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CHAPTER 2

The Fourth Industrial Revolution and Its Impact on Business

A new type of thinking is essential if mankind is to survive and move toward higher levels.

—Albert Einstein

THE FORCES SHAPING THE WORLD OF WORK

WHETHER YOU ARE A TEAM MEMBER or you lead a team, large or small, you will have noticed that the world of work is changing, a consequence of the way the world in general is changing. For one thing, countries like the United States and Canada are experiencing higher levels of racial and ethnic diversity through international immigration patterns. According to the Pew Research Center, by 2055, the United States won’t have a single racial or ethnic majority.¹ This shift in demographics is naturally affecting the workforce, which is becoming more diverse by gender, culture, religion, sexual preferences and identification. The burning question facing organizations is how their talent operating model is set up to accommodate the diversity of thought, personal and professional experience, and work habits that people bring to the workplace every day.

Most notably, the workforce is simultaneously growing older (because baby boomers aren’t retiring) and younger, with the rise of the millennial generation. Millennials currently make up more than half of the workforce and bring with them high expectations for work experiences that provide them with purpose and meaning at work. They want continuous learning and development opportunities that will result in rapid career progression.

Gallup has studied millennials for several years. In its 2016 report, How Millennials Want to Work and Live, it challenged the notion that they’re a generation of job hoppers, a bad reputation that has been unfairly pinned on them. Research by Gallup indicates that 55 percent of millennials are simply not engaged at work. Many don’t want to job-hop, but their companies fail to give them compelling reasons to stay. This is a product of the traditional talent operating model that boxes people in with a culture that roadblocks learning, growth and taking on new challenges. In today’s tight talent markets, every organization needs to constantly provide employees with significant motivation to stay.²

Maynard Webb and Carlye Adler, the authors of Rebooting Work, provide a framework that illustrates how work is changing and what organizations have to do to engage their employees. They write about the millennials’ high levels of disengagement and their need to embrace their entrepreneurial spirit and take control of their careers by seeking fulfilling work. Webb and Adler contrast four philosophies of work (see Figure 2.1). They believe that whether you start your own company or work for another person, you can be the “CEO of Your Own Destiny” and embark on a path to a gratifying career.³

Webb and Adler further argue that the rise in freelance work might have been prompted by the economic downturn and people looking for employment, but it has nevertheless inspired a generation to take more control over their careers, reduce commuting time and leverage technology to work anywhere at any time. This concept fits well with their desire to integrate work and life and to be more in command of their work options.

Technology and Obsolescence

Early signs of the unprecedented velocity, scope and impact of what has been called the Fourth Industrial Revolution are becoming apparent. Previous industrial revolutions made substantial improvements in the way we farmed; brought us into the Industrial Age, ushered in mass production; and eventually propelled us into the Information Age, whose eruption of technology and available information makes it easier to access facts and find talent through the Internet with job boards like Monster and social networks like LinkedIn.

Figure 2.1 Four Philosophies of Work

Maynard Webb and Carlye Adler, Rebooting Work: Transform How You Work in the Age of Entrepreneurship (San Francisco: Jossey-Bass, 2013).

Klaus Schwab from the World Economic Forum defines the Fourth Industrial Revolution as one characterized by a range of new technologies fusing the physical, digital and biological worlds, impacting all disciplines, economies and industries, and even challenging ideas about what it means to be human.⁴ According to the World Economic Forum, four specific technological advances are significantly disrupting the world of work: high-speed mobile Internet, widespread adoption of big-data analytics, artificial intelligence and cloud technology.⁵ These new technologies are economic game changers, and the rate of change for new technologies remains unabated. So does disruption in all sectors, from retail to health care. With respect to people, the capital investments an organization is making in new technologies have short- and long-term implications. People need to be trained, and often in a hurry. But can a talent operating model—perhaps even yours—that is designed for a different time keep up?

