Talent is still the most precious asset firms have and it needs to be nurtured as the real proponent of growth and success, not merely the fancy technologies that can automate workflows. Our technology and business services industry desperately needs a mindset shift – and one that requires a longer term view, than the next quarterly Wall St announcement. Whilst we are not the only guilty party here, our technology and business services industry is still rooted firmly in people capability, much more than technology and commodity products, hence the desperate need to correct course and avoid circling the drain…
I was interviewing with the Delhi branch of NPR the other day on the layoff paranoia engulfing the Indian IT industry, and it dawned on me just how inhuman our business has become. These are normal people who still view the world as one where employers have responsibilities to their employees, where people still care about the welfare of others, when you got up in the morning and went to a job that had a purpose and a future.
The poor interviewers simply couldn’t comprehend why major employers enjoying ~20% profit margins and continual 5-10% growth were so focused on making massive staff reductions. “Don’t these firms have a responsibility to their employees, Phil?” was the question. “Of course they don’t, it’s all about their shareholders” was my immediate hair-trigger response. Ugh – I suddenly felt ashamed of the business of which I was part.
We’re in the business of increasing profits for investors, not creating new business value from people
Is our sole purpose now simply to eliminate people? We spend a couple of decades displacing “expensive” workers because we could find less expensive able ones to do the job. Now we’re getting rid of them altogether just to keep the Buffetts and Elliotts happy? And why are we literally obsessing with labels to describe what we do: Digital, Machine Learning, Intelligent Operations, Robotic Process Automation… or my favorite “Digital Labor”.
Let’s be honest, what all these things really signify is “how to get work down without the need for people”. And how can you call something “Digital Labor” when the labor is no more… unless we start redefining RPA recording loops based on optical recognition software as “labor”. Maybe we need to revisit what labor actually is, according to Merriam-Webster:
Definition of Labor (Merriam-Webster):
“1) The human activity that provides the goods or services in an economy;
2) The services performed by workers for wages as distinguished from those rendered by entrepreneurs for profits.”
Correct me if I am completely losing my mind here, but we’re no longer in the business of promoting human activity to stimulate economies… we’re in the business of increasing profits for investors. Is there any way to dig ourselves out of this hole, or are we on an inexorable nosedive to the lowest common denominator of creating and promoting business operations that no longer require people?
As technology and operations professionals, we must rediscover our purpose or we’re just promoting the end of labor
I wish I had a silver bullet solution to help us take this dramatic U-turn, but sadly, all I can offer are some ideas on how we can re-humanize what we do:
Find meaningful work for our people to do – not just fire them. In the past, when most businesses had some excess staff capacity, there were always useful things for them to do – such as consulting and outsourcing firms deploying their benched consultants to work gratis with existing clients on special projects that could eventually lead to future business – or just make those clients happy. Why just fire them for the sake of it? Why not set aside some modest investments to use these people to grow the business and increase client satisfaction? Why do we have to operate on a “you pay for what you get” basis with clients today? With all the guff we hear about co-creation and co-innovation between clients and service partners, surely this is the time to invest in our staffing ranks to change the nature of partnerships and create more trusted and innovative work cultures? Why does everything always have to have easily-accounted dollar attached to it? Will extracting a few extra dollars, rupees and pounds from the bottom-line, just to reduce excess human capacity, really have a hugely beneficial impact in the medium term? Maybe we could have had a few of these recently redundant folks examine the potential security issues of an airline IT system going down, thus saving billions of dollars in lost productivity and brand impact? Did British Airways really make out, when it cut as many corners as it could, just to lay off some onshore IT staff?
Stop this inane drivel about digital, automation and machine learning and start focusing on proper business solutions. There, I said it. Sorry to be blunt, but why is almost every service provider and consultant subjecting us to the same sales pitch about how amazing they are at automating, digitizing the machine-learning the crap out of everything. I have found myself imprisoned at conferences with legacy outsourcing advisors, analysts and service providers – many of whom can barely spell “algorithm” – suddenly pretending they have been lifelong evangelists of these areas… And all these enterprise practitioners who subtly sneaked “RPA” into their job titles. Have we really become an industry of bullsh*tters and callous labor eliminators promoting this new wave of technology-driven human greed?
Enough! Any modern service provider with delivery credibility can fashion a framework to help orchestrate and implement all sorts of slick data-driven technology. Most advisors can probably help you kick the tires with an intelligent automation strategy and a selection of products to tinker with… and most enterprise side practitioners should (by now) be smart enough to work out if they can even start to adopt this stuff in their current environments.
Let’s just assume we can automate rudimentary manual processes and create meaningful machine learnings from data and text that is in some state of being legible to a series of algorithms. The technology is here today and we have the capability to take advantage of it. Let’s refocus the conversation on solving business problems and finding new opportunities and challenges together. Let’s talk about how we can help healthcare providers improve their patient satisfaction levels, or how banks can do a better job helping small businesses qualify for loans… or how retailers can better leverage Amazon and Alibaba to market and sell their products… Or how RPA providers can work with their partners clients to find value for their clients beyond sheer labor elimination. There are so many business needs to address, let’s raise the conversation to making business more successful, as opposed to simply whacking their staff.
