But is global economic connectivity really responsible for the demise of the middle classes and the rise of income inequality? Or is it much more a question of how we distribute the economic benefits? I believe it is the latter and that this is not just a question about the past. This issue will be even more important as we begin to navigate the imminent changes that the Fourth Industrial Revolution and associated megatrends bring for the future.
2016 has taught us to expect the unexpected. It has also left many people longing for a more rational public debate, based more on fact and less on rhetoric. Adding to this global conversation should always start with examining the data and looking critically at what history and global comparisons tell us. Context is everything - and because the world moves so quickly now - it can be easy to lose sight of this bigger picture.
The status quoModern global, multilateral trade liberalization can be dated back to 1947 when the United States and 22 other nations signed the General Agreement on Tariffs and Trade (GATT). This trade treaty, as a complement to the 1944 Bretton Woods financial system agreement, would go on to establish the post war order and promote international prosperity, peace and security. In the ensuing years, real global exports of goods and services increased by a factor of 24, almost triple the pace of real world output growth, from 1960-2013 (White House, 2015).
Waves of industrial revolutionsAlmost always, economic and social developments implement irreversible structural adjustments to the world. Here are the most prominent ones that come to mind.
In the wake of the Third Industrial Revolution, the US manufacturing industry provides an illuminating case study of the changes unleashed. The US civilian labor force grew from 62 million workers in 1950 to 160 million in 2015 (FRB, 2016). But while manufacturing accounted for over 30% of the jobs in the 1950’s, today it accounts for less than 10% (Lee & Mather, 2008). During this same period, the UK witnessed a similar decline in manufacturing (Sentence, 2015). Is this due to globalization?
While it is a fact that that manufacturing jobs were off-shored, there are other influences at play. Despite offshoring, US manufacturing output continued to climb until around 2000, and has remained relatively steady since, in spite of the two most recent financial downturns of 2001 and 2008.
The Center for Economic Policy and Research highlights that “it is wrong to blame trade for the majority of [these job] losses” (Dobbs, Mischke & Roxburgh, 2012). Rather, productivity growth and the shift to services are the main contributors. The Heritage Foundation states: “Contrary to popular belief, these jobs have not moved overseas. They have been automated” (Sherk, n.d.).
In fact since 2010, nearly one million factory positions have been created and/or returned onshore in the US, with wages increasing some 10% (Rothfeder, 2010). The graphs below (Sherk, n.d.) suggest two key points:
The investments in technology also coincide with changes in the educational profile of the US manufacturing workforce. As depicted below (Sherk, n.d.), lower educated workers have fared much worse suggesting that as the demands in manufacturing have become more sophisticated, the accompanying workforce needs to be more sophisticated, too. It’s no surprise then that the only people who have experienced a rise in manufacturing jobs in nearly the last 25 years are those who hold university degrees.
So to an extent, as the US economy has become more advanced, it has shifted away from a manufacturing base and less educated workforce to a service base and university educated workforce.
The question to ask is: who has benefited from the expansion of global trade and GDP growth?
Who benefits?The US paints a stark picture of inequality. The share of national income going to the richest one percent of Americans has doubled since 1980, from 10% to 20%. The share going to the top 0.01% - some 16,000 families with an average annual income of $24m - has quadrupled, from just over 1% to almost 5% (The Economist, 2012). When accounting for taxes and transfers, the US has the second-highest level of income inequality, after Chile, among 31 OECD countries (Desilver, 2014). Wealth inequality is even greater and presents quite a shocking picture: a fifth of US families earn 59.1% of all income and the richest twenty per cent hold 88.9% of all wealth.
Widening income gaps have also been gaining traction, though to lesser degree, across other economies including Britain, Canada and India. More broadly over the last 30 years, income inequality has risen in about three quarters of all OECD countries. Significant socio-economic differences remain between the US and other countries.
Here are some examples:
What’s next? The examples above demonstrate that societies make choices about how they distribute wealth. Blaming globalization for inequality is not only inaccurate, it also avoids responsibility for a prevailing culture that encourages the centralization of wealth. Yes, global trade has contributed to offshoring to meet evolving demands in manufacturing – but the real problem is that in many countries the resulting wealth has not been distributed to benefit larger society. Mark Carney, the Governor of the Bank of England, said as much in a recent speech: “Among economists, a belief in free trade is totemic. But, while trade makes countries better off, it does not raise all boats… the benefits from trade are unequally spread across individuals and time.”
