At the present, organisations and firms are asking questions about how they will compete in the new digital age. Similarly, UK government is asking similar and related questions about the future direction of service and industrial employment. This commentary explores these questions and the issues faced by organisations, government and society.
Capital and labour
The action of creating digital businesses includes the marketing of future products and services. Taking advantage of current and new digital resources, requires investment in both people and physical assets.
Digital and other technological advances have contributed to soaring global employment and unemployment in almost equal measures. Robotics, commercial algorithms, 5G & 6G bandwidth, artificial intelligence and 3D printing are all paving the way towards a highly automated society which is likely to result in a whole portfolio of white-collar jobs being surplus to requirements.
Access to low priced technology, has become within reach of many firms around the world. As firms grow to understand and appreciate the usefulness of technology, more and more of them are investing their money, time and energy in tech-related commodities. Gone are the days when large firms had a monopoly on technology and markets. In the last decade, the transformation of many internal (and external) markets has been nothing short of spectacular.
Consider the advances that have taken place in aerospace, defence, energy, health and education. For instance, in health care, remote diagnostics from doctors to patients (living in rural areas) is significantly easier today, and so is remote learning and education via mobile devices – again think how technology has aided distance learning and influenced higher education policy in the UK.
Creating opportunity
Whilst the capital formation of a business is important to its success, so is innovation and new ways of doing things. There is no shortage of capital to finance new innovation and new ideas. All firms are challenged on many dimensions, as economic entities; they must be innovative, creative and learning institutions which exist to serve their customers.
If the focus is directed towards creative and innovative behaviour, then positive responses or actions tend to follow. If not, the opposite occurs, generally causing a loss of competitiveness in the market.
We can highlight some of the key features within innovation, by examining the interrelationship between strategy and innovation. Successful innovation practice is based on organised and efficient processes. In many organisations, the majority of people work with others who have different skills, tasks and responsibilities; it is about taking active responsibility for the role you undertake and finding ways to improve what you do.
Competing in the digital age
In this emerging digital world, multi-transitional communication processes have enabled the internet to emerge as a global means of connecting whole industries, organisations and consumers, helping to create new products and services - and in direct consequence new markets.
This is evidenced by the rise of social media, in which content and service development is strongly influenced by interactions with online communities, ones that are focused on the same dynamic and service type. The same can be said of research and development (R&D) where data and information can be exchanged in minutes between researchers. Where, once upon a time it would take weeks even months to process.
There is an important distinction between current and future technology. Both could be described as assets (or investments) but the latter incorporates risks of a political (P), economic (E) and social (S) nature which carry unforeseen consequences.
Maintaining equilibrium between P, E, and S, falls within the UK Government’s domain through legislation and competition regulators. The falling cost of technology acquisition has enabled smaller firms to compete with larger firms at a transactional level. This places additional pressure on existing market incumbents, because the future will consume those organisations that fall behind, technologically.
Looking to Europe
Across the European Union (EU), attitudes towards new technology vary and governments in different countries have different expectations of how technology will enhance performance and investment. The rationale of investment is no longer premised on fixed returns.
There has been a growing emphasis on investments that improve social productivity. For instance, Germany, a world leader in technology, engineering and innovation tends to factor into its investment decisions the longer-term implications of employment losses due to technology replacement.
Here in the UK the emphasis is on ensuring decent working conditions, social protection and equal opportunities for all. In this situation, UK firms have generally focused their investment opportunities on current technologies, replacing outdated systems and related telecommunications infrastructure. Scandinavia is home to some of the largest and most innovative companies in Europe.
The support for high technology firms through investment in start-ups, and preferential government assistant has made a huge difference to attracting talent, new businesses and even more investment. For example, Spotify a small start-up in Stockholm, Sweden formed in 2006, is today the most valuable music-streaming service in the world.
Focusing on growth
Maximising the growth potential of the digital economy, both in the UK and wider Europe, is a major driver for government ministers and technology CEOs. Many of Europe’s CEOs have made big efforts to ensure that Europe is at the forefront of the digital economy.
Given Europe’s strong role in manufacturing and public services, it is vital that Europe secures and builds its leadership in critical technologies, such as AI, big data processing, virtualisation, 5G, and blockchain to support its economic backbone and avoid too great dependency on technologies from outside of Europe.
Failure to secure key market positions, will result in tens of thousands of jobs being sacrificed, whilst firms suffer radical re-adjustments to counter their loss of market share. In deciding which sectors and technologies are particularly critical. What we need to consider is which industries contribute most to the economy (in investment, employment, R&D and productivity).
The major industries in Europe include automotive, aerospace and defence. Other important industries comprise chemicals, biotechnology and the food industry.
Europe’s defence industry is identified with R&D and sophisticated types of technology including nanotechnology and biological innovations. The industry includes space, aeronautics, electronics, and military hardware. The growing divergence of high technology firms in the UK and parts of Europe is contributing to an imbalance in regional growth rates.
Think of the entertainment industry, which includes film and TV production, sound recording and music production which is largely concentrated in London. Alternatively, scientific research and development, which is undertaken within university science parks, such as Cambridge, Oxford and Bristol.
In consequence, a region with a high initial share, in a fast growing industry, will become poles apart from those that are located at the bottom end of the spectrum (low wage and low skill roles, such as call centre employment).
Future direction of employment
Technology is always about people, so as technology evolves, it will make some of the lower-skilled roles that exist today, redundant. There will be less demand for both blue and white-collar workers in industry and services.
In terms of empirical evidence, Europa: The digital market says the economy and society of Europe will need to upskill its workforce to make the most of digital opportunities. Currently 47% of the EU population is not properly digitally skilled, however in the near future, 90% of jobs will require some level of digital skills.
The availability of human capital within the various technology industries is a major concern for both government and industry leaders. A recent report, Cedefop: Skill shortages and gaps in European enterprises highlights that skill shortages are a marker of growing, dynamic, international enterprises and are likely to prevail in specific economic sectors such ICT.
The people problem
Hiring difficulties, particularly when related to shortages of staff in high skill jobs, will constrain firm productivity, as will the adoption of innovative technologies and forms of work. This prompts the questions ‘what strategies should be used to encourage skills acquisition?’ and ‘what type of training can effectively work to allow people to upgrade skills and move to jobs that are essential to innovation and technical application?’
The main drawback of this type of narrative is that it can take little into consideration of cost versus benefit. The cost of skilled labour shortages to firms depends on their duration. Short term shortages can generally be managed, whereas medium-long term shortages need to be planned and supported by investment (in this case, both private and public funding).
We still have time
The observed differences in digital and technical skill mismatch across European countries and industries can be linked to past differences in institutional and government policy. The good news is, that we have some breathing space to rectify the situation - perhaps 5-10 years to plan, co-ordinate and transition to this new digital economy.