Lobby governments to offer tax breaks to tech firms which increase their employee bases. This just has to happen. Companies need to be encouraged to add talent to their ranks, not slash it because they think they can. I sincerely hope Prime Minister Modi is in talks with India’s flagship IT services firms to fashion new tax incentives to have them invest in their staff – not simply resign themselves to satiating the whims of greedy investors. And President Trump – how about offering those promised tax breaks to US firms which invest in their people?
Raise our social responsibility brand as discerning employers. Let’s celebrate firms which grow through great people investments. Sure, we have to be smart about balancing the P&L, but those which can do it with real talent investments should be the beacons for us all to follow. Let’s highlight our talent successes and how great we are at investing in people to be great at what we do. No one is going to remember us for being amazing at automation, but they may remember us for creating a culture of collaboration and great service. People still buy from people and are (still) predominantly serviced by people, so let’s not lose sight of that.
The Bottom-line: The enterprise IT and business operations industry is venturing down a very dangerous path and we need to get off it – and fast.
We have to focus on helping clients find business value, not obsess with this labor elimination disease which has taken a stranglehold over our conversations. You can just sense we’re sinking into a new abyss of paranoia and negativity and we need to work hard and fast to pivot the discussion up a level, where the focus is on people and technology driven success, not simply a morass of algorithms designed to turn our firms into highly cost efficient transaction machines. Let’s get back to business and let the technology do its thing to enable it, instead of dominating it.
Posted in : Business Process Outsourcing (BPO), cognitive, Cognitive Computing, Digital Transformation, intelligent-automation, IT Outsourcing / IT Services, Robotic Process Automation, sourcing-change
Phil – you have called out what so many people are worried about. I completely agree we are in a negative “anti-labor” spiral and we need to dig ourself out of it urgently,
Heather Peterson
Great perspective Phil. We have to refocus on developing our talent – you are spot on in calling this out. Layoffs only make for short term profit gains, not long term growth,
Rohit
@Charles – too many firms have gutted the middle layer and are left with incompetent leadership and great young folks with noone to develop them. The urge to cut talent without even a modicum of a plan to redevelop it, but so many firms, depresses me…
PF
Phil, your comments are spot on but the companies you complain about are themselves caught in the spiral you refer to. What you’ve identified is a major societal issue which cannot be effectively addressed by individual companies operating in a competitive environment. We’re in the midst of a technological paradigm shift that requires an organised national response. Corporations have a social responsibility (CSR) to speak up about this problem and actively participate in solutions but they can’t do it alone. Governments, professionals and businesses need to collaborate to make sure technology works for everyone and not just the few. Thanks for making a stand yourself.
Passionate and to the point. It’s high time we focused more on the human side to all this.
@Alan – totally agree that this is a major societal issue. However, our industry is too keen to jump on the glitzy marketing and try and “solution sell” when we should be talking about solving and finding business problems together. It is my strong view that those firms which only look to eliminate labor, as opposed to focusing on making their talent more aligned with valuable activities and new innovations, several of which I mention, are myopic. We have to learn from lessons of previous industry shifts, where just focusing on short term cost cutting is a failing strategy. In my (perhaps naïve) view, talent is still the most *precious asset* firms have and it needs to be nurtured as the real proponent of growth and success, not merely the fancy technologies that can automate tasks. It’s a mindset shift and one that requires a longer view that the next quarterly Wall St announcement… while our industry is not the only guilty party here, it is also the one which is still centered on people capability much more than technology and commodity products.
PF
Phil – superb piece. You get right to the heart of the matter! It’s definitely time we worked harder to focus on investing in people, as opposed to retrencing them – it only leads to one depressing sceanio,
Jason Levitt
Best piece of advice I have read for a long time. Thanks for sharing your deep thoughts, Phil
Phil, you yet went to another level, thanks.
I’ve been (re)locating companies since the early 1990s and agree to your points, fully.
But isn’t there an even wider perspective on this all? Our Western worlds continuously demand lower prices for everything, from washing-machines to airline tickets.
I agree that analysts and consultants alike have the opportunity to make an impact, and that we should assume that responsibility.
But what seems to be needed here is a shift in consumer thinking.
Let me know how guys like us can make that happen, I’ll sign-up.
Elias van Herwaarden
@Elias – the wider perspective is we focus on business value and how talent can drive that… i.e. business value by nurturing talent – not getting rid of it. It’s great to improve processes through digitization and automation, but the focus should be on the innovation that can be delivered because of a better process, not simply the reduction in people the company can benefit from it. The “realignment” of talent should be our watchword, not the retrenchment…
PF
Phil – You have been one of the pioneers to predict this crisis long back with actual numbers!. Its unfortunate that your predictions are turning true!.
Here is my perspective:
1. While we all understand the ramifications of the impact, the solutions are not simple and straightforward. Even the causes of this current phenomenon are not that simple. Its highly complex and the contributor is not just technology alone.
2. The only way to solve this problem is to create new markets, either by existing businesses or by encouraging entrepreneurship.
3. Creating new markets is a multi-faceted effort that requires participation not just from IT/Technology alone. It requires serious participation from business, consumers and policy makers as well.
