Knowledge and Wisdom:

1
Knowledge and Wisdom Towards A Globally
Competitive City
Sapientia et doctrina
Milan Zeleny Fordham University in New York, USA
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Four types of Capital

• Man-made capital, produced physical assets of
  infrastructures, technologies, buildings and
  means of transportation. This is the manufactured
  hardware of nations. This national hardware
  must be continually maintained, renewed and
  modernized to assure its continued productivity,
  efficiency and effectiveness.
• Natural capital, i.e., nature-produced, renewed
  and reproduced inputs of land, water, air, raw
  materials, biomass and organisms. Natural capital
  is subject to both renewable and non-renewable
  depletion, degradation, cultivation, recycling
  and reuse.
• Human capital (or human resources) refers to the
  continued investment in peoples skills,
  knowledge, education, health nutrition,
  abilities, motivation and effort. This is the
  software and brainware of a nation, perhaps
  the most important form of capital for rapidly
  developing nations.
• Social capital is the enabling infrastructure of
  institutions, civic communities, cultural and
  national cohesion, collective and family values,
  trust, traditions, respect and the sense of
  belonging. This is the voluntary, spontaneous
  social order which cannot be engineered, but
  its self-production (autopoiesis) can be
  nurtured, supported and cultivated.

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Portfolio of national capitalRich countries

• Italy (373,000 82, 15, 3)
• Belgium (384,000 83, 16, 2)
• Netherlands (379,000 80, 18, 2)
• Japan (565,000 81, 18, 2)
• Switzerland (647,000 78, 19, 3)
• Luxembourg (658,000 83, 12, 4)

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Portfolio of national capitalPoor countries

• Ethiopia (1,400 40, 21, 39)
• Sierra Leone (2, 900 14, 18, 68)
• Bhutan (6,500 8, 7, 85)
• Zambia (13,000 9, 18, 73)

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Moving From Or Strategy to And Strategy

• Global Producer Global Customer
• Cost Cost
• OR Quality AND Quality
• OR Speed AND Speed
• OR Reliability AND Reliability
• OR AND

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Human and Social Capital are most importantHow
to create Knowledge/Innovation City or Region?

• The Innovation strategy is created bottom-up as
  an outcome of collective entrepreneurship
  through cooperation among Business, Government
  and University the BGU Triad.
• The key event is the creation of an
  Entrepreneurial University (EU), which takes
  initiatives together with government and industry
  to create a support structure for firm formation
  and regional growth.
• The common objective of knowledge-based economic
  development efforts everywhere in the world is
  the creation of an Innovating Region. An
  Innovating Region (Or Knowledge-Wisdom City)
  has the capability to periodically renew itself
  through new technologies and firms generated from
  its BGU Triad cooperation.

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BGU Triad
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BGU

• Business driving sphere wealth producer,
  source of added value and competitiveness of the
  region, creation of employment opportunities,
  development of human capital in cooperation with
  the university sphere
• Government enabling sphere, supporting factor
  creates the optimal conditions for both driving
  spheres, i.e. physical, institutional and social
  infrastructure, for effective functioning of
  cooperation between university and business
  spheres.
• University driving sphere creation of human
  capital, production and transfer of information,
  knowledge and wisdom in cooperation with business
  sphere.
• Socio-Cultural Environment creates the social
  capital through cultural traditions, social
  institutions, values and preferences, behavior
  and habits, trust and cooperation. It evolves
  relatively slowly and cannot be changed
  overnight.

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Linköping, Sweden

• Linköping, Sweden - Innovating Region
• Traditional dyads of universitygovernment or
  governmentindustry are insufficient in Global
  era must be transformed into BGU Triad
• Transition to Knowledge-based society is basic
  premise of the Triad model
• The Triad model
• More prominent role for the university in
  innovation, on a par with industry and government
  in a knowledgebased society
• Cooperative relationships among the three major
  institutional spheres innovation policy is
  outcome of interaction, not a prescription from
  government.
• Each institutional sphere also takes the role of
  the other. Entrepreneurial university, taking
  some of the traditional roles of industry and
  government, is the core institution of Innovating
  Region.
• A region with a traditional cluster of SME firms,
  rooted in a particular technological paradigm is
  in danger of decline once that paradigm runs out.

