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The Modern Business Environment Essay Sample

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The Modern Business Environment Essay Sample

The modern business environment is characterized by an intense level of competitiveness and as a result businesses are constantly reengineering their internal processes in order to build and maintain a competitive advantage. The high level of competitiveness is the most important challenge facing business organizations operating in the new economy. In the new economy, business organizations are undergoing a fundamental structural shift in which knowledge is becoming their most prized possession. As a result, whatever competitive strategies the managements in business organizations might employ, the critical success factor in the new economy is access to knowledge. Therefore, organizations which are more efficient and effective at knowledge management have greater chances of achieving a sustainable competitive advantage. Building a sustainable competitive advantage is not an easy task in the new economy because the pace at which organizations change their work practices is increasing.

Knowledge management has become the tool with which to compete in the fast paced competitive environment. In this regard, distinctions must be drawn between data and knowledge. Data may be regarded as the raw materials of knowledge because data by themselves do not facilitate decision making. They are simply a set of numbers which without interpretation have no value for decision-making. It is the interpretation which gives meaning to data in the form of knowledge. However, once the knowledge has been generated, it is no easy task to manage the intellectual capital in such a way as to make it available to the right entities which can use the knowledge to its maximum potential. In other words storing and disseminating knowledge is the most important task when it comes to competing effectively in the new economy.

The data necessary for creating knowledge can be generated in any number of ways. For example the management in an organization can conduct market research activities in order to generate data which can be converted into knowledge about market trends which facilitate decision-making on the part of the management. In this respect, capturing knowledge is a straight-forward means. However when it comes to capturing the knowledge that lies within the expertise of employees, the challenge is a difficult one. Yet in the new economy, that is the challenge exactly that the management in a business organization has to tackle. In other words, in the new economy, the management treats its employees as knowledge workers. As a result, the organization which can maintain the quality of its knowledge workers has a competitive advantage over its competitors. For this reason, the internal environment of a business organization is being structured along the lines of recruiting and retaining knowledge workers so that rival organizations do not have access to knowledge of competitive value.

In order for knowledge to have practical value, business organizations must create the sort of framework which facilitates knowledge sharing. Therefore, the issue is here is one of creating the right organizational structure. The organizational structure that is likely to be the most effective in the new economy is built on the fundamentals of focus, mastery, intensity and integrity (cited in Johannessen 1999, p. 117). Each of these four elements creates the basis for an environment in which knowledge sharing happens to the attainment of its full potential. Focus is particularly necessary in the new economy because the business environment is in a constant stat of flux and in this context, unless the management of a business organization can focus the energy of itself and its employee on the core competencies, it will be impossible for the business organization to compete.

The question as to how organizations can achieve the right level of focus is answered by three sub-elements: proactiveness, willingness to take risks and forming personal goals (cited in Johannessen 1999, p 118). An analysis of the three elements can only be conducted in the context of the vision and mission statements that guide organizational activities. The management of a business organization must formulate vision and mission statements if the employees are to have a sense of direction in terms of the strategic value of their contributions. This is particularly relevant when it comes to motivating knowledge workers and as mentioned before they are the most prized possessions in the new economy. In the old economy, competitiveness stemmed from improved manufacturing processes and employees were assigned these processes without their having authority to modify the structural characteristics of those processes. This was a top-down management approach in which employees were assigned structured and repetitive tasks.

In performing structured and repetitive tasks, employees were barred from applying their creativeness. In the new economy, the most important task for the management is to motivate employees to apply that creativeness. For this reason, in the new economy, focus on organizational vision and mission is one of the fundamental principles of managing people and work systems. The focus facilitates communication of vision and mission of the organization to the knowledge workers so that they can channel that knowledge towards maximizing organizational effectiveness.