We are on the verge of witnessing far greater changes in the domestic labor market than global trade has ever unleashed. Technology will impact not just manufacturing but the service sector which represents nearly 80% of major economies like the US and UK. It is likely to have a wide-scale impact on a near majority of people in advanced economies as many jobs become automated, including those in highly-skilled labor.
Responsive and responsible – how? As the consequences of globalization and new technologies become clearer, people are looking for a different kind of leadership from business and governments. We need leadership that is “responsive and responsible” as suggested by the World Economic Forum’s 2017 agenda. But we need to work out what this actually means.
I believe that we need to start by recognizing inequality not as an inevitable result of globalization but as an outcome of the lack of balanced distribution of the benefits. Some societies have chosen to share their wealth and prioritize the collective well-being of their citizens over individual gain. This is based on the concept that placing value on greater equality ensures higher levels of social cohesion and a functioning society. They have also realized that broadening the base of wealth in a society leads to better economic outcomes in the longer term.
It’s instructive in this context to look at Germany and some of the Nordic countries. Here governments, businesses, unions and citizens have already initiated a public discourse and are exploring strategies to address many of the changes that are underway. They are focused on debating a new social compact and new policies on retraining and education, technology access, housing, health care and other social welfare systems. Importantly, they are discussing how to protect the individual by separating the concepts of labor and income, for example via potential Universal Basic Income (UBI) schemes.
We are at a critical point where we face significant transformative changes to our economies, social fabric and wider societies – much of which has yet to be imagined. Governments, business and citizens need to be prepared for this period. That means, at the very minimum, having the right balance of information, transparency, education, skills and safety nets to navigate this new environment.
To be responsive and responsible in this time requires us to lead with a sense of urgency and to actively shape a world that is likely to present new threats but also many new opportunities.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
I was recently asked about my predictions for the coming year. Here is one: 2017 is likely to be the year in which virtual health finally crosses the tipping point and achieves scale.
In my role, I am engaged with many disruptive industry trends across all sectors. One area where I have seen consistent advances has been the emergence of smart health technology. Health care has long been ripe for disruption and with consumers now using technology to meet many of their needs, we are well on the road to Health 2.0. The question is what will it take to get to real scale in the multi-trillion dollar global health industry?
Very soon the vision of virtual health will seem like it was always inevitable. Instead of being passive recipients of care, patients will become empowered consumers, with greater access to information and control over their decisions. Instead of being delivered only in hospitals and clinics, health care will become available wherever patients happen to be. In mature economies systems will need to contain costs as health care spending continues to rise. In emerging markets, where access remains an issue, mobile service delivery such as SMS campaigns and data collection will become more prevalent and is already taking off, for example across countries in Africa. No matter where, wide scale adoption of virtual health will enable approaches that are dramatically more cost-effective and efficient both for the consumer and provider.
The difference between virtual health and its model components is that virtual health represents a consolidated, integrated model of health service delivery. Its components include: online bookings and diagnostics; virtual patient communities; remote health service delivery (e.g. telehealth, monitoring, diagnostic results, robotics); machine-based diagnostics; electronic medication management; and readily available online information including personal health records, health provider information like reviews and ratings, and health product information like authoritative reviews of health apps.
Virtual health providers integrate many or all these functions into a coherent, patient-centric health service delivery model. The opportunities presented by virtual health have already seen a variety of new players enter health service delivery markets, including telecommunication and tech firms. And with an additional 2.6 billion smartphone devices set to enter the global market by 2020, demand for mobile health technologies is primed for take-off.
Are consumers ready and what is the growth potential?
Already, according to a 2015 survey, 62% of American consumers believe that a live mobile video consultation with a physician would more likely yield an accurate diagnosis than a phone, email or even an in-person visit. In a separate 2015 survey, 70% of Australian adults would use mobile technology to not only communicate with their doctor but also to order prescription drugs.
In spite of this demand, adoption of mobile health has remained elusive. But we are now at a turning point.
