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How Will Automation Affect A Changing Workforce?

Alexander Arnold

According to a study conducted by the German Ministry of Labor and Social Policy, the population pyramid no longer exists; rather, it is morphing into a mushroom shape. By 2030, the German workforce will comprise 38 million people—5 million fewer than the current 43 million, and 3 million fewer than in 2010.

A Boston Consulting Group (BCG) study, presented in the TED Talk The workforce crisis of 2030 — and how to start solving it now, shows a likely scenario in which German economic growth will create a labor demand for 46 million people, leaving a gap of a breathtaking 8 million workers.

The sheer size of this gap is sobering, but the assumptions behind the study’s 38 million projection are also worth noting (all figures are compared to 2010):

  • The working population is defined as people between 15 and 74 years old. This assumes that people will work much longer than they do today, with 3 million people over age 55 working. We will have 4.8 million fewer people between 25 and 54 years old.
  • 0.5 million more women will work.
  • 0.9 million more labor will be created by part-time workers who increase the percentage of work they give.
  • 3 million more people will have a university degree.
  • 0.2 million fewer people with a dual education (typical for Germany) will bring skilled labor to the labor market.
  • 3.4 million fewer people who have completed vocational training will be in the workforce.
  • 0.2 million net immigration into Germany. Before the refugee crisis, around 0.9 million people left Germany each year, so a net immigration of .2 million will require 1.1 million people to immigrate into Germany.

You might think that we could simply increase net immigration. As BCG’s analysis shows, the aging population crisis will hit many major economies in 2030, including China, so there will be fierce competition to prevent “brain drain” and attract skilled immigrants. And there is no guarantee that Germany will win this talent war.

With this is mind, we might take a new look at automation brought by digitization. The basic formula is that automation is the result of digitization and connectivity. For example, machine data from a wind turbine is broadcast via the Internet to service technicians, enabling them to more quickly and thoroughly understand what to do if there’s a problem. This reduces time-consuming inspections and allows technicians to identify issues quickly and efficiently so they can fix things right the first time. That, in turn, helps optimize maintenance intervals, reduces downtime, and enables service technicians to service more wind turbines.

Predictive analytics based on huge amounts of data from many wind turbines takes this a step further: An algorithm can detect breakdowns before they occur, trigger a work order, and order the required spare parts in advance, making the work of the service technician even more efficient.

Here’s the formula:

Digitization + Connectivity + Artificial Intelligence (AI)/Machine Learning (ML) = Hyper-automation

Admittedly, this can be a scary scenario in a world with sufficient or excess labor supply—but it is comforting in the labor market projections described above.

With some studies predicting that half of all jobs will be killed by robots or AI bots, you might worry that automation will lead to mass unemployment, even with a reduced workforce. That’s why it’s helpful to look at a study conducted by McKinsey that analyzes the U.S. labor market in terms of automation potential of existing technologies. The research organizes jobs into seven basic work categories:

  • Management tasks: 9%
  • Application of expert knowledge: 18%
  • Interaction with stakeholders, i.e. customers: 20%
  • Unpredictable physical labor: 25%
  • Data collection: 64%
  • Data processing: 69%
  • Predictable physical labor: 78%

For each category, McKinsey analyzed the percentage of existing technology that can automate these tasks (shown above). The study also looked at each job and the level at which each category is required to fulfill this job. At the end, it shows the overall automation potential of each job.

If you are a CEO, for example, your job comprises a very high percentage of management, interaction with stakeholders, and application of expert knowledge to make informed decisions. These tasks are difficult to automate; thus, CEOs are less likely to be replaced by robots or automation technology. Similarly, if you are a firefighter, much of your work involves physical labor and unpredictable conditions. Each fire is different and requires expert knowledge, so this is another job that is unlikely to be automated.

On the other hand, if you are a factory worker who performs highly repetitive tasks, your job is much more likely to be automated and replaced with a robot.

