Managing in the Next Society (Classic Drucker Collection)

1. The Next Society: Knowledge as the Key Resource

Knowledge will be its key resource, and knowledge workers will be the dominant group in its workforce.

Knowledge economy emerges. The Next Society is characterized by the primacy of knowledge as the critical economic resource. This shift fundamentally alters the dynamics of power, productivity, and value creation in organizations and societies.

Knowledge workers dominate. As knowledge becomes the key driver of economic growth, knowledge workers – those who apply theoretical and analytical knowledge to develop products and services – become the most valuable asset in the workforce. This group includes professionals like doctors, engineers, and teachers, as well as knowledge technologists such as computer technicians and paralegals.

Implications for organizations:

• Focus on attracting and retaining knowledge workers
• Emphasis on continuous learning and skill development
• Flattening of hierarchies as knowledge workers demand more autonomy
• Shift from traditional employment models to more flexible work arrangements

2. Demographic Shifts: Aging Population and Workforce Transformation

By 2030, people over sixty-five in Germany, the world's third-largest economy, will account for almost half the adult population, compared with one-fifth now.

Aging populations reshape societies. Developed countries are experiencing a significant demographic shift, with the proportion of older people increasing rapidly while the younger population shrinks. This trend has profound implications for social systems, economic structures, and political priorities.

Workforce dynamics change. The aging population leads to:

• Pressure on pension systems and retirement age policies
• Need for lifelong learning and career reinvention
• Emergence of two distinct workforces: under-fifties and over-fifties
• Increased importance of knowledge workers in maintaining productivity

Immigration becomes critical. To address workforce shortages, many countries will need to rely on immigration, leading to:

• Political tensions around immigration policies
• Challenges in integrating diverse populations
• Potential for cultural and social changes in host countries

3. The Decline of Manufacturing and Rise of Protectionism

Manufacturing is following exactly the same path that farming trod earlier.

Manufacturing's paradoxical decline. Despite increasing output, manufacturing's share of GDP and employment in developed countries is shrinking dramatically. This trend mirrors the earlier decline of agriculture in developed economies.

Productivity gains drive change. The decline in manufacturing employment is primarily due to:

• Technological advancements and automation
• Improved manufacturing processes (e.g., lean manufacturing)
• Shift towards knowledge-intensive industries

Protectionist pressures increase. As manufacturing jobs decline, there is a growing push for protectionist policies, similar to what happened in agriculture:

• Rise of regional economic blocks (e.g., EU, NAFTA)
• Increased use of subsidies and non-tariff barriers
• Political influence of manufacturing sector disproportionate to its economic size

4. The Evolution of the Corporation: From Hierarchy to Confederation

The corporation moves toward a confederation or a syndicate, it will increasingly need a top management that is separate, powerful, and accountable.

Traditional corporate structures become obsolete. The rigid, hierarchical corporations of the 20th century are giving way to more flexible, networked organizations better suited to the knowledge economy.

New organizational forms emerge:

• Confederations of semi-autonomous units
• Networks of alliances and partnerships
• Virtual organizations leveraging outsourcing and contract work

Top management's role evolves. In these new structures, top management focuses on:

• Setting overall direction and strategy
• Managing key resources: people and capital
• Balancing economic, human, and social dimensions of the organization
• Representing the organization to external stakeholders

5. The Changing Nature of Work: Rise of Knowledge Workers

Knowledge workers, by contrast, expect to make the decisions in their own area.

Knowledge work transforms employment. The rise of knowledge workers fundamentally changes the relationship between employers and employees:

• Workers own the means of production (knowledge)
• Increased worker mobility and bargaining power
• Shift from subordinate-boss to professional-client relationship

Managing knowledge workers requires new approaches:

• Focus on providing meaningful work and opportunities for growth
• Emphasis on results rather than time spent
• Need for continuous learning and skill development
• Balancing autonomy with organizational goals

Work arrangements diversify. Traditional full-time employment gives way to:

• Part-time and temporary work
• Consulting and contract-based arrangements
• Portfolio careers spanning multiple organizations

6. The Impact of Information Technology on Business and Society

Information technology, although only one of many new features of the Next Society, is already having one hugely important effect: It is allowing knowledge to spread near instantly, and making it accessible to everyone.