Revenue for video consultations, for example, is projected to rise from less than $100 million in 2013 to $13.7 billion by 2018 – with most revenues coming from health insurers as virtual consultations replace face-to-face visits. Over this same period, the number of US households using virtual health is forecast to rise from less than one million to 22 million.
Connecting the dots
Health care’s reinvention is being driven by two main factors: digital disruption and economic sustainability. In 2017 we will see greater alignment between these supply and demand drivers.
On the supply side – there have been advances in biomedical and health informatics technologies and standards, supported by public investment in health information infrastructure in most major markets. Health apps are expected to expand further into mainstream consumer markets, and reduction in regulatory and health financing barriers to entry has commenced. For example, a range of health insurers in the USA are now including virtual care in their reimbursement models.
On the demand side – demographic shifts and current spending levels are simply unsustainable. Consumers are seeking more productive delivery models in response to an estimated global health workforce shortage of 7.2 million workers. This shortage is contributing to the wide-scale increase of health care expenditures amid growing demand. By 2030 advanced economies face daunting projections with costs expected to approach: 25% of GDP in the USA, 17.5-18% in Germany and France; and 13.5% in the UK. Estimates demonstrate how virtual health will reduce these costs:
Virtual health is one such trend in an industry that needs to change. The greatest barriers to the scaling of new health service delivery models have been health financing systems and professional attitudes. Both are now shifting as a result of financial and consumer pressures. Newcomers are already entering the market and hence virtual health will be ready to scale from 2017.
This article is part of the LinkedIn Top Voices list, a collection of the must-read writers of the year. Check out more #BigIdeas2017 here.
Once you’re a successful disruptor, how do you grow without losing the innovative spirit that got you here? This was an underlying theme of “The Art of Innovation” panel I had the pleasure of moderating at the 2016 US Strategic Growth Forum™, the US’s most prestigious gathering of high-growth, market-leading companies.
It was great to be part of a panel comprised exclusively of successful women CEOs to talk innovation and building businesses – and not just about gender. Two of the panelists are alums of the EY Entrepreneurial Winning Women program, which helps women entrepreneurs scale their companies and makes panels like this one much less rare.
As we spoke about their innovative business models – all four panelists run companies that are disruptors in their industries – we explored the question on many people’s minds: how do you disrupt your industry, stay focused on growth and continue to innovate? In short – once you’ve achieved initial success, what’s next?
Sell to grow
Panelist Jaime Kern Lima of IT Cosmetics has answered this question through a transaction. She recently sold her fast-growing cosmetics company to industry giant L’Oreal. Jaime remains CEO, and with the power of L’Oreal’s global infrastructure behind her, she can now enter new markets and anticipates explosive growth in the years to come. It’s a great example of how corporate venture capital and alliances with major players can give disruptive companies a boost to scale, while helping more traditional companies pivot into new markets and innovate through osmosis.
Find the jobs to be done
But what of growth that comes through new products and services? Outdoing yourself isn’t easy. A second effort that doesn’t live up to the promise of the first creation isn’t exclusive to musicians and novelists. How do disruptive companies keep out-innovating the competition once they’ve had their first successes?
The “Jobs to be done” theory has helped panelist Amy Chang of Accompany stay focused on what her customers want. It describes how customers “hire” products to solve a problem – that is, to do a job. Using this framework to analyze customer and market data, companies can continually develop products that are tailored to what consumers already want to do.
Don’t fake it
Panelist Clara Shih of Hearsay cautioned that in search of growth, it can be tempting to chase the latest fad masquerading as real consumer change, but that’s a mistake. Consumers are smart and can smell insincerity. Don’t try to fake authenticity; instead, make business decisions and product changes in line with your brand, your story, and the “why” of buying your product.
Kara Goldin of Hint Water put it perfectly: “The best entrepreneurs didn’t have the perfect product when they launched, but were willing to watch and listen and change.” By shifting her focus from competing for grocery store shelf space to ecommerce, Goldin has put this into practice, and ecommerce now accounts for 40% of Hint’s business. In the process, the company has gained invaluable customer data for future use.
