Preparing for the digitisation of the workforce

Executives certainly see technology as part of the solution: 82% of those surveyed for this re-port agree that their organisation needs to transform the way it sources and manages labour

Executive summary

About this research

Foreword

Introduction

1 The background to workforce digitisation

2 Putting strategy into practice

3 Robots on the payroll

4 Machine intelligence at work

5 The on-demand workforce

Conclusion

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Executive summary

Executive summary

The world of work is changing, fast and fundamentally Against a backdrop of difficult-to-solve staffing and employment issues, companies are increasingly turning to technology to help them get work done

For many, automation provides an answer Advances in robotics and artificial intelligence mean that machines are increasingly capable of taking over work that was previously performed by human employees In many cases, they are proving a great deal faster, more efficient and more accurate, thereby making it possible to perform certain tasks that were previously impossible to carry out

At the same time, senior executives are looking beyond their own workforces for the skills and labour they need, searching Internet-based jobs marketplaces that connect them with a seemingly limitless pool of on-demand workers

In this report we explore how these trends—collectively termed “workforce digitisation”—are changing the nature of work and how organisations are preparing for this revolution Written

by the Economist Intelligence Unit (EIU) and sponsored by everis, it is based on a survey of over 220 C-level and other senior executives, desk research and interviews with companies and thought-leaders who have considered the likely implications of new ways of working

The key findings are:

Workforce digitisation is taking place against a backdrop of high demand for talent The most common labour and employment challenge among respondents to the EIU survey is limited local supply of skilled labour Technology offers a number of solutions to this issue: three examples examined in this report are robotics, artificial intelligence (AI), and on-demand, crowdsourced la-bour Executives certainly see technology as part of the solution: 82% of those surveyed for this re-port agree that their organisation needs to transform the way it sources and manages labour using digital technology, and 80% believe that an organisation’s ability to use digital sources of labour will

be a key factor in its future success

More than half of companies have devised a strategy to address workforce digitisation, but fewer than one-quarter have deployed it The impact of the digitisation of work is certainly

on the corporate agenda Only 7% of respondents say their organisation has not discussed it at all But while a total of 58% of respondents have devised a strategy that covers the digitisation of labour, only 23% have implemented that strategy Common barriers to taking action on workforce digitisation include an absence of technical knowledge, business processes that are too hard to change, and a lack of desire to innovate This does not mean workforce digitisation technologies are not being used—quite the opposite—but they are not being deployed strategically This may prove problematic, as the technologies raise a number of strategic questions

Robotics technology is being used to free highly skilled physical workers to focus their talents on where they are needed Robotics is the least adopted of the three technologies exa-mined in this report It is commonly adopted among companies which report high-demand for high-skilled labour, and the most popular application is in manufacturing, although adoption in warehouse or stock management may grow faster in future, the survey suggests Concerns have been raised about the impact of robots on human employment Companies interviewed for this study which use robots claim they allow skilled employees to focus their talent where they are nee-ded most, and permit new capabilities and company growth that would otherwise not be possible

AI has the potential to displace mid-ranking clerical workers AI is already fairly widespread in business, the EIU survey reveals: 43% of respondents say their organisation is making some use of

Executive summary

are helping companies extract insight and learn from the growing volume of data they collect ponents see AI as a tool to help expert knowledge workers to become more productive However, they concede that clerical staff whose job is to process, compile and integrate information sources could well be displaced

Pro-On-demand, crowdsourced labour offers scalability but raises strategic issues Digital tech- nology is allowing businesses to recruit on-demand workers on a larger scale and at greater speed than ever before Survey respondents acknowledge that using temporary workers has its drawbacks: 74% believe that using contract or short-term labour prevents organisations from building knowledge, and the same proportion say that offering employees job security is important to attract top talent Nevertheless, 44% use the on-demand, crowdsource labour model to some extent, most often to access creative talent such as graphic designers or copywriters The ongoing public debate about Uber, the taxi-booking app, may dissuade companies from making strategic commitments to this kind of service, but integrating them into the overall employment strategy will require executive oversight, sooner or later

Business leaders who wish to benefit from workforce digitisation can expect to face tough questions from employees Each of the three technologies discussed in this report can be seen, not without reason, as a threat to current employees While they are eager to benefit from the work- force digitisation, few executives surveyed for this report want to see jobs cut from their organi-sation Many of the experts interviewed for this report argue that automation can help to make people’s working lives safer and allow them to focus on higher-value work And survey respondents value the engagement, loyalty and accumulated knowledge of employees As they begin to apply workforce digitisation more strategically, executives must ensure that these values are protected

