Trust vital for e-commerce

IT plays a comparatively small role in a well-functioning "knowledge economy", says knowledge management specialist Larry Prusak.

IT plays a comparatively small role in a well-functioning “knowledge economy”, says knowledge management specialist Larry Prusak.

What matters more are the extent of personal and company networks and the willingness to use all available avenues of inquiry. Along with this is needed a well-tuned sense of trust in the parties with whom you exchange knowledge.

Prusak, from New York, has been appointed inaugural visiting fellow in the school of information management at Victoria University of Wellington. He was the founder and first executive director of IBM’s Institute for Knowledge Management.

“The dissemination and management of knowledge is the most important story of the 21st century,” he says. It was pretty important in previous centuries too, but in the modern world, where capital chases cheap labour, the way to ensure continuing employment for the individual and continuing health for a company’s balance sheet or a nation’s economy is to get into work that “can’t be done by an algorithm and can’t be done [in a cheap-labour overseas country]”.

Those who can do such work should be valued in companies and nations, he says. At present, many seem to value “apparatchiks” (administrators), including lawyers and accountants, and salespeople.

A successful company should look to reward information sharing rather than exclusive possession of information, Prusak says.

“I’ve seen companies that say ‘we reward intellectual capital’. But they only promote salesmen — people who’d step on their own grandmothers to get an advantage over someone else.”

Knowledge sharing means the freedom to ask questions. At Toyota — in the next few years destined to overhaul General Motors as the world’s leading car-maker, he forecasts — anyone on an assembly line can ask a question. They type it into a terminal whereupon it is flashed on to a large display visible to the whole floor. Anyone can answer the question.

Organisational knowledge is not in brains, documents or even databases, he says, but in “groups, communities, networks; ‘practices’ is the latest term, which share and reinforce common vocabularies and traditions”.

Implicit in the efficient distribution of knowledge is trust. “Trust lowers the cost of transactions. If A asks B for a piece of knowledge and B doesn’t trust A, then what happens? Either A doesn’t get the answer, or they have to write a contract first.” And that’s either unproductive or expensive.

Useful as IT is, its importance to knowledge economies is “definitely overrated”, Pruisak says.

“When electricity first became commercially available and everyone was looking for a way to use it to best advantage, all the large companies had vice-presidents of electrification. What happened to them?”

In the same way, the IT manager will become obsolete as a specific function, he suggests, as IT becomes absorbed invisibly into the functioning of the organisation, the way electricity has.

“Human qualities are not driven by technology. In the 1880s they told us the telephone was going to bring an end to warfare, because the leaders of nations would be able to talk one-on-one and sort out their differences. What happened? Telecommunications has made warfare more efficient. But then they told us television would elevate the culture of the US.”

Tying knowledge down to bits and bytes limits it, he says. As if in illustration of this, he spoke to an audience at Victoria University without notes. “I’ve taken PowerPoint off all my computers; it’s an enemy of thought.

“The champions of technology tell us it eliminates space and time; that space is no longer needed for knowledge exchange, and it can be done in much less time. If that’s so, why did I travel 10,000 miles to speak to you, and why did you come here tonight? Why aren’t we all at home watching a screen?”

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