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Are we long—or short—on talent?

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  • By looking at their supply of skills and talent in a new light today, organizations can take actions that better prepare their companies for tomorrow’s challenges.

 

CEOs and HR leaders worried about the viability of their talent strategy may be excused an occasional sleepless night. After all, there’s a closetful of bogeymen to pick from as disruptive technologies such as digitization, automation, and artificial intelligence combine with demographic forces to continue transforming the nature of work, how it gets done, and by whom. The resulting job displacement could be massive—think Industrial Revolution massive—affecting as many as 800 million people globally by 2030 and requiring up to 375 million of them to switch occupational categories and learn new skills.

Companies are already feeling the heat. Fully 60 percent of global executives in a recent survey expect that up to half of their organization’s workforce will need retraining or replacing within five years. An additional 28 percent of executives expect that more than half of their workforce will need retraining or replacing. More than one-third of the survey respondents said their organizations are unprepared to address the skill gaps they anticipate.

The competitive implications are profound. Organizations that expect to benefit from a digital transformation or a promising new strategy won’t get very far if they lack the people to bring the plans to life. What might seem like an irritating talent gap today could prove a fatal competitive liability in the not-too-distant future.

 

How can organizations better prepare for what’s coming?

For starters, they should embrace a more expansive and dynamic view of their talent supply—one that tosses out the usual preoccupation with titles and traditional roles and looks instead at the underlying skills people have. Indeed, we find that when companies start with skills—the ones they need, the ones they have, and how the mix may change over time—they can free up their thinking and find more creative ways to meet the inevitable mismatches.

In this narrative, we’ll show how forward-looking organizations are grappling with these challenges and highlight ways that CEOs and senior leaders can spark progress that is tangible, practical, and quite often beneficial for both employer and employee alike. Oftentimes, taking the first step can be as simple as asking: For our five most important skills, are we long—or short—on talent?

 

Shift happens

Consider the European bank whose market position was threatened by new, more digitally savvy rivals. The shifting competitive landscape required action, but when the bank’s leaders compared their proposed strategic response with a three-year projection of the bank’s talent pool, they saw a mismatch. The plan made sense, but executives feared that their people couldn’t execute it.

For example, the bank would soon have serious skill gaps in its retail-banking unit, particularly among branch managers whose roles needed to change to encompass areas such as sales expertise, customer orientation, and digital capabilities, given the new strategy. Meanwhile, the bank’s IT group faced both undersupply and oversupply: programming skills would be too scarce, while IT infrastructure skills would be too plentiful. To complicate matters, the bank faced strict regulatory and labor restrictions that prevented most layoffs. Any solutions would require flexibility and creative thinking.

To respond to the imbalances, the bank developed a range of interventions. For example, the bank is rolling out upskilling programs to help prepare its retail bankers for the aspects of their jobs that are changing; elsewhere, reskilling and retraining programs (including new digital and analytical skills) are helping employees’ secure new roles in the company. Still other employees have been offered part-time positions, an option intended to appeal to those nearing retirement.

Finally, for some employees, the bank is exploring secondment opportunities with selected not-for-profit organizations. Under the arrangement, both organizations pay a portion of the employee’s salary. In principle, this benefits everyone: the not for profit (which gets a talented employee for less money), the employees (who are doing meaningful work using skills that are in high demand), and even the bank (which pays less for skills it already has in surplus, while potentially enhancing its visibility in the community).

While the bank’s overall approach is still a work in progress, its example is instructive not only for its breadth but also for the outlook of its leaders. Instead of just looking at its talent supply through the lens of its traditional jobs or roles, which after all are changing, the bank’s executives pushed themselves to take a more objective, skills-based look. Similarly, the bank’s experience underscores the importance of setting aside long-held assumptions about which roles are most important, as prevailing opinion may be outdated or biased.

 

Are we long—or short—on talent?

Adjusting the skills of a workforce requires a blend of rigor and creativity; it also requires dedicated commitment and attention from senior management. One way to spark a fruitful C-suite conversation about talent supply is to borrow a page from the dismal science and look at skills in the context of surplus and shortage.

Starting with a thought exercise such as this can help break down an otherwise intractable problem into smaller chunks that can be approached with discipline. At the same time, testing potential interventions using the logic of microeconomics can help managers see a wider portfolio of options beyond reskilling at one extreme, and layoffs at the other (exhibit).

 

The following snapshots highlight ways that organizations have addressed both talent gaps and overages.

 

 

We’re short on talent: Build, acquire, or rent?

While talent shortfalls arise for many reasons, the supply-side remedies can be summarized in just three watchwords: Should we build on our existing skills? Should we acquire them? Or should we “rent” them?

A global manufacturer investigated these options as it looked for ways to fill several looming skill gaps. One of the most acute shortfalls was in data science, a problem complicated by the company’s suspicion that it was losing ground to high-tech firms as an employer of choice.

