Managing disruption in the digital age

The world has experienced technological disruption before.

In the industrial age of the 18th till mid-20th centuries, mechanisation dramatically increased productivity and eroded age-old traditions of apprenticeship and craftsmanship. The information age saw the rise of knowledge worker.

Those with higher education and skills have thrived while those without faced limits to their wage growth and social mobility.

Today we are in the digital age. It is bringing its own forms of disruption. There are four major differences between these and the patterns of the preceding waves of change.

First, speed of change. The industrial revolution was spread out over nearly two centuries (end of the 18th to the mid-20th century).

The information age also took a long time, commencing with the telegraph in the mid-19th century and passing into the age of the internet in the 1990s. In comparison the digital age is breaking upon us at a furious pace.

In the first half of the 21st century we can expect to feel the full disruptive effects of intelligent automation. These effects – disruption and displacement - will be rapid and radical.

Second, effects on economic structure. Through the second half of the 20th century, the global economy operated in two modes.

Advanced economies increasingly embraced and pushed forward the new information age while developing economies relied on industrialisation to succeed. Manufacturing was increasingly displaced from advanced economies and redeployed to developing ones.

Singapore was amongst the beneficiaries of this twin mode economic structure. It then took advantage of it to move aggressively to an advanced economy, displacing its manufacturing activities to lower cost economies behind it on the development curve.

The digital age will also feature a twin-mode economic structure but one that is far less benign and not organised according to stages of development. It will between economies which are digitally relevant and those which are left out of the digital economy.

The latter will be critically disadvantaged and their progress to advanced economy stage will be without a predictable order.

Third, effects on structural employment. The previous waves of change ran parallel to each other for large periods of time.

This permitted for an economy that could accommodate both those suited to an emerging age and those best fitted to the prevailing structure. The general base of employment grew as a result. Hence, through the 20th century, low and semi-skilled workers could find employment in large factories while those with education found opportunities in knowledge – driven service sectors. There was also scope for motivated workers, through enterprise, education and training, to transition between industrial and knowledge economies.

The digital age is much less accommodative. Not only will intelligent automation mean a shrinking employment base but it will also be difficult for those displaced to retool to re-enter the workforce.

Fourth, eroding value of experience. Historically, professional and work experience has always had a premium economic value. Companies gave workers increments to recognise increasing years of service and long experience gave workers and business leaders’ judgement, tacit knowledge and networks which were competitive advantages that were impossible to substitute.

Digitisation and machine learning are rapidly eroding the value of experience. Machines can compact and make sense of historical information far more, better and faster than human beings. They have no foibles or need for rest and can continue to absorb new data, make sense of it and make decisions rapidly on a continuous basis.

‘Experience’ in the digital age is now merely a function of the size of computer memory and ng power and complexity of programming. Machines are being taught and learning to be creative and dextrous.

These four major impacts of the digital age create the need for equally major adjustments for economies, societies and work forces to cope.

NEED TO CHANGE

For developing countries, the fact that linear-step order to development is no longer applicable is both a challenge and an opportunity. They can use technology to leapfrog development stages if they can mobilise investment into digital infrastructure and equip their populations with education and skills to make the most of opportunities.

However, the lack of predictability and the speed of change means that developing economies have a small window, possibly 10 to 20 years, of opportunity to leapfrog or risk being alienated from the digital economy.

Mindsets have to change. Barriers to entry are rising and so too are standards for retention. Workers can no longer be complacent about their job security not businesses about their commercial security. Longevity of service or of business are no longer assurances of economic survival.

Workers must be prepared to be redeployed across sectors during their work-life and to make iterative investments into reskilling and acquiring new knowledge to ensure their continued economic relevance.

Social security systems have to be rethought and restructured to match employment models which are more varied. Technology has enabled the advent of the ‘gig’ economy. Structured employment will increasingly become less common as businesses and workers seek greater flexibility in employment markets.

The prevailing models of social systems are predicated on 20th century assumptions which no longer apply. Greater flexibility will have its advantages but it also reduces predictability in earning and savings power. This will have impact on how social safety nets and retirement financing models are structured.

Both the industrial and the information age rewarded conformity. Workforce discipline and adherence to standards were desirable characteristics of workers and companies alike. In the digital age, where machines can replicate and substitute both manual and cognitive labour effectively and efficiently, it will be diversity and creativity which will be valued most highly. Those who can think differently and create new products or new ways of doing business will have an advantage. So too are those who are nimble and adaptive. The most important criteria for success in the digital age will be the ability to learn autonomously and continually, and in applying the knowledge quickly in different and creative ways.

The digital age is not for everyone but it will impact everyone. It is important that governments, businesses and workers become more aware and more prepared for those impacts. Political, social and institutional systems take a long time to build and to change. However, the digital age moves in a hurry. This asymmetry will be the source of problems and social angst. To succeed in the digital age means synchronising the speeds of change and response.

Synchronised adaptation will call for inspired leadership at political, social and economic levels and a willingness to initiate change while much remains uncertain. But taking early action will be rewarded by ease in the longer term in adapting to the digital age while maintaining social stability.

ABOUT THE AUTHOR:

Devadas Krishnadas is chief executive of Future-Moves Group, an international strategic consultancy and executive education provider based in Singapore.