MAIN VIEW

Achieving success in a time of upheaval

Rapid technological change and demographic shifts are transforming the business environment, society and individuals’ lives. To prosper in the future and seize the opportunities offered by innovation, governments, companies and workers will have to adapt a new mindset.

How will we live in 2030? Or 2050? The honest answer is that nobody knows. Yet based on recent technological developments and long-term demographic change we can guess that one answer is ‘very differently to now’.

The few businessmen that hauled around brick-sized mobile phones in the 1980s couldn’t have envisaged that in 2016 more than 2 billion people would own a smartphone – a mini-PC with more power than a supercomputer of that era. Likewise, even a decade ago only the most ambitious daydreamers might have imagined that a self-driving car could drive its owner to hospital when he suffered a medical emergency.

“The speed of current breakthroughs has no historical precedent,” says Klaus Martin Schwab, the founder of the World Economic Forum, which organises the Davos meeting of political and business leaders. Many observers claim we are living through a fourth industrial revolution – the first being driven by water and steam power, the second by electricity and the third by electronics and information technology.

The drivers of the current technological revolution are myriad: artificial intelligence (AI), autonomous vehicles, biotechnology, energy storage, the internet of things, materials science, nanotechnology, robotics, quantum computing and 3-D printing. “When compared with previous industrial revolutions, the fourth is evolving at an exponential rather than a linear pace,” says Schwab. “Moreover, it is disrupting almost every industry in every country.”

These changes will have dramatic consequences for society, companies and individuals. It is no exaggeration to claim that our readiness – and willingness to embrace change – could spell the difference between success and failure in our careers and the firms we work for.

Turning companies upside down

The new wave of technological developments has the potential to cause widespread disruption, both to companies and individuals. For companies, one risk is what might be known as Uberisation: new entrants with a revolutionary business model could undermine existing market leaders. In Austin, Texas, where Airbnb supply is highest, hotel revenue has fallen 10%. In San Francisco, taxi use fell by 65% when Uber and other ride sharing services were introduced.

Technology is not only impacting how we access services but how – and what – things are made and distributed. Industries that have been broadly similar for the past century, such as car manufacturing, appear to be on the verge of revolution. New entrants, whether electric car pioneer Tesla or tech giant Google, could unseat existing industry leaders as electronics, rather than mechanical engineering, is used to differentiate vehicles.

Established players are rushing to catch up through acquisitions and partnerships. In March 2016, General Motors (GM) spent more than $1 billion to acquire Cruise Automation and gain “a unique technology advantage that is unmatched in our industry”, according to Mark Reuss, global product development, purchasing and supply chain at GM.  In August 2016, Volvo and Uber joined forces to develop next generation autonomous driving cars: “By combining the capabilities of Uber and Volvo we will get to the future faster, together,” claims Travis Kalanick, Uber’s chief executive.

Similar M&A and partnership activity is taking place across a range of industry sectors, from biotech (witness Pfizer’s $14 billion takeover of Medivation) to nanotechnology (where AstraZeneca paid Bind Therapeutics around $200 million to use its technology to develop a cancer medicine) as new entrants seek scale and established companies try to harness emerging technologies. “In the financial sector, ING and some other banks are rapidly embracing collaboration with fintech companies to leverage the benefits of new technology for clients,” explains Ivar Wiersma, head of innovation at ING Wholesale Banking.

But acquisitions and partnerships are unlikely to be enough. Companies will need to invest more and be more ambitious, unconventional and wide-ranging in their thinking, both in relation to operations and how they manage their finances and treasury. In short, they need to behave more like disrupters themselves. “Just as the earlier generations of managers needed to redesign their factories, we're going to need to reinvent our organisations and even our whole economic system,” explains Erik Brynjolfsson, author (with Andrew McAfee) of The Second Machine Age.

The effect on people

The need to reinvent the economic system is not just hyperbole. Many observers fear that technology will destroy jobs on a massive scale: 57% of jobs in rich countries could be susceptible to automation and developing countries could be hit harder, losing more than three-quarters of all jobs. Some of the factories offshored to emerging markets in search of lower costs look set to return to developed markets – without the accompanying jobs: in May sportswear company Adidas said it would build a factory in Germany to make shoes using robots.

Of course, there has always been a fear that technology will eliminate workers – from the cotton weavers and wool spinners of the early industrial revolution to the mass "technological unemployment" warned about by John Maynard Keynes in his 1930 essay Economic Possibilities for our Grandchildren. In reality, new technologies have always created rather than destroyed jobs. Why should the fourth industrial revolution be any different?

The answer, according to some, is the scale and scope of new technology. AI, for example, could replace the cognitive jobs that represent the majority of many developing countries’ workforces. Consequently, the middle class could be ‘hollowed-out’, according to Martin Ford, author of Rise of the Robots, with the jobs market focused on a handful of elite jobs (such as designing AI or performing complex surgery) and low skill ‘gig economy’ jobs such as retail or logistics that offer no job security. Many people are likely to fall between the two groups and will need support: one potential outcome, according to George Zarkadakis, digital lead at advisory firm Willis Towers Watson, is that “the role of government will be increased, probably through universal income”.