—for the benefit of the organisations, of their employees, and perhaps even society

About this research

About this research

Preparing for the digitisation of the workforce is a report by The Economist Intelligence Unit, sponsored by everis The report investigates the groundwork that companies are laying as they consider the role that robotics, artificial intelligence and the ready availability of on-demand, crowdsourced labour will play in their employment and workforce strategies

The research draws on a survey of 228 senior-level and C-level executives from companies in the

US, Europe, Latin America and Asia-Pacific

It incorporates interviews with the following executives:

Alex Allen, vice president of marketing, Spring Venture Group

Robbie Allen, founder and CEO, Automated Insights

Hal Blenkhorn, director of engineering, Tegra Medical

Rodney Brooks, founder, chairman and chief technology officer, Rethink Robotics

Paul Clarke, chief technology officer, Ocado

Ian Davies, head of engineering and technical director, Easyjet

Lou Ferrara, vice president and managing editor, Associated Press

Jennifer Griffin, vice president of content integrity and insights, Bazaarvoice

David Hale, CEO, Gigwalk

Daniel Nadler, CEO, Kensho Technologies

Tanya Perry, vice president of US sales and operations, Shopguard

David Plouffe, senior vice president of policy and strategy, Uber

Brad Schneider, director of applications development, The Container Store

Mark Skilton, professor of practice, Warwick Business School

The report was written by Jessica Twentyman and edited by Pete Swabey

Foreword.

By Marc Alba, Chief Innovation Officer Head of NextGen Consulting

everis An NTT DATA company

Recently the chairman of a major corporation, told me he was fed up with all the “digital blah-blah” (as he called it), convinced this was just another hype fostered by analysts, consultants and vendors Asked about my opinion, I first thought about highlighting the amazing new possibilities of digital and how they are transforming one sector after another Instead, I invited him to one of the sessions we regularly hold at everis to unleash, through the power of digital, the innate creativity of our emplo- yees’ children After he experienced how kids produce their own astonishing movies, videogames, mu- sic, robots, apps or fashion designs within a couple of hours, just by being exposed to coding tools, makers toolkits or 3D printing, he started to understand what digital transformation really means Digital natives such as these children will be—and often already are—our future clients and employees The corporate chairman, and the rest of us, would rather be prepared for the digital natives, as they repre- sent something close to a new civilisation Hype? For sure, as with any other next “big thing”, workforce digitisation is subject to occasional exaggeration However, well beyond “blah-blah”, a digital tsunami full

of stories of disruptions is already putting many industries under siege Moreover, it is transforming the nature and definition of the workforce.

This leads us to where the story of this report begins In 2014, we in everis, after joining the NTT DATA family and becoming part of the NTT Group, defined our new collective goal/dream: becoming the number one business and IT services company in the world Those who do not know us enough usually laugh when we share this dream But, those who know how we created this company from scratch to become a business with nearly 15,000 employees and sustained double-digit organic growth, know this

is possible, and smile when they think how much fun this new journey will bring (again!) In the thorough transformation of our business that we are undertaking to achieve this global leadership, digital is not

a nice-to-have: it is our new oxygen, a key ingredient for survival, the cornerstone to become an nential organization As part of our transformation journey, we decided to sponsor this report, written independently by The Economist Intelligence Unit.

expo-Firms throughout the world have been aiming to excel in the first waves of digital, focusing on digitising processes and channels But two new disruptive waves are now emerging: digitised workforces and digital habitats Digital habitats heavily rely on the Internet of Everything and Ambient Intelligence The digitisation of workforces—the focus of this report—consists of many components This report, howe- ver, focuses on three key disruptive technologies: crowdsourcing, artificial intelligence (AI) and robotics This report aims to provide real-world learnings and insights on the digital workforce in general, and on these three technology trends in particular When commissioning this report, we decided not to focus

on assessing digital workforce technologies from the viewpoint of the “supply-side”, as other reports do

We have seen and experienced enough of crowdsourcing, AI and robotics, to conclude that they are real game-changers Rather, we decided to focus the research on the “demand-side”, understanding how big corporations and key decision makers assess the impact of the digitisation of the workforce.