The authors of the study point out that their analysis looks only at the potential of automation. Additional factors such as costs, availability of skills, and benefits such as improved safety, higher quality, and increased speed are also required in order to make automation decisions.

Rather than completely replacing workers, automation could increase value by taking over tasks that require less skill—think of a doctor who, instead of spending time on the common cold or flu, is able to focus on more complex medical cases. This will likely lead to further disruption in the labor market: the need for upskilling in each job. Those who are unable to keep up will be hit hard.

In short, automation could create a work environment in which professionals and robots work efficiently together and elevate the quality of the work performed — much like a chess player whose skills are supported by a sophisticated chess program.

What is the call to action for companies and participants in the labor market? It all starts with sound workforce planning: Analyze where you are most likely see a skill shortage in the future, and take action. Work to build a reputation as an attractive employer for the talent you anticipate needing, while also embracing digitization to reduce dependency in areas with more limited resources.

This will likely require a radical transformation of your core processes as you collect and process data from within and outside the company and use it in a way that empowers your employees. For this to happen, you must digitize how your organization interfaces with suppliers and customers, eliminating unnecessary steps and enabling real-time reactions to changing market conditions. As shown above in the example of the service technician, companies need to build systems that collect and process data from the Internet of Things. This will allow processes to transform in ways never seen before.

For employers and employees, constant skill development and renewal is essential. Many jobs that do not yet exist will be created. Who predicted, 10 or 15 years ago, that data science or search engine optimization professionals would earn a very good living today? This is the other side of digitization: New businesses, business models, and job opportunities will help counterbalance the negative effects of automation.

For more insight on how digital transformation is affecting the workplace, see An AI Shares My Office.

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Alexander Arnold

About Alexander Arnold

Alexander Arnold is Vice President Industries for Middle and Eastern Europe at SAP. He is based in based in Walldorf, Germany. His team provides industry and SAP expertise to help customers succeed in a digital world.

How To Design Your Company’s Digital Transformation

Sam Yen

The September issue of the Harvard Business Review features a cover story on design thinking’s coming of age. We have been applying design thinking within SAP for the past 10 years, and I’ve witnessed the growth of this human-centered approach to innovation first hand.

Design thinking is, as the HBR piece points out, “the best tool we have for … developing a responsive, flexible organizational culture.”

This means businesses are doing more to learn about their customers by interacting directly with them. We’re seeing this change in our work on d.forum — a community of design thinking champions and “disruptors” from across industries.

Meanwhile, technology is making it possible to know exponentially more about a customer. Businesses can now make increasingly accurate predictions about customers’ needs well into the future. The businesses best able to access and pull insights from this growing volume of data will win. That requires a fundamental change for our own industry; it necessitates a digital transformation.

So, how do we design this digital transformation?

It starts with the customer and an application of design thinking throughout an organization – blending business, technology and human values to generate innovation. Business is already incorporating design thinking, as the HBR cover story shows. We in technology need to do the same.

Design thinking plays an important role because it helps articulate what the end customer’s experience is going to be like. It helps focus all aspects of the business on understanding and articulating that future experience.

Once an organization is able to do that, the insights from that consumer experience need to be drawn down into the business, with the central question becoming: What does this future customer experience mean for us as an organization? What barriers do we need to remove? Do we need to organize ourselves differently? Does our process need to change – if it does, how? What kind of new technology do we need?

Then an organization must look carefully at roles within itself. What does this knowledge of the end customer’s future experience mean for an individual in human resources, for example, or finance? Those roles can then be viewed as end experiences unto themselves, with organizations applying design thinking to learn about the needs inherent to those roles. They can then change roles to better meet the end customer’s future needs. This end customer-centered approach is what drives change.

This also means design thinking is more important than ever for IT organizations.