IT revolutionizes knowledge dissemination. The rapid spread of information technology, particularly the Internet, has profound effects on how knowledge is created, shared, and accessed.

Business models transform. IT enables:

• E-commerce and direct-to-consumer sales
• Disintermediation in various industries
• New forms of collaboration and innovation

Power shifts to consumers. Easy access to information leads to:

• Increased price transparency
• Greater consumer choice and customization
• Shift from seller-driven to buyer-driven markets

Globalization accelerates. IT facilitates:

• Global competition for local businesses
• Rise of transnational corporations and virtual teams
• Increased outsourcing and offshoring of knowledge work

7. The Importance of Continuous Learning and Adaptation

Continuing education of already highly educated adults will therefore become a big growth area in the Next Society.

Lifelong learning becomes essential. The rapid pace of technological change and the evolving nature of work make continuous learning a necessity for individuals and organizations.

Education systems transform. Traditional education models give way to:

• Emphasis on learning how to learn
• Integration of work and education throughout life
• Rise of online and distance learning platforms

Organizations focus on knowledge management. Companies invest in:

• Internal training and development programs
• Knowledge sharing systems and practices
• Partnerships with educational institutions

Individual responsibility increases. Workers must take charge of their own skill development and career management to remain relevant in the changing job market.

8. The Emergence of New Organizational Structures

Different banks may be quite different from one another, depending on how each of them responds to the changes in its workforce, technology, and markets.

Organizational diversity increases. The Next Society sees a proliferation of organizational forms, each adapted to specific contexts and needs.

Examples of emerging structures:

• Network organizations with fluid boundaries
• Project-based organizations assembling teams as needed
• Virtual organizations leveraging technology for coordination

Key characteristics of new structures:

• Flexibility and adaptability to change
• Focus on core competencies
• Extensive use of partnerships and alliances
• Emphasis on knowledge creation and sharing

Implications for management:

• Need for new leadership skills to manage diverse structures
• Importance of building and maintaining organizational culture across boundaries
• Challenges in coordinating and aligning diverse units

9. The Challenges of Managing in the Knowledge Economy

The management of knowledge workers should be based on the assumption that the corporation needs them more than they need the corporation.

Power dynamics shift. In the knowledge economy, skilled workers have increased bargaining power, changing the traditional employer-employee relationship.

New management approaches required:

• Focus on creating an environment that attracts and retains talent
• Emphasis on intrinsic motivation and meaningful work
• Need to balance autonomy with organizational goals
• Importance of fostering a culture of innovation and learning

Challenges for managers:

• Managing diverse and often virtual teams
• Balancing short-term performance with long-term capability building
• Navigating the ethical implications of new technologies and work arrangements
• Adapting to rapidly changing competitive landscapes

10. The Growing Importance of the Social Sector and Communities

Only the social sector, that is, the nongovernmental, nonprofit organization, can create what we now need, communities for citizens—and especially for the highly educated knowledge workers who increasingly dominate developed societies.

Social sector fills crucial gaps. As traditional institutions struggle to address complex social issues, nonprofit organizations play an increasingly vital role in society.

Key contributions of the social sector:

• Building communities in urban environments
• Providing opportunities for meaningful engagement and volunteering
• Addressing social issues not adequately handled by government or business

Knowledge workers seek community. Highly educated professionals look for ways to contribute beyond their work lives, often through involvement in nonprofit organizations.

Implications for society:

• Need for policies that support and empower the social sector
• Importance of collaboration between business, government, and nonprofits
• Growing role of social entrepreneurship in addressing societal challenges

Last updated: August 21, 2024