As I discussed in my previous blog about starting my own business, it’s my firm believe too many business software companies suffer from what I have begun to refer to as ‘the innovation gap.’ This means they do not live up (anymore) to their real potential, delivering average solutions, to average customers, with average results.
So, the fundamental question is: What does it take to become remarkable (again)? And the answer to that is obviously not an easy one. But a good way to approach the challenge is to understand what’s going on around us and how that shapes new opportunities to reimagine the core of what we do.
And let’s face it, doesn’t it feel everything is shifting these days? New cool companies arrive every day, and known brands appear to lose their power at the same pace.
We live in an era where, at a much higher pace than ever before, the norms of what ‘excellent’ looks like are being challenged, resulting in new experiences that we could not even imagine 5–10 years ago. Some we like instantly, others we have to get used to before we embrace them. At a personal level, I have many ‘heated’ discussions with my wife when it comes to a future with electric, and even more interestingly, self-driving cars. As a true car lover, she simply can’t imagine ever ‘driving’ one of them, where I loved the concepts at the point of arrival. And that’s just touching upon the experience of ‘the car’ itself — not to think about how the combo of electric with self-driving will change fundamentally change the nature of transportation, commuting, goods delivery, infrastructure development, let alone the question of what we’ll own, and whatnot (anymore).
So, the past months I have done a lot of research around these shifts, in particular, to understand what they mean for the future of business software, the service industry as a whole, and what levers services organizations should pull to reimagine the core of what they do. In this blog I exclusively focus on the shifts — my next blogs will be about the opportunities that arise.
In my opinion, four mega shifts are happening in parallel — pulling in conflicting directions, and consequently, the real opportunity hides in combining the individual shifts to arrive at something bigger than the sum of the individual pieces. This has the potential of redefining almost everything we have become accustomed to. Let’s review them one by one.
1) Technological breakthroughs
Compute power is increasing every single day. According to Ulrich Eberl, author of a 2011 book titled Life in 2050: How We Create the Future Today, we are only halfway through an era of rapid advancements in computing. Over the last 25 years or so, information technology has become 1,000 times better. And in next 25 years, that scale of improvement will happen again. While the price to compute is coming down all the time.
This has opened a wealth of opportunities already from the way we design, produce and deliver almost every product and service, to complete new business models that we couldn’t even imagine 10 years ago.
As they say: Everything that can be connected to the internet, will be connected to the internet. Massive increases in sensors combined with today’s processing power make the world a programmable system. This will unleash an unprecedented torrent of data, the opportunity to see patterns, and design systems on a scale never before possible. And this fuels the power of Artificial/Augmented Intelligence — which alone, according to Accenture, has the potential to double the annual economic growth rates and boosts labor productivity by up to 40% by 2035.
2) The radical change in the nature of careers.
Besides the technical revolution, a dramatic shift in demographics is going on due to the changing size, distribution and age profile of the world’s population. This creates extreme longevity and is transforming the nature of careers in ways we have not ever seen before. Here’s why: By 2020 the number of people aged 65 and older will outnumber children under the age of five for the first time in history. At the same time, another shift is happening: people will simply stay longer in the workforce. Some people expect the concept of ‘retirement’ is becoming a thing of the past. Sometimes forced to have adequate resources for retirement, and sometimes out of opportunity, as ‘pensionados’ (as they call it here in Spain), are increasingly being challenged to adapt to new roles as mentors, coaches, and often subordinates to junior colleagues.
At the same time Millennials now make up more than half the workforce (and in less than a decade even 75%), and they bring high expectations for a rewarding, purposeful work experience, constant learning and development opportunities, and dynamic career progression. Adding to this, they also value independence, so multiple careers will be commonplace and consequently lifelong learning to prepare for occupational change will see major growth. All in all, this places great challenges on any service intensive organization in terms of attracting and retaining talent, and beyond that, in the way they capture, protect and share their core IP: knowledge.
3) The skills gap is becoming an ever-widening chasm.
Despite the extreme longevity described above, Accenture recently published that today +40% of employers report talent shortages. This highlights the issue of a skills-mismatch of an enormous size. It appears some 30–45% of the working-age population is under-utilized, either unemployed, inactive or underemployed. McKinsey Institute calculated this % to equals 850 million people in US, UK, Germany, Japan, Brazil, China, and India alone.
And this is creating a double-edged sword problem for organizations of any size. Not only does this directly effects their net-capacity to deliver, it’s also negatively impacting their existing workforce in terms of net productivity. Skills mismatch, in general, has a negative impact on labor productivity. So, reducing skills mismatch creates massive opportunities. Accenture calculated that reducing skills-mismatch could boost efficiency by +10%. Just imagine the impact this could have on your business, let alone society.
The solution is obvious: re-skilling. And that appears to be a sizeable challenge. The World Economic Forum recently published that by 2020 more than one-third of the desired skill sets of most jobs will be comprised of skills not yet considered crucial today. Just imagine the sheer challenge this probes on the Education system, or turn it around to your private live: What study advice would you give your kids to prepare themselves for the workplace of tomorrow.
Automation partly drives this shift. According to McKinsey 60% of all jobs have at least 30% of activities that are technically automatable based on technologies available today. This means jobs will change and more people will have to work ‘in partnership’ with technology. But it’s not only existing jobs that will change. There will also be a host of new jobs created as a contribution to technology, just like we have seen in the past. I came across some example from France that pictures this nicely. In France, 500.000 jobs were destroyed by the internet in the period 1996–2011. At the same time, 1.2 million new jobs were created, i.e. 2.4 new jobs created for every job destroyed.
4) The rate of change keeps accelerating at unprecedented scale
Combining shift one with the constraints discussed in shift two and three, catapults the creation of new ideas, which accelerates the pace of change like we’ve not seen before in the past decades. This creates a whole new shift by itself. And as computing power continues to increase, and the cost of it continues to come down, this is likely to accelerate even more.
The changes can be felt at the business model level — retailers have turned into banks, product manufacturers have morphed into service providers, and so on.
It’s reshaping global powers. For example, the US and Europe no longer hold a monopoly on job creation, innovation, and political power. Organizations from resource- and infrastructure-constrained markets in developing countries like India and China are innovating at a faster pace than those from developed countries.
It’s creating completely new markets. Companies such as Uber, Airbnb, and Netflix are well-known examples of organizations that have mastered leveraging this opportunity of technology, skills-gaps and changing workforce needs to create markets that were unimaginable ten years ago.
I am fascinated seeing these forces drive opportunity. For what it feels like these shifts allow for more opportunity to rise to the surface than ever before, coupled with high rewards if you’re first to spot them.
It’s this opportunity what I will dive into in my following blogs. How will these shifts impact the business software and the service industry, and how does this result in opportunities to become remarkable (again).
Stay tuned, and please share your experiences on how these forces have already impacted you in your role, or your business as a whole. Value inspiration at its best is when it helps create a better world for all of us. That’s a cause worth aiming for. So share!