However as mentioned before, in order to attain the level of organizational focus that facilitates attainment of vision and mission in the new economy, employees must exhibit proactiveness, willingness to take risks and to form personal goals. These three elements are particularly important in the new economy given the turbulence and the complexity that characterizes the new economy. The organization must create a proactive mindset in its employees if it is to be in a position to pre-empt future competitiveness. Otherwise it is forced to respond to challenges that might come and go too fast for the organization to adapt. In this context, the important thing to remember is that the business organization must be able to create opportunities which will generate competitive advantage. Being proactive allows the organization to invent the future in which the competitors will be ill at ease so that the proactive organization develops a sustainable competitive edge. However employees will not exhibit proactive behavior patterns unless they are also encouraged to take risks and to form personal goals.

As mentioned before, knowledge workers are given considerable flexibility in how they choose to do their jobs. As a result, effective and efficient resource allocation is one of their primary responsibilities. In this respect, they must be willing to take risks and to form personal goals if they are to maximize the return from deploying limited resources. Risk-taking in this respect means exploring new work processes in order to minimize their cost and maximize profits from the continuing operations. Knowledge workers must also form personal goals in order to prioritize the allocation of resources. These goals will help in creating organizational focus on vision and mission. When that focus has been achieved, the organization has addressed one of the four fundamental principles of creating the framework for maximizing innovation.

The management of a business organization in the new economy must also have mastery over the existing circumstances through creating commitment, initiating change and managing time. Creating commitment is once again an issue of communicating the vision and the mission of the organization to its employees effectively. This is because employees must know to what end their expertise is being put to use. When they are in a position to assess the level of contribution that they are making to organizational vision and mission, they are more committed to enhancing the effectiveness of their contributions. However, once the employees start to perform with an established procedure, they will be reluctant to relinquish those procedures when the time comes for change.

This is because over time employees develop a tacit knowledge about the detailed workings of the established procedures and this enhances the level of their performance. When the time comes to abandon those practices, employees are naturally reluctant to do so because of the learning challenges that lie ahead. However change is essential in the modern competitive business environment. Therefore if the management of a business organization is to perform its tasks effectively in the new economy, it must be able to initiate change. Equally important is the ability on the part of the management to manage time. Because the number of competitive variables is increasing exponentially given the rising turbulence and complexity of the business environment in the new economy, it is important more than ever to manage time in such a way as to spend it only on those tasks which have greater strategic impact.

The third important element is intensity which is related to the drive and energy that is seen in the employees of a business organization. Intensity is a function of confidence in mission, discipline and detachment. The intensity of the commitment on the part of the employees is maximized when they have confidence in organizational mission, when they have a disciplined approach to contributing to organizational mission and when they are able to achieve a level of detachment which enables them to focus on the most important issues at hand and reject the rest. Integrity which is a function of trust, personal values and ethical rules, is the fourth management principle of operating in the new economy. These four principles combine to create an organizational framework in which the effectiveness of the contributions made by knowledge workers is maximized. In the process, this also facilitates the process of knowledge management. For example, in the organizational environment in which focus on vision and mission is achieved through proactiveness, risk-taking and personal goals, knowledge creation and generation becomes aligned with the vision and the mission of the organization. As a result, the process of knowledge management becomes more targeted towards maximizing organizational effectiveness.

In the new economy, information technology is increasingly being embedded in organizational processes in order to reduce the cost of resource allocation. This is particularly important when it comes to the issue of knowledge sharing. Business applications such as enterprise resource planning take the different work processes online so that knowledge sharing takes place in the form of bits and bytes rather than in the form of paper. This enhances the speed and reach of knowledge management. As a result innovations utilizing the capabilities of information technology are one of the critical strategies in developing a sustainable competitive advantage in the new economy. However innovations cannot capitalize on information technology as a process enhancer unless the management of the business organization has a clear perspective of how the operation of information technology will affect the attainment of strategic focus. Thus they have to engage in an exhaustive strategic alignment process before innovations can be made to contribute synergistically to strategic focus. However when it comes to managing people and work systems in the new economy, innovations that interface with information technology are one of the prime ingredients of achieving and sustaining a competitive advantage.

