Why the knowledge economy matters for small business

The knowledge economy represents a new horizon for optimised innovation, operational efficiency and global competitiveness. The Fourth Industrial Revolution (4IR), the Internet of Things (IoT) and the way we use information is shaping a new global economy where knowledge and intellectual capital are the most valuable commodities.

The concept of the Internet of Things has been around for over 20 years and has come to represent the interconnectedness of everyday objects and devices that can store and transmit data, Gugu Mjadu, executive general manager for marketing Business Partners Limited, says.

“We must appreciate the fact that data is now the most in-demand currency. On a broader scale, this means that there is readily available information on the internet that small businesses can use to help them learn about their own ventures, target audience and the overall marketplace, which could be the key to increased productivity and ultimately, greater profitability,” she says.

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More efficiency in more competitive marketplace

One of the simplest ways to describe the knowledge economy is to review how consumers across the world use smart watches and other forms of wearable technology. As a ground-breaking innovation, wearable technology gives consumers access to real-time data on health, vital bodily functions, dietary habits and sleeping patterns. Smart watches were one of the earliest examples of the IoT in action.

The data collected from billions of smart watch wearers around the world is used to inform key medical developments. A team of researchers from the US National Institutes of Health now use wearable sensors to predict clinical test results and aid in the early detection of several underlying health issues.

“Data and how we process it has become a disruptive force in a range of industries, including the small business sector, where participating in the knowledge economy can give these businesses the boost needed to overtake competitors and improve their business models.”

In the knowledge-based economy, you can use information to inform business decisions and maximise key metrics, such as output volume, lead generation, sales conversion and talent retention.

Knowledge-based businesses are on the rise in a number of industries, such as agriculture, where farmers can use yield measurement and management tools to map the yield of an entire field of produce and maximise the yield of each square metre.

Smart agriculture systems provide this information by linking farming equipment to satellite-based networks that can record the coordinates of farmland and apply algorithmic formulae to produce forecasts on yields and harvesting. With this information, small-scale farmers can dramatically increase their operations and scale their businesses to start competing with their larger counterparts.

“In a very real and tangible sense, information has and will continue to democratise industries that were dominated by monopolies and big business. What is incredibly useful about information is that its practical value increases over time. The information we learn today can give us the insight we need to pivot or iterate a business according to future trends,” says Mjadu.

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Research in the spotlight

The emerging knowledge economy also has implications for small businesses in terms of their ability to invest in research and development. Research is a key driver of the knowledge economy and this represents a golden opportunity for small businesses to position themselves as research and development partners for larger firms and industry.

Miadu says this is particularly relevant in South Africa where, as per this year’s Budget Speech, the research and development tax incentive allow companies undertaking scientific and technological research and development to deduct 150% of its spending when calculating taxable income.

The incentive is set to play a vital role in boosting innovation in the business sector by improving the country’s overall capacity for developing new products and processes. For small businesses along the research and development value chain, investing in information gathering and sharing has never presented more promising potential than now.

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Access to global audience

Known as the ‘weightless’ or ‘borderless’ economy, the knowledge economy also holds opportunities for South African small businesses to expand their reach beyond national boundaries. By trading in information and using digitally enabled platforms, they can reach wider, more global audiences and compete alongside innovators across the African continent and the world.

“We have seen great examples of small businesses operating in the online education field or building businesses around the monetisation of educational content, such as global unicorn Go1 with some of its roots in South Africa. Not only is this vital for small teams, but it is also an important driver behind the rise of independent content creators as ‘solopreneurs’.”

She says these developments bode well for the industry at large and although the local socioeconomic front presents many unique challenges, we will be halfway to making the knowledge economy really work for local businesses if we can focus on the establishment of digital infrastructure and prioritise aspects such as training and development.