We, in the IT industry, have been charged with being responsive to business, using technology to solve the problems business presents. Unfortunately, business sometimes views IT as the organization keeping the lights on. If we make the analogy of a store: business is responsible for the front office, focused on growing the business where consumers directly interact with products and marketing; while the perception is that IT focuses on the back office, keeping servers running and the distribution system humming. The key is to have business and IT align to meet the needs of the front office together.

Remember what I said about the growing availability of consumer data? The business best able to access and learn from that data will win. Those of us in IT organizations have the technology to make that win possible, but the way we are seen and our very nature needs to change if we want to remain relevant to business and participate in crafting the winning strategy.

We need to become more front office and less back office, proving to business that we are innovation partners in technology.

This means, in order to communicate with businesses today, we need to take a design thinking approach. We in IT need to show we have an understanding of the end consumer’s needs and experience, and we must align that knowledge and understanding with technological solutions. When this works — when the front office and back office come together in this way — it can lead to solutions that a company could otherwise never have realized.

There’s different qualities, of course, between front office and back office requirements. The back office is the foundation of a company and requires robustness, stability, and reliability. The front office, on the other hand, moves much more quickly. It is always changing with new product offerings and marketing campaigns. Technology must also show agility, flexibility, and speed. The business needs both functions to survive. This is a challenge for IT organizations, but it is not an impossible shift for us to make.

Here’s the breakdown of our challenge.

1. We need to better understand the real needs of the business.

This means learning more about the experience and needs of the end customer and then translating that information into technological solutions.

2. We need to be involved in more of the strategic discussions of the business.

Use the regular invitations to meetings with business as an opportunity to surface the deeper learning about the end consumer and the technology solutions that business may otherwise not know to ask for or how to implement.

The IT industry overall may not have a track record of operating in this way, but if we are not involved in the strategic direction of companies and shedding light on the future path, we risk not being considered innovation partners for the business.

We must collaborate with business, understand the strategic direction and highlight the technical challenges and opportunities. When we do, IT will become a hybrid organization – able to maintain the back office while capitalizing on the front office’s growing technical needs. We will highlight solutions that business could otherwise have missed, ushering in a digital transformation.

Digital transformation goes beyond just technology; it requires a mindset. See What It Really Means To Be A Digital Organization.

This story originally appeared on SAP Business Trends.

Top image via Shutterstock

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Sam Yen

About Sam Yen

Sam Yen is the Chief Design Officer for SAP and the Managing Director of SAP Labs Silicon Valley. He is focused on driving a renewed commitment to design and user experience at SAP. Under his leadership, SAP further strengthens its mission of listening to customers´ needs leading to tangible results, including SAP Fiori, SAP Screen Personas and SAP´s UX design services.

How Productive Could You Be With 45 Minutes More Per Day?

Michael Rander

Chances are that you are already feeling your fair share of organizational complexity when navigating your current company, but have you ever considered just how much time is spent across all companies on managing complexity? According to a recent study by the Economist Intelligence Unit (EIU), the global impact of complexity is mind-blowing – and not in a good way.

The study revealed that 38% of respondents spent 16%-25% of their time just dealing with organizational complexity, and 17% spent a staggering 26%-50% of their time doing so. To put that into more concrete numbers, in the US alone, if executives could cut their time spent managing complexity in half, an estimated 8.6 million hours could be saved a week. That corresponds to 45 minutes per executive per day.

The potential productivity impact of every executive having 45 minutes more to work every single day is clearly significant, and considering that 55% say that their organization is either very or extremely complex, why are we then not making the reduction of complexity one or our top of mind issues?

The problem is that identifying the sources of complexity is complex in of itself. Key sources of complexity include organizational size, executive priorities, pace of innovation, decision-making processes, vastly increasing amounts of data to manage, organizational structures, and the pure culture of the company. As a consequence, answers are not universal by any means.

That being said, the negative productivity impact of complexity, regardless of the specific source, is felt similarly across a very large segment of the respondents, with 55% stating that complexity has taken a direct toll on profitability over the past three years.  This is such a serious problem that 8% of respondents actually slowed down their company growth in order to deal with complexity.