4. We may not be able to stop the train of technology that continues to automate to achieve higher productivity/progress.
5. What we have failed to do is creating abundance of new markets where people can participate and that has led to the current crisis.
6. Its natural to retreat and think about alternatives that are defensive in nature. I don’t believe it will be sustainable.
7. Let technology continue to make inroads. Let’s prove that we, collectively, are much more capable in creatively overcoming this obstacle.
Bala
We need human augmentation tech than human replacement tech. Predator vs Terminator :).
Phil – Interesting – the world is changing, and so is how work is done – we need to adapt, rather than be eliminated – change the way we work – move to a more variable workforce so we can better utilise people’s skills. I totally agree that this requires a mindset change we all need to drive.
Jennifer
I don’t necessarily feel that companies are committing to automation, machine learning and use of robots to fire people or increase profit margins and growth – they are simply making sure their own relevance in the long term. I know there are a lot of companies which are also investing heavily in upgrading skill set of their employee base so everyone grows together – I was reading somewhere that "Once a task becomes automated, it also becomes largely commoditized. Value is then created on a higher level than when people were busy doing more basic things." In a nutshell, the companies and people who will survive say 3-5 years from now (maybe even shorter) will be the ones who are able to keep themselves relevant.
I had this precise ah-ha moment about 8 years ago. Said differently, technology…will destroy us. And I’m a technologist! Oh, and the notion of the cool-sounding gig economy…is also a fraud. We’ve been played. All of us.
Until then, welcome all to join me in Asia where I have had to re-create my former executive sales self (multiple times) to this new new reality, with some success, many failures, and stories you wouldn’t believe… Life
Phil – am far more optimistic! A lot of blame must be sheeted home to those “RPA Evangelicals” who either deliberately or out of ignorance conflated RPA with Machine Learning and AI and sold it to idea-hungry shared-services executives who did with it what they know best, smash head-count! Thankfully, over the last 12 mths or so, we are starting “true” AI and Machine Learning emerge from the shadows of this humbug to show how things can be for the better using the power of AI and ML, even at the mundane day-to-day corporate level
Sri
Hey Phil – Just wanted to let you know that I thought this post on services companies only focusing on earnings was one of the best you’ve ever written. Totally spot on and unfortunate.
Haven’t you heard people are fungible.
Everyone is equal and can they can be evaluated based upon quantitative analysis from the ERP systems we’ve spent so much on implementing.
We also have these large support organizations and consulting firms that we pay significant amounts of funds — so they must be right about what is important for our business and its future.
It does make me wonder where the next generation of leadership will be coming from in those organizations that cut their people who were evalutated as being their best — assuming that the reward systems are working the way they are supposed to be working.
Phil,
You certainly bit off a mouthful here. Our tax structure is built to monitor and track capital-intensive business models from the manufacturing era and we’re pivoting into the knowledge era. Hence capital investors should receive proportionately less of the profit dollars with the difference going to labor.
But for now Wall Street still rules the day, and struggling tech firms go private to avoid being monitored on a 90 day shot clock when in the middle of a major shift in how they conduct business.
And then there’s skills, education, and public policy reform … but there just aren’t enough hours in the day to give those issues justice.
A good read; an accurate read.
Phil
Take private equity early in your growth, you are now in the investment return business. There is a better way.
Jay
Phil –
All forms of organisations (government or corporates) at the end of the day exist for the people they serve and because of they people who make that service or product happen. Your article is spot on in calling out the urgent need to bring the focus back on people. Recently Indian government redefined startups as part of the Startup India program, to also include the criteria of employment projection.
It’s high time we got the Humane element back into business
Shiwani
@Geoff – one big economic correction and everything changes… let’s pray is doesn’t happen
PF
@philippe – that’s great coming from you =)
@Sri – let’s hope you’re right!
PF
I wholeheartedly agree with this analysis Phil.
Too many people are still worshipping the totem of shareholder value, a theoretic and flawed notion from its conception. We are in a slow transition to a stakeholder value focus, more fitting our interdependent world that needs more cohesion and inclusiveness. Ever since the invention of the term shareholder value, it was adopted as the dominant discourse by Wall Street and institutional investors. It, among other factors, has led to a short-term, myopic circus that reduced the horizon of executives to 90 days, de-humanizing our enterprises.
It’s a fact that we are richer than ever before and there is less sickness, famine and war (you wouldn’t say it if you watch the news) than ever before. But there are still large swaths of the world struggling to improve the standard of living. And even in the world’s richest countries, large groups of people don’t feel better off than before. They feel left behind, disenfranchised and powerless. This is about half the population in countries like the US, the UK and France, evidence Brexit, Trump and Marine Le Pen’s rise.
Coming back to shareholder value; it’s time to go full circle. Take a minute to think who are behind the vast pools of capital institutional investors manage…
It’s us, the people saving money for their pensions. Shareholder value is a construct that served the money managing industry well but forgot to look at the wider interests of the actual owners of the money…. If you take a narrow interpretation of ‘fiduciary duty,’ you can get away with the fallacy that returns on investment is the only metric of interest. But what if you fail to let that money you invest create prosperity for the people you invest it for in their real life? If your addiction to dividends and higher share prices is actually ruining the jobs of your future beneficiaries? It’s time to bring the financial economy and the real economy closer together.
