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|Online Knowledge Markets:
how do they work?
The period 1999-2000 saw a rapid growth in the development of B2B exchanges - online marketplaces where buyers and sellers trade a wide variety of goods and services. While many may not survive, online marketplaces can play an important role in helping creating efficient and effective marketplaces. Online knowledge marketplaces are not as well developed as those for conventional products and services. However, many are emerging as important places to seek out and trade specialist knowledge. This Insight provides a general introduction to the different types of online knowledge markets and gives an overview of how buyers and sellers can exploit their potential.
What are Knowledge Markets?
Knowledge markets are not new. Recruitment agencies, author's agents, speaker's bureau's, and the consultancy matching services of many professional associations are example of knowledge markets that are well established. We must also not forget that knowledge markets already exist in organization, where individuals use discussion groups, knowledge centres and informal networks to share knowledge. What is new, is that Internet Commerce enables such markets to be much more efficient by bringing in a broader range of buyers and sellers, as well as introducing alternative marketing methods and business models (some still to be proven!). A typical online knowledge market will offer the following facilities:
In many respects, the facilities are like those on auction sites like eBay, but with added refinements because of the more complex nature of the sales process for some types of knowledge product and service. These may include the pre-qualification of participants, facilities for buyers and sellers to negotiate privately, and dynamic pricing, where prices on easily replicable knowledge, such as that in reports, can be dynamically adjusted according to demand.
Although knowledge markets inherit many of the characteristics of B2B exchanges, the motivation for creating and using them is different. In many B2B exchanges a group of dominant players in a market segment create an Internet markteplace to gain economies of scale in purchasing and to optimize their supply chains. Knowledge, however, is much more differentiated that a typical supply, and the market for knowledge is much more fragmented. Therefore, most knowledge markets are more balanced in terms of the relative power of buyers and sellers.
Types of Marketplace
Knowledge markets can be categorized in several ways:
The Kaeiteur Institute of Knowledge Management (KIKM) has developed a taxonomy that merges some of these distinctions, but nevertheless gives a good overview of what is available. Its categories are shown below, with some illustrative examples added:
See the KIKM Knowledge Markets Portal for further examples. Of the various types, there is currently much activity in the eighth category (Intellectual Capital) since it provide an opportunity for freelancers and small consultancies to extend their market reach with minimal marketing expense. The exact facilities on offer vary from market to market and buyers or sellers will need to evaluate which ones are most suited to their own individual circumstances (see Resources).
Opportunities and Benefits
Knowledge markets can offer some significant benefits for buyers and sellers alike:
Knowledge markets are relatively new, and like B2B exchanges, many will have to restructure or reinvent themselves significantly in the near future if they are to survive. One of the pioneering markets that had many good features - iqport.com - was closed following its market trial. Participating in knowledge markets is not suitable for every buyer or seller of knowledge or in specific situations. For example, where product and market characteristics are well known and the organizational impact is high, buyers often prefer competitive tendering situations with suppliers they already know. However, where the risk is small and the opportunities to save costs or gain unique knowledge are high, then going to knowledge market may yield some valuable benefits. Some of the factors that organizations should look for in a knowledge market (and that market owners should consider as part of their strategy) are:
As with B2B marketplaces and many dot.com companies, knowledge markets are embryonic and the whole scene is one of flux. For most market owners, the immediate concerns are to develop a critical mass before the funding from their backers runs out. Others are taking a more cautious approach, evolving organically with a very low cost base - after all many of today's successful Internet companies grew through word of mouth (now called viral marketing!).
From our analysis, three things are clear:
Being a relatively new phenomenon, little has been written about knowledge markets. Here is some recommended reading and links to explore
'The Promise and Challenge of Knowledge Markets', Chapter 2 in Working Knowledge by Tom Davenport and Laurence Prusak. This is about internal knowledge markets (i.e. within organizations) but give a good overview of some general considerations.
The Knowledge Markets Metaportal. The Kaieteur Institute of Knowledge Management (KIKM).
'Online Knowledge Markets', Chapter 4 in Commercializing Knowledge, David J. Skyrme, Butterworth-Heinemann (to be published Spring 2001). This gives expanded coverage of the topics in this Insight.
Management Insights are publications of David Skyrme Associates, who offers strategic consulting, presentations and workshops on many of these topics.
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