So, if complexity oftentimes impacts productivity and subsequently profitability, what are some of the more successful initiatives that companies are taking to combat these effects? Among the answers from the EIU survey, the following were highlighted among the most likely initiatives to reduce complexity and ultimately increase productivity:

  • Making it a company-wide goal to reduce complexity means that the executive level has to live and breathe simplification in order for the rest of the organization to get behind it. Changing behaviors across the organization requires strong leadership, commitment, and change management, and these initiatives ultimately lead to improved decision-making processes, which was reported by respondents as the top benefit of reducing complexity. From a leadership perspective this also requires setting appropriate metrics for measuring outcomes, and for metrics, productivity and efficiency were by far the most popular choices amongst respondents though strangely collaboration related metrics where not ranking high in spite of collaboration being a high level priority.
  • Promoting a culture of collaboration means enabling employees and management alike to collaborate not only within their teams but also across the organization, with partners, and with customers. Creating cross-functional roles to facilitate collaboration was cited by 56% as the most helpful strategy in achieving this goal.
  • More than half (54%) of respondents found the implementation of new technology and tools to be a successful step towards reducing complexity and improving productivity. Enabling collaboration, reducing information overload, building scenarios and prognoses, and enabling real-time decision-making are all key issues that technology can help to reduce complexity at all levels of the organization.

While these initiatives won’t help everyone, it is interesting to see that more than half of companies believe that if they could cut complexity in half they could be at least 11%-25% more productive. That nearly one in five respondents indicated that they could be 26%-50% more productive is a massive improvement.

The question then becomes whether we can make complexity and its impact on productivity not only more visible as a key issue for companies to address, but (even more importantly) also something that every company and every employee should be actively working to reduce. The potential productivity gains listed by respondents certainly provide food for thought, and few other corporate activities are likely to gain that level of ROI.

Just imagine having 45 minutes each and every day for actively pursuing new projects, getting innovative, collaborating, mentoring, learning, reducing stress, etc. What would you do? The vision is certainly compelling, and the question is are we as companies, leaders, and employees going to do something about it?

To read more about the EIU study, please see:

Feel free to follow me on Twitter: @michaelrander

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Michael Rander

About Michael Rander

Michael Rander is the Global Research Director for Future Of Work at SAP. He is an experienced project manager, strategic and competitive market researcher, operations manager as well as an avid photographer, athlete, traveler and entrepreneur. Share your thoughts with Michael on Twitter @michaelrander.

The Future of Cybersecurity: Trust as Competitive Advantage

Justin Somaini and Dan Wellers

 

The cost of data breaches will reach US$2.1 trillion globally by 2019—nearly four times the cost in 2015.

Cyberattacks could cost up to $90 trillion in net global economic benefits by 2030 if cybersecurity doesn’t keep pace with growing threat levels.

Cyber insurance premiums could increase tenfold to $20 billion annually by 2025.

Cyberattacks are one of the top 10 global risks of highest concern for the next decade.


Companies are collaborating with a wider network of partners, embracing distributed systems, and meeting new demands for 24/7 operations.

But the bad guys are sharing intelligence, harnessing emerging technologies, and working round the clock as well—and companies are giving them plenty of weaknesses to exploit.

  • 33% of companies today are prepared to prevent a worst-case attack.
  • 25% treat cyber risk as a significant corporate risk.
  • 80% fail to assess their customers and suppliers for cyber risk.

The ROI of Zero Trust

Perimeter security will not be enough. As interconnectivity increases so will the adoption of zero-trust networks, which place controls around data assets and increases visibility into how they are used across the digital ecosystem.


