Category Archives: Innovation Systems

Digital Economy Series: In a digital world does being faster, better and cheaper still count in business?

Achieving success today

One of the dominant narratives of the business world is that in order to succeed the products you provide either need to be cost competitive, be differentiated in some way, or you need to be quicker to market than others. Will this narrative hold as the economy turns fully digital?

vehicles on road between high rise buildings
Photo by Craig Adderley on Pexels.com

Consider what happens today. In order to maintain profitability an external improvement approach may be taken: variations of current products may be offered, or price discounting may take place to increase the quantity sold, or new markets might be opened up. Another approach would be to focus internally. That is to reduce costs and to streamline processes. And a third approach would be to go down the innovation route and develop new products for the same or for different markets.

All of these are variations on the faster, better, cheaper narrative. A narrative that holds true in an economy based on atoms, but does it hold for an economy solely based on bits?

Achieving success in a world of bits

We can gain some insights into this future state from the transition that is currently underway. This shift can be seen in the increasing proportion of business, of the economy, of even work itself being categorised as digital. Consider some observations. First, the marketing of goods and services. No longer does the maxim hold of “not knowing which half of the marketing budget is wasted”. For with the analytics available from advertising campaigns using social media channels and search engines the marketing budget can be spent more efficiently.

And second. What about the potential of big data, machine learning and the internet of things currently being brought to bear on say manufacturing processes, the logistics sector, and on agricultural practices? Finally, not forgetting consumers in all this data processing potential: we can find what we want or need more efficiently among the increase array of choices available to us.

Another insight from this transition is the merging of values with business activity. No longer can a company opaquely distance itself from that which is socially unacceptable. Today’s consumers, and even employees, increasingly call out participants in the local, national and global economies for lack of transparency and corporate behaviour at odds with forward looking standards.

A final insight is with respect to legal and political matters. Until recent times, the digital economy could be regarded as this anarchic wild-west frontier where the scale of profits was beyond comprehension and regulation was an anathema to the full gamut of stakeholders. But now we are seeing serious discussions concerning appropriate taxation regimes, effective safeguards of personal and private data for business use, and a range of attitudes of governments when it comes to how they use their citizens’ data.

Increasing efficiency and transparency

So, from one perspective digital technology is making the market more efficient. Perhaps even moving it toward that holy grail of it being a perfect market. Where there is perfect information, sufficient products are available for consumers, and where the lowest cost is the hallmark of all goods and services produced.

And from another perspective, digital technology is making the market more transparent. Where the ulterior motives of its stakeholders become clearer and the governance of data is weighted in the consumer’s favour. In other words, there is possibility that a defining characteristic of the market of the future is its integrity. That across the globe the economy operates with a high level of ethics.

A fully digital economy, then, has the potential to be described in terms of it being a perfect and ethical economy. And this potential will shape the current dominant “faster, better, cheaper” business success narrative. Where even if you are “faster, better, cheaper” due to the nature of perfect markets long lasting economic rents will be almost non-existent. Where even if your business succeeds by being “faster, better, cheaper” the rewards may well be short-lived if that path to victory was less then ethical.

The implication is that “faster, better, cheaper” is becoming “faster, better, cheaper, clearer”. For even if the systems involved in the current transition to an economy based on bits seem opaque, the potential is for all digital economy systems to be fully pellucid.

 


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.

Advertisements

Digital Economy Series: In a digital economy will the abundance of data fuel a golden age of wisdom?

abstract art blur bright
Photo by Pixabay on Pexels.com

Knowledge in action. Sagacity. Percipience. Having experience, knowledge and good judgement. These words and phrases all describe and define wisdom. But will an abundance of data lead us to a golden age of wisdom? Will a richness of facts and figures, statistics and evidence lead us to a never-ending harvest of good judgement?

If we give credence to the DIKW (data, information, knowledge, wisdom) information science hierarchy, the answer leans to the affirmative. For with this framework, the following is the pattern: firstly, an abundance of data certainly leads to a wealth of information, or descriptions, about a plethora of matters. Which should, in turn, facilitate a breadth and depth of knowledge that is available for teaching and mentoring at a level unsurpassed in human history. Where the fruits of expertise, of mastery and of prowess are collectively this knowledge. And where this teaching and mentoring is an enabler to all people across the world regardless of the strata of society in which they sit. Where all of this flow upward from data, information and knowledge leads, finally, to a culmination in a golden age of wisdom. A time of good judgement and wise action.

But is the preceding flow true if we use a different time horizon? This piece you are reading is written for a time-frame of several decades into the future. What if you and I were to wind the clock back several decades to a time where “today was that tomorrow of several decades into the future”? Comparing this “back-in-time today” to the “current-time today”, is the latter enriched with an abundance of data? Do we, in the “current-time today” have a wealth of information about a plethora of matters compared with the times past. And thirdly, with respect to the current times, do we not have the ability, through information and communications technology, to teach and to share the fruits of expertise globally?

The argument can be made that we are better off today than yesterday. That we are wiser, that we have made sound judgements. While there is so much more to do, we can point to improvements in economic and physical health across the globe. We can make mention of the reduced rates of nation-state armed conflict and of improvements in education. But as we cast our eyes forward, will the teenage grandchildren of today’s teenagers be enveloped in, and benefit from, a milieu of experience, knowledge and good judgement? Consider the following two scenarios.

While matters of family are a common thread, that young woman in Asia, on the cusp of adulthood, may well have a personalised AI avatar to guide her through career and social choices. Offering her advice that could be heeded. And what-about that young man? A product of his Western heritage, looking to develop a career in the physical trades, finding his options don’t include the routine work he desires. Just like he was told throughout his schooling years.

In both cases, wisdom is offered but not infused. The prospects are that tomorrow will be just like today. Today we have that abundance of knowledge and the capacity for wise outcomes. And tomorrow? Our knowledge will have grown, we’ll have intelligence on hand and our capacity for delivering wise outcomes will be enhanced, but whether or not our results reflect these well-developed inputs is surely debatable.

These same arguments can be made regarding the generation of these teenager’s parents. Regardless of whether they live in Africa, the Sub-continent or in the Global North, one can imagine these parental pillars of society having responsibility in business or in policy making. Where the leaders in business are bound to a then long-established fiduciary duty to consult digital oracles. Where the policy makers can freely receive a finely curated harvest of good judgement.

Again it plays out in these two cases, decisions not quite fully imbued with the wisdom on offer. For across all four of these vignettes witness a surfeit of data, of information and of knowledge ripe with judicious potential. But where the consumption of this particular fruit is not universal. And the common denominator? What stands in front of this golden age of wisdom is surely our inherent human nature.

 


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”

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.