I3 UPDATE / Entovation International News

a free monthly briefing on the knowledge agenda

No. 54 October 2001





David J. Skyrme


David Skyrme Associates


Contents - Main Feature - Readers' Replies - Knowledge Digest


Problems/Promises: Russia in the Knowledge Economy

Debra M. Amidon

"Knowledge is practically nothing if not used for the benefit of society" Staszik, 1800's

There have been several stories written over the years about economies shifting to knowledge-based strategies. Fueled by the OECD, The European Union, The World Bank and other professional and industry groups, managers worldwide have realized the implications for developing and industrialized nations alike.

Thanks to a recent initiative by Sue Nelson of the Bureau of Intelligence and Research, the US State Department recently convened a full day conference "to assess the potential of Russia's rich human capital to move the economy from one based upon natural resources and individual output to one based upon the creation and application of knowledge."

It was the day after a front page feature story ran in The Washington Post (19th August) about the 'Journey to the New Russia' illustrating the national divide 10 years after the failed coup in August, 1991, that set in motion the collapse of the Soviet Union. This followed another feature story in the Economist on "Putin's Choice" describing the paradox of three contradictory trends - revival, stagnation and decline. Although there are 8 million Russians working in small businesses, most managers are nowhere near international standards. The reported 'capital flight' - averaging $1.5B each month - shows there are plenty of missed (innovation) opportunities.

This provided the ENTOVATION work of Dr. Tom Malone, who was featured in Global Learn Day IV - http://www.entovation.com/whatsnew/learn-day-entovation.htm, and Debra Amidon to frame a discussion on "Millennium Challenge for Russia" together with presentations from the Central Intelligence Agency, the National Research Council, Microsoft Consulting Services, RAND Corporation, the International Finance Corporation, the US Civilian R&D Foundation and The World Bank.

An 8 Point Vision for Change

Using the foundation for sustainability outlined for the Western Hemisphere Knowledge Partnership (WHKP) that was premiered in Boston (USA) in July, participants imagined a vision (and relevant strategies) for such a nation:

  1. Education - life-long learning is a sine qua non for a knowledge-based economy. Distance education is a promising tool with which to pursue life-long learning.
  2. Health and resilience of natural ecosystems - requires development of indicators for the pressures on, extent of, and output by agricultural, coastal, forest, freshwater, and grassland ecosystems. As civilization expands, hazards from natural disasters increase. Extensive use of collaboratories is envisioned in this and subsequent agenda items
  3. Eco-efficiency in the production and consumption of goods and services - environmentally benign to alleviate the impact of further economic growth on world ecosystems.
  4. Energy --to power economic growth - conservation and exploration of environmentally friendly sources of energy (the accumulation of greenhouse gases in the atmosphere is emerging as a regional as well as a global problem).
  5. National income accounts - extension to include environmental impacts and make realistic the consequences of contemporary patterns of production and consumption.
  6. Intellectual property rights - the knowledge-based economy is transforming legal and measurement standards.
  7. Delivery of health care - now entering an era of profound change in which integration with the sciences and sharing of new knowledge and its applications to health care are increasingly important.
  8. Community networks - to foster interactive participation by individuals at all levels - local, regional, and global - indigenous communities to major urban centers.

It is not these factors individually, but the inter-relationship of how these economic elements combine to establish conducive to attracting foreign investment, stimulating entrepreneurial management and taking advantage of the opportunities technological advancement provides. Citing the OECD 1996 Report on Knowledge-Based economies, we use the working definition:

"Economies that are directly based on the production, distribution and use of knowledge and information…reflected in the trend in OECD economies toward growth in the high-technology investments, the high-technology industries, more highly-skilled labour and associated productivity gains."

"Although knowledge has long been an important factor in economic growth economists are now exploring ways to incorporate more directly knowledge and technology in their theories and models."

"'New growth theory' reflects the attempt to understand the role of knowledge and technology in driving productivity and economic growth. In this view, investments in research and development, education and training and new managerial work structures are key."

"Better indicators are needed of knowledge stocks and flows, particularly related to the diffusion of information technologies, in both manufacturing and service sectors; social and private rates of return to knowledge investments; the functioning of knowledge networks and national innovation systems; and the development and skilling of human capital."