It’s abundantly clear that innovation is not just inevitable; rather, the opportunities it creates are accelerating. As a result of ubiquitous technology, entrepreneurs can create new businesses or become disruptive forces much faster. But even disruptors can be disrupted. Within this charged environment, finding ways to scale while staying innovative is not simple, but as I saw firsthand at the Forum, it is possible for the ingenious entrepreneur. And these four women are leading the way!
ShareShare The art of innovative growth
We live in interesting and unexpected times. The many disruptive changes impacting our world are playing out in politics, business and wider society. Brexit and the recent American election outcome have been just two expressions of a world in transition.
This is why it is a critical time for business and government leaders to work closely together to come up with the solutions that will create growth and drive prosperity – fueled by the understanding that solutions in the 21st century will look different to the past. For example, manufacturing is fundamentally changing and might well move back onshore. However, it is likely that many old style manufacturing jobs will not be recreated as the work will largely be automated and other methods like 3D printing are already changing production methods.
Disruption is everywhere and affecting every industry. But what does this mean for organizations dealing with disruption? Today, disruption hits everything from businesses to governments and can come from halfway across the globe or even from unexpected challengers close to home. Responding to disruption is one of the biggest strategic imperatives facing today’s business leaders and policymakers.
We recently brought together some of the world’s leading minds to discuss disruption from all angles, including “Can disruption be a force for good?” as seen in this video:
Disrupting a business model requires learning from those who do it well but also being aware of the constraints that one’s own organization faces. This involves challenging long-held assumptions about matters as fundamental as the purpose of your business, who your customers and competitors are and will be, what technology infrastructure you need to deliver your services and being decisive about discontinuing the parts of your business that have become obsolete.
Recent events across the world show that the future is hard to predict. Working in uncertainty requires a culture that allows people to fail – preferably fast, early and cheap. When people can rapidly test and learn, it’s much easier to pick out winning ideas and reallocate resources. Whether you are in business, government, in a start-up or an NGO, asking the right questions and not jumping to conclusions has never been more important.
So how are you changing your approach to seize the upside of disruption?
Click here for more insights on how to seize the upside of disruption.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
Today we live in the age of disruption — where new technologies are transforming the way we live and behave in ways that would have seemed unimaginable even a few years ago.
Responding to disruption is now one of the biggest strategic imperatives for business leaders and policymakers. In a world where everything from business models and value networks to political systems and social contracts seems to be changing, it’s easy to perceive threats.
That is why I really like this EY video which instead looks at the upside of disruption and how to make the most of the opportunity that presents itself:
The world of tomorrow is one filled with data streams from everything around us. Understanding the full impact of these trends is hard and often requires imagination. We don’t yet fully understand what constant connectivity will mean to businesses and governments or how to ensure that the overall impact on consumers, workers and citizens is a good one.
It also means that this is a time for asking questions and not just jumping to conclusions or applying solutions that might have worked in the past.
And one such question is: How will you stay ahead of the curve and disrupt yourself?
Click here for more insights on how to seize the upside of disruption.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms
The race towards gender parity hit a depressing low.
The World Economic Forum's (WEF) latest Global Gender Gap Report 2016 estimates that we won't achieve this milestone until the year 2186! The same report in 2014 estimated parity by 2095.
Think about that for a minute. In just two years the forecast for global gender parity has been pushed back 91 years. It is now 170 years away.
It sounds crazy, but by the time we reach that milestone, future politicians will be campaigning to our grandchildren's grandchildren's grandchildren about their expectations for the 23rd century.
This is more than just a setback – it also comes at a bad time. The report is especially disheartening at this point in history where we are seeing massive changes as a result of the disruptive forces of technology. Having women participating in all aspects of society and contributing to decision-making as peers is not just nice to have; instead, it is essential to tackling the 21st century challenges we face.
The Global Gender Gap Report provides annual benchmarks of progress toward parity between men and women in four areas: educational attainment; health and survival; economic opportunity; and political empowerment. In this latest edition, WEF states that progress toward parity in the economic pillar has slowed dramatically with the gap – which stands at 41% globally – now larger than at any point since 2008.