Here is a prime example of technological advances creating disruptions. In 2001, people who lived in Oakland, California, and worked in San Francisco had to drive an hour in traffic, pay a $3 toll to cross a bridge, and spend $40 a day to park their cars. Many of these people lived too far away from public transit to make it convenient to get to work. But then an interesting change occurred. “Casual carpool,” a new social phenomenon that hundreds of thousands of commuters used to travel to work, sprung up all over the East Bay. Every morning, people lined up at predetermined spots (generally bus stops) and waited for drivers to come by to pick them up to form carpools. The drivers then proceeded over the Bay Bridge and dropped their passengers off in downtown San Francisco. As an added bonus, carpools were allowed to cross the bridge for free and had access to expedited lanes. Never did these carpoolers imagine that less than a decade later, mobile technology and big data would be leveraged to create Uber, a ride-share service similar to casual carpooling, but now, of course, not free. This is just one-way technology has disrupted our world—in this case causing a massive panic in the taxi industry by launching a system where people are more in control of their transportation experiences.

The Half-Life of Skills

In 2011, Douglas Thomas and John Seely Brown stated that the half-life of the skills we learn is only five years. New technologies or transformations in business practices will make half of what we know obsolete in a five-year span.⁶ With the amount of change we’ve experienced in the past decade, the half-life of skills is even shorter today. According to the World Economic Forum, by 2022, the core skills required to do a job will shift by 42 percent, resulting in the loss of an estimated 75 million jobs.⁷ However, media drama about robots taking over jobs is a slight exaggeration. Although many jobs will be lost to automation, several sources also estimate a net gain of new jobs due to digital transformation.⁸ The World Economic Forum predicts this increase will amount to 133 million new jobs, a net gain of 58 million.⁹

By 2020, 14 percent of the global workforce may need to switch occupations due to digitization, artificial intelligence and automation.¹⁰ As a result of the Fourth Industrial Revolution, an unparalleled shift in the skills required by the workforce is occurring. The hot jobs today—full-stack developers, user experience designers, cloud developers, data analysts and AI engineers—didn’t even exist a decade ago, so who knows what the next hot skill set will be.

In their book, A New Culture of Learning, authors Douglas Thomas and John Seely Brown tell us that “the half-life of a learned skill is 5-years,” meaning that half of what we know will become obsolete in that time because of new technology or transformations in business practices.

This new world of work has enormous potential to fulfill the desire of millennials to find more purpose and meaning in work. As the more mundane aspects of their jobs are removed, they are able to contribute to the success of their companies in completely different ways. Aaron Hurst’s book The Purpose Economy shares how millennials want to build opportunities for self-expression into their day-to-day roles. But that, of course, requires new skills.¹¹

Fifty-three percent of U.S. CEOs think their companies should retrain workers when jobs are eliminated through automation.¹² Unfortunately, only the highest-skilled workers receive reskilling, if it happens at all.¹³ With the rapid pace at which skills are changing, companies must develop new strategies to upskill and reskill within the flow of work. It is not practical to expect employees to devote time to leave the workforce or take time away from their jobs to keep up with the skills necessary to compete today. However, if organizations don’t find new approaches to revamp their talent operating model, the world of work will move from one that can provide employees with meaningful work to one that increases the gap between the haves and have-nots.

But not all the responsibility should reside with organizations. Employees must proactively pursue continuous learning opportunities to ensure their skills don’t become obsolete. Governments must provide incentives and facilitate the creation of public-private partnerships to encourage companies to invest in reskilling their employees.

As we advance further into the Fourth Industrial Revolution, it is imperative for companies to rethink the way they work. The speed of change continues to accelerate. The need to adapt and pivot is becoming critical for everyone.

The Rise and Makeup of Adaptive Teams

According to Deloitte’s Global Human Capital Trends 2016,¹⁴ in the face of the forces that are reshaping the world of work, companies understand the urgency of doing away with traditional, hierarchical and functional models. These models will be replaced with flexible teams that are more agile and customer-focused, and better connected and integrated across functional lines.