We can’t ignore the externalities of business any longer. People elimination is one of the challenging externalities that is a short-term lever executives in our industry seem to see as the inevitable answer to competitive pressures and new technologies (RPA, AI).
Our industry requires a shift in mindset from providers, buyers, AND investors. Buyers need to deal with their cost reduction obsession. And recognize talent is still the differentiating factor and will be for the foreseeable future. In some of the areas I cover, for example in oil & gas and the utility industry, the service providers that are perceived as delivering the most value by buyers are those that invest in talent, local people with deep industry expertise and innovation prowess. These folks are not the cheapest, but bring exponentially more value.
Organizations in these industries also recognize the talent they need to compete in the new economy, aren’t as smitten with the work and reputations of the oil & gas industry or utilities. The reality is that the competition for data scientist, for instance, is not Shell versus Exxon Mobil, but Exxon Mobil versus the likes of Apple, Google, Facebook and a host of startups. Service providers can offer more interesting career paths and are seen as a source of talent that can plug the quantitative and qualitative skills gap these industries face. Long story short; focusing on talent, continuous education and business value creation is the viable path forward for service providers.
Taking social responsibility seriously is a critical and foundational aspect of doing business anno 2017. Only ten years ago, when I was doing research about investment preferences of pension fund beneficiaries and their ability to influence pension fund investment policy, CSR and socially responsible investing were a theoretic discussion, often painted as the domain of idealistic, money-hating tree huggers. Not anymore. Since the 2008 financial crisis, everyone understands CSR is a real thing, a source of durable value creation, competitive advantage and not a fad you only use as window dressing. CSR has come a long way since. It’s time for service providers and buyers, along with governments, to come up with credible policies to make sure talent is up for the new tasks at hand, to truly augment people with the new technologies instead of using this as an excuse for the next round of layoffs.
Phil,
Very ironic that India is now feeling the effects of job loss from automation that US workers felt from the displacement of US jobs to low cost India. From a business perspective we have to continue to drive cost and time out of our processes. From a Social Engineering perspective we have some very tough decisions on what to do with the displaced workers. I am not a social engineer but would love to hear their perspective on a highly automated workforce where 30% – 50% of the potential workforce skills are no longer relevant. What new jobs are coming? What do we teach in school to prep the next generation for the new workplace? How do we fund the displaced during the disruption? Are their lessons learned from the Industrial Revolution we can apply today?
Michael
Do you really think many employers have EVER been passionate about their employees well-being to the detriment of profit and growth? I didn’t think so! We are at a point when a new set of technologies is rapidly displacing old, valued skills. Are there ways for organizations to gainfully employ those displaced individuals? I’m not sure but I suspect not all of them will be lucky regardless of skillset or effort.
As someone remarked earlier this is a well-known problem that demands a societal shift in thinking about how people should get enough to enjoy life and make a contribution to society – government funded basic income is one way but it will be massively unpopular with the ‘haves’ and it has a major free-rider issue to boot.
It is a good insight on the current situation. There is a panic across which has cascading effects on other dependent businesses. The catch today is bridging the gap between skill required and skill available. It is a prejudice to wipe out masses as incapable all of a sudden wherein the accountability has to be dispersed. Without predicting future trends of businesses and upgrading skills of the manpower, this type of decision may make future blink. Where is all our collective intelligence went to anticipate the change required and plan alternative ways without loosing manpower who contributed to the business. We all become more reactive to the situation and fire fighting for survival may become our regular style of living. There is a phrase in our Tamil language —- Varum mun kappan arivali —- Vantha bin aluvan moolu moodan. This means intelligent is the one who prevents it from happening and idiot is the one who cries after things have happened. The choice is ours..
Phil,
I have consulted with numerous off-shore firms assisting them in reducing their client’s headcounts. I have grown uncomfortable with this dedication to eliminate jobs with technology. I believe it is not the role of our technology society to change but it is our Harvard Business School leaders (CEO’s Board members, etc) who must change their singular focus on “shareholder value” at the appalling expense of employees lost, poor customer service, poor products, etc. .
You may wish to read a recently published book “the Golden Passport” Harvard Business School, the limits of capitalism, and the moral failure of the MBA Elite. By Duff McDonald
Thanks for sharing your thoughts Phil,
Steve
Phil, I think you’ve hit the nail on the head here. One thing that comes to mind in observing this shift is the outsized returns on capital in the last decade. Reducing labor costs shifts companies toward having greater returns attributed to the capital they have. Technology, too seems to be multiplying the returns on capital (by embedding the knowledge/or tasks of labor into machines). meanwhile, Labor productivity gains are slowing down. The tech we have just isn’t multiplying employee productivity as much as it is multiplying IT System efficiency. Couple that with misplaced understandings of corporate fiduciary duty to shareholders and we get lots of focus on perpetuating returns on capital, and short term focus on the role of talent/labor/skills.
