6 challenges in shifting towards a new economy

Today we´ve moved on from the production economy to the knowledge economy, and production optimization is no longer the most significant driver of growth.

This new economy demands big shifts both from the organizations and their staff.

Today, in the knowledge economy, it´s no longer their´ hands people are mainly employed for – it´s their brains. And companies are dependent on their people "at the bottom of the organization" to think for themselves.

But the shift also affects the top management. They need to adopt an entirely new role and view of themselves as well.

Understandably this creates challenges for many traditional and established organization who are often built to allow for only their people at the top to manage, delegate, condition and participate in this kind of work.

Here are 6 challenges most companies are facing in shifting to the knowledge economy.

A more transparent culture needs to blossom

In the knowledge economy we´re dependent on a transparent culture. But many companies are stuck in old structures that create a culture of protecting information. In this culture there´s little to be gained for management in being transparent with plans and visions when employees only need to know about their specific tasks to fulfil their duties.

This way of working makes it hard for the employees to fully participate. How are they supposed to know how to make decisions if they do not know the company´s vision and goals, or how the decision can affect others work? How are employees supposed to contribute with ideas that are relevant to a company they only know a small piece of?

Create a “learn as we go” organization

All processes and structures in the production society are built to achieve a predetermined goal - making the product that has already been invented. And making it with enough quality and without waste.

In the new organization, we seldom know exactly what we are making from the start (at least not when working with innovation). Instead, we are learning as we go and define the end goal along the way, using trial and error.

Structures built to delegate and control are not suited for that type of knowledge-driven work.

Managers needs to adopt a very different role

In a traditional organization managers are meant to tell people what to do and to control that their workers perform according to the set goals. The manager is the person with the most knowledge, the most information, and the highest position in the organization. He or she has all the answers - how else could a manager control the workers?

In the new type of organization, the manager needs to adopt a very different role. He or she is now supposed to create the right conditions for the employees to be able to utilize their brain power, and to have them design and develop new ideas. This without the manager being the expert, and without delegating, controlling and making all decisions.

Employees need to shift their mindsets

For employees to shift from receiving orders and deliver on something that was delegated to them towards working with continuous learning and making their own decisions is a substantial change. It demands that they are able to change how they view their role. And that they are able not only to shift mindsets but also shift between different levels of abstraction (detailed and strategic level).

It also requires that the employees are willing to learn new things and dares contribute with their opinions and ideas.

Current silos and command- control-structures needs to be changed

The silos and command- and control-structures that worked so well for delegation in the past becomes an obstacle for collaboration today.

There´s little to gain to collaborate with other departments in an organization when each unit only reports its results upwards to show that they are doing a good job.

In the past it was the guy at the top that would break down and delegate the tasks needed to be done. But today organizations have to coordinate knowledge cross functionally and from further down in the organization to find the next revenue stream.

This means that today the experts are scattered across the entire organization. And this brings new, and not always so well understood, challenges. For example, who gets credit when different department collaborate and create something great? And who takes the cost of the work? Besides, who knows and trusts people in other silos?

Find ways of working that are closer to the customer

In the traditional organization, market- and product planning decided what was supposed to be manufactured over time. Those products were then designed, manufactured and released to the market.

Today's companies must understand their customers´ needs and drivers. They need to dynamically work with developing products that creates value for their customers. This forces companies to find ways of working that are much closer to the customer. They also need to try to predict how the market is going to evolve in the future, in order to understand what the next successful product will be.

Conclusion

Above challenges indicates that the ways we used to organize ourselves in the production economy are not the best ways in the knowledge economy.

To stay competitive, we need to find new ways of organizing, structuring, and leading our organizations. We need to find new ways to encourage, bring forth and utilize our employees’ knowledge and ideas. We need to help a new kind of management fully create new and more productive work conditions.

And we need to put much more focus on innovation. Innovation is the best future-proofing companies can do.

To learn more about companies´ challenges, and other important aspects of innovation we encourage you to read our article The Definitive Guide: What is innovation?