Of course, results vary across the world. The Nordic countries consistently lead as the most gender equal countries, while the United States now sits at number 45 in the country rankings, having dropped 17 places since last year. The report states:
The report speaks for itself and provides great detail on each country's position. While results vary for each country, I believe there are also some prevailing moods around the world that add to the overall narrative:
Our people are everywhere in the world. While part of EY, they also go home to their families and friends and they are active in their local communities. I have seen the profound effect a multinational workplace can have in building communities, engaging people in finding out about each other and fostering positive attitudes toward people who come from backgrounds different to one’s own. Women. Fast forward builds on this experience and aims to accelerate the pace of achieving gender parity and diversity in our workplaces, and also in our wider societies.
Despite yesterday's news and prevailing attitudes, I see encouraging signs that show the trend can be reversed at EY, similar organizations and select parts of the world. One such recent example came from Australia where nearly half of the top 200 listed companies appointed women to their executive boards for the first time ever this year. More countries in the G20 in the last year have elected women to leadership positions and are advancing women in the civil service every day. And here at EY we continue to make strides promoting women into our partnership every year.
Sometimes it is the seemingly small changes that make the biggest difference – encouraging girls into STEM, supporting a young woman’s career choice, actively promoting women into leadership roles, supporting women entrepreneurs, creating opportunities to start businesses – and most importantly, recognizing every day that talent and capability come in many forms and do not always look, sound or act the same. Embracing diversity of all kinds is nothing if not an asset to any organization and society. Let's work together to accelerate gender parity within our lifetime – and make sure the numbers never go backward again.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
A version of this article also appeared in The Huffington Post.
By solving long-standing problems, can cutting-edge technology also create ethical issues in its wake? Can these issues spurred by technology be preempted during the research and development stages? How can businesses and individuals forecast the next problem? These (and other) questions were triggered and explored by start-ups and large corporates at EY’s Journey 2016 – Israel’s most prestigious annual business conference.
I was one of more than 2,000 people who attended the conference in Tel Aviv last month. For the past 20 years, Journey has connected Israeli innovators and entrepreneurs with global corporate executives, business advisers, investors and opinion leaders to seek out the hottest industry trends and share the latest ideas
The conference halls buzzed with app developers, technologists, executives and other enthusiasts who wrestled with some very big topics, such as:
Israel – Start-Up Nation
Israel is a unique place. As the only independent Jewish state in the world, its roots stretch back millennia, yet the modern Israeli state is a comparatively new invention. Founded in 1948, it is essentially a start-up nation. Israel embraces the risk that comes with innovation and entrepreneurship. It has become a vibrant hub for technology innovation, defined by perseverance and a willingness to try again when something does not work the first time.
While I was in Tel Aviv, Shimon Peres, the former President of Israel, passed away. Widely admired, Peres’ lasting legacy will be that of a leader with foresight. In one of his last public letters, which was quoted at Journey, Peres seemingly understood what we face on the horizon: “Science which develops without a moral spine may destroy the world. On the other hand, morality which prevents science from developing may starve the world.”
As we now routinely consider the impact of new technologies – on business, labor markets and our lives more broadly – we are in urgent need of a wider debate on technoethics – that is the moral and ethical issues associated with technology.
Emer Coleman, a colleague and Chair of the Open Data Governance Board in Ireland, recently underscored this urgency at a talk in Dublin.
Coleman pointed out that search engines, which are not constrained by ethical frameworks, already know a huge amount about us through our email content, demographic backgrounds, geographic presence, and lifestyle interests. As a result, software developers are positioned to reinforce but also engineer our social behaviors through our search habits. The big question for technologists, concluded Coleman, is: “We can do this, but should we?”
Businesses and government need to grapple with the ethics of technology. Through all of this discussion, several immediate takeaways come to mind:
The downside risk.
Technology can usher in unintended consequences, some of which may not be apparent upfront. A technology platform is implemented individually, but its cumulative effects are important – the whole is more than the sum of its parts. For example – automated technologies are substituting humans with machines, and to date the associated job loss is substantially outweighing the creation of new jobs. So while this might enhance efficiency and profitability for businesses, a cumulative effect could be large scale social displacement. An unintended consequence like this is problematic and needs to be considered in the development stages.
I love my gadgets. But we should question whether some technologies actually make the world work better and in other cases are they negatively impacting peoples' ability to connect with each other both publicly and privately? Seems to me they do both, sometimes driving more connection rather than less. However, a 2015 Pew Research Center study found that 82 percent of adults felt the way they used their phones socially hurt their dialogues; and a 2010 University of Michigan study found a 40 percent decline in empathy among college students, with most of the decline taking place after 2000.