Phil, great article. Totally agree, cost cutting by eliminating human workers is very short sighted. Personally, I see much more value in using automation to enhance human performance. What if every enterprise knowledge worker could come to work, strap on their Iron Man helmet and have their own personal Jarvis to help them get stuff done. Human productivity would escalate dramatically. I think it’s coming. As a service provider myself, I would also give more credit to our clients, many of whom are already well beyond expectations of simple cost savings and want to really understand what automation can do – to your point about finding a solving business problems. It’s going to be a wild ride, for sure.
Good insights and I always like the straight talk. My view (I am part of this service base industry for 18+ years now) it that this correction was needed. Most of these firms had created a fat middle management layer (less IT skills and more headcount management skills). So I am not surprised this is happening…in fact I think this is needed. At the end of the day it is survival of the fittest. One more point is about re-training the workforce. All corporates need to invest in training their best folks for these new IT skills and not just always focus on keeping shareholders happy.
Now coming to your point about RPA, ML and AI taking jobs, my optimistic view is that this is a great opportunity for all of us. Robots aren’t coming, they are already here. Automation is not optional. it is a means and not an End. So your comment that we should start focusing on proper business solutions is absolutely the MUST thing to do. Automation will create more jobs than it will take away.
Phil, while your assessment makes sense, the given pecking order today of economic value appropriation is shareholder, management, labor. This is also in increasing order of expendability. The capital markets sanction it. So in a sense the behavioral outcome is already automated (some may say robotically). Unless some of the fundamental capitalist definitions, precedence and entitlements change things are going to remain the same.
Service providers look at every technology discontinuity as an opportunity to learn on-the-fly and bill warm bodies. This time around the shift is hitting at this model. Therefore the knee jerk response. Digital transformation is also going to create a new stack of technology applications and its interplay. Like its predecessors this stack will also need maintenance and retooling over time. The promise being held out is that such services will not need too many people. We still need to eat the pudding to get real proof though.
Bit late for everyone to grow a conscious now. Most have been happily replacing our people with your people, your people with their people, and then their people with someone else’s people. And than cashing a check for doing it with some wringing of hands and self analysis at various poncy, pretentious dinner parties. “hey if I didn’t do it, someone else would, and people need to keep evolving, and getting used to change, blah, blah, blah”. Weak.
The Indian offshorers have got a real battle. They have spent years thumbing their noses at Western companies’ indifference to their employees by extolling the sanctity of their own employees. When those folks start getting canned it’ll be a different story. Time to start dishing up the “crow” and “humble pie” old chap.
Excellent thread on possibly the most important topic affecting the business world right now – namely does technology cause unemployment and if so what is the appropriate political/economic response.
Let me put forward an alternative viewpoint. Historically, over the last 200 years, every generation has been very concerned about technological unemployment. But evidence suggests technology creates jobs overall rather than destroys them. So over the last 20 years whilst hundreds of thousands of travel agents and typists have lost their jobs, the improved productivity brought about by technology has increased wealth and reduced the prices of many consumer products – which means disposable incomes have risen which has generated huge demand for new products and services, which in turn has created many new jobs. In the UK look at the massive growth of urban spas and coffee shops over this period. As a result we have the highest employment we have ever seen in the UK.
The problem is that the jobs being destroyed this time round are in our specific sector – let’s call it the business services sector. So obviously our worldview will be affected more than most. But if history repeats itself these technological interventions will increase productivity, increase wealth, reduce consumer prices, increased disposable incomes and lead to increased demand for all sorts of new products and services that are difficult to forecast right now. That won’t necessarily help people who wanted to work in the shared services environment but should mean that there is plenty of work elsewhere.
The people supporting the “but it is different this time because the technology is cognitive” argument state that there are increasingly fewer and fewer jobs that humans will be able to do better than the robots. If that is the case we are moving into a period of abundance – where almost all of our material needs will be met through automation without people having to work much at all. If this does happen then clearly there will need to be radical political solutions or else the 95% of people who aren’t working and who aren’t earning will rise up and there will be bloodshed! Hence the increasing talk of universal basic income and so forth. It would be ironic if, through the forces of free market capitalism which encourages innovation and automation, we end up having to adopt some very left-wing, wealth redistributing government policies. But to some extent it looks likely.
The other elephant in the room besides the question of technological unemployment is whether we will reach the technological singularity any time soon (when artificial intelligence exceeds human intelligence) and, if and when we do, whether the robots will need humans at all. This really is the big issue and will make the issue of technological unemployment look like a minor irritation in comparison.
@Peter Moller – good to hear from you, old chap. You create the perfect argument for what could lie ahead.
One additional shift I hope to see is the emergence of infrastructure jobs as we rebuild our roads, hospitals, schools, affordable housing. We need to see money pumped into better (and more) school teachers, higher education, environmental development, healthcare, science and so on.
The tech sector will reach a point in the next 10 years where we just won’t need nearly as many people as AI can manage other AI… and automations can be automated to the point where people are obsolete.
But if we can create millions of new jobs that the tech sector and emerging generation can take on we can enjoy the fruits of a better, healthier, cleaner society that is stimulating growth through all the things we’ve needed for so long. Just slapping a univeral wage around will be like a whole new social security nightmare and putting our world into terrible (further) debt.