At the root of achieving and sustaining a competitive advantage is the process of knowledge management. However as mentioned before, extracting knowledge from employees is not easy task. However the importance of that task in the context of the new economy can hardly be exaggerated. Therefore the challenge in the new economy is how to de-personalize knowledge. De-personalized knowledge is referred to as prescripts (cited in Anell & Wilson 2002, p 31). Prescripts facilitate the process of capturing intellectual capital in the form best suited for widest possible dissemination.

They are critical for managing people and work systems in the new economy because business organizations in the modern environment need to have access to mission-critical information and inasmuch as it is hidden in employees in the form of tacit knowledge, prescripts are the only means of brining it out in the open so that even in the case of high employee turnover, the knowledge is retained by the firm. An example of prescripts may be the windows operating system which depersonalizes and disembodies knowledge in such a way that the competitive advantage enjoyed by the developer is transferable to the user as well. As a result of this unique framework in which companies can market prescripts to great strategic advantage not only to itself but also to buyers, companies like Microsoft can generate enough revenue to achieve a dominant leadership position in its industry.

Prescripts are particularly important when it comes to the cross-functional structure which is one of the characteristics of the leading organizations in the new economy. In this context, several departments in an organization combine their expertise in order to create a competitive advantage. A popular example of the cross-functional approach is total quality management which emphasizes quality control in all aspects of the work processes in an organization. Implementing TQM necessitates the application of prescripts because the knowledge workers must be able to share their knowledge in order to facilitate inter-departmental coordination.

This coordination is a function of knowledge sharing which itself is a function of five factors: trust, communication between staff, information systems, organization structure and reward system (cited in Al-Alawi 2007, p. 25). Therefore creating prescripts is not sufficient for managing people and work systems to competitive advantage. In order for the prescripts to have strategic value, employees must be able to trust each other so that they have confidence in the knowledge sharing process. Interdepartmental communications are the key to maximizing the strategic value of prescripts because unless the departments in an organization are positioned in the context of a clear communications structure, the direction of the flow of information will be in question and the effectiveness of knowledge sharing will suffer in the process. Information systems must be supported by the organization which must provide incentives through the reward system for employees to share their knowledge.

The new economy is characterized by an environment structure which values knowledge above all else. Therefore one of the challenges for the management in a modern business organization is to create the framework which maximizes the efficiency of knowledge capture to mission-critical effects. However the strategic value of this mission-critical information derives from the organizational ability to act on it. If the knowledge is simply stored, then it has no value. The management has to act on the basis of the knowledge in the form of implementing innovations.

Given the fast-paced nature of the competitive business environment in the new economy, managing knowledge to maintain a continuing process of innovation is the only means of sustaining a competitive advantage. However in order for the management to be in a position to create the kind of environment in which knowledge management and innovation go hand in hand, some new organizational issues have come into being in the new environment. One of the most important of these issues is to create prescripts so that important knowledge is no longer tied up in employees. However, as mentioned before, the process of depersonalizing and disembodying knowledge for organization-wide dissemination can only be possible when the management in the organization has focus, mastery, intensity and integrity because then it is in the position of creating the most suitable environment for knowledge sharing. Inasmuch as the new economy is the knowledge economy, such knowledge sharing lies at the heart of managing people and work systems in the new economy.


Al-Alawi, Adel Ismail, et al. “Organizational Culture & Knowledge Sharing: Critical Success

Factors.” Journal of Knowledge Management. 2007: 22-42.

Anell, Barbro I. & Timothy L. Wilson. “Prescripts: Creating Competitive Advantage in the

Knowledge Economy.” CR. 2002: 26-37.

Johannessen, Jon-Arild, et al. “Managing and Organizing Innovation in the Knowledge

Economy.” European Journal of Innovation Management. 1999: 116-128.

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