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Active University Role

• Active role for the university in economic and
  social development, rather than merely playing a
  supporting role providing human capital and
  research resources, is the defining
  characteristic of the Entrepreneurial university.
• The university is especially suitable site for
  innovation
• 1. High rate of flow through of human capital in
  the form of students who are a source of
  potential inventors. The university is a natural
  incubator.
• 2. Potential source of new interdisciplinary
  scientific fields and new industrial sectors,
  each cross-fertilizing the other.
• 3. Overlapping network of academic research
  groups and start-up firms, with alliances among
  large firms.
• People representing the Triad functions science
  park and incubator directors, the university, the
  municipality, the regional county, council,
  private firms, and small business support
  networks.

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The Entrepreneurial University

• The entrepreneurial model based on action,
  producing new firms
• Business is a profession and business schools are
  professional schools
• Professions 1. accepted body of knowledge, 2.
  certified practice, 3. code of ethics, 4. serving
  the public, focusing on clients needs.
• Education in business must involve history, moral
  reasoning, theology, logic and most importantly
  practical knowledge, wisdom and ethics.
• Bennis and OToole The problem is not that
  business schools have embraced scientific rigor
  but that they have forsaken other forms of
  knowledge.
• The entrepreneurial university based on the
  Triad of cooperation
• UNIVERSITY STATE - BUSINESS

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Digital City Shanghai Digital City Strategy
Waitakere, New Zealand

• Shanghai Municipal Government announced in 2000
  the Digital City Shanghai strategy
• Digital City Strategy Waitakere, New Zealand
• To deliver the Digital City - Four core concepts
• 1. Actions need focus
• coordinate the delivery of solutions that add
  most value through rigorous measurement and
  prioritization of projects
• 2. Work smarter
• By working together maximize the efficient use
  of time, people and money.
• 3. Mobilize support for change
• Ownership of the Digital City Strategy by City
  council, businesses and universities to ensure
  words are turned into actions and actions into
  results
• 4. Stakeholders
• Digital City Strategy will involve many
  stakeholders
• ? Business
• ? Government
• ? Community agencies and groups
• ? City Council
• ? Education and University
• ? Individual citizens

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São Paulo, Brazil

• Knowledge City
• approved by the University of São Paulo, now
  under construction with the support of banks,
  high tech companies (IBM), NGOs, important media
  groups in Brazil as well as developing a global
  network of knowledge cities.
• Only if organizational culture and knowledge
  producing cycles follow creative, innovative
  paths can evolution take place.
• Four main themes
• 1. Relation of global and local
• 2. Transformation of educational systems,
  problems of governing and governability
• 3. Relation of intellectuals and knowledge in the
  problem of educational change
• 4. Relation of knowledge management methods and
  educational reform
• In other words
• Knowledge Creation
• Continuous Innovation
• Competitive Advantage
• Traditional observers view the organization as a
  machine for information processing tradition
• Needed is a biological view of organization as a
  knowledge producing organism
• win/win solutions can be created
• learn from failures and setbacks of others

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Manchester Ideopolis, Knowledge City-Region

• Manchester City Council Ideopolis Knowledge
  City-Region
• 1. National priorities create a framework for
  local priorities in a way that best meets local
  needs
• 2. Government policy needs to be more local
• 3. Regional institutions provide a framework that
  encourages Ideopolises to work together within
  the region.
• 4. Regional Development Agencies ensure that
  Regional Economic Strategies reflect the local
  needs
• 5. Government Offices should help local
  institutions conncet their policies
• 6. More decision-making powers need to exist at a
  local level
• 7. City-region should have earned more autonomy
  where local leadership has proved effective
• 8. The creation of city-region institutions
  should be relevant to the local context not a
  one-size fits all or best practices approach

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Information is not knowledgeAlbert Einstein

• There can be information overload, but never
  knowledge overload
• There is plenty of data and information, yet
  knowledge remains (and will remain) in short
  supply
• Knowledge management is not (and can not be)
  Information management
• Information technology is not Knowledge
  technology

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Taxonomy of Knowledge

• Knowledge is the purposeful coordination of
  action
• All doing is knowing, and all knowing is doing
• Bringing forth a world of coordinated action is
  human knowledge
• Data ? Information ? Knowledge ? Wisdom
• (? Enlightenment)

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Where is the Life we have lost in living?Where
is the wisdom we have lost in knowledge?Where is
the knowledge we have lost in information?