The digital divide is entering an era of new sophistication, in which it is not just access to technologies that is at issue, but also the extent of both operational and strategic digital literacy required. Individuals may know how to operate their smartphones and personal home assistants, but how many of us can plan the technological configuration to get our maximal advantage in our lives? Similarly, we know that health literacy is low even in our most mature societies. Yet health and biotechnical advances are staggering and unprecedented, particularly in areas such as neuroscience and genetics. Health is getting better at obtaining informed consent for administrative processes – the small things – but how are the major choices about which technologies are ethical, under which circumstances, being made?
In light of these takeaways, Coleman raises several questions worth thinking about:
It is clear that as technology moves on, we get used to it and we willingly give up some of our privacy in exchange for convenience. It is equally clear, however, that we do not understand all the consequences that come with ubiquitous technology. The smartphone epitomizes this divide and undoubtedly there will be other future technologies we will be hard pressed to live without.
That’s why it’s so important that we heed President Peres’ advice and examine ethical issues now to ensure that science and technology do indeed develop with a moral spine.
Imagine – just a decade ago if someone had told you that one day soon all your movements would be recorded by a small device in your pocket with accessible readouts of your whereabouts and other personal data. At the time this possibility surely would’ve seemed more threatening than liberating. But of course we now accept this as a price to pay for having a smartphone as this technology continues to pave new ways for us. Now this same quandary is being applied to arguably what has long been viewed as a modern symbol of personal freedom – the automobile.
Over the last few months alone – all eyes have quickly turned to the brave new world of how we will next interact with our vehicles. We’ve read about and debated questions on – the safety of nascent self-driving technology, Silicon Valley’s entry into driverless technology, Uber trialing autonomous technologies with major automakers, implications for insurance companies and of course, the issue of privacy.
And just this week - US federal automobile safety regulators came out and judged that America's highways will be safer when cars are driven by machines, not by people. President Barack Obama has endorsed this view by rolling out a fifteen point plan that will pave the way for new rules and guidance that automakers should follow when developing self-driving cars to keep passengers safe. While the guidance stops short of being official regulation and policy - the key points of the plan address areas like safety, technology and privacy. All of these events point to how we have rapidly moved the conversation around the automobile from the possibility to the inevitability of driverless cars and automated technologies.
A few weeks ago while I was in Japan – a country already familiar with advanced robotics in everyday areas like restaurants and recreational golf courses – I was reminded of two imminent realities that I will likely face around the world. For one, I might soon be hard-pressed to find a traditional cab when I leave the office. And when I hail a car from a ridesharing app, there is likely to be no driver.
My friends and I will be the only people sitting in the car as it makes its journey to our next destination. Indeed, the sweeping changes unleashed onto traditional taxi businesses have already rocked an entire industry from London to Singapore. Even the innovative business models of ride-sharing apps that now dominate the landscape will soon be disrupted by newer forms of transport. But these two developments are no longer newsworthy. Innovation can happen so quickly that whole industries can be blindsided and redefined without warning. How industries prepare themselves and respond to disruption is the real story here.
Don Butler at The Ford Motor Company recently said that the value in cars today is shifting from being 90% hardware-based to being more than 50% software and experience-based – with that percentage set to keep climbing. Already the cars we drive are becoming a rolling software platform able or soon able to deliver services built on cloud-based data collection, robotics, sensors and artificial intelligence (AI).
This shift in focus is opening the door for technology companies to compete directly with carmakers. Tech companies like Alphabet, are aggressively developing fully self-driving vehicles of their own. This incoming competition is changing the way we imagine the next generation of vehicles and other products we consume. No doubt, some of this new technology will spill over into other industries like the consumer products and media and entertainment sectors that are relying more heavily on personal data collection.
And as more vehicles become self-driving and have the technology to connect with other cars, infrastructure and smartphones – we could very well see the transportation industry converge with the technology, logistics, energy and other industries into a broader mobility industry.
