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The Knowledge Economy and Convention Centres

The Knowledge Economy and Convention Centres. Presentation to International Association of Congress Centres Will Hutton July 6 th 2010. Banking sector assets (per cent of GDP). 600. 500. 400. 300. 200. 100. 0. 1880. 1904. 1928. 1952. 1976. 2000.

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The Knowledge Economy and Convention Centres

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  1. The Knowledge Economy and Convention Centres Presentation to International Association of Congress Centres Will Hutton July 6th 2010

  2. Banking sector assets (per cent of GDP) 600 500 400 300 200 100 0 1880 1904 1928 1952 1976 2000 The astonishing growth of finance – the UK example UK banking sector assets Source: Sheppard, D. K. (1971) and Bank of England.

  3. Per cent 30 United States 25 20 15 10 United Kingdom 5 0 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Long-run equity capital ratios Source: US – Berger, A., Herring, R. and Szegö, G. (1995). UK – Sheppard, D.K. (1971), British Bankers’ Association, published accounts and Bank calculations.

  4. And financial salaries boom…

  5. Private debt overhang overshadows recovery

  6. British Prospects for the 2010s ? • Credit crunches are bad news. On average unemployment rises 7 per cent, GDP declines by 7-9 per cent, public debt rises by 86 per cent • “Deep and lasting impact on asset prices, output and employment” • However government reaction in 2008/9 remarkable – some recovery inevitable • Stock market jump biggest 9 month rise since 1693 – now correction and consolidation • Proposed near elimination of structural deficit over five years big risk • Superimposed on huge deleveraging in prospect from indebted households, commercial property and private equity. • OBR thinks trend growth is 2.35 per cent. My view is growth unlikely to exceed 2 per cent over decade and could be lower.

  7. Five G20 Challenges • Rebalancing the economy – from unproductive to “productive entrepreneurship”. The need for innovation and investment. The return of business purpose. Shareholder value maximisation “ stupid “ – Jack Welch • Rebalancing public finances. Sequencing and timing crucial. Beware Japan’s example. German policy in eurozone very dangerous. • Rebalancing society – mitigating social polarisation. Need to mobilise the majority for an effective knowledge economy • Rebalancing politics – effective central strategy, local ownership and proper deliberation to produce good law and regulation • Rebalancing the international economy. A solution for a ) the imbalances b ) the unbounded nature of modern finance c) China

  8. Defining the Knowledge Economy “ Economic success is increasingly based on the effective utilisation of intangible assets such as knowledge, skills, and innovative potential as the key resource of competitive advantage. The term knowledge economy is used to describe this economic structure” Source: UK Economic and Social Research Council 2005

  9. Knowledge based industries defined by the OECDNote: manufacturing classified by R&D intensity; services classified by ICT use and employment of graduates. Recreational and cultural industries recognised as knowledge based by EU but not OECD, and includes libraries and museums.

  10. Key drivers of the knowledge economyGrowing as proportion of GDP in all western & advanced Asian economies Driver TwoShift in demand towards higher value added, experiential services and tech based goods as consumers have become more sophisticated and diversified. Driver OneNew technologies, especially General Purpose Technologies ( GPTs), create new goods, services, processes and business models with multiple spill-overs.

  11. A short history of general purpose technologies (GPTs)… • 9000 BC – 1400ADSeven GPTsdomestication of animals & plants; wheel; smelting of ore; writing; use of bronze; iron & steel; creation of water wheel • 1400 – 1750 Two GPTsthree masted sailing ship and printing • 1750 - 1900 Five GPTs steam engine; factory system; railway; iron steamship; communications • 1900– 2000Nine GPTsinternal combustion engine; electricity; motor vehicle; airplane; mass production; computer; lean production; internet; biotechnology

  12. Twenty-first century prospects ? Grand Challenges • The mobile phone • Nanotechnologies • Energy from fusion • Advanced materials • Carbon sequestration • Space • Manage the nitrogen cycle • Water • Health informatics • Durable customised infrastructure • Customised medicine • The brain • Cyberspace security • Enhance virtual reality • Personalised learning

  13. The rise of the experiential – authors of our own lives • Air travel • Customised cars – Formula One forerunner for all of us • The adventure holiday • The shopping mall • The live gig • Virtual reality • The SIPP • The Sarkozy Index • etc etc

  14. Intangibles compared across the OECDSource: OECD (2008) Intellectual Assets and Value Creation

  15. Investment in some knowledge assets (R&D, higher education, software) in 2003-2004OECD composite indicator, share of GDP: EU13 excludes Greece. US, Japan, Germany are 2004, rest are 2003. OECD STI Scoreboard 2007.

  16. Growth of knowledge based work 1984-2004knowledge workers defined as managers, professionals and associate professionals; other white collar is personal services, sales and admin and clerical. Source; Working Futures SSDA.

  17. Knowledge workers across the European Union in 2006share of knowledge workers defined by occupation (managers, professionals, associate professionals) in total employment; NMS= New Member StatesEurostat, European Labour Force Survey

  18. Openness Access to finance Skills Competition Demand The Innovation Ecosystem Public research Source: NESTA

  19. Convention Centres as building blocks of Innovation eco-systems • Convention centres generally regarded as loss-leading means of urban regeneration and a means to boost tourism • Some truth in this – but why rising demand? • Urban regeneration and tourism generally second tier or bottom of first tier priorities for public expenditure • Much better to position the convention centre as an indispensable component of city, regional and national innovation ecosystem • Vital for networks, knowledge sharing and horizon scanning • Form strategic alliances with knowledge businesses and sectors? Science parks? Knowledge based industry associations?

  20. The World to 2030 • If you believe that GPTs and Innovation must drive growth in next two decades, beware simple narrative that the future is Asia. • Eg.. The Chinese economic model is looking increasingly problematic as China approaches technological frontier, savings are squandered and US/European capacity to absorb Chinese exports reaches limits • Political upheaval in China almost certain in 2010s • Equally Russia uniquely dependent upon oil and gas – very weak innovation and investment ecosystem • India and Brazil much better positioned – but beware India’s caste system and poor infrastructure and Brazil’s population growth • My hunch – the US will still be dominant if not hegemonic power in 2030

  21. The paradox of capitalism – fairness is vital to organisational health • Productive entrepreneurship and innovation vital to organisational and economic health • Unfairness has viral affect on organisation • De-legitimises leadership because decisions are seen as instrumental to enhance personal wealth • Organisations are teams • Knowledge workers in particular expect parity of sacrifice and reward • No trust without fairness

  22. Where do we go from here? • The need to construct an innovative capitalism less reliant on finance • The return and importance of business purpose • Every organisation must have an understood innovation system • Proportional desert for genuine effort • Beware signals on pay – annual bonuses problematic, LTIPs much better way of organising remuneration, include staff with share ownership schemes

  23. Conclusion • There will be no return to business as usual (2002 -7) • The banking system is very fragile, needs ongoing state support and permanent lost output in OECD considerable. • The aftermaths of credit crunches are difficult – even for single countries • The next five years will be very fraught. Low growth, potential for inflation and geo political risks very high ( China, oil price, eurozone collapse, collapse of economic consensus, beggar my neighbour economic policies) • Good news is acceleration of scientific and technological innovation • Successful knowledge companies will stress business purpose, innovation and organise themselves fairly • Conference centres and the conference business is firmly part of this story

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