On closer look, their fears were justified: a talent-supply forecast that used machine learning to predict the likelihood of employee attrition found the company’s data scientists would be eight times more likely to leave than other colleagues. Clearly, the company couldn’t simply hire its way out of the problem; filling the skill gap would also require better employee retention.

Subsequent analysis helped the manufacturer spot opportunities in both areas, starting with a plan for more meritocratic career paths and redesigned leadership tracks to keep employees engaged and happy. The company is now working on simple changes to its recruiting and interviewing processes, to be more responsive and to help make candidates feel more valued throughout the process.

Of course, another way that companies can acquire skills en masse is through M&A, an approach pioneered in the tech industry, where it was given the portmanteau “acquihiring.” It has since become more common in other industries. Walmart used it in 2011 when the company bought Kosmix, a social-media company, to form the nucleus of what would become Walmart Labs, the retailer’s digital-technology unit.

Companies can also start nurturing skills today that they may benefit from later. Programs such as this are intriguing to employers, because it lets them tap a new pool of talent and then create and shape the specific skills they need. The approach also holds considerable social promise, as it can be designed to support underemployed groups, such as young people or military veterans.

Finally, companies can obtain skills by “renting” talent; for example, through outsourcing partnerships that bring specialized skills or by tapping the gig economy, where the rise of digital platforms has rightly captured executives’ attention.

 

We’re long on talent: Redeploy—or release?

Invariably, the changing nature of work will create skill overages that even the most inspired corporate upskilling or reskilling programs can’t manage. In these cases, companies must choose whether to redeploy workers or to find thoughtful ways to let them go.

As the case of the European bank demonstrated, there may be regulatory reasons to consider the redeployment of workers by offering their skills to a third-party organization for a fee. There might also be cultural, financial, strategic, or even social reasons for redeploying skills.

In the private sector, meanwhile, the video-game industry has long “loaned out” the specialized skills of software engineers to other video-game companies, including competitors, when their own projects hit unforeseen snags. While the approach may seem counterintuitive, the arrangement helps the sponsoring company maintain ready access to skills that are particularly rare and hard to recover once lost. The engineers, meanwhile, appreciate the change of pace and the chance to work on high-visibility projects with talented counterparts.

To be sure, redeployment programs such as these tend to be the exception rather than the rule. And no program can forestall all the job separations that come with technological change.

 

Work, Adapt, Repeat

The nature of the evolving workplace confronts leaders with the need to think quite differently about people’s relationship to work. In this vein, we are particularly intrigued by concepts such as “lifelong employability” that prioritize helping people successfully adapt—again and again, if necessary—as the economy evolves.

Yet if companies are to bring ideas such as these to fruition, and truly reorient their organizations around skills and not just roles, they will need more than just a mind-set shift. Many, if not most, companies will find their people-operations infrastructure and talent-management system creaking under the strain of new challenges. Designing a winning employee value proposition, for instance, is much harder when career paths are themselves in flux.

Indeed, HR will need to sharpen its own skills, not only in traditional areas, like employee retention and performance management, but also in new ones, such as managing the risks associated with gig work. In this respect, HR leaders are no different from those in any other function—all of whom must be prepared to evolve if they are to be effective in helping the larger enterprise adapt to the changing nature of work.

 

  • By Megan McConnell and Bill Schaninger

 

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The four fights to win in Digital Strategy

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Yesterday’s tentative approaches won’t deliver today; you need absolute clarity about digital’s demands, galvanized leadership, unparalleled agility, and the resolve to bet boldly.

If there’s one thing a digital strategy can’t be, it’s incremental. The mismatch between most incumbents’ business models and digital futures is too great—and the environment is changing too quickly—for anything but bold, inventive strategic plans to work.

Unfortunately, most strategic-planning exercises do generate incrementalism. The only way for leaders to cut through inertia and incrementalism is to take bold steps to fight and win on four fronts:

  • Fight ignorance by using experiential techniques such as “go-and-sees” and war gaming to break leaders out of old ways of thinking and into today’s digital realities.
  • Fight fear through top-team effectiveness programs that spur senior executives to action.
  • Fight guesswork through pilots and structured analysis of use cases.
  • Fight diffusion of effort—a constant challenge given the simultaneous need to digitize your core and innovate with new business models.

Thus, here’s how real companies are winning each of these fights—overcoming inertia while building confidence about how to master the new economics of digital. Companies can join in that effort, thereby giving their digital strategy a jolt and accelerating the shift of their strategy process as a whole, from old-fashioned annual planning to a more continuous journey yielding big moves and big gains even when the end point isn’t entirely clear.

