No list of Digital Megatrends would be complete without this one. Automation is driving an increasing mismatch between the skills that firms require and the talent that is available. In the long run, almost all jobs can be automated, as so compellingly described by researchers such as Erik Brynjolfsson & Andrew McAfee, and demonstrated by the likes of Google’s driverless cars. But what are we likely to see in the near term, and what actions should firms take? In the near term, four trends are already playing out in businesses across sectors:
First, loss of middle management jobs. Full automation often requires both a shift in customer expectations and significant capital investment (e.g., in robots or software). But technology can be deployed quickly and cheaply to improve transparency over manual processes. For example, workflow tools can help to control manual processing tasks (e.g., opening an account). Items of work are routed depending on worker availability and skills. Management information is automatically collated and circulated. As a result, much higher spans of control are possible (sometimes 1:100), making middle management positions redundant.
Second, a shortage of digital skills. At the same time, digital is creating high demand for new types of skill. For example, the best ‘apps’ are highly intuitive and aesthetically pleasing. But finding user experience (‘UX’) designers with the capabilities to create such works of art is challenging. Persuading them to work outside the technology sector is even more difficult.
Third, increasing pay differentials. Automation is starting to increase the disparity in pay between those whose roles are hard to automate (e.g., UX designer) vs. those who are not.
Finally, a slow-down in offshoring. Offshoring a process typically offers a net cost saving of around 30% whilst the equivalent figure for full automation can be double that. Offshoring continues for those processes that are hard to automate, but less so for routine work.
These trends are playing out at different rates by country and sector, often obscured by prevailing macro-economic conditions. But all firms can start to take action to position for a ‘resource surplus, talent scarcity’ future. Specifically they can:
1. Refresh the talent model. Historical models of hiring, promotion and attrition start to break down as spans of control change and specific skills are suddenly in high demand. Firms need to understand how their resource and skills dynamics are likely to shift and react accordingly (e.g., by increasing lateral hires, changing compensation schemes).
2. Re-train displaced talent into new roles. Many companies remain reluctant to re-train displaced colleagues into new roles, believing that retraining is expensive and difficult. But research suggests that a meaningful proportion of workers – even those later in their careers, have a high ability to learn new skills. As the pay disparity increases, the business case for retraining will look increasingly persuasive.
3. Re-imagine how talent can create competitive advantage. Harley-Davidson has persevered with a manual manufacturing process which allows each motorcycle to be customized in a way that a robot-centric process couldn’t replicate. One bank has invested in highly-skilled call-centre staff, recognizing that customers who no longer want to travel to branches may want a high-quality human interaction at pivotal moments.
In any case, organisations should not delay. High end digital skills are becoming progressively harder to find. Social & political pressure on downsizing may increase if employment rates increase.
Look out for further Digital Megatrends soon.