head is a good try but it won’t work.

Consulting firms often try the same gambit.  They try to hire in staff hoping the staff will bring in the clients.

Turning business models the right way up again

The thinking needs to be turned around.

If we want to be players in the development of business systems in this town, then what will it take?  What endowment is needed to support the people who are working with other people in other firms to define the cutting edge?

For people entering either industry as researchers or consultants (as opposed to equity and working capital providers), then we ask other question?

  • What part of the supply chain/network do we want to work in?
  • Who takes up our work and on whose work do we depend?
  • How and where do we get together to work out goals for the whole of our supply chain/network?

That’s the thinking that turns us into  players.

Managing in knowledge network industries

For HR manages and other system designers, we have to remember this essential fact: we cannot produce knowledge within the firm.

Knowledge is created when we work on projects with people in other firms.   So we are not ‘in control’.  All we can ask is what does it take to be a player in this game?

When we undertand this question, and we depend on our ‘employees’ to explain the game to us, then we can broker the resources to allow us to host chunks of the game.

This is simply not a factory model where we make something and sell something.  This a game where we negotiate participation in a supply chain network that is advantageous to our stakeholders.

To take an example, in physics, obviously we want representation at CERN.   And so it goes with other subjects too.  Which are the frontiers where we want to be represented?  Why?  When we understand the what and the why, we might know who is motivated to pay.

We are brokers in these businesses, not managers or even private equity players.  If anyone suggests otherwise, you can be sure that business is not cutting edge.  It can’t be.  No enterprise has such a narrow knowledge base that it can be cutting edge and under the control of a handful of people.

Our job in knowledge work is to have knowledge workers on one hand and people who need knowledge on the other.   And broker the match.

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