Surviving the Digital Age: 4 Corporate Transformations

Disruption Is Coming

The convergence of artificial intelligence (AI) — machine learning — increased global mobile connectivity, the Internet of Things, heightened computing power, virtual and augmented reality, and nanotechnology will produce a data tsunami that will require most organizations to transform how they do business. The magnitude of the coming disruption is mindboggling. One major aspect of this disruption will be the impact on employment and the resulting loss of global consumer purchasing power.

According to a January 2017 McKinsey Global Institute report, adapting existing technologies could now automate $15.8 trillion dollars of work activities, equivalent to over 1.1 billion full-time equivalent (FTE) jobs globally — including 60 million FTE jobs in the United States, totaling $2.7 trillion dollars of U.S. wages. According to research from the Martin School at Oxford University and Citi published in January 2016, technology has a high probability of automating 57 percent of the jobs in the Organization for Economic Cooperation and Development countries, as compared to 47 percent of the jobs in the United States alone. The corresponding high risk of job automation numbers for China is 77 percent, India is 69 percent, South Africa is 67 percent and Ethiopia is 85 percent.

Existential Challenges

How do businesses grow in that environment? How do you create consumers in that environment? How do economies develop? The challenges that business leaders will face will be existential. Will they be able to continuously adapt and innovate internally and externally fast enough? Will they be able to optimize the integration of human excellence and technology in a differentiating, value-creation manner?

In the face of such disruption, it is likely that every business will face four critical transformations: technology, organizational design, leadership and people — human development — the need for its human workforce to excel at tasks that technology won’t do well. Technology will change the story of work — who works and how people will work. Transformation will mean embracing ways of working, new structures, new mindsets, new behaviors, new ways of making decisions and faster data-driven adaptation, innovation and resilience in a world that is changing at the speed of technology.

Four Critical Transformations

1. Technology: The first type of business transformation will be the integration of new technologies and data analytics into every part of the business. The architecture of that integration and the choice of where to start are hard strategic and technical decisions. Do you start with the customer or your business processes or your business model? Do you build, buy or partner? In many cases, current CTOs or CIOs will not be well-versed in the new technologies. Additionally, building the capabilities to analyze the data and effectively deploy the insights throughout the organization will be a challenge. That will require silo busting and empowered, networked, cross-functional, cross-product, cross-geographical teams who can effectively collaborate. Existing structures, compensation programs and career paths will be disrupted. How you work, with whom you work and how you make decisions will change. Speedy experimental learning will be necessary. That will most likely require a redesign of the existing work system.
2. New System: The second transformation is a systemic redesign of the organization — the creation of a technology-enabled Human Excellence System. In many cases that will require new structures, culture, processes, leadership model, measurements and rewards designed to optimize human learning in concert with technology. Humans will be needed to do the work activities — the types of thinking, emotionally engaging and complex problem-solving — that technology won’t be able to do well. The challenge is that we humans do not naturally do those tasks well because of our natural inclinations to be confirmation-seeking and emotionally defensive, ego-affirming thinkers, listeners and collaborators.
   
   This redesign should focus on promoting and developing the mindsets and the behaviors that enable human cognitive and emotional excellence in concert with technology and data analytics. That will require a culture that is based on candor, an idea meritocracy, data-driven decision-making, fast experimental iterative learning and three psychological principles: Positivity, Self-Determination Needs and Psychological Safety. Technology will dehumanize business in that it will reduce human headcount, but at the same time it will require businesses to become much more humanistic, people-centric workplaces that psychologically reduce the negative performance impacts of ego and fear. Psychology and emotions will be as important as data analytics.
3. New Leadership Model: The third major transformation needed is a new model of how to lead and manage others. The Industrial Revolution model of leading — with its hierarchal, all-knowing, command, control and direct leaders/managers — will become obsolete because it will not optimize the type of human performance needed in the Smart Machine Age. You can’t command, control, direct or coerce the types of high cognitive and emotional human performance that will be needed. You can’t optimize adaptation and learning in an environment of fear and lack of positive regard and trust. Who will lead/manage? It will be those people who earn the trust and respect of others by how they behave, how they think, how they collaborate and how they bring people together to accomplish amazing things by helping others take their cognitive and emotional abilities to higher levels. Leaders will be Enablers — enablers of organizational and individual excellence.
4. HR Becomes HD: All of the above will require Human Resource functions to be transformed into Human Development functions. Human development will become a mission critical organizational competency. That will require the transformation of HR people, processes, measurements, rewards, hiring, training and retention practices. Human development will be necessary both for organizational effectiveness and attracting and retaining the best human workforce. It is highly likely that the quality of an organization’s human performance may well be the key differentiator when smart technology becomes widely available and user-friendly. Moreover, as technology continues to advance, the speed and quality of an organization’s learning will come into play. Humans must be able to excel at lifelong learning in order to add value to and with the smart technology that will be able to itself learn.

The Smart Machine Age will be more disruptive than the Industrial Revolution because of its scope, scale, and the power and quality of what the technology can do. Technology’s move into doing service and professional jobs will require the human component of the workforce to excel at adaptation and learning in order to stay relevant with the technology. The new business mantra? TRANSFORM — both organizationally and individually.

Ed Hess is Professor of Business Administration and Batten Executive-in-Residence and co-author of the new book Humility Is the New Smart: Rethinking Human Excellence in the Smart Machine Age (Berrett-Koehler, 2017).