Wishful thinking for a Friday?
PF
Phil,
My sense is that neither shareholders nor employees are central to the existence of a firm. Drucker said it perfectly many decades ago, the purpose of a firm is to create a customer ( and of course to retain her forever if possible). You alluded to it in the concluding paragraph, but most of our conversations on this topic is restricted to jobs (for employees) and profits (for shareholders).
The whole point of an efficient well functioning free market is to produce consumer surplus – not jobs, not profits. Both jobs and profits are just milestones on the path towards creating consumer surplus. Technology is just a catalyst here.
To be more specific, the role of a well functioning economy is to eliminate jobs and profits. There I said it! You dont have to have a communist/anti profit mentality to come to this conclusion. This is completely in the Adam Smith, Ricardo tradition.
Jobs are a means to earn incomes. Incomes are a means to actually satisfy your economic needs/wants (there is no difference to economists -maybe to the layman). If AI or some technology eliminates jobs and makes production and distribution so efficient that no longer are human beings needed to do jobs, then that is perfectly in sync with the standard behavior of the eocnomy as long as consumers can consume them . Income stagnation doesnt need to imply consumption possibility stagnation if productivity has reduced prices a billion times Computers etc are a good example of that in our current world.
The whole jobs/profits worry, especially in India is a management issue -not a jobs issue. Lay offs are new to this demographic . It needs to be commonplace and sans stigma. For that, management needs to stop using ‘non performance’ as a label to stick people with. A frank admission of changing customer adoption (which Jeff Bezos perfectly characteritzes as the only thing that is ‘disruptive) and a 3 month severance pay will go a long way in smoothing ruffled feathers
Well said, Phil.
In my 29 year career, I have seen employers in the IT industry change from the R&D techie culture of respecting work and people to profit-chasing, investor-pleasing, grow-at-all-costs, mega corporations. Not surpisingly, the employees who work for these organisations have changed in attitude as well.
Smaller, privately owned businesses in other industries seem to do much better on multiple parameters – taking care of employees, investing in what makes sense for the long term, and giving their clients value for their money.
Hi Phil,
Great perspective.. I feel these all are side effects of an Capitalistic business system where Profits is the only and only motive. How can it keep on growing all the time..If any growth is not helping nation building, its not a growth.
Its exploitation of resources all over..it can be either Human, Nature and no one is thinking (even so called Researchers, Scholars, Big Five consultants) about sustainable growth and its going to fell one day..which day no one knows..
To reduce the impact if not able to reverse this, we really need to see ways and means of sustainable growth and first thing comes to my mind is CEOs and CIOs need to define what is bare minimum need of my business of these fancy systems to upkeep with my competition and not take decisions with short term view to save own chair by choosing the most costly and top rated (again a scam of big consultants) so that tomorrow no one questions them.. Need these people to take justified and bold decisions. The current workforce then can get realigned with different job roles.
Hope those days comes soon and we have some time for choice, I believe.
Girish Prakash Deshpande
Valid points.
Creating value for investor is an important aspect. However, should this be at the cost of employees and their well being? There is a significant change in the mindsets of people in the “People Office” (as the some companies call it). There was once a time when focus was to create employee value. Now the focus is how to reduce employees. One of the leading IT company announced that going forward the performance review process would get tougher. I feel this is a very short sighted approach. I agree this goes against the definition of labor as described above. Technology should uplift the economy in long run and add value to people. You cannot pitch both against each other. Technology and people need to go hand in hand.
Aren’t you forgetting technology is the art of reducing human labor? From the first machine invented tonthe most recent flight search engine that makes booking travel more convenient than speaking to a travel agent, sll the technology has been to reduce our dependency on people. So it’s natural that technologyas a job goes itself through a similar transformation. Otherwise it could be seen as hypocritical that’s it’s okay to eliminate other types of jobs, but not tech jobs…
@Hanz – Fair question – this is much, mmuch more than just technology jobs, this is technology eliminating white collar jobs in general, and a culture of firms focusing on eliminating people as opposed to investing in people. But I agree in retail, manufacturing especially they have suffered from this culture for a decades. It’s just the rapid uptick in focus – and hype – on job elimination for white collar jobs that is alarming…
PF
Phil, excellent rant that made me think of one of my favourite Dilbert cartoons: the one where the pointy-haired boss says “It’s often been said that people are our greatest asset. They were wrong. Money is our greatest asset. People came in eighth.”
I have been saying for some time now that RPA and AI is a significant challenge for the offshore firms as they give a significant opportunity to repatriate (a significantly smaller volume of) roles and still save substantial amounts of money. However, this all only makes sense for firms if it is accompanied by improvements in levels of customer service and hence satisfaction. There is a significant backlash against total automation of the customer experience, while at the same time the digital economy is also creating new types of role, including that of the consultant who actually works out how to get the value out of the technology implementation and embed it in the behaviours and performance of the organisation.
Although in the short term such roles cannot immediately replace the massed ranks of transaction processors, I am still cautiously hopeful that, as with the original dawn of the technology era, the ultimate fears of mass displacement will be offset by better educated people creating new roles for themselves. After all in most western societies we are now operating at historically very high employment levels despite far greater automation than we had 10, 15, 20 years ago.
