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The 4th Industrial Revolution, the Future of Jobs and the Right-Skilling for the Future Workforce  

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The 4th Industrial Revolution is building on the first Industrial Revolution which used water and steam power to mechanize production, the second which used electric power to create mass production and the third, which used electronics and information technology to automate production; the 4th Industrial Revolution is taking automation to new levels, blurring the lines between the physical, digital, and biological spheres and using technologies to perform tasks previously carried out by humans, ranging from piloting vehicles to ‘rules-based’ jobs in areas such as accounting and law.

When we compare it with previous Industrial Revolutions, we find the dramatic differences between the fourth Industrial Revolution and the other three. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. The 4th Industrial Revolution is not merely a prolongation of the Third Industrial Revolution but rather a new and distinct revolution.

Firstly, people can continuously produce new information and generate new knowledge in the mining of information. The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. We can record a person’s daily life through their mobile phone location.

When this data is monitored for a long period of time, we can get to know a person’s lifestyle habits, such as their work place, the supermarkets they shop in, the restaurants where they dine, the times they do so, and even their personal preferences. This technology will allow the intelligence level of machines to increase through continuous data accumulation and analysis.

Secondly, the Industrial Revolution represents not only a huge advance in technology and in the improvement of productivity, but will also transform modes of production and the relationships between elements of production processes. The 4th Industrial Revolution, by enabling the complete communication of all relevant information at every stage in the production chain, creates separate production sectors for each process and informs how they relate to each other, bringing together such processes as inventory taking, improving production efficiency, saving energy and reducing emissions, thus making the manufacturing industry part of the information industry. At the same time, it can make production flexible and allow mass customization, enabling different products to be produced in a production line, which will revolutionize the warehousing, transportation and the whole manufacturing industry.

Thirdly, the 4th Industrial Revolution will spawn a new economic form, the ‘sharing economy.’ A typical example of sharing economy is ride-hailing online services, such as Uber and the Chinese Didi service, which allow customers to obtain taxis services from private car owners. The impact of this new form is disruptive, not only to the taxi industry, but also the whole transportation industry.

(Maybe in the near future, we won’t need drivers at all and unpiloted vehicles will fill the streets.) The impacts of the sharing economy are not limited to online ride-hailing services, but also include the shared space service, e.g. Airbnb, and the global online work platform. From the shared motors and houses, to the shared umbrellas, basketballs, toys, clothing and jewelry, the sharing economy is constantly updating, and will be very profound and revolutionary.

Last but not least, as the economists Erik Brynjolfsson and Andrew McAfee have pointed out, the revolution could yield greater inequality, particularly in its potential to disrupt labor markets. With the growth of automation, robots and computers will replace workers across a vast spectrum of industries. Low-skill/low-pay jobs will disappear and the poor will face tougher challenges, which in turn will lead to an increase in social tensions.

In a strict sense, this is not a unique feature of the fourth Industrial Revolution. Historically, Industrial Revolutions have always begun with greater inequality followed by periods of political and institutional change. However, mankind will face a more serious challenge in this revolution, because it is robots and computers that take our jobs, not the flow of labor between different sectors.

What Happens with Employment?

The characteristics of the fourth Industrial Revolution are destined to bring about different impacts on employment, which are no longer confined to one industry, but all industries. At the same time, a lot of jobs will disappear, but there will be a lot of new job requirements. It is expected that more than 65% of children entering primary school today will end up working in completely new jobs that currently do not exist when they enter the workplace 15 years from now.

As the changes brought by the social media, digital publications and e-commerce, the most in-demand occupations did not exist 10 or even five years ago. According to the Future of Employment report, a high percentage of global employment is in the high risk category. People may be more concerned about what types of jobs are at high risk than specific Numbers. So which jobs are at greatest risk? What jobs will be safe in the future? These are some of the questions on the minds of people.

Whilst the business world is already discussing and preparing for how this revolution will affect their businesses, dubbing it “Industry 4.0”, the wider societal impacts of this new revolution have not, to date, been discussed in depth nor planned for.

Past Industrial Revolutions have forced society to undergo major and often painful processes of adaptation, for example from rural, largely agricultural societies, to urban, industrial societies, and then to post-industrial societies dealing with the loss of traditional industries and sources of employment. The societal impacts of the 4th Industrial Revolution also appear likely to be far-reaching, resulting not only in the social and economic impacts of the loss of many current jobs, but also fundamental, and increasingly volatile shifts in the nature of work and future jobs, and in how public and private services will be delivered.

Right-skilling for the future workforce

The fourth Industrial Revolution has shown the possibility of disrupting the entire industries and trigger massive job loss through technological innovations, such as artificial intelligence, machine learning and 3D printing. Just consider the impact of driverless cars on the taxi and ride-sharing industry. This new age requires significant “right-skilling” – retraining your workforce and acquiring people with the right skills to fill the gaps.

For right-skilling, organizations need to have a strategic plan for talent to make the shift. Any good talent strategy should focus on retaining and training existing talent, as well as take into consideration all of the levers and options, which includes acquiring new workers (either internal or external).

A growing number of forward-thinking organizations are concluding that to emerge stronger from the coming automation age, they must develop the skills of their workforce to meet new requirements rather than simply retrench. Contractors and new hires will not be enough; retraining must be part of the solution. Not to mention that firing 20 percent of the workforce because they don’t have the right skills has negative implications for the company and society.

A company undergoing major changes in the workforce due to automation was not able to eliminate part of the workforce, due to employees being highly unionized. Instead, the firm worked to understand the future roles and skills needed by their workforce, and how to transition into these new roles. By determining the future capabilities and skills required based on functional team assessments, they were able to conduct an analysis to determine what percentage of existing employees had these skills, and what percentage needed to be reskilled.

By 2030, as many as 375 million workers globally will have to master fresh skills as their current jobs evolve alongside the rise of automation and capable machines, estimates McKinsey Global Institute. And while individual sectors and companies will experience layoffs, it is expected most economies will generate net new jobs in the years ahead as different types of careers, new sources of demand and reskilled workforces emerge.

Still, an unprecedented skills crisis will strike unless employers and employees recognize that they must adapt to change and begin actively forging reskilling initiatives. For employees, self-direction is also necessary to discover new promising work opportunities and to reskill.

How should an organization think about right-skilling its workforce? One good way is to determine how many employees it will take to handle A, B and C skills. If you conclude you need ten but only can get five employees, it will take longer to build and benefit to the new way of working. Companies that identify the skills needed and the employees with those skills in advance will be at a strong advantage.

Certainly, employers will hire and outsource some of the future skilled talent they need. But right-skilling will play a significant role, since hiring and outsourcing won’t prove sufficient to fill most gaps.

Building a competitive workforce of the future proactively requires:

  • Gaining clarity on today’s workforce gaps and the future skills needed. Translate your strategy into a vision of what future skills are needed. Quantify the chasm, including the business value at stake.
  • A robust plan to supply the future demand. Design a portfolio of initiatives that encompasses hiring, right-skilling and contracting. Upgrade your talent and operations infrastructure to reinforce the new workforce composition and performance management system.
  • Rapid, disciplined execution. Establish a dedicated, cross-functional team, including HR and business unit members, for agile plan execution.

In a recent survey, 75 percent of executives said they believed reskilling would fill at least half of their future talent needs, given the war for talent and hiring difficulties. How organizations specifically apply right-skilling, and the implications, will be explored in the near future.

 

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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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