Workforce digitisation involves complex hard and soft issues One of the main general concerns is jobs losses, which applies to both jobs virtualisation through crowdsourcing and jobs computerisation through

AI (software bots) and robotics (hardware robots) For us at everis, this is the key challenge post by workforce digitisation; job creation and talent development have always been our motto with 15,000 jobs

in everis, 80,000 in NTT DATA and close to 250,000 in NTT For us, the tricky new equation to solve is how to continue creating jobs and developing talent while leveraging a hybrid workforce that combines human and machine “talent” This led us to create a new concept we call the Augmented Workforce, to harmoniously and sustainably combine human and machine intelligence Here again, this report provides valuable insights on both the bright and dark side of the digital workforce.

The real game-changers across industries are striving to lead this emerging digital workforce revolution Similarly, in order to become the global number one consulting company, last year we created a new strategic initiative called NextGen Consulting Our goal is to disrupt and reinvent consulting through the creation of one-of-a-kind assets that enable us to truly go digital, open and exponential, leveraging the huge potential of crowdsourcing, AI and robotics The results have been amazing so far, so I really hope this report helps you to embrace workforce digitisation, as we have.

Introduction

Faster, more efficient robots Intelligent computers capable of learning new tasks A vast pool of freelance human talent, accessible to employers on demand, over the Internet The future of work

is already here Are company leaders ready to embrace it?

Many are, according to a new worldwide survey of 228 C-level and senior executives, conducted

by The Economist Intelligence Unit (EIU) and sponsored by everis Eight out of ten (80%) agree that the future success of their organisation will depend on their ability to harness new digital tech-nologies and techniques to solve their skills and labour challenges

Achieving that success, however, will depend on their ability to understand and exploit the new technologies The biggest barrier to embracing the digitisation for 45% of respondents is a lack of understanding

This report focuses on three technology-driven trends that are changing the dynamics of work in the 21st century The first is robotics, which has spread beyond its early use on car manufactu-ring production lines to other sectors such as healthcare and farming According to the industry trade body, the International Federation of Robotics (IFR), robot sales reached 178,132 units in 2013—by far the highest level ever recorded in one year In 2014 they rose by a further 27% to an estimated 225,000

The second is artificial intelligence (AI) This is a field that has progressed significantly in recent years thanks to the increased and more widespread availability of computing power and new programming techniques that approximate “intelligence” in software, enabling computers to tackle tasks that were previously thought to be solvable only by the human brain Thanks to such emer-ging techniques, computers can now handle some of these tasks faster and more accurately than human beings

Finally, there is on-demand, crowdsourced labour A number of Internet-based marketplaces have emerged in recent years that connect companies or individuals who have a task they need per-forming or a problem to be solved with independent, on-demand workers who have the time and skills to do that work The veteran in this market is Elance, which was launched back in 1999 and

is now part of Upwork, but more recent entrants include Work Market, Gigwalk and TaskRabbit.Employers like this style of sourcing skills and labour, because it offers the chance to offload work that is repetitive or short-term or seasonal onto a seemingly limitless pool of outside providers, without overburdening the company payroll or benefits programme It also allows employers to keep fixed costs lower, paying only for labour as needed Many workers like it too, because life as

an independent contractor allows them to balance work with the other demands on their time (the care of children, for example) and to retain control over the type of tasks they take on, the nature

of the teams with which they work, as well as their working hours and locations In many cases, on-demand workers can work from home, while at the same time interacting with other team members across the world to solve complex problems

This report examines these trends in depth, but first it explores the business trends that are creating demand for new approaches to labour and investigates the extent to which these trends are on the corporate agenda

The background to workforce digitisation

1 The background to workforce digitisation

It is a cruel contradiction of the modern age that while many people are unable to find work, cially among the under 25s, companies also struggle to find the talent they need to fill positions.According to the Hays Global Skills Index 2015, a measure of labour supply and demand across the globe, “global labour markets are approaching crisis point as the supply of skilled workers stru-ggles to keep pace with demand.”

espe-This gap between supply and demand is evident among respondents to the EIU survey Over four in ten (42%) say their organisation suffers from the limited local availability of specialist labour.Meanwhile, 37% suffer from an inability to source specialist labour quickly enough to meet de-mand, suggesting their current labour sourcing prevents them from handling fluctuations in their workload Only 7% of companies say they suffer no staffing or employment issues

CHART 1: Limited local availability of specialist labour is the most common staffing and employment issue

From which, if any, of the following staffing and employment issues does your organisation suffer? % of respondents

These issues apply across both large and small companies For example, limited local availability of specialist labour is an issue for 45% of respondents from large organisations (with annual revenue

in excess of US$500m) and for 39% of those from smaller organisations Similarly, sourcing labour quickly enough to meet demand is an issue for 40% of large-organisation respondents and 33% of those from smaller organisations

