48 Chapter 1.5 Smart Organizations in the Digital Age Erastos Filos European Commission, Belgium Copyright © 2008, IGI Global, distributing in print or electronic forms without written permission of IGI is prohibited. AbstrAct The chapter aims to present and explain the concept of the smart organization. This concept arose from the need for organizations to respond dynamically to the changing landscape of a digital economy. A smart organization is understood to be both internetworked and knowledge-driven, and therefore able to adapt to new organizational challenges rapidly. It is suffciently agile to re- spond to opportunities of the digital age. The three networking dimensions of smart organizations, ICT-enabled virtuality, organizational teaming, and knowledge hyperlinking, are elaborated. This networking capability allows smart organizations to cope with complexity and with rapidly changing economic environments. The paper also shows how managing the smart organization requires a more “fuzzy” approach to managing smart resources: people, information, knowledge, and creativity. Research is also presented, mainly from the European perspective. It has been key to creating the conditions for organizations to become smart. chArActeristics of the DigitAl Age Over the last decades, information and communi- cation technologies (ICT) have been the enabling factor in organizational change and innovation, and there is now evidence of their impact on in- dustrial value chains. Organizations today strive to become agile and to operate proftably in an increasingly competitive environment of continu- ously and unpredictably changing markets. The digital age is different from the industrial age in various ways (Figure 1). For example, today ICT represent a substantial—and increas- ing—part of the added value of products and services. ICT-intensive sectors include manufac- turing, automotive, aerospace, pharmaceuticals, medical equipment, and agro-food, as well as fnancial services, media, and retail. In the auto- motive sector, for instance, an estimated 70% of innovations that happened over the last 20 years were related to ICT. According to recent studies, more than half of the productivity gains in developed economies