Knowledge Companies in the USA – Wave of the Future

When judged by official statistics the United States is a service society. 2/3 of all Americans are today working in what is labelled “the service sector”. When looking closer on the services sector we see that The service society is rapidly being replaced by the knowledge society, where more and more of the people are working in the knowledge industries, processing information.

50% of the fastest growing companies in the US are knowledge companies, i.e. they sell the knowledge and the know-how of their employees rather than manufacture products or provide services.

Knowledge companies employ highly educated people, knowledge workers, whose job it is to solve problems for their customers. Most of their time they process information, be it in advertising, management consulting, financial or legal advice, specialist nursing care, programming, systems design, teaching, energy conservation, etc.

The outcome of their information processing is not visible as a product, usually just a few reports or some highly specific advice. The main result is to improve the customer’s business, like a better deal at the court, a less polluted environment, a computer program that performs a task, improved sales or higher efficiency, or even a healthier body.

Not one of the problems is identical

The prime production resources are therefore the knowledge of the staff and their creativity in finding customized solutions. Such solutions can not be bought and sold like bars of soap, nor do the knowledge workers provide a packaged over-the-counter “service” like McDonalds. Instead they tend to work in a close long-term relationship with their customers.

No less than 24% of the fast growing knowledge companies in the United States, are involved in software development. Only 95 of the INC500 – 19% – are manufacturing companies whereas 155 – 31% – are traditional services incl. retail.

The lack of reliable official statistics in this area is notorious. Most of the knowledge companies on the INC 500 list are probably labelled “Business services” in the official statistics.

If we wish to see the future of corporate America, we don’t need a crystal ball or sophisticated forecasts. All you need to do is to visit some of the fast growing knowledge companies. The management styles they are pioneering and the strategies they are pursuing will be on the standard curriculum of the Harvards and the Whartons – but probably not until ten – twenty years from now.

One thing the small knowledge companies have learned – sometimes the hard way – is that knowledge businesses are people businesses and that their most important assets are as invisible as their companies are in the statistics.

If you want to learn how to manage people and intellectual capital, don’t watch the GEs, the GMs or even the Microsofts. Talk to the entrepreneurs and staffs of TGV, (INC40), Mevatec (INC43), Staffing (INC99) or Kestrel (INC118) instead.

Karl E. Sveiby PhD, October 1995

Share of Employment in the United States

(Caution: Some 3% of the categorisations in the INC 500 analysis are uncertain, since I have had to rely on the brief description in the INC500-list, but I do not think this uncertainty distorts the general conclusions).

Source: OECD database Paris

America’s 500 fastest growing companies

The sector Business services in the US has grown steadily over the years and is now employing 18 million people, as many as the whole manufacturing sector.

Leave a Reply

Your email address will not be published. Required fields are marked *