All of the economies of the past were based on natural resources as the means of production and the employment of hard capital in the form of buildings, gold-based currencies and machines. Agricultural and industrial economies are economies of scarcity, based on finite resources. Today, the new knowledge economy is based on an infinite resource—ideas. True, we still have physical inputs into production processes, but the input that gives the greatest competitive advantage is knowledge. There is a very on both scarcity and abundance. Our material “things” are limited, they are scarce, but our ideas are unlimited, they are abundant. It takes a new mindset to appreciate the significance of this important shift.

Knowledge also does not behave the same way as other resources. Knowledge, as ideas, replicates endlessly. It is an infinite resource. Natural resources deplete with use. Knowledge expands with use. If a natural resource is sold or given to another, it is at the expense of whoever had to give it up. However, sharing knowledge allows both parties to not only retain the resource, but to amplify and expand it through the exchange process itself. This multiplier effect of knowledge as a resource means significantly different economic equations must be brought to bear.

This infinite resource of knowledge that resides in and is largely controlled by individual workers and professionals cannot be managed with industrial era methods. Prior to the recent focus on knowledge most explorations of knowledge and organizations focused on information and data flows, being more concerned with the manipulation of documents and data “objects” than with the conversion of knowledge to value. We still have much to learn about what this really means for the way that we will manage our organizations in this new economy. As more and more individuals appreciate the value of their knowledge, the ability to forge creative partnerships with each other becomes critical. People will only build knowledge together in an environment of trust and appreciation. This requires new management principles and a new ethic for knowledge sharing that is built on fairness and openness.

The questions posed by the knowledge economy offer a unique opportunity to help organizations shift from the mechanistic, linear thinking of the industrial age to a more dynamic view of the world – being ushered in by discoveries from a wide variety of scientific and human behavior fields. Business leaders must question and rethink underlying business models and practices in order to incorporate the new fundamentals for successfully leveraging knowledge to create value. The knowledge questions go very deep into our underlying assumptions of how we create value. Leadership teams preparing for the new economy will find themselves engaged in challenging, provocative and sometimes baffling and paradoxical situations. Those companies willing to live into the questions, however, will build the adaptive capacity needed for the new economy.

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