 

FIGHTING IGNORANCE

Many senior executives aren’t fully fluent in what digital is, much less up to speed on the ways it can change how their businesses operate or the competitive context. That’s problematic. Executives who aren’t conversant with digital are much more likely to fall prey to the “shiny object” syndrome: investing in cool digital technologies (which might only be relevant for other businesses) without a clear understanding of how they will generate value in the executives’ own business models.

They also are more likely to make fragmented, overlapping, or subscale digital investments; to pursue initiatives in the wrong order; or to skip foundational moves that would enable more advanced ones to pan out. Finally, this lack of grounding slows down the rate at which a business deploys new digital technologies. In an era of powerful first-mover advantages, winners routinely lead the pack in leveraging cutting-edge digital technologies at scale to pull further ahead. Having only a remedial understanding of trends and technologies has become dangerous.

Raising your technology IQ

For inspiration on how to raise your company’s collective technology IQ, consider the experience of a global industrial conglomerate that knew it had to digitize but didn’t think its leadership team had the expertise to drive the needed changes. The company created a digital academy to help educate its leadership about relevant digital trends and technologies and to provide a forum where executives could ask questions and talk with their peers. Academy leaders also brought in external experts on a few topics the company lacked sufficient internal expertise to address.

Supplementing the academy effort (aimed at leaders) was an organization-wide assessment of digital capabilities and an evaluation of the company’s culture. This provided a fact base, which everyone could understand, about what the organization needed to build over the course of the digital transformation. As business leaders developed digital plans, they were accountable for explaining and defending them to other executives. They also had to help gather those plans into an enterprise-wide digital strategy that every business leader understood and had helped to create.

Overcoming competitive blind spots

If your company resembles other known companies, still stuck in some old ways of thinking about where money gets made and by whom. Companies are also likely to be overlooking ways digital is changing both the economics of the game and the players on the field in your industry. If any of this sounds familiar, you probably need a jolt—something that forces you to think differently about your business. More specifically, you need to start thinking about it as digital disruptors do.

From experience, this demands a process that begins with a sprint to get everything moving, to see what your industry (and your company’s role in it) could look like if you started from scratch, and to redraw your road map.

Once the new realities are discovered, companies should speed up the process of understanding how other players—including nontraditional ones—will respond. Seeing through the eyes of “baggage-free” attackers inspires an awareness of how players with very different core competencies are likely to act in the new landscape. It can also propel a shared sense of urgency to change the old ways of thinking and acting.

Such a session radically change the way companies leaders think about their business, their industry, and the digital shifts remaking both. The end result is a set of leading-edge ideas for deploying digital to make the current operating model faster and more effective, for investing in new digital offerings, for designing and launching a new digital ecosystem to meet the emerging needs of digital consumers, and for partnering with start-ups beginning to emerge as leading players in advanced mobility.

FIGHTING FEAR

Getting left behind by digital first movers can be hazardous to your company’s future. But many of companies’ executives may perceive responding to digital—making the big bets, building new businesses, shifting resources away from old ones—as hazardous to their own future. As we’ve noted, that exacerbates the social side of strategy and breeds strategic inertia. If you want to make big digital moves, you must fight the fear that your top team and managers will inevitably experience.

From what we have seen, this kind of fight doesn’t happen organically. You need to design a programmatic effort with the same rigor you would insist on to redesign key processes across your organization. This typically involves making a clear case that executives can’t hide from the changes digital is bringing and that encouraging and accelerating change—rather than chasing it—can create more value. Then you need to give executives the tools and support network they must have to succeed as leaders of that journey. Many companies focus on the extensive detailing of digital-initiative plans but skip the critical step of building an equally rigorous program to sustain the leaders driving change.

Honest dialogue

Companies can organize workshops where executives can discuss the specific mind-sets and behavioral shifts needed to gain “ownership” of digital initiatives as a group and to become role models for their organizations.

Support networks

Leaders can form communities that cut across their businesses, to share best practices and coordinate the timing of implementation. Over time, the role of these communities can grow to include skill-building activities, such as bringing in speakers with specialized capabilities and motivational messages and organize Silicon Valley go-and-sees that reinforces the importance of leading digital change. The communities also provide peer support to help teams navigate the new landscape.

Indeed, leaders who understand the shifting economics also understand that their careers will be affected one way or another.

 

FIGHTING GUESSWORK

Pursuing an aggressive digital strategy involves leaps into the unknown: simultaneously, companies are likely to be moving into new areas and overhauling existing businesses with new technologies. What’s more, in many digital markets, the premium of being a first mover makes it necessary not only to shift direction but also to do so faster than your peers. The combination of ambiguity and the need for speed sometimes gives rise to guesswork and moves that are hasty or poorly thought out—and too anxiety about whether a move isn’t going to work or just needs more time.