T.S. Eliot, "The
Rock", Faber Faber 1934
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Taxonomy of Knowledge (Zeleny, M. (1987)
Management Support Systems Towards Integrated
Knowledge Management, Human Systems Management,
Vol. 7, No. 1, pp. 59-70.)
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Philosophers on knowledge, wisdom and
enlightenment

• G. Ryle the capacity to act, to live, more or
  less successfully in the world, is more
  fundamental than (propositional) knowledge.
  Knowing how' is more fundamental than 'knowing
  that'. All our knowledge is but a development of
  our capacity to act. Dissociated from life, from
  action, knowledge stored in libraries is just
  paper and ink, devoid of meaning.
• N. Maxwell The primary task of academic inquiry
  is to help humanity solve its problems of living
  in increasingly rational, cooperative,
  enlightened ways, thus helping humanity become
  more civilized. The basic aim of academic inquiry
  becomes to promote the growth of wisdom -
  wisdom being defined as the capacity to realize
  what is of value in life (and thus including
  knowledge and technological know-how). Those
  parts of academic inquiry devoted to improving
  knowledge, understanding and technological
  know-how contribute to the growth of wisdom.
• N. Maxwell The basic idea of enlightenment is to
  learn from scientific progress how to make social
  progress towards an enlightened world. Putting
  this idea into practice involves getting
  appropriately generalized progress-achieving
  methods of science into social life itself. But
  in sharp contrast to all this, the traditional
  Enlightenment has sought to apply generalized
  scientific method, not to social life, but merely
  to social science. Instead of helping humanity
  learn how to become more civilized by rational
  means, the traditional Enlightenment has sought
  merely to help social scientists improve
  knowledge of social phenomena.

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Knowledge vs. Information

• Knowledge is action, the manifested capacity to
  act
• Information is symbolic description of action
• Any description that can be digitized text,
  numbers, picture, sound is information
• There is no explicit knowledge, only
  information
• All knowledge is tacit (M. Polanyi)
• There is a difference between what you say
  (describe) and what you do (The Knowing-Doing
  Gap)
• It does not matter what they customers say
  the only thing that matters is what they do!

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The Talking-Doing Gap

• Pfeffer and Sutton (The Knowing-Doing Gap, 2000)
  have explored the phenomenon of talking replacing
  action in managerial activities and
  decision-making. Why knowledge of what needs to
  be done frequently fails to result in action or
  behavior consistent with that knowledge? they
  ask.
• There is some evidence that competitive advantage
  comes only from doing something (preferably what
  others cannot do), not from talking about it.
  Anybody can read a book, attend a seminar or
  prepare a ppt presentation.
• The Talking Doing equivalency is a disturbing and
  continually increasing phenomenon. New
  generations of managers, the ppt digital ones,
  behave as if talking about what they or others in
  the organization ought to do is as good and as
  important as actually getting it done.

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Strategy is what you do, not what you say

• Mission statements are among the most blatant
  and common means that organizations use to
  substitute talk for action. (Pfeffer-Sutton,
  2000)

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Knowledge-Information Cycle

• The Knowledge Portfolio
• Information (I) ? Information (I)
  (Combination)
• Information (I) ? Knowledge (K)
  (Internalization)
• Knowledge (K) ? Knowledge (K) (Socialization)
• Knowledge (K) ? Information (I)
  (Externalization)
• The Knowledge Improvement Cycle (E-C-I-S Cycle)

Information
New Information
Upgraded Knowledge
Upgraded Information
Knowledge
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Components of the K-I Cycle

• Externalization transformation (knowledge ?
  information) is designed to describe, record, and
  preserve the acquired, tested and proven-only,
  effective knowledge and experience in a symbolic
  form of description. All such symbolic
  descriptions, like records, manuals, recipes,
  databases, graphs, diagrams, digital captures and
  expert systems, and also books, cookbooks and
  procedures, help to create the symbolic memory of
  the enterprise. This phase creates the
  information necessary for its subsequent
  combination and recombination into forms suitable
  for a new and more effective action.
• Combination transformation (information ?
  information) is the simplest as it is the only
  one taking place entirely within the symbolic
  domain. This is the content of the traditional
  information management and technology (IT). It
  transforms one symbolic description into another,
  more suitable (more actionable?) symbolic
  description. It involves data and information
  processing, data mining, data warehousing,
  documentation, databases and other combinations.
  The purpose is to make information actionable a
  useful input into the process of coordination of
  action.
• Internalization transformation (information ?
  knowledge) is the most important and demanding
  phase of the cycle how to use information for
  effective action and for useful knowledge.
  Symbolic memory should not be passive
  information, just lying about in libraries,
  databases, computers and networks. Information
  has to be actively internalized in human
  abilities, coordination, activities, operations
  and decisions in human action. Only through
  action does information attain value, gain
  context and interpretation and integrated with
  the experience of the actor become reflected in
  the quality of the achieved results.
• Socialization transformation (knowledge ?
  knowledge) is related to sharing, propagating,
  learning and transferring the knowledge among
  various actors, coordinators and decision makers.
  Without such sharing through the community of
  action, knowledge loses its social dimension and
  becomes ineffective. Through intra- and
  inter-company communities, markets, fairs and
  incubators, we connect experts with novices,
  customers with specialists, and employees with
  management for the purpose of learning through
  example, practice, training, instruction and
  conversation. The learning organization can
  emerge and become effective only through the
  socialization of knowledge.