Appropos Peter and Phil comments in reference above,
Please do consider that there is a sizeable majority (across nations) that cares little for many of the issues discussed here.This majority has already rejected (successively in many countries including the US and India) the world view (a technology driven liberal outlook, of the economic theories and human progress programs driven by globalization and expansion) that has been prevalent for many decades so far. There is no predicting where this will go to eventually.
This debate must consider a multi-dimentional view to where things are headed. An elitist world that we are part of which mulls over the question raised here and an alternative facts world, that lives and operates to very different principles, a hark back to the times prior to the modern age?
Possible?
Thanks,
Manish
Appropos Peter and Phil comments in reference above,
Please do consider that there is a sizeable majority (across nations) that cares little for many of the issues discussed here.This majority has already rejected (successively in many countries including the US and India) the world view (a technology driven liberal outlook, of the economic theories and human progress programs driven by globalization and expansion) that has been prevalent for many decades so far. There is no predicting where this will go to eventually.
This debate must consider a multi-dimentional view to where things are headed. An elitist world that we are part of which mulls over the question raised here and an alternative facts world, that lives and operates to very different principles, a hark back to the times prior to the modern age?
Possible?
Thanks,
Manish
Phil.
Thank you for an article that struck back at the headcount reduction mantra that we hear daily when it comes to implementing Intelligent Automation in general and RPA in particular. Unfortunately I have no hope that any of what you call for will come to pass without government intervention…which in the Trump era is not likely scenario. People do what they are incented to do and in today’s world executives are incented to drive up shareholder value quarter over quarter instead of building sustainable businesses.
The truth is that we have been in the people elimination business for years now. What was offshoring if not a people elimination strategy for those in high cost locations and for the same reason, to reduce cost and thereby drive up shareholder value. Intelligent Automation is nothing more than the next step in a progression that sees people as expendable in pursuit of shareholder value only this time it impacts people in medium and low cost locations as well. As you rightly point out it should not and does not have to be this way but it will continue to be this way until we change the incentive structure that drives executive decision making.
It’s simple really – and I say this as a self-described “accounting geek and techy nerd”…. I was at a client location in the foggy left-coast city by the bay, where, one late night a a bar in the financial district, I overheard a few guys that had just gotten off the silicon valley transit bus that they take to their “would-be master of the universe” employers, talking over a few beers…
1st guy says to the 2nd guy: “I love my apartment – I never have to see anyone or go anywhere to get everything I need or want”
The 2nd guy: says something along the lines of “how so?”
1st guy replies: ” my food is delivered before I need it and my refrig is stocked, my place is cleaned twice a week, with bedding changed and laundry done, folded and put away, my friends are only a few buttons away…. hell, even my dog is walked 3 times a day for me – all I need to do is get up, get on the bus and get to work
I immediately had an epiphany – the future captains of industry are seemingly crafting business solutions and lifestyle solutions that are “cool and slick”, but they are also aimed at reducing our interaction and engagement with each other…. Maybe its’ “the youth thing”? Maybe what I heard was just BS? I know not which it may be, but I do know that I was in that bar not because the food was great or that I was in desperate need of a nice lager…. no, I was there to be amoungst people, to have some meaningless, but nonetheless enjoyable, banter with someone, about a game on the TV that I really didn’t care about. For me, it was about recharging my energy levels by being around others that were vibrant, interesting and even a bit light-hearted. It was about investing a bit of my social capital into a small snippet of society, for my benefit no doubt, but perhaps also for the others I engaged with during that 60 minutes?
For someone in this line of work, it is indeed troubling to realize that when I am successful in delivering for my client, I may actually be part of a change that will negatively impact, perhaps forever, the life of a single mom with a few children or someone that is just living paycheck-to-paycheck. I try to offset this concern by rationalizing that “I can’t save everyone – it’s their fault for not seeing the changes coming and for not reacting appropriately, to ensure that they can continue to be relevant, going forward” This approach typically works for a while, until the moment passes and real-world concerns come back into focus
I don’t have a lock on all of the underlying social, political and economical issues at play, nor do I have a clue as to what the “world of work” will be like in 20 or 30 years, but as the father of
pre-teenage children, my SO and I (just as our parents did 30-40 years ago), are striving to equip our children with broad foundational intellectual & behavioral skills, values and experiences, that will ideally help them navigate what the future holds
Phil, you’re so very right. For these reasons we’re holding what I believe is a world first discussion on the societal impact of automation and the roles of employers, Governments and industries within it. We need to apply learnings from previous industrial revolutions to minimise displacement and act responsibly. Delighted you will be joining me and that discussion, along with unions: Unite, Unison and Community at the GSA Symposium in London on 28 June. I hope we can collectively drive positive change.
Kerry
Great post, Phil.
Also, “Inexorable Nosedive” is my new future band name.
