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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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Born agile or journey to an agile organization

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Agility is catching fire, and there is growing recognition of its transformational benefits. But moving to an agile operating model is tough, especially for established companies. There are several paths to agility and many different starting points, yet successful agile transformations all share the common elements described below.

Agile organizations are different. Traditional organizations are built around a static, siloed, structural hierarchy, whereas agile organizations are characterized as a network of teams operating in rapid learning and decision-making cycles. Traditional organizations place their governance bodies at their apex, and decision rights flow down the hierarchy; conversely, agile organizations instil a common purpose and use new data to give decision rights to the teams closest to the information. An agile organization can ideally combine velocity and adaptability with stability and efficiency.

Transforming to an agile operating model

Any enterprise-wide agile transformation needs to be both comprehensive and iterative. That is, it should be comprehensive in that it touches strategy, structure, people, process, and technology, and iterative in that not everything can be planned up front (Exhibit 1).

There are many different paths to enterprise agility. Some organizations are born agile—they use an agile operating model from the start. As for others, broadly put, we see three types of journeys to agile: All-in, which entails an organization-wide commitment to go agile and a series of waves of agile transformation; Step-wise, which involves a systematic and more discreet approach; and Emergent, which represents essentially a bottom-up approach.

Born-agile organizations are relatively common in the technology sector. Most organizations must undergo a transformation to embrace enterprise agility. Such transformations vary in pace, scope, and approach, but all contain a set of common elements across two broad stages (Exhibit 2).

First, successful transformations start with an effort to aspire, design, and pilot the new agile operating model. These elements can occur in any order and often happen in parallel. Second, the impetus to scale and improve involves increasing the number of agile cells. However, this involves much more than simply rolling out more pilots. Organizations may iterate among these stages as they roll out agility across more and more of their component parts.

Aspire, design, and pilot

Most transformations start with building the top team’s understanding and aspirations, creating a blueprint to identify how agility will add value, and learning through agile pilots. These three elements inform one another and often overlap.

Top-team aspiration

Successful agile transformations need strong and aligned leadership from the top. A compelling, commonly understood and jointly owned aspiration is critical for success.

Adopting an agile operating model can alleviate challenges in the current organization (such as unclear accountabilities, problematic interfaces, or slow decision making). Yet a desire to address pain points is not enough; there is a bigger prize.

To build the top team’s understanding and aspiration, nothing beats site visits to companies that have undergone an agile transformation.

Blueprint

The blueprint for an agile operating model is much more than an organization chart and must provide a clear vision and design of how a new operating model might work (Exhibit 3). An agile transformation fundamentally changes the way work is done and, therefore, blueprinting also needs to identify changes to the people, processes, and technology elements of the operating model. The blueprint should, at first, be a minimum viable product developed in a fast-paced, iterative manner that gives enough direction for the organization to start testing the design.

The first step in blueprinting is to get clear on where the value lies. All operating-model design must be grounded in an understanding of how value is created in the industry and how the individual organization creates value. This fundamentally links to strategy.

Next comes structure. An agile organization doesn’t deliver work according to a classic organization chart; rather, it can be thought of as a series of cells (or “teams,” “squads,” or “pools”) grouped around common missions, often called “tribes.” The blueprinting element should produce a “tribe map” to illustrate how individuals that are grouped get work done, as well as a more recognizable organization chart to show the capability axis along which common skill sets are owned and managed (Exhibit 4).

Individual agile cells are defined by outcomes or missions rather than by input actions or capabilities. Teams performing different types of missions will likely use different agile models. However, three types of agile cells are most common. First, cross-functional teams deliver products, projects, or activities. These have the knowledge and skills within the team and should have a mission representing end-to-end delivery of the associated value stream. Second, self-managing teams deliver baseload activity and are relatively stable over time. These teams define the best way to set goals, prioritize activities, and focus effort. More broadly, lean-management tools and practices are highly complementary with enterprise agility. Third, flow-to-work pools of individuals are staffed full time to different tasks based on the priority of the need. Functional teams like HR or scarce resources like enterprise architects are often seen as “flow” resources.

Working in teams may sound familiar, but at scale this requires change across the whole operating model to provide appropriate governance and coordination. The organizational backbone comprises the stable components of an agile operating model that are essential to enable agile teams. Typically, these backbone elements include core processes (for example, talent management, budgeting, planning, performance management, and risk), people elements (including core values and expected leadership behaviours), and technology components. In trying to scale up, many agile transformations fail by simply launching more agile teams without addressing these backbone elements.

The final step of blueprinting is to outline the implementation road map. This road map should contain, at minimum, a view on the overall scope and pace of the transformation, and the list (or “backlog”) of tasks. The five steps of the blueprint form a coherent approach.

Agile pilots

The purpose of a pilot is to demonstrate the value of agile ways of working through tangible business outcomes. Early experiments may be limited to individual teams, but most pilots involve multiple teams to test the broader elements of enterprise agility. Nothing convinces sceptical executives like teams of their own employees having verifiable impact through agile working.

