The Role of Government in the Age of Knowledge.

• Author: Hunter, David R.

This article identifies five new rules of the electronic economy and what they mean for governments.

Editor's note: This article originally appeared in the May 2000 issue of Insights, and is reprinted and adapted with permission from Andersen Consulting.

The debate around the e-economy is focused on the impact on the private sector--business and consumers--and how these relationships will be transformed. The public sector barely rates a mention in most of the commentary, and yet for governments, the change will be no less profound. It will have an equally significant impact on government relationships with their stakeholders--businesses, citizens, political leaders, and other governments.

Each government will have different relationships with their stakeholders depending upon what functions they provide. However, this is not a debate about whether government should be involved in health care or education or telecommunications. Each government and each situation is different. It is about how government can enable and empower its citizens, and make the best choices for stakeholders in an age of rapid transformation.

The Age of Knowledge

We are clearly living through the most significant economic and technological change of any century. The developed world is changing from an industrial to an information economy, a shift in economic and human relationships as significant as the previous displacement of the Agricultural Age by the Industrial Age.

Information technology is enabling an economy based on knowledge. But technology convergence has done more than change the way business is conducted. It has rendered obsolete many of the fundamental economic assumptions on which most businesses have been based.

Andersen Consulting has identified five new rules of the e-economy:

1) vertical disintegration--no longer are Interaction and collaboration costs high;

2) return on assets--no longer do physical assets play the central role in value propositions;

3) returns from scale--no longer does size ultimately limit returns;

4) access to information--no longer is access to information restricted and expensive; and

5) time to market--no longer does it take several years and deep pockets to build a business with global presence.

For established businesses, the new rules mean nimble new competitors are creating faster, better, cheaper value propositions and stealing market share at "e" speed.

Implications for Government

But what do they mean for governments? How do these new rules impact their role?

For governments, there are equivalent new demands. New services are desirable and necessary as new public-interest issues arise, often involving new working partners, and requiring organizational transformation. The explosion of Internet access is making national borders less relevant and...