Brandon Curry is a Global Advisor, CGS Fellow, and lead author of the CGS Insights report – The Restructuring Labor Market Will Accelerate the Fourth Industrial Revolution (Industry 4.0). He often helps CXO’s and their teams remove inertia during transformations, focusing on organization design and development, driving performance improvement, and leading large organizational change initiatives.
Beth White, MeBeBot’s Founder and CEO, spent time with Brandon to learn more about his new report and the transformative effects of Industry 4.0. Here are the highlights of their conversation:
Beth:
Industry thought leaders have been discussing the 4th industrial revolution for a few years now. However, your report focuses on specifically the role that technology will play based on the emerging shortage of people in the labor market. Why do you think it is key to focus on absorbing technology into the workforce now?
Brandon:
Our study was born out of discovery calls with a broad range of leaders in the spring and summer of 2021 as the I4.0 Orchestration Collaborative was forming. Regardless of the function of the leaders, their industry, business model, or market, expanding shortages of people were impacting their ability to execute and challenging performance. As a former HR executive, it was no surprise to me that labor shortages are disruptive, but this was different. It cut across seemingly every discussion.
While there is increasing awareness of the change in the supply of people (and the opportunity for I4.0 solutions to help), understanding the implications and learning how to respond is very much work in process. Most organizations have not yet begun to shape how they will adapt their strategies and business models in response.
We gained insights into the labor market restructuring, technology adoption, and the relationship between the two. We were not surprised to find high agreement from executives on the shortage of labor. What we were more surprised to find is the level of understanding that this is an enduring structural change rather than a cyclical change. The labor shortages we are experiencing are not a transient problem.
It is key to focus on absorbing technology now because the supply of people continues to be insufficient and the growing acceptance of technologies, and networks of connected digital tools across our lives has leaped forward throughout the pandemic. We see the tides changing where technologies are not just accepted but expected to optimize employee experience.
There are and will continue to be less people working. What employees are looking for from work is changing. Over the coming decades, the labor market will continue to experience accelerating changes due to forces that haven’t happened before. Somewhat to my surprise, our study suggests that if you are leading your organization with the assumptions that the supply of people will go back to normal, you are in the minority.
Beth:
How can organizations start to make changes to combine people and technology together? And can you discuss the term “First Mile” of transformation?
Brandon:
Industry 4.0 (I4.0) enabling solutions will play an increasingly important role in people strategies across functions. However, the adoption of these solutions is not keeping pace with the changes in labor supply and not making up for labor shortcomings.
Organizations should progress on several fronts to mature critical capabilities required to augment human labor with digital technologies:
- Continue to invest in use cases with accretive returns, putting technology in the flow of work
- Identify shortcomings in your technical infrastructure that require a one-time investment to unlock competitive business advantages
- Ensure your governance and executive team are aligned and incentivized to design and staff your organization to make investing in technology and business model changes in their interest
In our study, we asked what the top barriers within organizations are to adopt digital transformation technologies. The top two were unclear business cases and talent/capability gaps. Those who are ahead are accelerating and widening the gap. Early adopters who have progressed their capabilities are magnets for talent to supply I4.0 solutions. This applies to employees, partners developing new solutions, and investors.
The executives we spoke with and surveyed acknowledge that there is significant structural adaptation required to absorb Industry 4.0.
The First Mile of Transformation is a model developed by my co-authors Dr. Warren Ritchie and Gregg Garrett in their 2018 book, Competing in the Connecting World. It illustrates the natural process that top leaders progress through as they understand, value, and commit to transforming their firms in response to industry disruptive forces. Overtime, we expect to see the shape of these measures increase from left to right as firms progress through the first mile.
Our point of view is that the environment in which firms are competing is and will continue to be increasingly connected and this will bring industry convergence where digital capabilities often will not favor the market leaders. It takes brave leaders to align their organizations to overcome the inertia of how the dominant logic and organization design that contribute to their past and even current success.
Beth:
What kinds of changes will be required within organizations to prepare now for ongoing digital transformation?
Brandon:
Investment cases for transformation must evolve. We found that executives recognize the benefits of I4.0 solutions and as a result, business cases for investment are expanding. However, I was surprised to see repeatedly that technology is not being deployed as a direct countermeasure to labor shortages in the present, but rather to unlock productivity and cost reductions in the future.
Despite the recognition of the value of solutions that enable Industry 4.0, we saw a clear pattern of assumptions in established processes. Firms plan to deploy connected technology use cases to unlock productivity and cost reductions in the future, but not as a direct countermeasure to labor shortages in the present.
Beth:
How do you see AI and automation helping to facilitate these changes?
Brandon:
In the past year, I have had the opportunity to partner with organizations bringing AI and automation solutions to market, ranging from S&OP (sales and operations planning) in supply chains to product development and engineering. These technologies reduce overproduction, waiting, and the other forms of waste that indirectly inflate labor content. When confronted with an unexpected shortage of people, most organizations react by raising wages and responding transactionally – yet stop short of the enduring need to deploy connected technologies. This provides a short-term effect in productive capacity. However, it will not be sustainable as costs will continue to accelerate and compound. Alternatively, the curve to gain productivity from technologies is longer for most companies but it has greater sustainability and scale.
Resistance to technology is shifting based on where it serves people and when it is deployed in a way that improves the employee experience. Pre-pandemic, the relationship between labor and I4.0 was significantly skewed towards technology as a threat to job retention. Today, people are being supported in various ways to improve performance and experience. Concern for job losses is decreasing as increases in labor costs fail to stabilize the shortage of resources (while accelerating inflation for everyone) and damaging performance. Technology-based solutions will be accepted (and even required) to bring support to the workforce shortages.
Beth:
How can HR and IT leaders learn from the research you surfaced, to create action plans?
Brandon:
The supply and cost of resources to perform needed work are increasingly challenging. These changes are structural and digital connected technologies will play a critical role in your business model and delivery of functional services going forward. Recommendations include:
- Obsess over retention – Retain and reskill talent through differentiated employee experiences and value proposition.
- Invest in your technologies to enhance your dynamic forecasting and work planning capabilities.
- Invest to modernize and scale the necessary human labor content and improve productivity by applying technologies in a way that differentiates your employee experience and strengthens employer of choice status.
Beth:
Thank you, Brandon, for sharing insights into Industry 4.0 and your supporting conversations and survey results with industry.
Brandon Curry is a Global Advisor, CGS Fellow, and lead author of the CGS Insights report – The Restructuring Labor Market Will Accelerate the Fourth Industrial Revolution (Industry 4.0). He often helps CXO’s and their teams remove inertia during transformations, focusing on organization design and development, driving performance improvement, and leading large organizational change initiatives.
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