By Michael Chappell
An interesting transition is occurring in economic development. In the 20th Century, companies focused on human capital – the ability to attract and retain the best individual talent to maximise the productivity of the organisation.
By contrast, the 21st Century has seen the emergence of the knowledge economy – where the interaction of individuals within and between organisations is the key to productivity growth. These interactions generate social capital – the connections that create new communities of practice, knowledge exchanges, information flows, alliances and innovative business structures. The more social capital – the more innovation is fostered and the faster the knowledge economy grows.
Understanding knowledge economy networks has overtaken supply chain logistics as the most important field of urban economic development. Because cities are where most network connections can be found, network analysis becomes a key foundation of the new era of urban development.
Knowledge is already the backbone of the competitive advantage of cities. Economic development driven by resource industries, drug discoveries, nanotechnology and green energy can be clearly seen in the emergence of prosperous cities. In the future, urban activity centres with low-friction knowledge exchange will outperform traditional, transaction–intensive logistics centres.
How ready are our cities to embrace the next round of economic development based on knowledge networks? The answer is that we are not ready.
Urban planning still focuses on the 50-year old notion that urban sprawl equates to economic development – that it is sufficient to build shopping centres and light industrial nodes servicing the direct consumption needs of households. In fact, we now understand that retail industries have low-to-negative productivity elasticities; while activity centres based around knowledge creation (eg: universities, hospitals, trade nodes) generate high productivity growth. Surely it is time that these places are given the highest priority in the urban development agenda.
So, how do we shape and adopt high-productivity development strategies? It’s a four-step process to grow knowledge networks:
- Identify
- Develop
- Retain
- Enhance
Identifying networks is relatively simple – just identify existing spatial concentrations of high-productivity industries, map the connections between the various players and indentify the key coordinators of the networks’ activities.
A basic knowledge network map
Developing networks takes a little longer – but two factors stand out. First the network must be based around some enduring comparative advantage – not just a local capability, but something at a globally competitive level. Second – it is essential to have determined and well-resourced leadership around a well constructed strategy.
Retention of networks depends on the people and resources being ‘sticky’ – anchored locally because of some irreplaceable infrastructure, skill set or amenity that can’t be replicated elsewhere. If it can be replicated, then the network will eventually leave or degenerate.
Enhancing networks requires long term planning and resourcing. So-called ‘Smart Communities’ are places where existing networks evolve and new networks are created continuously.
For more information on how to grow knowledge networks, visit www.pracsys.com.au.
Congratulations on a concise summary of a powerful concept. Would love to map our own knowledge networks as a way of understanding the value they bring to our business and the reciprocal value to other businesses and the community we live in.