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Innovation and Knowledge

• Innovation is a value adding cycle.
• Notice the learning and knowledge cycles within
  the larger innovation cycle.

Money Invested
I ? I
Money Maintenance And Implementation
Innovation
Production
I ? K
Learn
K ? I
Learn
Customer
K ? K
Learning Cycle
Knowledge Cycle
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Wisdom On the Art of Asking Why

• Wisdom is knowing why things should or should
  not be done locally, regionally and globally
• Asking Why vs. asking How
• How implicitly conserves the process
• Why explicitly challenges towards change
• On the Global Economy
• THE KEY Differentiation
• do things differently (not just better)
• do different things, not just the same ones

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Wisdom and Ethics

• Relationship between wisdom and ethics
• An unethical person is not considered wise
• Relationship to strategy and strategic action
• Ethics is about doing, not just mastering the
  rules
• Problem with corporate ethics
• Not with knowing but with doing what is right
• It is clear that teaching ethics, i.e.,
  providing descriptions, does not necessarily lead
  to ethical behavior and deeds, to being good and
  wise.

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Strategy and Strategic Action

• The 4Es, the Spine of business education and
  practice
• EFFICIENCY ? EFFECTIVENESS ?
• EXPLICABILITY ? ETHICS
• Efficiency (Doing things right) ? Effectiveness
  (Doing the right things) ? Explicability (Knowing
  Why) ? Ethics (Being right)
• The Spine of 4Es and the taxonomy of knowledge
  are about action and doing
• The Wisdom Project brings forth a new era of
  corporate strategy action-based, global,
  differentiating
• Strategy is not about statements or descriptions,
  but about action
• Your strategy is what you are doing. What you are
  doing is your strategy.

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All About Adding Value

• Knowledge is real and tangible
• Knowledge, wisdom, and ethics are measurable
• Relationship between knowledge and value creation
  is tangible
• Knowledge, wisdom and ethics MUST ADD VALUE
• (Data and information are only inputs into the
  value-adding processes)
• Process of creating new value
• Adding value to the business
• Adding value to the customer

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Stan Shihs Smiling Curve
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Adding Value for the Customer
Maximum price
Value for customer
Price paid
Value Created
Profit
Value for business
Wages and salaries
Cost
Direct and indirect materials and services
purchased
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Adding value

• First, the customer pays for the service or
  product the price paid.
• The producer subtracts the cost incurred.
• The difference is the added value for the
  business.
• This added value can also be interpreted as the
  value of knowledge.
• In order to pay wages and salaries, the
  production process and its coordination must
  generate this added value. Added value is the
  only source of corporate wages and salaries and
  profits. If the added value does not cover the
  wages and salaries, then these must be
  correspondingly lowered. If no value has been
  added, then the value of knowledge is zero and no
  payment can be due to it. The business must add
  enough value in order to cover at least its
  workers and managers, their salaries and wages.
  If even more value has been created, then profits
  can be realized, up to the price received.
• A business which does not generate sufficient
  added value cannot cover its wages and salaries,
  has no profits, and cannot function over an
  extended period of time. Added value is the key
  to assessing the quality of human knowledge in
  business.
• The customer, of course, must be willing and
  ready to pay more for the service/product than he
  actually paid. The maximum price the customer
  would be willing to pay must exceed the price the
  producer has asked for. The difference is the
  added value for the customer.

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Mass customization
Poor fit
Mass Production
Low cost
Mass Customization
Good fit
Custom Made
High cost
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Mass customization

• Mass customization is a good example of
  delivering value for the customer as a guide to
  the innovation process.
• Mass Customization (MC) represents a new way of
  understanding (eliciting customer preferences),
  designing, implementing (producing and
  distributing) and operating (selling and using)
  processes, products and services fitted,
  individualized and customized for specific
  customers, yet provided at the cost of
  mass-produced, standardized, off-the-shelf items.
  
