The world economy itself is changing drastically, and businesses must exist within that changing environment. We often hear reference to a “knowledge-based” economy: What does that mean? And, more to the point, “So what?” In a knowledge-based economy, innovations substitute knowledge for other capital. Some creative person comes up with a great idea, and suddenly some other product or service is obsolete. Someone gets rich, and someone else is looking for a new job. But more important, we, as a society, gain knowledge. Knowledge breeds more knowledge. Just imagine the ideas and wealth that have been dependent on the development of the first Web browser created by graduate students at the University of Illinois. The World Wide Web wasn't their idea. Their creative input was in developing a different way to use it. The creativity that sparks innovation is often the ability to recognize another use or potential for someone else's idea.

Knowledge expands at an even faster rate when more people talk to each other and share ideas. This principle has expanded to create a global business network—enhanced even more by close relationships between companies that trade with each other to the point that they invest in each other, help develop each other's new products and services, and help each other solve problems. These strategic alliances have created a new business environment.

Rapid change, driven by technology and expanding global markets, has changed the way we make business decisions, the way we value assets, and the way we calculate costs. The traditional understanding of value and how customers perceive it has been turned inside out. For a while, even the way people thought about profit changed. Market share was the only important measure. Profit didn't matter. Just ask shareholders of “pavingstones.com” or “petfoodinbulk.com.” No one should be surprised that consumers would not pay $13 plus $7 shipping for a $15 bag of dog food. That was then. This is now. Profitability matters.