Blog. The future of work and organisation. Part 5 of the series ‘Disruption and new business models’
We live in a fascinating and rapidly changing world. Together, technologies such as robots, artificial intelligence, the Internet of Things, self-driving vehicles, 3D/4D printing, solar energy, nanotechnology, biotechnology and quantum computing are initiating a 4th Industrial Revolution. We are witnessing new products, new methods of production and new business models across all industries. This is Part 5 of the series Disruption and new business models, discussing the future of work and organisation.
Robots and artificial intelligence also replace skilled labour
We have all heard about the replacement of unskilled labour by robots in factories and about defunct mail rooms shut down due to the wide range of documents and forms now sent using websites or email. And don’t forget self-driving cars which render the chauffeur obsolete. These examples list the disappearance of repetitive and relatively uneducated tasks.
Yet we are now witnessing the automation of knowledge work thanks to artificial intelligence, especially when this work is routine. In an earlier blog about the future of insurance, we wrote about virtual insurance advisors and chatbots which take calls and answer customer questions. Increasingly, artificial intelligence robots are making decisions relating to the payment of claims, provision of loans and the planning of delivery services. Brokers, lawyers and labour market intermediaries must be beginning to get nervous; both the process and content aspects of their jobs can, to a large extent, be digitalised.
Bridgewater, the largest hedge fund in the world with $160 billion of capital under management, is working towards the replacement of its managers by artificial intelligence. Their goal is to have three quarters of managerial decisions made by a computer within the next 5 years. These computerised decisions will be used to hire personnel and to prioritise various proposals made within a team. The founder of the fund, Ray Dalio, seeks to ensure that the fund is led on the basis of his vision, even when he is not personally in attendance.
Adaptability and learning ability are more important than knowledge
The jobs that do remain are the ones that do not involve routine and require capabilities in which humans perform better than robots, such as creativity, social intelligence and personal contact. A financial adviser or medical specialist supported by artificial intelligence for analysis purposes is not superfluous, but will perform a different role. Conversation with the customer or patient, will be less about the accuracy of an analysis and more about the impact of the findings and the most appropriate options and actions for the person in question.
In schools and universities, the transfer of knowledge is pivotal. This is relatively easy to teach and assess. However, knowledge also becomes quickly outdated, is easy to access and is now digitalised. On the labour market, success is not determined by knowledge, but by one’s ability to adapt and learn.
The role and skill set of the manager
What does all of this mean for the manager? Will managers become superfluous? Creating staff schedules and coordination within the workplace were previously important management tasks, but in many organisations these tasks have become automated. Computers are faster and better equipped at creating staff schedules and connecting various processes with each other.
The manager is now less of a go-to authority on content issues. Knowledge has become available to anyone everywhere and it is no longer the case that the manager knows best. We are also witnessing the slow but sure disappearance of traditional staff assessment systems; instead of a once or twice yearly assessment done by the boss, we now have self-assessment tools and peer reviews.
However, managers will not become superfluous at any time soon. Groups need leaders who inspire, encourage team spirit, set goals, build trust and resolve conflicts.
The challenge for leadership: change is more important than stability
Many business owners and managers strive for continuity: in customer relations, in business operations and in financial results. When determining annual plans and budgets, it is often assumed that the environment in which the enterprise operates is relatively stable. However, ‘business as usual’ does not last as long as it used to.
Modern leaders prioritise adaptability to change over continuity. How quickly does one notice shifts in the market caused by technological innovation or new business models? How quickly can one implement large or small changes? How quickly are decisions made, even if the impact of these decisions cannot be precisely forecasted? Companies who cherish their competitive advantage are forever searching for trends, working through various scenarios and defining their strategic options.
Agile, but not everywhere and all the time
Agile working is an effective method for the more rapid development and introduction of new products and services to the market. By reducing bureaucracy and transfer times between departments, as well as encouraging greater employee autonomy in multidisciplinary, self-steering teams, an organisation’s production rate will subsequently increase. Agile working was originally developed to be used within IT projects, but companies such as ING are applying this method on a much larger scale. They have combined their IT and commercial activities, meaning marketing, product management, channel management and IT development no longer exist as separate departments.
Agile working usually produces good results in the development of software and relatively small, incremental improvements. Much end user testing is done prior to and during product development, so that the product can be adjusted according to the latest requirements and at any stage, from early development right up to the project’s end. This ‘bottom-up’ approach does not automatically lead to disruptive innovation. However diverse and smart your internal team is, developments are often accelerated with the input of external sources. Which brings us to the subject of open innovation.
The best people always work elsewhere: open innovation
Organisations are becoming more and more aware that the best people work elsewhere. This is not meant as a put-down for an organisation’s permanent staff, but as recognition of the fact that one will always come across more knowledge and experience outside of an organisation than one would within its four walls. Open innovation is the collective term for a variety of methods used to take advantage of knowledge from outside your organisation.
You can work together with suppliers, clients, universities and consultants. Procter & Gamble, in their Connect + Develop programme, are constantly on the lookout for partnership deals with groups who come up with innovative ideas, and enjoy a share of the profits. Various platforms such as Innocentive and NineSigma can introduce you to specialists around the globe to help solve any technical issues.
By adding a flexible layer of temporary, external staff a company may benefit from continued external input. Practically every function is covered on crowdsourcing platforms designed to help you find a suitable candidate.
Digitisation isn’t always positive: the risks and disadvantages
It is wonderful when robots take over a significant part of the workload, artificial intelligence optimises business processes and employees at all levels have access to the information they need both inside and outside of their organisation. However, if we extrapolate the digital developments within the fields of work and organisation, we can also foresee some much less attractive scenarios.
To begin with, there are the security risks. Digital criminals can also make use of artificial intelligence, and use it against you.
Furthermore, continuous monitoring could lead to Big Brother-like working conditions. This is not only irritating to staff members placed under constant supervision at the expense of a part of their privacy, but also limits creativity and innovation; space is necessary for the development of new ideas and for experimentation.
We can also surmise that a company consisting only of temporary employees does not encourage loyalty or a ‘go the extra mile’ mentality; employees will simply move to the best paying competitor. The computer was created to serve people and not the other way around.
Consequences for the labour market and for society
Then there are the consequences for the labour market. While prosperity rises and global poverty drops, we are enjoying an even shorter working week. This is the good news. In 1870, the average working week in the Netherlands was 65 hours; in 1970 it had fallen to 45 hours. Now, it is less than 35 hours. We need to work less then we ever have before in order to survive.
The other side of this story is that this is not the case for everybody. Social inequality is on the rise and subsequent protests are becoming clearly audible; take, for example, the protests against technology companies such as Apple, Google and Uber. Furthermore, during the meeting of the World Economic Forum in Davos in January 2017 there were significantly more debates than ever before about the gap between people who benefit from technology and those who do not.
Government policies cannot stop technological progress. Automation and robotisation will lead to the disappearance of many more jobs with labour continuing to become more flexible. Holding on to an old fashioned labour market model with measures to discourage flexible work such as compulsory insurance for the self-employed will only slow down the transition to the new labour market at best.
Finland recently launched an interesting basic income experiment. From 1st January 2017, 2000 unemployed citizens have been paid a monthly basic income with no strings attached. They are not required to inform anyone if they have applied for a job, and this income will not be reduced should they find work. Citizens are given security and freedom, bureaucracy takes a back seat and the labour market is left unhindered by government intervention.
It would be great if experiments such as those in Finland could be carried out in more locations around the world, but unfortunately the Netherlands is out of the running. State Secretary Klijnsma prohibited such an experiment involving 20 beneficiaries in Terneuzen in January 2017.