• MC emerges from a special fusion of two
  traditional approaches mass production and
  custom made modes. MC retains the best features
  of both low cost and good fit for use.
• MC creates innovative advantages for the business
  and customer
• First sell, then produce cash at the start of
  production
• No finished products inventory
• No retail outlets, no unsold or returned goods
• No anonymous customer
• No intermediaries

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Conflict dissolution
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Profile Map of the Environment
High
Low
Price
Speed
Quality
Service
Image
Our profile
Their profile
Desired profile
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Profile Map of the Environment

• Any product or process can be analyzed according
  to at least the key dimensions of price, quality,
  and speed, but possibly to many others, like
  service, image, etc.
• Our product can be compared with their product
  and both with what the customer wants. Our, Their
  and Desired value profiles can be created and
  compared.
• The map shows the gaps or spaces to enter.

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Example of Introducing Innovative Service
High
Hotel
Performance Level
Hotel
Formule 1
Low
Eating Facilities
Architectural Esthetics
Room Size
24-Hour Receptionist
Room Furniture
Amenities
Bed Quality
Hygiene
Silence
Price
Service Attribute
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An Example of Introducing Innovative Service

• Observe that comparing two kinds of hotels with
  respect to ten service attributes leads to
  virtually parallel value lines, adding little to
  the customer.
• It is extremely difficult to enter such a
  competitive and well covered market at any
  interesting environment level, other than
  strictly local.
• Formule 1 hotels is an example of a successful
  innovation which created its own new space and
  a significant new value for customers. They chose
  not to compete along traditional hotel
  dimensions (got rid of the piano music in the
  lobby) and focused on bed quality, hygiene,
  silence and price. In these four key
  customer-driven areas they easily surpass their
  industry standards. Their innovation adds
  value.

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Activity Map of Ikea
Suburban locations with ample parking
Explanatory catalogues, informative displays
and labels
More impulse buying
Self-transport by customers
High-traffic Store layout
Limited customer service
Self-selection by customers
Most items in inventory
Ease of transport and assembly
Limited sales staffing
Ample inventory on site
Year-round stocking
knock-down kit packaging
Self-assembly cy customers
Increased likelihood of future purchase
Modular furniture design
Low manufacturing cost
100 sourcing from long-term suppliers
Wide variety with ease of manufacturing
In-house design focused on cost of manufacturing
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Activity Maps A Different View

• In the activity maps, the higher order strategic
  themes are represented by the black circles,
  while the tightly linked activities are
  represented by the grey circles
• Activity maps represent a companys strategic
  position through the use of activity organization
• Activity maps are useful when redesigning on
  realigning strategy
• Useful questions to ask when reevaluating
  strategy
• Is each activity consistent with the overall
  positioning?
• Are there ways to strengthen how activities and
  groups of activities reinforce one another?
• Could changes in one activity eliminate the need
  to perform others?

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Related Authors References

• Zeleny, M. (1987) Management Support Systems
  Towards Integrated Knowledge Management, Human
  Systems Management, Vol. 7, No. 1, pp. 59-70.
• Zeleny, M. (2005) Knowledge of Enterprise
  Knowledge Management or Knowledge Technology?
  in Governing and Managing Knowledge in Asia,
  edited by T. Menkhoff, H-D. Evers, Y.W. Chay,
  World Scientific, pp. 23-57.
• Zeleny, M. (2005) Human Systems Management
  Integrating Knowledge, Management and Systems,
  World Scientific Publishers.
• Zeleny, M. (2006) Knowledge-information
  autopoietic cycle towards the wisdom
  systems, Int. J. Management and Decision Making,
  Vol. 7, No. 1, pp. 318.
• Zeleny, M. (2007) The mobile society effects of
  global sourcing and network organisation, Int.
  J. Mobile Learning and Organisation, Vol. 1, No.
  1, pp.3040.
• Zeleny, M. (to appear) Strategy and strategic
  action in the global era overcoming the
  knowing-doing gap, Int. J. Technology Management
• Zeleny, M. (to appear) From Knowledge to Wisdom
  On Being Informed and Knowledgeable, Becoming
  Wise and Ethical, International Journal of
  Information Technology Decision Making

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Recent book
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Good bye