This new sector would likely attract new competitors and success will go to those who offer the best capabilities for the redefined marketplace. This is what EY calls ‘Industry Redefined’ in its latest report: The upside of disruption: Megatrends shaping 2016 and beyond. This future undeniably poses many challenges for traditional automakers – and how they introduce this new technology into their existing business models will have long-lasting effects.We’ve seen many incumbent organizations in other industries lack the digital savvy at the leadership level to react and effectively disrupt their long-held practices when challenged by new technologies and competitors. The news media is a prime example of this and it is seemingly always tackling questions around its longevity.
Arguably, tech companies may hold the initial advantage in this race as the increasing demand for software content in cars attract firms that excel at code, algorithms and AI to enter this new competitive space. Tech companies are also the leaders in connectivity, logistics and other areas critical to autonomous vehicles and connected-driver experiences – like smartphones, interactive maps, cloud-based data and more. While automakers face high hurdles in recruiting and retaining talent in advanced technologies, they’re also saddled with legacy costs in real estate, IT infrastructure, supply chains, and other hard assets. Simply put, they have a lot of catching-up to do.
I love a good debate about the world, policy issues and even politics. But, these days when I get together with friends and family, it seems a lot less fun — largely because most of what we are talking about leads to pretty polarized discussions. Whether it’s about the rise of a new nationalism, Brexit, free trade and globalization, recent acts of violence and terror in places like France and Turkey, or the fact that 230 million migrants are on the move across the world, conversations can turn tense pretty quickly. All this points to a world undergoing major transitions with more to come.
One such transition that's going to impact millions of people in coming years is the change in how work is structured and how labor markets work. Already, the impact of technology is profound and particularly felt at a time of heightened anxiety over rising inequality across both the developing and developed worlds. As with other topics, there are those who are intensely concerned about the future of work and others who are equally optimistic.
On the more pessimistic side, Thomas Friedman wrote in June in The New York Times: “We have globalized trade and manufacturing, and we have introduced robots and artificial intelligent systems, far faster than we have designed the social safety nets, trade surge protectors and educational advancement options that would allow people caught in this transition to have the time, space and tools to thrive. It’s left a lot of people dizzy and dislocated.”
The economic angst over increasing job losses is ever prominent. Over the last few months, continental Europe has seen nationwide strikes and violent protests in France against the government’s proposed labor laws and has highlighted workers’ fears for the future. At its core, the pending “loi travail” will make it easier for companies to fire people, which its backers say will make employment in France more flexible and create new jobs. But French unions and their supporters are convinced that “bons boulots,” or good jobs, will be lost forever. Under siege — not just in France — are hard-won protections for workers, such as five-day workweeks, health benefits, and insurance against workplace injuries and unemployment.
Former U.S. Treasury Secretary Lawrence H. Summers recently recalled that — several decades ago — only “stupid people” believed that technological progress could reduce employment. “If there’s more productivity, then people are going to have more money,” the “smart” argument went. “And if people have more money, they are going to spend it and then everybody’s going to be employed.” But now Summers says: “Suppose the stupid people were right. What would it look like?” In his view, it turned out, “that’s kind of what we did see.”
The gig and machine economies are starting to disrupt and displace the labor market as pointed out in EY’s The upside of disruption: megatrends shaping 2016 and beyond. With sharing platforms like Uber, Airbnb and TaskRabbit, the gig economy’s workers are just freelancers on temporary assignments. While in the machine economy, artificial intelligence, virtual reality and robotics have the capacity to flat-out eliminate jobs. Just think what driverless cars will mean to human employment.
Even highly skilled white-collar roles once considered immune to new technologies will be impacted. Algorithms have uprooted jobs in financial services with high-frequency trading and are starting to move into health care with robotic surgery.
The estimates of how many jobs will be lost in the gig and machine economies vary. Oxford University professors Carl Benedikt Frey and Michael A. Osborne have predicted that about 47% of total U.S. employment is at risk, with wages and educational levels mattering little. Meanwhile, a recent Organisation for Economic Co-operation and Development study argues that only 9% of all Americans face “high automatibility.” And for measure, the 2016 World Economic Forum report, The Future of Jobs, predicts that by 2020 a net total of 5.1 million white-collar jobs will be lost to disruptive labor trends.
