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Vocational education and training (VET) systems in highly industrialised western countries have been faced with a shift from the Fordist industrial paradigm to a new techno-economic information dominated paradigm: the learning economy. This chapter highlights challenges of the learning economy for VET systems. The author examines VET delivery in the Fordist paradigm, analyses the political and social context of VET in the learning economy, and contrasts and discusses two models of balance between VET and innovation in organisations: the social organisation of innovation and the technical organisation of innovation. The chapter presents six directions of change for VET institutions and organisations in response to the new requirements of the learning economy.