Organizations have historically been built to be efficient and effective, which was appropriate in an era of predictability. The resulting business models established strong silos that discouraged cross-boundary collaboration. But in today’s era of unpredictability and constant business model disruption, companies must be designed for speed and agility to allow them to respond better to business priorities and customer demands. As a result, organizations are creating flatter, more fluid structures.

Imagine work teams coming together to find solutions to business challenges or to innovate new products. These teams would assemble to achieve their objectives, and when they finished, disband and move on to different projects. While some organizations already operate in this manner, parallels are often drawn to the way work gets accomplished in Hollywood. A director pulls together a multi-disciplinary team that includes actors, scriptwriters, camera operators, makeup artists, visual effects people, costume designers and so on. When the film is completed, these talented and skilled people move on to other projects.

Today’s business challenges are often too complex for one discipline within the organization to develop a solution or devise a fresh approach. To look at problems from different perspectives and arrive at optimal solutions, it helps to bring together diverse teams. This deliberate team structure is often seen in the biotech industry, where new product development teams are put together. To advance a molecule to a drug that will be a viable product, it takes the expertise of many disciplines to understand all the complexities. The shift to team-based work structures enables companies to be more agile because of the impermanence of these groups. These groups can be quickly formed, expanded, reduced or eliminated based on changing business dynamics. According to a 2019 Mercer report, the highest return on investment on talent will come from redesigning jobs to better deliver value.¹⁵

Delivering better value to a large part will depend on the leader’s ability to align and optimize the talent and skill of team members who represent multiple generations, and so have different needs and approaches to problem solving based on their personal experiences. For example, baby boomers grew up with a mindset of “hard work pays off for an individual, and individual accomplishments matter.” Conversely, millennial employees were taught from an early age to work in teams to solve problems, were rewarded for their “collective success,” and have seldom encountered individual awards.

Millennials’ inclination to collaborate has been of great benefit to them. They are entering an era of work that has grown increasingly complex and requires the input of people from different disciplines with different skills. Don’t underestimate this change in the nature of work. A study published in the Harvard Business Review (HBR) reports that the growing complexity of work means that the time spent by managers and employees in collaborative activities has ballooned by 50 percent or more over the past two decades.¹⁶

So, for multiple generations, employee experiences that suit very different work styles and cultural backgrounds must be balanced with significant shifts in how work is accomplished. All of this is an outgrowth of the burgeoning complexity of work and the need to connect across boundaries in organizations in ways that were never done before. Outmoded talent operating models will not be up to the challenge.

THE NEED FOR DIVERSITY AND CHOICE: A CONSUMER EXPERIENCE

Looking at the five most prevalent forces driving change in the workplace (see Figure 2.2 Five Forces of Change), two themes illustrate why you need to offer employees greater choice in personal work experiences—democratization of work, and technological empowerment. The five forces of change are as follows:

•Social and organizational reconfiguration: Increased democratization of work creates a shift away from hierarchy in favor of more power-balanced organizations and communities that are less employment-based and more project-based. Talent will increasingly “join” based on aligned purpose.

•All-inclusive global talent market: Work is seamlessly distributed around the globe with 24/7 operations enabled by new corporate and social policies. Extreme longevity allows mature talent to stay in the workforce longer, while women and nonwhite ethnicities become talent-market majorities.

•A truly connected world: The world is progressively connected through mobile devices that allow work to be done from anywhere by a network of freelancers. New media enable global and real-time communications to speed up ideation, product development and go-to-market strategies.

•Exponential pattern of technology change: Technological breakthroughs increasingly disrupt markets and businesses. The rapid adoption of robots, autonomous vehicles, commoditized sensors, artificial intelligence and global collaboration will renew the rethinking of work.