Initially, the scope of the agile pilot must be defined and the team set up with a practical end in view; this might include deciding on team staffing, structure, workspace, facilities, and resources. Next, the way the agile pilot will run must be outlined with respect to structure, process, and people; this is typically collated in a playbook that forms the basis for communications with those in the pilot.

Scale and improve

Scaling beyond a few pilots is no small feat; this is where most agile transformations fail. It requires recognition from leadership that scale-up will require an iterative mind-set: learning is rapidly incorporated in the scale-up plan. In this, enough time is required—a significant portion of key leaders’ time—as well as willingness to role model new mind-sets and behaviours. Agile transformations acknowledge that not everything can be known and planned for, and that the best way to implement is to adjust as you go.

Agile cell deployment and support

Agile scale-up first and foremost requires standing up more agile cells. However, an organization can’t pilot its way to enterprise agility. The transformation should match the organizational cadence, context, and aspiration. But at some point, it is necessary to leap toward the new agile operating model, ways of working, and culture. For large organizations, this need not be a day one for the entirety but will likely progress through a series of waves.

Many chose to start by transforming their headquarters and product-development organizations before touching frontline, customer-facing units (call centres, stores, or manufacturing facilities). It is possible to transform one factory or one end-to-end customer journey at a time, but highly interconnected functions in the headquarters may need an All-in transition approach.

The size and scope of waves depend on the context and aspiration.

Resources to support new agile cells—for example, availability of agile coaches or appropriate workspace—can often limit the speed of scale-up. Failure to address the support of new agile cells can cause friction and delay in the transformation.

Backbone transformation

The backbone governs how decisions get made; how people, budgets, and capital get deployed; and how risk gets managed. Taking an organization to an agile operating model requires that this backbone be transformed (Exhibit 5).

Capability accelerator

Successfully scaling an agile operating model requires new skills, behaviours, and mind-sets across the organization. This is vitally important and constitutes an intensive phase of an agile transformation. Most organizations require existing staff to take on these new roles or responsibilities, and as such, need a way to build new skills and capabilities. Specifically, any successful agile transformation will invariably create a capability accelerator to retrain and reorganize staff, make the agile idea common to all, and develop the right skills across the organization.

A typical capability journey may well have distinct phases. First, organizations need to identify the number of trainers (agile coaches) required, and then hire and develop them; a failure to do so can cause delay and blockage when the agile transformation extends across the whole organization. Second, as part of building capabilities, the organization must define the new agile roles (agile coaches, product owners, tribe leads, chapter leads, and product owners, for example), along with a clear idea of what success looks like in each role. Third, learning and career paths should be set for all staff, making clear the opportunities that the agile transformation opens up. Fourth, the organization needs to enable continuous learning and improvement across the organization (this will entail a large-scale digital and communications program). Finally, it’s necessary to design and run a whole-organization effort to raise agile skills (often by means of intensive boot camps) and ensure that new staff are on-boarded appropriately. Larger organizations often set up an academy to consolidate and formalize these functions.

Focusing on culture and the change team

A culture and change team is an essential coordinating element of an agile transformation. But it is not a traditional project-management office; rather, the emphasis should be on enabling the other transformation elements, helping to remove impediments and catalysing culture change.

The importance of investing in culture and change on the journey to agility cannot be overstated. Agile is, above all, a mind-set. Without the right mind-set, all other parts of the agile operating system can be in place, and yet companies will see few benefits. In contrast, when leaders and teams have a strong agile mind-set, then a clear aspiration alone is often enough for a successful agile operating model to emerge.

Understanding transformation archetypes

All successful enterprise-wide agile transformations include the elements described above, but there are several different ways in which the elements can be combined and sequenced. As mentioned earlier, there are three major transformation archetypes:

Step-wise. Transforming to an agile organization often feels like a step into the dark for senior leaders. Perhaps understandably, then, the most common transformation archetype shows a clear distinction between aspire, design, and pilot phase and the scale and improve phase. Many companies will run multiple rounds of pilots and iterate their blueprint several times before fully committing to scaling up across a large part of the organization. It is not uncommon for this process to take one to two years, as leaders and the organization build familiarity with agility and prove to themselves that agile ways of working can bring value in their organization. Organizations may well go through several subsequent rounds of aspire, design, and pilot before scaling up elsewhere.

All-in. Although less common, an increasing number of organizations gain strong conviction early on and fully commit up front to move the whole organization to an agile model. Leaders from these organizations define a plan to execute all steps of the transformation approach as quickly as possible. Even in these types of transformation it is rare for the whole organization to transform to an agile model in a single “big bang”; rather, it is more common for the transformation to proceed through a number of planned waves.

Emergent. It is impossible—and not very agile—to plan out an agile transformation in detail from the start. Instead, most agile transformations have emergent elements. Some organizations have chosen to progress their entire agile transformation through an emergent, bottom-up approach. In this archetype, an aspiration from top leaders sets a clear direction, and significant effort is spent building agile mind-sets and capabilities among leaders.

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