′Digitalization creates winners and losers′ | Business| Economy and finance news from a German perspective | DW | 15.09.2015
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'Digitalization creates winners and losers'

Every second job could be at stake, as computers and robots take over more workplaces in a digital economy. But not only employees will be affected, says Charles-Edouard Bouée, CEO of Roland Berger.

DW: Is our digital agenda human?

Charles-Edouard Bouée: Not enough. When we try to define "digital organization," we initially think of technological devices: employees with laptop computers under their arms, permanently connected to a shared virtual platform, people working from a multitude of external locations and with people they have never physically met. And it is a fact that all major changes in the workplace over recent decades have occurred as a result of the impact of new technology.

However, innovation should not be seen merely in terms of machines replacing humans. In fact, technology is the tip of the iceberg. In my essay: "Light Footprint Management, Leadership in Times of Change," I explain that technology is one panel of a broader triptych, including organization and culture. Change that is only technology-driven has little prospect of success.

Think of emails. It is not just the communication medium that has changed. Email has fundamentally transformed the way work is organized, the way employees interact and the way information is shared or retained.

In most cases companies follow the pace of technological change, but don't ask themselves what, in terms of organization and culture, the implications are. This is why it took so many years for some companies to start questioning the use of emails, the time employees spent dealing with them and to begin the search for more adequate tools.

Roland Berger-CEO Charles-Edouard Bouée EINSCHRÄNKUNG

Bouée: "We cannot imagine what our work-life balance will look like in a few years"

Digital technologies - smart phones, email, social networking, etc. - are fundamentally changing our relationship to work. Digital technologies enable us to be connected permanently. How do digital technologies affect our work-life balance?

"Remote working" was one of the first and most significant transformations that digital technologies brought to the workplace. The first concerns about their effect on our work-life balance appeared almost a decade ago. Traditional organizations were deeply affected by this change as employees, mainly executives, became reachable beyond traditional working hours. Digital technologies, such as a permanent mail connection and the intrusion of working tools in the personal and family space, became a stress factor. To avoid this, some companies started to experiment with solutions, such as "one night per week with no email or SMS." And it proved successful, with increased motivation and efficiency.

Work-life balance in the digital age

However, I also think the expectations and aspirations of successive generations are changing the game. Digital technologies are increasingly seen as a way to improve our sense of well-being at work, with greater autonomy and more flexible working hours. Companies that have mature digital organizations are clearly more attractive for younger people.

We also need to bear in mind that emails, smart phones and social networking are already behind us. The next step is about sensors, 3D printing. We cannot imagine what our work-life balance will look like in a few years.

Industrie 4.0 Symbolbild Roboter Produktion Fabrik

Where did all the workers go? Automated assembly of cars at Mercedes-Benz plant in Rastatt, Germany

Digital technology erodes the physical boundaries that have previously confined some work tasks to particular locations, allowing these to be performed almost anywhere. What does that mean for employees and management?

Throughout the 20th century, the progress of industrial automation enabled greater specialization, tailorization and eventually the outsourcing of large parts of industrial production. Today, thanks to digital technologies, intellectual work is being affected in the same way. New forms of "on demand work" are being developed in all sectors. Companies can count on the fact that their employees all have computers in their pockets with instant access to the Internet. Often they can also access external expertise more cheaply than if they had to organize it internally. The transaction cost has become negligible.

This has enormous consequences. In its latest report entitled: "The Changing Nature of Jobs," the International Labour Organization ILO shows that wage earners represent approximately half of employment globally. Contrary to the historical trend observed over the last two centuries, this figure tends to decline in mature economies. In the United States, one in three workers is already in part-time freelance employment. By 2020, there will be more freelancers than employees. If we add to this the rise of part-time working and fixed-term contracts, full-time wage earning now accounts for less than one in four workers globally.

For managers, and employees alike, this represents a considerable shift. A digital company is no longer a physical place that brings together hierarchically organized workers. It is an ecosystem where both managers and employees navigate and seek to develop their know-how and opportunities.

