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Digital business and its discontents

October 27, 2014

For the past year, we’ve been watching the national unemployment rate in the United States steadily dropping, now down to 5.9 percent as of September. Optically, that’s pretty good news: it was 7.2 percent at the same time last year.

However, in both an anecdotal and polling sense, there is persistent public anxiety about the economy. A POLITICO poll discovered 64 percent of respondents feeling as if the country was “out of control” and only 36 percent believing it’s in a “good position to meet its economic and national security challenges.” When a subsequent POLITICO story highlighting economic concerns as a central issue in the upcoming elections dropped, it was peppered with quotes from average voters expressing “raw” concerns about matters such as “outsourcing” and “job growth.”

Enter Gartner analysts such as Ian Marriott and Frances Karamouzis, with their fairly sobering research note entitled “Digital Business and Disruptive Technologies Will Increase Global Unemployment.” What’s probably not captured in those monthly jobless numbers is the impact of digital business on the job market and what that means for the long term. Observers watching these trends carefully know it’s there, but it’s not the most comforting subject to talk about—at least on the surface.

“Digital business and smart machine technologies/services will cause a massive shift from labor-based models to "straight-through" digital processes, requiring IT and business leaders to address the resulting impacts of job loss and changing resourcing requirements,” reads the Gartner analysis. It’s not something we want to hear, but will have to tackle in creative ways. Think tank Brookings Institution is also looking very carefully at this question with its Project on Civilian Robotics as rampant automation is assumed to help all lines of industry accelerate innovation while also causing certain job displacement. There is a distinction, however, between automating and innovating; automation is primarily an efficiency and cost-reduction play, which doesn’t necessarily mean things are innovative. Brookings’ expert Kemal Dervis begins to address the displacement dilemma in a 2013 opinion piece where he writes, "Moreover, technological progress is becoming ever more ‘labor-saving,’ with computers and robots replacing human workers in settings ranging from supermarkets to automobile assembly lines. Given the volatile macroeconomic outlook, many firms are reluctant to hire new workers, leading to high youth unemployment throughout the world.”

Dervis’ colleague, Brookings Fellow Scott Winship, slightly disagrees with that argument and dismisses it as technophobia. “Technophobia is a psychological condition, but infectious. Hardly a week goes by without a new outbreak documented in another blog post or business column,” Winship argues, slamming the critics of automation. Citing economic historian Robert Fogel, Winship highlights the prediction “that the increase in leisure between 1995 and 2040 would exceed the gain Americans saw in the 115 years before 1995.”

“Will Fogel be proven right? I certainly don’t know. What I’m pretty sure of, however, is that in 2040 we will not look back at 2013 and think, ‘We’ve made a huge mistake,’ ruing the day we failed to listen to those afflicted with technophobia. Technological progress is not a trick we have played on ourselves to throw ourselves into poverty. It is a means for fulfilling our material wants and needs and continues only to the extent that it does so.”

The challenge, however, will be in the transition period between now and. Those could be difficult years, albeit with a light at the end of the tunnel. That time will call for creative ideas and shrewd decision making on the part of both government and the private sector, which it will need to view as partners in this growing digital economy. For years, gaining efficiencies in IT and business has been either a cost-reduction play or a ‘free up my really good people to do higher value-add stuff’ sort of play. Now that companies will have more flexibility toward what ends they target their workers, what will they do? Do they need different types of workers?

Gartner Research VP Andrew White touches ponders this in a recent blog while picking apart the International Monetary Fund’s latest annual meeting notes: “Unfortunately the IMF is so full of policy ideas it seems to forget one thing. In its haste to come up with the complete set of ideal levers to pull off a sustainable recovery, it seems to assume that politicians are the ideal captains of industry to get the job done. It was these captains that steered the good ship, ‘Global Economy’, against the rocks in the first place with a set of policies that they had little idea would create unforeseen conditions. The main policies governments should focus on are where they help enable private sector growth and investment.”

Basically, all is not lost in the impending digital business world as long as organizations “[s]ource new skills, and do not procrastinate, [since] leveraging new forces to drive business enhancement will require competencies that are absent in the majority of organizations,” as the Marriott and Karamouzis research note recommends. Smart, creative and long-view strategic sourcing is something organizations, along with their partnering vendors, can master and should be able to do while remaining cognizant of the larger implications for global employment. Awareness of employment disruptions caused by digital business could actually serve as a business opportunity if organizations are able to demand and help create the skill sets needed to meet those challenges head on. 

Charles Ellison is a senior analyst relations strategist for TEKsystems. He keeps close tabs on changes and public policy shaping the innovation space. He is also a former congressional staffer, senior aide to state and local elected officials and an expert advocacy strategist. You can reach him with questions and comments @twoARguys via Twitter.


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