The Economic Impact of Digital Disruption

Finger on tab Enterprise Technology Strategy and Innovation advisory practice, to discuss the impact of IT on people and the economy, and vice versa. Below is a transcription of their conversation, edited for length and clarity.

Mayerhauser: We’ve heard a lot about digital disruption, but there’s a piece that is often overlooked – people. This next phase in digital, call it the third industrial revolution, represents a real blurring of the lines between people and technology, to the point where they really can’t work independently of one another.

At the same, we’re still seeing structural changes in the labor force. Many people who left the labor force during the Great Recession of 2008 didn’t return. Even though unemployment is now at 3.7%, we’re still seeing skill gaps. Business leaders are telling us that they can’t find the right skills they need now and into the future.

It is within that landscape that technology leaders are challenged to make sure that they can meet the demands and integrate people, technology and process to meet the digital challenges ahead.

Diane, you stated numerous times that you expect to see a contraction in the labor force by 2020. The question I have for you is how do you see technology playing a role as we get to that point?

Swonk: With regard to the contraction, first, we are curbing immigration fairly dramatically. If we stay on this track we will see a contraction in the labor force by 2020. And second, it’s important to understand that the skills erosion we are seeing has been decades in the making.

“New technology doesn’t eliminate people, it increases their ability to think faster and jump higher…”
— Laverne H. Council
The interesting thing is the Great Recession both revealed and exacerbated the skill shortages. I’ve been talking to employers who have been complaining about a skill shortage since the onset of the crisis and that seems a bit odd, when ten years ago we were losing about 600,000 jobs a month. It was truly stunning. We were losing close to a million a month by the beginning of 2009. Even then people couldn’t find the skills they wanted. It really gets into how multi-decade and multi-dimensional this is.

Now we’ve got a decade where we’ve had subpar growth and failed to put people in jobs, and had erosion of skills on top of it. Women are beginning to rejoin the labor force much more rapidly than men. We’ve lost about a half a million men 25 to 34 years old, millennials that are no longer participating in the labor force. We don’t know why they’re not participating, although we have some good ideas. Everything from the opioid crisis to an erosion in skills, to the stigma of long-term unemployment.

We have to shift this dynamic. Look at the defining workforce shift that happened as a result of World War II. We systemically raised the skills and education of an entire generation at once. We had 25% unemployment. But people joined the armed forces, they went to boot camp and they learned soft skills they needed to work in the factories when they came home. The GI bill also systemically raised the level of education. Women had to join the labor force, and once they got in they didn’t want to leave.

We need the same large-scale shift today, but we have no way to do it. Which means we have to marry technology with human capital, not just replace it, although we will need to replace the people who are missing in the labor force going forward. We will also need to marry it with those who don’t have the skills, and help them leverage beyond their skills.

Mayerhauser: What can an IT leader could do to prepare a flexible agile workforce for profitability into the future?

Council: We all know something interesting happened between the ‘90s and now, there was a shift. People began to think that IT and automation could replace people. That is a fallacy. Automation makes you need people more. Technology is changing every day. And so people have to change how they think every day. New technology doesn’t eliminate people, it increases their ability to think faster and jump higher, but the fact is that any technology solution is only good as its developers – your people.

“We need the same large scale shift today… that happened as a result of World War II. We systematically raised the skills and education of an entire generation at once.”
— Diane Swonk
When we talk to leaders, one of the key things we stress is diversity. True diversity – not how we look, or our gender, but how we think. It’s understanding and embracing what each of us brings to the table. It’s nurturing those folks that might not be the best technologists today, but are great thinkers. They have good insights and understand the tradeoffs and understand different combinations of solutions. If we only have one group of people that are the best technologists in the world, you know what you’re going to have -- poor technology because the intelligence has to be based on the global perspective, on of all of us.

But how can we get there if we think every time we put in new tech we can eliminate people? We have to tell them the truth. We have to say, I expect for you to figure out smarter ways to do something new. We have to be prepared for the new “New.” Every single one of us has probably changed careers three times and didn’t know it. I think in the future we’ll change careers ten times, and know it. That’s the reality of what we need to bring as leaders.

