Category Archives: Governance

Digital Economy Series: “Who and what is holding us back from a fully digital economy?”

Digital Economy, Entrepreneurial Strategy, Futures, Futurist, Governance, Leadership, Scenario Planninng, Strategic Foresight

Among many responses to the to the unfolding phenomena of a digital economy there are two that stand out. The first, is “yes, we will be enmeshed in a full digital economy by 2050”. The other, and more phlegmatic, response is “potentially, we could be enmeshed in a fully digital economy by 2050”. Upon examining the reasons for the less than full hearted second response, we reveal the forces arrayed against change. What follows is an assessment of the second response.

stop sign
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Consider the fields of human affairs in which we are experiencing change. There’s environmental change, shifts in international and domestic politics, technological advances and the constant innovation in the health and human services sectors. Let us not neglect the spheres of finance, education, and governance. The list goes on. Trends, change and drivers of change. All threads in the dynamic tapestry of early 21st Century life.

In among all of this we are examining the digital economy and who and what is stymieing what some would call progress to the realisation of a fully digital economy in the decades ahead.

Asking questions is the key to this examination. Questions like: who benefits from the status quo and who loses if we go fully digital? What are the social, political, economic, legal, environmental or technological barriers to realising a fully digital economy? Are cultural worldviews and belief systems the obstacles in the path to building an economy that is fully digital?

Turning firstly to the status quo. Benefiting from the status quo are those whose influence, power and profit are founded on the world of atoms. If these attributes of prominence do not translate to the world of bits change is resisted. Remember the retailers of a few years back? To them the internet was but a passing fad. They saw no need to embrace the digital economy.

Our reference point for an examination of the social barriers could be the introduction of Facebook. Once Metcalf’s law kicked in, ordinary people could see the inherent value in sharing their lives online and overcame their reluctance to enter their personal and private details into the Facebook database. Turning to one potential aspect of life that could be with us the time ahead: personal artificial intelligence assistants (we do have Alexa, Cortana & Siri now don’t we?). Our uneasiness with being second guessed ahead of time by artificial intelligence may be rendered moot because of the value and ease these new machines bring to our lives, relationships and careers.

And what of the governing class and the way political life is conducted. Is it because of the Machiavellian dictum “never attempt to win by force that can be won by deception” that political barriers will remain? For with this category of barrier the perspective that “a fully digital economy is equivalent to full transparency” may well be the non-negotiable impediment raised by its stakeholders. An anathema to the political class.

And what of legal barriers? Consider the difficulties presented by cryptocurrencies, the machinations we have with privacy in a digital world, and the conundrums with copyright. And let us not forget the implications of RegTech, the jurisdictional challenges faced by taxation authorities in this digital world, and the quagmire at the interface of human bodies and technology.

Finally, there is who we are as individuals, as members of families, communities, tribes and nations. All revealing a rich and complex global panoply of worldviews and belief systems. We can conjure images of dystopia and pockets of doomsday preppers as symbols of resistance to a fully digital economy. And similarly we watch the countervailing forces of progressives and conservatives. Progressives seeking a better way, conservatives seeking to only incrementally improve the way things are. And then we have the reactionaries who are bent on impeding any forward movement that the forces of improvement show.

Given all this, is it any wonder that we have so far been able to thread the needle of change. Is it any wonder that the quality of so many parts of our daily life for so many lives is better than what it was decades ago?

There is no single “who” or “what” holding us back from a fully digital economy. But what there is this: a multitude of challenges that are to be overcome on our collective arc of accumulation.

 

For more of what I have to offer, visit Dellium Advisory, follow on Twitter, connect using LinkedIn, review my IT Strategy blog, subscribe to my YouTube channel, or buy my ‘Jobs. Future. You.’ workbook.

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Digital Economy Series: In a fully digital world will companies still need to account for the environment?

Digital Economy, Environmental Strategy, Futures, Futurist, Governance, Leadership, Strategic Foresight, Strategy

There are a number of ways in which companies account for the environment. Including a seasonal perspective in terms of the variations in goods and services brought to market, another is from an environmental perspective in terms of energy usage as well as production and packaging materials, and a third is from a shareholder and stakeholder perspective in terms of statutory requirements.

person on a bridge near a lake

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In recent years the triple bottom line reporting framework has made its way into corporate practices. Where companies, for reasons due either to regulatory compliance or enlightened executives, report on profit, people and planet. That is, in addition to their standard financial statements organisations are reporting on metrics related to their staff and their impact upon the environment.

Building on the acceptance of reporting on more than one performance parameter, there is a nascent movement to embrace the quadruple bottom line. Where this fourth performance parameter is “purpose”. Defined as the ethics, culture and desires of the organisation.

The implication of the preceding is this. The administrative policies and processes that are established by government bodies, and are used to govern companies and organisations, change over time. Long gone is the notion that business reputation is solely built on a profit and loss statement.

So, into this governance implication let us now draw two threads from previous articles and elsewhere: the structure of business and the changing environment. Firstly, we know that the processes business engage in to make a profit will change in the decades ahead. Pervasive digitisation will drive an increasingly ubiquitous phenomena of process automation and forms of cognitive processing. Limiting the typical set of tasks available for the human workforce to those requiring people skills and/or thinking skills.