Fortunately, the outlook may not be as bleak as some fear. There is a notable lack of consensus on the impact of automation, let alone other technology: a recent OECD report suggested just 9% of jobs are automatable in rich countries.

”There is often a confusion between jobs and tasks when calculating the impact of automation,” says Marieke Blom, chief economist at ING Netherlands. “Many individual tasks associated with production or administration can be automated. However, individuals rarely perform a single task and we are still some way from being able to produce cost effective multi-tasking machines. Moreover, humans in admin, for example, can interpret the results of their tasks and present them in an understandable way. It may be possible for machines to do this in the future but it is far from imminent: any increase in automation will be slow and gradual, giving people time to retrain.”

In addition, many studies often underestimate the number of new jobs that will be created by technology, according to Blom. “Employment in IT and on help desks will increase, for example, and there will be other opportunities that have yet to be imagined,” she says. “Also, as we become richer, demand for services such as restaurants will grow, increasing employment in those sectors.” Another theory is that the supply of jobs that require uniquely human capabilities will soar as robots and AI take over routine tasks. Richard Newton, author of The End of Nice: How to be human in a world run by robots, says that people will be hired in the future for human skills such as “inter-personal communication, empathy and compassion” as well as creativity, problem solving and caring.

Working differently

To assess whether new technology will produce mass unemployment, it is necessary to know how many workers there will be in the future. Compared to technological changes, demographic changes are glacial. Many developed countries are still shaped primarily by the high birth rate that followed World War II – the baby boomers – followed by steeply declining fertility. With a few decades lag, a similar trend has occurred in many developing countries.

As a result, “virtually every country in the world is experiencing growth in the number and proportion of older persons in their population,” according to the UN. By 2030, one in six of the global population will be over 60: a 56% increase from 2015.

The decline in the working age population creates challenges in terms of supporting retired people: an ever small workforce is supporting an ever larger population of retirees. Yet it also reduces the threat that technology poses in terms of workforce reduction. Could tech simply replace jobs as employees become scarce while increasing the productivity of the remaining workers? Indeed, could it also free up remaining workers to become more creative and flexible. Certainly, surveys of millennials suggest such an outcome would be welcomed.

Society’s choice

How AI, automation and other new technologies affect society is far from certain: ultimately it will depend on the choices society – likely acting through government – makes.

Technology run wild could indeed have dystopian consequences, including mass unemployment, greater inequality and potential social disruption. However, adopted in a responsible way – with humans using their unique conceptual skills to take their place at the heart of technological disruption – it could create value for businesses and help people to enjoy more independent, meaningful jobs, better living standards and more leisure time.

Sources

  • www.statista.com/statistics/330695/number-of-smartphone-users-worldwide/, accessed August 17, 2016
  • www.techrepublic.com/blog/classics-rock/the-80s-supercomputer-thats-sitting-in-your-lap/, accessed August 17, 2016
  • www.theguardian.com/technology/2016/aug/08/tesla-model-x-missouri-medical-emergency, accessed August 17, 2016
  • www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/, accessed August 15, 2016
  • The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry, Georgios Zervas, Davide Proserpio, John Byers, January 27, 2016
  • www.worldbank.org/en/publication/wdr2016, accessed August 23, 2016
  • media.gm.com/media/us/en/gm/home.detail.html/content/Pages/news/us/en/2016/mar/0311-cruise.html, accessed August 22, 2016
  • www.media.volvocars.com/global/en-gb/media/pressreleases/194795/volvo-cars-and-uber-join-forces-to-develop-autonomous-driving-cars, accessed August 22, 2016
  • www.ted.com/talks/erik_brynjolfsson_the_key_to_growth_race_em_with_em_the_machines?language=en, accessed August 22, 2016
  • www.worldbank.org/en/publication/wdr2016, accessed August 23, 2016
  • www.ft.com/cms/s/0/7eaffc5a-289c-11e6-8b18-91555f2f4fde.html#axzz4I9JgQVIA, accessed August 23, 2016
  • www.bbc.co.uk/news/technology-36111869, accessed August 23, 2016
  • www.towerswatson.com/en-GB/Insights/Newsletters/Europe/HR-matters/2016/06/Artificial-Intelligence-will-destroy-entry-level-jobs-but-lead-to-a-basic-income-for-all, accessed August 23, 2016
  • www.oecd-ilibrary.org/social-issues-migration-health/the-risk-of-automation-for-jobs-in-oecd-countries_5jlz9h56dvq7-en, accessed August 23, 2016
  • www.theguardian.com/careers/2015/sep/22/future-job--robot-revolution, accessed August 23, 2016
  • www.un.org/en/development/desa/population/theme/ageing/WPA2015.shtml, accessed August 23, 2016
  • www.un.org/en/development/desa/population/theme/ageing/WPA2015.shtml, accessed August 23, 2016
  • www.pwc.com/mx/es/gosth-pages/nextgen-study-2013.html, accessed August 15, 2016

The View is the online magazine of ING Wholesale Banking