Mayerhauser: Diane, you’ve been known to say that diversity in terms of profitability is a necessity, not a nicety. Can you elaborate on what that means to you and what that means for business leaders?

Swonk: The jury is in on diversity. We know that the answer is the more diverse your decision group is, the better your decisions will be. We know that more diverse management teams are better decision makers, but really it’s not just about checking a box, or having on or two different voices at the table, it’s about critical mass. This is really important and often lost in translation.

Mayerhauser: LaVerne, what does diversity mean in terms of the digital technology?

Council: Well, for one example, it looks like facial recognition that works anywhere in the world, on anyone. And if you’ve never had that happen to you, it’s happened to me in a number of places. It hadn’t been tested for me. My pigment was off. My nose wasn’t in the right place. I should be able to go anywhere and have anything that’s supposed to recognize a human being recognize me. When something is artificial it does not have a heartbeat, and we have to bring a heartbeat to it, which means we bring intelligence, and we make it a reality.

Mayerhauser: We’ve talked a lot about why diversity is important to digital business. But, how do we do it?

Swonk: First, you have to do the math. Millennials now make up the largest percentage of the workforce. Millennial women out attain men in education, so if you’re not hiring more women than men, you should be looking at what you’re doing. Also it’s the most diverse generation ever produced. Thirty percent of millennials are considered “new minorities.” This is a different generation and most diverse, largest, most educated generation we’ve ever produced. That’s important and that’s an asset. It’s an asset that China doesn’t have. It’s an asset that Japan doesn’t have. It’s an asset that we have. And contrary to mainstream folklore, turnover rates among that age group have been constant since 1950, except for one period during the Great Recession when their tenure increased. So these workers are not a gamble, they are an asset. Figure out how to hire them, how to keep them, and how to team them with Boomers and Gen Xers to achieve diversity of thought.

You also have to have the people who are going to use the technology integrated with the people who are helping you build and implement technology. You can bring in the best of Silicon Valley to deliver artificial learning but you have to match it up to human behaviors, or you will waste time and money. I have seen this happen again and again. And so integrating, again the people are the key. You can’t just buy the technology and expect it to work without integrating to your own system and making sure those people who are using it are part of the process.

Council: The real question is, how do you make great technology, or fix technology, if you don’t embrace it, if you don’t have the conversation, if you don’t build trust? The fact is trust in technology is at an all-time low. We’ve all lost information due to technology. We’ve all been hacked. So that’s the reality. So, where do we go for trust? We build it with people: our employees, our business partners and our customers. We have to. And I think that’s going to be a bigger part of the IT leader’s job going forward. What people call the “soft” skills are not so soft. In fact, they are very hard. So I think that if you’re leading technology, building trust is where you are going to be spending your time.

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LaVerne H. Council LaVerne H. Council is the national managing principal for Enterprise Technology Strategy and Innovation at Grant Thornton. She has more than 30 years of experience in both the public and private sector, implementing global technology solutions and supply chain strategies that drive growth and innovation. Council previously served as Assistant Secretary for the Office of Information and Technology and chief information officer (CIO) for the Department of Veterans Affairs; Corporate Vice President and first global CIO for Johnson & Johnson; and Global Vice President for information technology, global business solutions, and development services at Dell Inc.

Nicole Mayerhauser Nicole Mayerhauser is Director of Strategy and Operations for Grant Thornton’s Enterprise Technology Strategy and Innovation practice. With 20 years of experience leading technical professionals in producing highly sensitive, public facing information and data products, she has worked to bridge technical experts and the public they serve. At the Bureau of Economic Analysis, she directed the research and development, production, and modernization of the Nation’s most significant macroeconomic statistics, including Gross Domestic Product (GDP).

Diane Swonk Diane Swonk is Grant Thornton’s Chief Economist. She is a well-known macroeconomist who advises the Federal Reserve Board and its regional banks as well as other policy makers from Washington to Tokyo. Her client list occupies a spectrum from Fortune 500 to middle-market and entrepreneurial firms. She trained as a labor economist and specializes in monitoring structural changes in the economy including the composition of the labor force. She was named a Fellow of the National Association for Business Economics (NABE) for outstanding contributions to the field.

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