Of course, these are all mere projections. But no matter what the final tally turns out to be, there’s no avoiding that business, government and society will face seismic shifts. Already, the gig economy is challenging government regulations covering hotels, restaurants, insurance, taxis and many other sectors.
The optimists about the future of work argue history shows that automation will surprise us by creating whole new industries and previously unimagined forms of work. In the early days of the computer revolution, for example, few saw the opportunities for web designers and app developers.
As Rana Foroohar, an assistant managing editor at TIME and author of Makers and Takers: The Rise of Finance and the Fall of American Business (2016), and others have argued, the platform technologies of the “sharing economy” might speed the transition from shareholder capitalism to a system that empowers labor and democratizes the workforce. Already, there are a growing number of digital cooperatives, like the new ride-sharing service Swift, which is owned and run by drivers themselves.
One idea attracting attention in the U.S. and Europe is the creation of a universal basic income (UBI) for all adults and children, regardless of their work status. As Sam Altman, president of the iconic start-up incubator Y Combinator, recently wrote: “I think it’s good to start studying [UBI] early. I’m fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of this at a national scale.”
In fact, UBI was on the ballot this summer in Switzerland. Despite the overwhelming vote against it, the idea is far from going away — with pilot UBI programs planned for Finland, Canada and the Netherlands.
Whether you are an optimist or a pessimist in the future-of-work debate, dramatic change is coming, faster than ever. There are many aspects — convenience, flexibility, lower cost, choice — that are benefiting consumers. But there are also some risks involved for society. Klaus Schwab of the World Economic Forum writes in his influential text The Fourth Industrial Revolution that “to prevent concentration of value and power in just a few hands, we have to find ways to balance the benefits and risks of digital platforms by ensuring openness and opportunities for collaborative innovation.”
What we need is less polarized debate and more constructive action. People in business, government and civil society must work together to deliver and exploit the many upsides of disruption, including creating whole new industries in the long term.
As Jamie Dimon, chairman and chief executive of JPMorgan Chase, said just this summer in his announcement of pay raises for 18,000 of the company’s employees: “We face many challenges. But they can be overcome by government, business and the nonprofit sectors working together to build on models of success that advance economic opportunity and create more widely shared prosperity.”
Reflecting on EY's most recent Women in Leadership Summit part of the EY World Entrepreneur of the Year 2016 Forum three big things stood out for me:
Undoubtedly we need more men actively engaged around gender and parity. As women we're achieving lots in the the workplace increasing our leadership roles significantly. But while men occupy most of the senior roles it's vital they are also part of the conversation. We need to work together to make real change.
We invited both men and women to our summit but the majority of attendees were women. We know that there are huge bottom line impacts when women are involved so why were so few men interested in discussing how to strengthen the role of women in business? We need both perspectives to strengthen the debate.
Questions for authentic leaders
Margaret Heffernan , entrepreneur, CEO and author of Beyond Measure: The Big Impact of Small Changes and countless other books and articles had a lot to say about this. “Work out what your game is" was her first piece of advice. She reflected that early in her career she tried matching the style of her male counterparts but quickly learned there was a different way. And it's one she has been advocating to other women leaders since: Don't just play the game - change it.
There was resounding laughter from the audience when Jacqueline de Rojas , President of techUK spoke about "Alphazillas" and the fact that you don't need to leave dead bodies around you to get stuff done elegantly. According to Jacqueline: "Sometimes asking a devastating question can be even more effective.” So, what were the “devastating” questions discussed at the leadership summit? Here are few that I found most thought-provoking. Do you…
And The impact of technology
The Summit also showcased a number of digital and entrepreneurial female thought leaders who set forth a debate about how today’s environment can be a powerful enabler for all leaders, and especially women leaders. But to accomplish this – women need to fully engage with technology. Countless studies show how problematic it is to have few women STEM at a time when STEM fields are ruling the world and it's problematic because:
We also have to teach women about technology. We held a technology master class for summit attendees and we'll be continuing this work stream in the coming year with our Women Fast Forward programme in EY focusing on Digital Leadership for Women. Enabling a culture in which women feel not only welcome but fully engaged is vital to getting women into the game. If you'd like to tell us what particular areas of digital leadership you'd like to develop drop me a line and we can incorporate into our programme of work. Follow our new Women Fast Forward Twitter account to stay up to date for the coming year