45% 40%

Low employee engagement and/or retention

High demand for high-skilled physical labour

High demand for high-skilled clerical workers

Low employee wellbeing

Inability to scale down employment levels in periods of low demand

High demand for low-skilled clerical workers

Inability to source specialist labour quickly enough to meet demand Limited local availability of specialist labour

The background to workforce digitisation

High-skilled clerical workers are the most sought-after, the survey reveals, with 32% of respondents identifying high demand for such staff as an issue Around one-fifth (21%) report high demand for low-skilled clerical workers

For physical labour, the shortage is less acute: 15% report high demand for high-skilled physical labour and 14% for low-skilled physical labour But the issue is more pronounced for respondents

in Latin-America, where 26% report high demand for high-skilled physical labour and 24% for low-skilled physical labour

Against this backdrop, it is little wonder that entrepreneurs have sought to ease companies’ labour issues through the application of digital technology

One such company is Gigwalk, a San Francisco-based start-up that offers instant access to a ket of independent workers (“gigwalkers” in the company parlance) who are available to perform

mar-an often simple, observational task in a specific location A mouthwash mmar-anufacturer, for example, might hire gigwalkers to check whether their products are being properly stocked and presented

in a local supermarket

Gigwalk CEO David Hale believes that companies are waking up to the possibilities of using the Internet and related technologies to extend their workforce

“I think what we’re in right now is a second phase of outsourcing,” he says “My background is

in subcontract manufacturing, and if you look back over four decades, companies have become accustomed to outsourcing labour They’re just looking to do it in different ways now, using the In-ternet, and on a more individualised basis Companies have tasks they need performing, but often those tasks are aligned with particular strategies or projects, so what companies like ours offer is real-time labour arbitrage.”

Other companies seek to ease the skills gap by automating work that is best suited to human beings and freeing up employees—and the budget that pays for them—to focus on more differentiated tasks In some cases, this enables them to deploy employees on new projects that weren’t previously possible due to time constraints

“Company leaders are starting to think: how many staff hours do I have at my disposal and how could my employees’ time be better spent?” says Robbie Allen, CEO of artificial intelligence soft- ware vendor Automated Insights “So tasks that are data-driven and repetitive and could be better performed by computers, those will be the candidates for automation Others, the ones that hu-mans are good at—well, there’ll be more time for employees to concentrate on them.”

“I believe that the future is going to be much more about humans and software working together and humans and computers splitting tasks according to their strengths,” he adds

Getting work done is not the only issue that companies face, however Around three in every ten respondents (29%) say their organisation suffers from low employee engagement or retention.Furthermore, respondents believe that employee engagement will become more of a concern in future Revenue and profit growth are the most common priorities today, with 54% and 53% of respondents identifying them as such as top priorities, but in 3-5 years’ time they expect their focus

to shift towards geographical expansion (42%) and employee engagement (40%)

Clearly, one of the challenges associated with adopting new, technology-driven models of labour sourcing will be to maintain that engagement throughout the upheaval This is just one example

of how the digitisation of labour will present strategic issues that will require strong leadership to overcome But are these issues on the boardroom agenda?

CHART 2: Respondents expect their organisation to shift their current focus on revenue and profit growth to geographical expansion and employee engagement in the next 3-5 years

Which of the following objectives are your organisation’s top priorities right now? And what will they be in 3-5 years’ time? % of respondents

everis view

Nowadays, everybody is talking about digitisation

Digitisation of companies, the economy, the

work-force—even digitisation of relationships But what

does it really mean, and what does it imply to turn

something digital?

A classic example may be digitising chess We

may think in a naive way that turning chess digital

is putting the board and the pieces inside a screen

Others, going a bit further, may understand that the

game is now being played in a different medium, one

that allows the players to be in different locations But

what is really going on under the hood? Through the

process of digitisation, what we are doing is turning

chess playing into a domain that computers can

un-derstand, and one that allows us to use computers

to become better players

This metaphor helps us to understand how a new

di-gital medium can be used to augment our workforce

in ways we are only just beginning to conceptualise

Source: The Economist Intelligence Unit survey, August 2015

Putting strategy into practice

2 Putting strategy into practice

The need for companies to apply digital innovations to their employment and staffing issues is dely accepted A resounding 82% of respondents to the survey agree that their organisation needs

wi-to transform the way it sources and manages labour using digital technology Almost as many (80%) believe that their organisation’s ability to use digital sources of labour will be a key factor in its future success