Some Presentation Highlights

Although comments were all made off the record and not for attribution, there were several compelling points raised.

One presenter discussed the 'brain drain' and the need to reverse the outflow of $230B per year by inspiring a climate and confidence to keep people at home (i.e., converting the economy to a 'brain gain').

Another provided the trend analysis related to R&D expenditures, employment in the IT sector, military dimensions and others reaching the conclusion that central to resolving the paradox (referenced above) is to restore the pipeline with young entrepreneurs.

A third traced the evolution of the relationship between education and technology outlining the problem of IT penetration coming from a lack of adequate financing, no reaction (or ability to react) to changing business demands and no alignment with international standards. He referred to the new government initiative 'Electronic Russia' (goal of 25 million Russians on-line by 2010) - that was introduced July 5th, 2001, to define more efficient government management systems.

Still another followed with a prospectus for an 'e-Russia' defining the infrastructure changes and policy implications necessary to ensure such a transformation. He suggested that the answers may not lie in getting a lot of money; but rather "start small, build successes and scale up." He provided insight into the problems of the culture not known for being open nor using knowledge that might come from the 'front lines.' He queries - as might be queried of other developing nations: "Does Russia want to be an Open Society?" His conclusion - build a pro-business environment.

Others described modern processes for getting research out of the laboratories and into the market. Some were experts on venture capital financing, the 'flowering of domestic demand', grant assistance programs and the leadership positioning needed by Russia for other neighboring countries in the region.

Towards a Knowledge-based Economy

Tom Malone (North Caroline State University), together with Gary W. Yohe (Wesleyan University), distributed a briefing "Toward a Knowledge-Based Economy in the Russian Federation". They outline the driving forces of demographic growth and gains in productivity (and their asymmetry) can: threaten the finite capacity of air, water, sunshine and plant and ecosystems that to sustain expanding human activity on the planet, increase the economic inequity among nations (as well as within their borders) and exacerbate social stability.

However, with a comparative scenarios of Population, GNP/cap and GNP of countries such as Russia with India, Ireland and China, they were able to create a template of sustainability with modest curtailment of economic production and consumption, moderation in population growth and reasonable increases in productivity driven by the further development of knowledge through new collaboration between disciplines and societal sectors. The conclusion was that with appropriate knowledge partnerships, the Russian Federation has a good chance of making a significant contribution/transition into the Knowledge Age. "There is a path forward one that is needed by Russia, the US and all nations a society in which all of the basic needs and wants can be met by successive generations while maintaining a healthy, physically attractive, and biologically productive environment. We can invent (innovate) our future rather than stumble mindlessly and competitively." For copies of the paper and information about the Western Hemisphere partnership, contact Dr. Malone directly (fmalone@aol.com).

The point is that the session provided a very thoughtful analysis with a variety of perspectives each in and of itself offering some plausible solutions. Together, they created a direction forward.

Some Observations

This was a seminal event being sponsored by the US State Department. The first national conference on the Knowledge Economy was held in the US in 1987. Although there were several national initiatives (e.g., France in 1989 and Poland in 1993) the European Union did not provide the regional emphasis until 1997 (Utrecht, The Netherlands). The Global Knowledge Partnership - 1st held in Toronto (Canada) and subsequently in Malaysia (2000) - and The World Bank (with their 1999-2000 World Development Report) fueled developing nations; and the OECD articles (1996 and most recently in 1999 National Innovation Systems reports) have provided the working definitions leading to some indicators for building Knowledge-Based Societies. Recent initiatives begun with the Intellectual Capital Reports of Sweden, Denmark, The Netherlands and Israel together with recently released reports in measuring intangible value (e.g., the Brookings Institute and FASB) have evolved our attempts to develop relevant innovation indicators. (For the Knowledge Societies Timeline, contact debra@entovation.com).

Combined insights were summarized in the form of a pneumonic:

F - Focus on alignment of resources with market demands/opportunities.
O - Openness/transparency is necessary in a knowledge culture.
U - Untapped intellectual resources can commercialize with the right conditions.
N - New value proposition balances economics, behavior and technology.
D - Digital Divide is real requires comprehensive, systematic response.
A - Adaptive learning is essential for the transformation to be realized.
T - Technology is the form of IT and other specialties to be 'mined.'
I - Innovation Infrastructure is necessary to harness intellectual resources.
O - Optimism amidst the obstacles.
N - 'New' Economy is one of knowledge, not technology.

