New Business Models for the Knowledge Economy

Citation

Hannabuss, S. (2008), "New Business Models for the Knowledge Economy", Library Review, Vol. 57 No. 6, pp. 476-478. https://doi.org/10.1108/00242530810886814

Traditional understandings of financial management need reframing when applied to and in information and knowledge contexts. The reasons for this are numerous and include the likelihood that funding may be mixed, the organization may be public or private sector, the products and services may be intangible (such as intellectual property in the form of patents) or abstract (such as innovative creativity and commitment by employees) or tangible (sellable entities generating revenue from, say, transactional costs, assets in many forms liquid and otherwise), and knowledge/information itself is a hybrid of public/merit/private good with many externalities and complex substitutions.

Interest in these issues helps to explain the increasing attention being given, by both practitioners and commentators, to business models. Conventional accounting and costing approaches that emphasize revenue streams, relationships between assets and liabilities, see themselves represented in financial statements like balance sheets and cash‐flow analyses, margin management and value‐added financial strategies have all been de‐ and reconstructed not only by the need to think differently about the entities themselves but also the governance and strategy context within which decision‐making takes place. Internet and online have further accelerated this change of mindset, as we see notably from examining the business models of companies like Amazon and, more radical still, the internet‐deliverable telephony service Skype (now part of eBay) which promises (threatens?) to make traditional revenue‐stream and sales‐less‐costs‐equals‐profit models obsolete.

This book by Jansen and her colleagues (respectively, at the University of Amsterdam, at the Dutch consultancy firm Ordina, and the University of Amsterdam) is timely in addressing the need every practitioner has not only to reassess their financial thinking (and model if it is that) but also to reconceptualize the models on which, and by means of which, they make sense of the financial management of the company/unit/department and organize it in and for decision‐making. Their evidence and argument take us some way into this exciting new domain. Assumptions first: the knowledge economy has created new kinds of business, new kinds of value‐added exchanges between providers and consumers, and it is usually interactive, connected, and tries to customize its products and services. Not unique, of course, because in a sense most service and product providers, from telephony to grocery, aim to do that, but OK as a starting point.

Traditional business models stress the importance of revenue (costs are incurred in creating and providing products and services, value is sought by stakeholders and value creation triggers cash‐flow, and the business is up and running). It might be an information broker, for example, and such businesses (and they may also be public sector libraries funded in traditional ways!) need to look beyond revenue to integrated business models. These incorporate an understanding of markets and the value‐chain, see value not merely in economic terms, and take account of strategy, technology, processes, and networking. This allows the authors to move on – and draw on research about – three new business models, as they call them. The three have snappy names – innovators (they provide the new), chameleons (they aim at efficiency and adaptability), and foyers (they develop shared identity and use loyalty and authenticity). All are customer‐orientated, all use IT, and all seek value. Characterizing all of them, too, is customization, innovation, and creativity.

The rest of the book is devoted to describing and discussing these three new business models (and how they incorporate the three characteristics). Any one of them can morph into any of the others, and any of them can grow into a traditional business structure. Coming through loud and clear is what value has come to mean – not merely revenue from transaction costs, important though that usually is (above all for any proprietary process), but the value derived from networking and collaborative trust, from shared identity and responding interactively to what customers want (such as the virtual personal shape for trying on clothes provided by the online supplier Land's End), and the ways in which such relational trust provides sustainable competitive advantage. Such thinking is already familiar to knowledge managers, and in KM value‐related accounting practices, even though it still, conceptually and practically, has to pervade information and library management practice as a whole.

The typology and the argument are, theoretically, quite beguiling, and the book will certainly be seen by practising managers as a useful trigger to their thinking. The models are intellectually convincing as far as they go and catch current fashions in placing emphasis on value, networking, and collaborative creativity. The actual business models themselves – as they carry through into practical managerial ways of running the business, representing the decisions in hard financial terms, demonstrating an ability to use financial statements as well as your auditors, and being able (if asked) to show what a marginal cost or an overhead or an intangible actually are – all these remain to be discussed.

A fully‐developed application, too, to traditional public sector organizations (as many libraries still are), and to the numerous hybrids in the knowledge and creative sectors (part endowed/trust, part earning entities), has yet to be offered. No case studies are provided on how these otherwise intellectually appealing ideas might be taken forward in such ways, and so practitioners will need to read more widely in the financial and KM literature to identify ways in which, for example, value‐added (above all that derived from networks, and that derived from collaboration with customers, online and otherwise) can and should be represented in actual financial decision‐making.

The sentiments here are good but as a guide to how to apply them that is the role of a future book. Very much a book for knowledge and information managers, above all those who want to consider how they might change their thinking and who are willing to develop hard applications in their own work. It is also a useful introduction to the ideas for students of information and library management, although even they will need some explicit connect (by say a lecturer) to mainstream financial approaches.