For as long as we take the view that organisations serve shareholders and nothing else then the race to displace employees and communities will continue. If that is the case and organisations maintain no responsibility for public good then we have a few choices. 1. Change the taxation system (in my view a must anyway) to take account of automation 2. Think about when all these jobs are automated who’s going to buy the needless stuff that’s produced if a large part of the workforce are redundant (maybe a good thing) and 3 as a direct result small companies pop up employing real people creating a groundswell of customers who want to support humanity not profit driven organisations and we have a fight profit vs people.
So, another angle. When was the last time any of you walked into a bank? Called someone to look up a phone number? Avoided the self checkout when the human lines were long? Posted a check? Sent a letter ? Brought a.single song?
We are all greedy consumers who prefer the lowest cost and rarely take personal action regardless of whether tech has digitized a process
Remember Blockbuster? Remember Comp USA?
Remember land lines and numerous engineers coming tto your house to add a phone socket?
This is not a new phenomenon. By any stretch. What’s different isn’t automation but rather a continuum of digitization that’s ttcaccelerating.
We can as a society decide to move back to a manual world, who’s first?
So, another angle. When was the last time any of you walked into a bank? Called someone to look up a phone number? Avoided the self checkout when the human lines were long? Posted a check? Sent a letter ? Brought a.single song?
We are all greedy consumers who prefer the lowest cost and rarely take personal action regardless of whether tech has digitized a process
Remember Blockbuster? Remember Comp USA?
Remember land lines and numerous engineers coming tto your house to add a phone socket?
This is not a new phenomenon. By any stretch. What’s different isn’t automation but rather a continuum of digitization that’s ttcaccelerating.
We can as a society decide to move back to a manual world, who’s first?
An article w a conscience and makes us stop and think – nice one Phil!
Mckinsey once published a paper which said for every dollar of outsourcing there was a dollar fifty of value created I think … premise was up-skill higher value jobs etc… I always felt it was redistribution of wealth from the bottom of the pyramid to the top… outsourcing created profit … profit for share holders who were already the top 5% percent of the population … having said that … automation is here to stay … we need to think about the right adoption model, that creates value without disruption to society … because it does have all makings of creating society level impact across geographies… it’s not necessarily negative… it is progress which will test the frame work of societies…and how they deal with it
Great article! One of the things I like most about RPA is that it isn’t just a cost reduction play – for most informed companies its about service improvement or transformational services on top of your legacy IT estate. So when companies realise cost reduction helps for one quarter or year, investment in better service or products lasts far longer. So I’m still optimistic that RPA (plus AI and digital) is actually about redeploying scarce, experienced, creative people to help drive a company forward.
PS Very glad that EY’s tag line is “building a better working world” – says it all really!
Can’t agree more with Phil here. No doubt RPA is the future and there is no going back, but irrespective of all the hype, the truth is, the solutions are not there just yet. In a classic case of putting the cart before the horse, the management wants commitment from the team leaders on the “FTE” reduction targets (in return for anticipated gains from the bots). One can only imagine the level of “loyalty” and the morale of the workforce, when the planned automation does not go off as planned and the firm has to fall back on the very teams, whom they wanted to eliminate..
These new technologies are supposed to save humans from the ‘boring’ jobs. The Buffetts Elliotts are supposed to plough back the money from profits into the society for inclusive growth. How long will that take to convert into new meaningful jobs is the question. In the long term, we are all dead. Assuming everyone has the betterment of society as the objective (with some little selfish motives), we need better planning and more importantly communication of the “new jobs” getting created + noise removal for the supposedly lost jobs. There is some media hype on the jobs lost Insightful article Phil. Regards, Ram
Great insight and Thread…
I think its goes back to Darwin theory of “Natural Selection” and “survival of the fittest” applicable to our industry…Re-skilling, new market and macro policy change is key for our service sector/ITES industry
If we humans are so poor in doing all the work that – supposedly an AI enable bot is going to perform, then why not start from the top and replace the “C” suite cronies, who are incompetent people sitting and staring all this shearing of human talent?
The “Ogranization” is going to save so much once the “C” suite folks are removed. Plus the organizations have better efficiency, productivity and so forth with the bots only hungry for electricity.
Phil,
Nicely worded. Now, how about us getting rid of winner’s circle for every single area of work and every single possible service provider :), A deep dive assessment of what these guys do, across the lines of work may be sufficient. No offence meant, in most service providers, the excellence is all based on the quality of the service provider’s account team handling the client projects / processes. Some get good ones, some get bad ones. Every three years, a new concept kicks on, started with outsourcing -> cloud -> SMAC-> Big Data-> RPA-> AI -> ML… and i found that numerous individuals have become experts in all these things. I still find clients not being able to articulate their requirements clearly, having the first shining object mentality. Half the time, the guys who come for sales pitches vis-a-vis the ops team on the ground are varied and remarkably different. We still have clients saying, we should have fewer vendors or have one vendor do all the work…. i find that particularly hilarious. The providers love that too.
Let me give an example: One of the big guys talked about their greatness in AI, ML, Digital etc.. we listened to them for 50 mins and then asked them about POC’s and Projects in the last 6 months with specific focus on digital and their contractual / commercial model. You would be surprised that 90% of the Projects, were still on Fx Bid and not outcome / transactional based pricing. When we asked the timeline to switch to the evolved method, they drew a blank…