Essentially, the new economy demands a entrepreneurial spirit (and talent), a favorable business climate and a culture that is receptive to learning and change. Russia as does every nation has a unique history, heritage and strengths to be leveraged. New leadership appears to be providing a frame for realizing the vision of the country. To be competitive in the new economic world order, nations must preserve the best of their past while aligning for future opportunities - the prescription for future sustainability.

Our opening quote by Tony Blair provides us great promise that indeed, the kaleidoscopic dynamics described in 'Innovation Strategy for the Knowledge Economy' (Chapter 2) provides us an opportunity to build the foundation for a new economic world order based upon knowledge, innovation, and international collaboration; and all of us have a role to play.

Only The Beginning

Stay tuned for other unexpected examples as reported recently through the Global Knowledge Development electronic forum: "Imagine a tiny, beautiful, land-locked, densely populated and extremely poor African country that seven years ago was the site of a devastating civil war and genocide that left it in tatters. Now imagine a country that sets up an ICT Commission headed by its President; that adopts a National ICT Policy for the country and that sets up a top level national IT Agency to oversee a 400-page 5-year US$500 million plan and strategy for ICT. And finally imagine a country that commits to transforming itself from an essentially agrarian economy to a knowledge-based society within twenty years and that plans to become a services center in its region, despite being poorer than its neighbors and much less well-endowed with natural resources. Hard to reconcile these images, but they are indeed all of Rwanda."

(Author's note: we believe that the "I" in ICT stands for Innovation, not Information!) Visit - http://www.entovation.com/whatsnew/knowledge-societies.htm - for more background on such national conversions. These are only the initial progress reports to be documented in unexpected places around the world.

The emerging Knowledge Economy affords a new source of wealth-creation based upon intellectual assets, collaborative learning networks and effective infusion of advanced technology. Countries developing and industrialized nations alike that are able to calibrate and manage their innovation capacity are likely to maintain their future prosperity and sustainability. A new program to define the 'Innovation Capital of Nations' provides an intensive fact-finding/reporting mechanism for country/region leadership to identify and track critical economic indicators integral to the vitality of a nation's economy, resulting in a shared vision, common language and leveraged worldwide strategy. The program has multiple objectives:

  1. To articulate a clear, concise vision for the future direction of the nation.
  2. To define the critical success indicators for 21st century sustainability.
  3. To energize a critical mass of local, national and regional leadership.
  4. To attract foreign investment capital to the country.
  5. To monitor results and plans for country positioning on the global stage.

For further information, contact Lynne Schneider (lynne.schneider@att.net) or Kim Wilson (kim.wilson@baselinealliance.com) - new partners with ENTOVATION International Ltd.

Footnote: For several years, Konstantin Golubev has served as a representative of the region and is featured on the Global Knowledge Leadership Map - http://www.entovation.com/kleadmap/index.htm. His translated versions of key ENTOVATION materials may be found in Russian: The Momentum of Knowledge Management - http://www.entovation.com/kleadmap/index.htm; and the Global Momentum of Knowledge Strategy - http://www.entovation.com/momentum/globalmn_r.htm.

Email: Debra M. Amidon

© Copyright, 2001. David Skyrme Associates Limited and Authors - All rights reserved.

I3 UPDATE / ENTOVATION International News is a joint publication of David Skyrme Associates Limited and ENTOVATION International Limited - providers of trends analysis, strategic advice and workshops on knowledge management and knowledge innovation®

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Global Perspectives (list of articles on other countries / regions)


Global Learn Day IV

The "I" in ICT stands for Innovation, not Information!

Global Knowledge Leadership Map

The Momentum of Knowledge Management

The Global Momentum of Knowledge Strategy


Customers: a new twist on knowledge management

Dot com winners and losers

Virtual teaming and virtual organizations: 25 principles of proven practice

Measurement myopia; those who measure and those who act

Portal power: gateways or trapdoors?

Creativity is not innovation

Virtual trust

China: accepting the knowledge challenge

Innovation action for Europe