•Human-machine collaboration: Advances in analytics, algorithms and automation continue to make improvements in productivity and decision-making. Smarter computing increasingly automates and abolishes mundane tasks previously performed by humans.¹⁷

Figure 2.2 Five Forces of Change

CHREATE, 2018, http://chreate.wpengine.com/2018/02/15/tools/.: //chreate.wpengine.com /2018/02/15/tools/.

The first three forces of change speak to the theme of democratization of work, where a new vision of the future is characterized by new “employment” relationships that are shorter in duration and place into balance the needs of the individual and the needs of the company. A shift toward a more agile and responsive view of work will deliver results by activating purpose-built networks such as teams that work on common goals.

The last two forces speak to technological empowerment, where technology is transforming the way we live and work. Machine learning, 3D printing, mobile, wearables and algorithmic analytics are some of the many technologies that promise to empower individuals. New technologies allow people to work from anywhere at any time, and, within the scope of privacy laws and company regulations, provide greater insights into the workforce.

These forces of change in the workplace make it obvious that companies must dispense with talent operating models where the power in employment relationships is centralized and employees are boxed into narrowly prescribed roles. Given the proliferation of on-demand talent platforms—such as Topcoder, Toptal, Figure Eight, InnoCentive, Upwork, and Guru—there is no longer a necessity to create a “job” for every need an organization has at the moment. Because a significant amount of work can be broken down into discrete tasks or projects, companies can access the specific skills required now and let the individuals involved then move on to other projects where they can put their skills to the best use.

While this can be done with external or on-demand talent, the process can also be implemented internally to provide employees with new, challenging projects that keep them interested and engaged. It also simultaneously contributes to their development by offering different work assignments with different people in the company, while exposing them to new skills of growing importance to the firm. This choice to decide what work fuels their passions and interests is the new consumer experience that employees want today. Giving employees a technological solution that makes choosing work assignments as easy as ordering from Amazon brings the dynamic of today’s consumer experience into the workplace.

The New Employment Contract: Continuous Learning

Before we address the research supporting an employee’s desire to learn and grow, let’s consider the issue from a company’s perspective. Skills, not jobs, will become the new currency of the labor market.¹⁸ We’ve already seen that in today’s rapidly changing business environment the half-life of skills is less than five years. This means we all have to embrace a lifetime of learning rather than continue with the old mindset where we spend the first part of our lives learning, the next phase working and the last stage in retirement. Such a transformation is particularly needed because we are living longer and are likely to experience several different careers in the course of a lifetime.

A study by McKinsey & Company in late 2017 found that 66 percent of top executives said retraining and upskilling their employees were urgent business priorities.¹⁹ More than 8 out of 10 global managers view learning as an important or very important issue for organizations today.²⁰ However, companies are aware that they aren’t keeping up with the demand for personalized, dynamic, continuous learning opportunities. As a result, they’re shifting to self-directed practices that enable people to develop themselves: on-the-job learning, access to massive online open courses (MOOCs) or other online content curated for their experiences. Cementing the importance of continuous learning for organizations, recent Glassdoor data reveal that the “ability to learn and progress” is now the key driver of a company’s employment brand.²¹ So, in today’s highly competitive talent market, continuous learning is a business priority. Furthermore, LinkedIn’s 2018 Workforce Learning Report indicates 93 percent of employees would stay at a company longer if the company invested in their careers.²²

Studies of the attitudes of new college graduates in the United States and United Kingdom found some alarming results.²³ When new college graduates enter the workforce, they report being eager, prepared, passionate and committed, but one or two years later, those same graduates feel disillusioned, underemployed and undervalued. These individuals are looking for a more personalized experience at work, where their passions will be acknowledged and their career paths or work experiences are customized to their interests.