A Layered Approach

Companies that embrace trust as a competitive advantage will build robust security on three core tenets:

  • Prevention: Evolving defensive strategies from security policies and educational approaches to access controls
  • Detection: Deploying effective systems for the timely detection and notification of intrusions
  • Reaction: Implementing incident response plans similar to those for other disaster recovery scenarios

They’ll build security into their digital ecosystems at three levels:

  1. Secure products. Security in all applications to protect data and transactions
  2. Secure operations. Hardened systems, patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud-operations security framework
  3. Secure companies. A security-aware workforce, end-to-end physical security, and a thorough business continuity framework

Against Digital Armageddon

Experts warn that the worst-case scenario is a state of perpetual cybercrime and cyber warfare, vulnerable critical infrastructure, and trillions of dollars in losses. A collaborative approach will be critical to combatting this persistent global threat with implications not just for corporate and personal data but also strategy, supply chains, products, and physical operations.


Download the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


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To Get Past Blockchain Hype, We Must Think Differently

Susan Galer

Blockchain hype is reaching fever pitch, making it the perfect time to separate market noise from valid signals. As part of my ongoing conversations about blockchain, I reached out to several experts to find out where companies should consider going from here. Raimund Gross, Solution Architect and Futurist at SAP, acknowledged the challenges of understanding and applying such a complex leading-edge technology as blockchain.

“The people who really get it today are those able to put the hype in perspective with what’s realistically doable in the near future, and what’s unlikely to become a reality any time soon, if ever,” Gross said. “You need to commit the resources and find the right partners to lay the groundwork for success.”

Gross told me one of the biggest problems with blockchain – besides the unproven technology itself – was the mindset shift it demands. “Many people aren’t thinking about decentralized architectures with peer-to-peer networks and mash-ups, which is what blockchain is all about. People struggle because often discussions end up with a centralized approach based on past constructs. It will take training and experience to think decentrally.”

Here are several more perspectives on blockchain beyond the screaming headlines.

How blockchain disrupts insurance, banking

Blockchain has the potential to dramatically disrupt industries because the distributed ledger embeds automatic trust across processes. This changes the role of longstanding intermediaries like insurance companies and banks, essentially restructuring business models for entire industries.

“With the distributed ledger, all of the trusted intelligence related to insuring the risk resides in the cloud, providing everyone with access to the same information,” said Nadine Hoffmann, global solution manager for Innovation at SAP Financial Services. “Payment is automatically triggered when the agreed-upon risk scenario occurs. There are limitations given regulations, but blockchain can open up new services opportunities for established insurers, fintech startups, and even consumer-to-consumer offerings.”

Banks face a similar digitalized transformation. Long built on layers of steps to mitigate risk, blockchain offers the banking industry a network of built-in trust to improve efficiencies along with the customer experience in areas such as cross-border payments, trade settlements for assets, and other contractual and payment processes. What used to take days or even months could be completed in hours.

Finance departments evolve

Another group keenly watching blockchain developments are CFOs. Just as Uber and Airbnb have disrupted transportation and hospitality, blockchain has the potential to change not only the finance department — everything from audits and customs documentation to letters of credit and trade finance – but also the entire company.

“The distributed ledger’s capabilities can automate processes in shared service centers, allowing accountants and other employees in finance to speed up record keeping including proof of payment supporting investigations,” said Georg Koester, senior developer, LoB Finance at the Innovation Center Potsdam. “This lowers costs for the company and improves the customer experience.”

Koester said that embedding blockchain capabilities in software company-wide will also have a tremendous impact on product development, lean supply chain management, and other critical areas of the company.

While financial services dominate blockchain conversations right now, Gross named utilities, healthcare, public sector, real estate, and pretty much any industry as prime candidates for blockchain disruption. “Blockchain is specific to certain business scenarios in any industry,” said Gross. “Every organization can benefit from trust and transparency that mitigates risk and optimizes processes.”

Get started today! Run Live with SAP for Banking. Blast past the hype by attending the SAP Next-Gen Boot Camp on Blockchain in Financial Services and Public Sector event being held April 26-27 in Regensdorf, Switzerland.

Follow me on Twitter, SCN Business Trends, or Facebook. Read all of my Forbes articles here.

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