Secondly, while this trend of digitisation gathers apace the climate and natural environment in which business and the digital economy is beholden to will still be changing. There are two responses to these macro changes. The first, described as a pathway of current and common ambition, is to succeed in humanity having a light footprint on the environment. On the other hand, the pathway of lackluster ambition necessarily leads to outcomes that are less than optimal for all life forms.

Now, there is currently a broad acceptance of the concept of a global carbon budget. Therefore, one can envisage that, over the course of the time horzon for this series of articles, this principle of a global budget being established in corporate governance practices. Where economic entities are given a “profile” to work within. Thus, realising a transition from triple bottom line reporting through quadruple to quintuple. That is adding “profile” to the currently recognised profit, people, planet and purpose.

With respect to the triple and quadruple bottom line reporting the sense is that these governance outcomes are the result of internal motivations. The result of what the business decides to do. With the “profile” metric, the sense is that the reporting is on the outcomes with respect to the environmental budget that any business is given to work within.

This “profile” metric, a response to a set of imposed environmental limits, is relevant to both climate outcomes. Through either an enforced collaboration upon all businesses to ensure a continued light footprint, or a set of rules to limit the damage upon our common habitat.

The image of this future for business, the government and the economy is this. It is where the operational milieu of business is characterised as an expanse of intensely interconnected entities that are data and computationally rich. Where the description has morphed from being called a digital economy into an intelligence economy. Where the wisdom of the quintuple bottom line enforces the boundaries of all behaviour.

In a fully digital world companies will not only need to account for the environment they will be required to.

 

For more of what I have to offer, visit Dellium Advisory, follow on Twitter, connect using LinkedIn, review my IT Strategy blog, subscribe to my YouTube channel, or buy my ‘Jobs. Future. You.’ workbook.

“Preparing for the change that is on the horizon”

Economic Development, Futures, Governance, Innovation Systems, Leadership, Strategic Foresight, Strategy

Abstract

Although we see change all around us, we aren’t yet fully aware of the coming impact that increasing computerisation and automation will have on the workforce. This paper looks at the research from leading academics and institutions and posits several implications for local businesses and economic development activities. Using a strategic foresight framework it outlines several courses of action that address the implications.

Current Research

Much discussion has been had with respect to the “40% of jobs will be lost between now and 2030” headline in recent times. But where has it come from, and what are the implications of this change.

Frey and Osborne, two researchers from the University of Oxford, released a paper in the latter part of 2013 entitled “The Future of Employment: How susceptible are jobs to computerisation”. They analysed the tasks of all of the standardised list of jobs (there are just over 700 different jobs – sales manager, hairdresser, CEO, etc). This analysis looked at the likelihood of computerisation of any of the tasks of any of the jobs.

Jobs and the probability of computerisation

 

Figure 1: The distribution of occupations and the probability of computerisation, along with the share in low, medium and high probability categories.

 

 

 

 

What they found was this. Firstly, that high-wage and high-skill jobs are the least susceptible. Secondly, that the more routine tasks that a job has the more susceptible that that job is to computerisation and automation.

Another of their findings was that employment in services, sales and construction is likely to be affected. Although this seems counter-intuitive, reflect upon recent technological advances. For example, robots are making their way into services, entry level sales jobs are being replaced by technology, and prefabrication, 3D printing and drone-based construction are forging paths into the construction sector.

Another major piece of research that you may not have heard about was that produced by David Autor and colleagues of the Massachusetts Institute of Technology (2013).

This research was focused on the types of tasks that a job is comprised of. Reflect upon the job that you do, even those of your colleagues or friends outside of work. Your jobs are made of manual tasks and cognitive tasks. Autor went one step further and divided these into routine manual, non-routine manual, routine cognitive and non-routine cognitive tasks.

Jobs and the demand for skill types

 

 

Figure 2: Trends in task input in the US Economy

 

 

 

As you can see from the graph (although it is of the USA job market, the trends nevertheless apply to Australia), the movement in skill demand is only good for non-routine cognitive tasks. That is, those that require non-routine interpersonal skills (social intelligence) or those that require non-routine cognitive skills (creative intelligence).

These historical findings make sense. For example, we have seen the replacement of a lot of manual manufacturing jobs with increasingly sophisticated machines over the years. Likewise with say routine cognitive tasks like account/book keeping where shoeboxes full of receipts have been replaced with automatically updated entries on some cloud-based software.

A third line of research related to employment is aimed at finding out how productive we are (Productivity Commission, 2016). That is, the better a firm is at turning its inputs into outputs the more productive it is. What flows from increased productivity is increasing profitability, higher wages, business growth, and so on.

Now, over the years, it used to be that the smartest and most productive firms (the frontier firms) were always a fixed percentage better than most. However, in recent times, these most smartest and most productive firms have been getting much more smarter and much more productive than the rest. The “fixed percentage better” is no longer fixed, the gap is increasing. So much so, that the majority of the economy seems to be stagnating.