By creating an Inside Gig experience, companies can offer employees a better learning experience, improved variety in career development, and the possibility of keeping them engaged in corporate strategy, all of which will help them utilize their skills and not feel underemployed. According to a 2019 Mercer report, 51 percent of employees are willing to take an internal gig to gain experience, up from 38 percent in 2018.²⁴

Through a series of interviews with companies experimenting with project-based opportunity platforms, we have learned that innovative companies are trying to help employees identify prospects for real-time learning. While almost all of these organizations provided these learning experiences on top of employees’ regular work responsibilities, the opportunities offered employees the ability to leverage skill sets in new contexts or grow skill sets by applying them in a larger or different manner than they were able to do in the past. Connecting employees to the learning possibilities they desire is perceived to be highly valuable to both employees and employers. Learning has become an important commodity for employees in a constantly evolving business environment where skills can quickly become obsolete if learning isn’t continuous.

The New Employment Contract: Meeting Changing Expectations

As organizations build people practices, they need to consider what employees or managers want or expect. To attract new employees to a company, the research is clear: career advancement, challenging work and opportunities to learn new skills are essential.²⁵ So providing employees with a diverse set of experiences in which they can craft their own path will help organizations entice the best talent in the marketplace.

Most companies that have experimented with internal talent networks have done so for the same reason—they’re trying to retain their best talent. It is often said that it is much easier to get a job in a different company than it is to transfer to a different department within the same firm. Employees today want new and different experiences. Yet most jobs are so specialized that people get “stuck” doing the same work over and over again, which leads to boredom and disengagement. If employees don’t get the work experiences they want, they won’t hesitate to leave in search of better opportunities. A chance to work with different people on different projects is exactly the type of dynamic learning experience today’s employees seek.

So what can we learn from the gig economy? While flexibility and control are the chief reasons people freelance, the ability to choose projects is also important to them, especially for full-time freelancers. Furthermore, freelancers are 24 percent more likely to feel their work gives them the opportunity to pursue projects they’re passionate about or find meaningful, and they’re 14 percent more likely to feel their work provides them with opportunities for learning and growth.²⁶

So two significant reasons for the increase in gig work in companies are freelancers’ desire to select what work they engage with, and the need for companies to acquire greater agility in terms of capacity and capability. With the barriers to free-agent or contingent work being low, talent demanding more diverse work and greater choice, and the opportunity for rapid acquisition of new skills, there is pressure to create an employee experience and mindset like that of a free agent inside organizations.

This is the question for companies to consider: Can you provide people with the experiences they want inside the organization rather than have them rely on freelancing to achieve greater diversity and choice in their work? We believe the answer is yes! The six core principles presented in Part Two create a foundation to attract the best talent, improve organizational productivity, foster innovation and enable companies to be more agile and stay ahead of the competition.

KEY TAKEAWAYS

•The global workforce is more diverse than ever before in terms of gender, age, culture, religion, sexual preference and identification. Creating a one-size-fits-all employee experience no longer works.

•The Fourth Industrial Revolution has created technological advances that have disrupted industries and the way we work, resulting in massive shifts in the skills needed in the workplace. Job losses due to skill obsolescence, though significant, will be surpassed by the growth of new jobs that never existed before, requiring new skills that aren’t widely available in the labor market.

•Organizations need to be more agile and responsive to the changes created by the Fourth Industrial Revolution. Organizational hierarchy and functional silos are being replaced by flatter, more fluid structures that rely on purpose-built networks of teams.

•The democratization of work puts more control in the hands of employees. These employees want more choice and diversity in the projects they work on so that they can continuously learn and fully utilize all of the skills they have to contribute to the success of their company.

•By creating an Inside Gig experience, a more agile work environment can leverage the full set of capabilities within an organization and unleash capacity by helping employees tap into their passions and fuel a continuous learning opportunity. This allows a company to build the skills needed as new technologies emerge in the workplace.

REFLECTION POINTS

How are the demographics of your company changing?

Has this change in demographics resulted in a shift in employee expectations? If so, how would you describe your employees’ expectations?

How rapidly are skills changing within your company (as a whole or in parts of the business)?

Are you experiencing a greater need for cross-boundary collaboration to solve business problems? How easily are you able to form cross-disciplinary teams?