In need of new management skills

Büro Computer Sitzball sitzen Gesundheit

Will they be winners or losers of tomorrow's labor market?

Managers are regularly confronted with staggering volumes of information. They have difficulties keeping everyone on the same page and monitoring data and information. What kind of effects does this have?

Our societies will find ways to adapt to growing volumes of information. When Gutenberg's printing technology spread throughout Europe, the scholars felt overwhelmed. How can we read so many books? Today we have accepted that we cannot read every book. We have come to the same conclusion regarding information. We will never be equipped with unlimited knowledge. This affects, of course, the role of managers, whose power in traditional organizations relies - at least in part - on the control of information.

Stability that was previously supplied by tight control over information has to be abandoned and replaced by peer pressure and self organization. Friendship, watching over each other's back and a sense of reciprocal obligation, all contribute to the self-organization that allows the system to be under control when no one is officially in control. It is common in small start-up companies, but tends to fade away as a company grows and becomes more complex. This is where managers have a crucial role in digital organizations. They are the place where trust can be built.

The rise of digital technologies has allowed companies such as Uber, which do not fit in traditional structures, to rise rapidly. And traditionally organized models have struggled to keep up. What are the challenges for the management and for the workers?

Not every company can become an Uber or Airbnb. Every single company will be affected by the coming changes and will have to develop a more flexible, less hierarchical organization, based on small, cohesive teams in contact with the top of the pyramid, but enjoying real autonomy in the field. This open and agile model, which I have called "light footprint management," also applies outside of the company. Market knowledge is no longer the reserve of marketing studies, but is acquired by including the clients, who become producers of information, content, innovation.

Machines could take over every second job

These changes are not limited to the business world: whole areas of our social organization may mutate in the digital age. The increased use of robots in the production process, the digitization of processes and know-how, the inclusion of customers or competitors in decision making - all these dynamics are gradually dissolving the company as we know it, both as a physical place and as a hierarchical employer of labor. Tomorrow, intelligence, creativity and innovation will be collective and distributed in networks. The company will no longer be the owner, as is the case today.

The social consequences of such a movement are major and still unexplored. Workers will no longer develop their skills for a specific company, but for a much larger ecosystem, in which they will have to navigate to find the best alliances and opportunities.

In 2013, researchers at Oxford University predicted that machines - that is, computers and robots - may replace humans in half of all American jobs within 20 years. Would you agree that regular work is crucially important, not only for financial support, but for mental health and the integrity of communities? If so what should be done?

Roland Berger applied Oxford University's methodology to the French labor market and estimated that 42 percent of French jobs were at risk. Not surprisingly, low-skilled jobs are threatened, but intermediate jobs are also affected. These include administrative functions, or many middle management functions, which have historically been providers of jobs for the middle class. Like all major economic transformations, digitization creates winners and losers.

Enormous social effects

In my last book, "Confucius et les automates" ("Confucius and the PLCs"), I tried to explore the consequences of these exchanges. When a majority of the jobs are being performed by robots or machines, most of humanity will enter a new age, which I called the "quaternary." After the predominance of the primary, then secondary and tertiary sector in our economies, we will enter an unprecedented age, where human activity dramatically changes in form and significance.

Many of us will enter a period of enforced inactivity. Others will develop the kinds of activities still necessary in the world of robots: Designers of electronic games, professional game players, service providers, dealers, care providers for the old and infirm, people working from home, craftsmen, operators of online food stores, bio farmers, journalists editing copy produced by robot reporters, and so on.

The social effects of such developments are enormous and, at this moment in time, difficult to imagine. It is not the end of employment, but perhaps the end of wage-earning. The demise of salaried employment and a corresponding rise in self-employed activity represent a huge challenge for social security and pensions systems.

Just as the nineteenth and twentieth centuries were moments of intense mobilization with governments educating, training and treating populations, people now need to adapt to the new requirements of the production system - a challenge which is today just as demanding as any in the past.

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