Building the proof points as you go

One way to fight guesswork is to anchor your strategy decisions to a thesis about the business outcomes that different digital investments will produce. This is less about elaborate business-school modeling and more about thinking that draws fast, ground-level lessons from the data to determine whether your business logic is correct. Put another way, it means figuring out if there is sufficient value to make it worthwhile to invest something—as part of a process of learning even more.

This approach increases the odds of successful implementation: a well-articulated view of the outcomes means that you can track how well the strategy is working. It also makes it easier to assess whether the new direction is worth it in terms of both financial capital and organizational pain.

Those proof points must be grounded in digital reality.

Pilots and stage gates

A second way to reduce the need for guesswork is to take full advantage of real-time data and the opportunities they provide for experimentation. Digital does amplify the gut-wrenching uncertainty by multiplying the strategic choices leaders face while reducing the time frame for making and implementing those decisions.

But it also contains a silver lining: the potential for gaining rapid, data-driven insights into how things are going. Information on the progress of a product launch, for example, is available in days rather than months. That makes rapid course corrections possible and, ultimately, considerably improves the chances of success.

An important element of this nimble approach is breaking up big bets into smaller, staged investments.

 

FIGHTING DIFFUSION

Effective strategy requires focus, but responding to digital inevitably risks diffusion of effort, or “spreading the peanut butter too thinly.” Most companies we know are trying, and struggling, to do two things at once: to reinvent the core by digitizing and automating some of its key elements, for example, and to create innovative new digital businesses.

The challenge is acute because of the dizzying pace of digital change and the uncertainty surrounding the adoption of new technology. Even if the technology for autonomous vehicles pans out, for instance, when will the majority of people really begin to use them? Given the impossibility of knowing, it’s easy to wind up with an unfocused hodgepodge of digital initiatives—a far cry from a strategy.

Two concepts can help a company navigate. First, view your company as a portfolio of initiatives at different stages of seeding, nurturing, growing, or pruning.

Second, embrace the necessity of “big moves,” such as the dramatic reallocation of resources, sustained capital investment, radical productivity improvements, and disciplined M&A. Successful market-beating strategies nearly always rest on such moves. Making them mutually reinforcing, so that developments in the core help to support new digital businesses and vice versa, is a critical part of managing the risks of diffusion.

A portfolio approach

As a first step, companies go through their portfolio business by business, focusing on three questions:

  • Which emerging digital products and services are missing from the portfolio?
  • Which product offerings and elements of the existing operating model should be digitized or fully digitally reengineered to improve customer journeys?
  • What areas should be abandoned?

Answers may differ from one company to another, but become comfortable with hard choices and more attuned to new opportunities by tying all decisions to clear use cases.

As part of the exercise, companies develop scenarios for how the value pools in each of its industry verticals would probably shift across component customer value chains. Companies may want to get a sense of the types of services that clients and potential clients may likely to demand and thus may try to obtain from new suppliers or IT outsourcers. For businesses where more revenue would be likely to shift, the companies are comfortable placing bigger bets on new digital offerings, in contrast with its approach to businesses where the revenue at stake isn’t changing as much.

Big, mutually reinforcing moves

This systematic evaluation of value-pool opportunities across the portfolio generates a frank discussion of how the organization’s risk appetite has to change. It also catalyzes a greater willingness to invest in new digital businesses—which companies must do.

As part of this strategic evolution, companies may launch an aggressive program to better leverage foundational digital capabilities, such as automation, advanced analytics, and big data. These capabilities, to be sure, will be key building blocks for the new digital businesses. Just as important, however, by deploying the capabilities at scale across existing businesses, the company will be better able to stretch the life of its core offerings.

The portfolio strategy pays dividends both in revenue gains and cost reductions. For example, investing in a balanced fashion between core and new businesses lead to faster than expected revenue streams from new offerings. This increases the leadership’s commitment to the strategy, bolstering confidence that the new portfolio offerings will provide growth more than compensating for the eventual decline of core businesses.

In conclusion, companies’ best digital competitors—the ones you really need to worry about—aren’t taking small steps. Neither can you. This doesn’t mean that a digital strategy must be designed or put to work with any less confidence than strategies were in the past, though. Strategy has always required closing gaps in knowledge about complex markets, inspiring executive teams (and employees) to go beyond their fears and reluctance to act, and calibrating risks when you bet boldly.

The good news is that the digital era, for all its stomach-churning speed and volatility, also serves up more information about the competitive environment than yesterday’s strategists could ever imagine. Simultaneously, analytically backed, rapid test-and-learn approaches have opened up new avenues to help companies’ correct course while staying true to their strategic goals.

Today’s leaders need to step up by persuading their organizations that digital strategies may be tougher than other strategies but are potentially more rewarding—and well worth the bolder bets and cultural reforms required, first, to survive and, ultimately, to thrive.

 

  • By Tanguy Catlin, et al

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