Markey sector labour productivity

 

Figure 3: Productivity of the Australian economy

 

 

 

 

What this chart (fig 3) tells us is that the majority of Australian businesses either aren’t looking at making better use of their labour, or they are making sub-optimal investments in their business.

The final piece of research to mention is with respect to employment multipliers.

We know that one the tenets of economic development is that for every local job created, additional jobs are also created. This employment multiplier is dependent upon the industry and whether or not the job is in the tradable or nontradable sector. Moretti (2010) finds that for every local manufacturing job created, another 1.6 jobs are created in the local nontradable sector. Lee and Rodriguez-Pose (2016) report on research that found 4.9 additional jobs in the nontradable sector for every 1 job created in high-technology industries.

According to Kaplanis (2010a, 2010b) there are three factors that drive the formation of these additional jobs: increasing the density of high income workers drives an increase in the demand in the local nontradable sector, rising production complementarities as the density of local skilled workforce rises, and improvements in one firm’s productivity benefit other firms.

Implications

Based on this research, there are several implications for both businesses and economic development activities in your local area.

First. Jobs that involve thinking and/or people skills are the future-proof jobs. Think about the different industry sectors (ie, agriculture, construction, education, manufacturing, etc) and their impact upon your local economy both now and into the future.

Can you see a range of employment options developing that are rich in these two types of skills?

Second. Jobs happen in the context of a business. And with more and more jobs being computerised and automated, are the businesses in your local economy looking to improve how they operate their business and how they produce their goods and services.

Take, for example, a telemarketing business. Say there is such a local business (call is “Biz-A”) and it employs about 200 people. The staff are paid to call people and move them along the sales pipeline. Now, lets imagine a competitor. And this competitor (call it “Biz-B”) uses computerised voice services. There is significant potential for the Biz-B to compete profitably against Biz-A.

Have you heard of Amazon’s “Alexa”, Apple’s “Siri” or Microsoft’s “Cortana”. It is not beyond the bounds of possibility that Biz-B could simply be a computer with the right software and an internet connection to be just as effective as Biz-A. The potential is for those 200 staff to lose their jobs, and for Biz-A to close down.

So, for businesses to thrive, they must always be looking to both improve the efficiency of their operations (a total cost of ownership calculation) and to improve the effectiveness of how they generate profit (a return on investment calculation).

Is there a bias toward improvement and innovation across your local business sector?

Third. For businesses to succeed in the period ahead they need to be able to attract people that can think and that are good with others. That means that the owners of the business and the organisational culture must be biased toward new ideas and working with those outside the firm.

Is there a continual flow of good ideas and forward looking people into your local economy?

Fourth. There is a definite linkage between businesses that export product out of your area and growth of local lower-paid jobs. Although developing the manufacturing base will do it, greater local employment gains will be achieved with a focus on high-technology industries.

What steps can you take to develop local high-tech industry?

Actions through the lens of Strategic Foresight

Strategic foresight precedes strategic planning. Planning strategies is about decisions. It’s about asking two questions: “what will we do” and “when will we do it”. Whereas strategic foresight is about understanding the future and clarifying emerging situations. It answers the questions: “what seems to be happening” and “what might we need to do”.

One model that helps us understand the future is Dator’s matrix. This model holds that the future for any organisation, person, business, community group, family, etc will follow one of four paths:

  1. Business as usual
  2. Something transformational will happen
  3. Decay and degradation set in
  4. Restrictions and discipline are enforced

With so much change on the horizon, particularly in the world of work and business we can probably discount the “business as usual” future.

We can probably also make the case that the transformational path won’t happen (ie, hope is not a strategy) and that an increasing “nanny state” future is also not likely.

So that potentially leaves a retreat from the prosperity we currently enjoy.

Therefore, because we can see this change fast approaching and to forestall, mitigate and overcome this retreat, the recommendation is for local action.

Where the action includes a focus on either attracting, or developing, high wage high tech industries.

Where the action includes ensuring local businesses have a bias toward innovation.

Where the action includes community development that is attractive to the thinkers.

Where the action includes events and programs to facilitate business to business interaction.

References

Frey, C. Osborne, M (2013). “The future of employment: How susceptible are jobs to computerisation”, Oxford Martin School, Sep 2013

Autor, D. Price, B (2013). “The changing task composition of the US labor market: An update of Autor, Levy, and Murnane (2003)”. MIT Economics, June 2013

Kaplanis, J (2010a). “Local human capital and its impact on local employment chances in Britain”, SERC, London School of Economics, Jan 2010

Kaplanis, J (2010b). “Wage effects from changes in local human capital in Britain”, SERC, London School of Economics, Jan 2010

Moretti, E (2010). “Local Multipliers”, American Economic Review: Papers and proceedings 100, May 2010, pp373-377

Productivity Commission (2016). “Increasing Australia’s future prosperity: Productivity Commission working paper”, Nov 2016

 

This article was first published in the journal of Economic Development Australia, Autumn, 2017

For more of what I have to offer, visit Dellium Advisory, follow on Twitter, connect using LinkedIn, review my IT Strategy blog, subscribe to my YouTube channel, or buy my ‘Jobs. Future. You.’ workbook.