This helps to explain why more than half of the executives surveyed by The EIU say their orga- nisation has devised a formal strategy to address the potential impact of digital technology on its workforce However, only a minority have put their strategic thinking into action: just under one-quarter (23%) have both devised and implemented their strategy, while 35% have drawn up

a strategy without putting it into practice

This does not mean organisations are not already applying digital solutions to their labour issues More than one-third of respondents (38%) say their organisations have adopted robotics, 43% are using AI, and 44% employ on-demand crowdsourced labour, the survey reveals

However, results suggest that this activity is not being implemented strategically Only around one-quarter of organisations have formally assessed opportunities to use crowdsourced labour (26%) or AI (25%), and 11% have done so for robotics Just 15% have addressed digital labour sourcing technologies in either their HR or digital strategy

CHART 3: Fewer than one-quarter of respondents say their organisation has devised and implemented a formal strategy

To what extent has the potential impact of digital technology on your workforce and employment strategy been discussed or addressed at the most senior level or your organisation? % of respondents

Source: The Economist Intelligence Unit survey, August 2015

40% 35%

Not at all Discussed briefly Discussed at length but no action taken

A formal strategy has been devised but not yet implemented

A formal strategy has been devised and implemented

Putting strategy into practice

While the technologies that underpin workforce digitisation are not new, they have only recently emerged on the executive agenda thanks to breakthrough innovations and falling costs Executive boards can be forgiven for not having fully realised their strategies just yet However, many of the challenges that companies face in making effective use of these technologies will require strategic directives to overcome

When asked to identify the main challenges to transforming the way their organisation sources and manages labour using digital technology, 45% cite a lack of understanding of new technologies and techniques, more than any other response This is despite the fact that 76% of respondents believe their organisation understands the risks and benefits of digitising labour

This finding underscores the fact that while digitisation may relieve demand for certain forms of labour, it will intensify the need for technical expertise For example, demand for robotics engineers

in the US is expected to grow by 13% between 2014 and 2018, according to the country’s Bureau

of Labour Statistics

The second most common challenge is that business processes are too hard to change, as cited

by 42% of respondents This, at least, is being addressed: 41% of respondents say their sation has redesigned business processes to allow for greater automation Third, 40% of respon-dents cite a lack of desire to innovate

organi-CHART 4: A lack of technical understanding is the most common challenge to workforce digitisation

Which of the following are the main challenges to transforming the way your organisation sources and nages labour using digital technology? % of respondents

ma-Source: The Economist Intelligence Unit survey, August 2015

50% 45%

A lack of desire to innovate

Employment law in the countries we operate in

A lack of understanding of new techniques and technologies

Union protections of our employees

Business processes that are too hard to change

A lack of budget to adopt new techniques and technologies

Putting strategy into practice

Budgetary concerns are a relatively uncommon challenge, although they are more pronounced among smaller companies At organisations with annual revenue under US$500m, 36% of respon-dents say their organisation lacks money to adopt new techniques and technologies, compared with just 26% in organisations with revenue over US$500m

This shows that companies are willing to invest in technology that has the potential to transform their organisation European airline easyJet, which is investigating the use of drones to support aircraft maintenance (see section 3), has adopted an “intrapreneurial” model to identify and nurture technology investments

“We’re granted seed money by the board to experiment with a particular technology or approach,” explains easyJet’s head of engineering and technical director, Ian Davies “If that’s successful, we’ll outline a viable business case to an internal board that’s chaired by CEO Carolyn McCall and has other board members in a session in which we’re invited to pitch our ideas.”

“Based on that, we’ll get the money we need, but we’ll also be expected to track our efforts closely and report back regularly on how they’re going, whether we’re delivering on target and getting the results we predicted,” he says “We probably have between 15 and 20 R&D [research and deve-lopment] projects like that running at any particular time Things that cost a lot of money require boardroom involvement—that’s a given.”

According to Rodney Brooks, founder, chairman and chief technology officer of Rethink Robotics, a US-based maker of smart, collaborative robots, when customers deploy the company’s products, their executives are focused on productivity, efficiency and operations “Most of our customers are very concentrated on the day-to-day running of manufacturing,” he says “The C-level executives are focused on operations and look for automation tools that are flexible, increase productivity and fill in the labour gaps that all their enterprises suffer from.”

However, as will be shown throughout this report, the use of labour digitisation raises difficult tions that leaders who wish to exploit the benefits will need to contend with

ques-The first of these is how the introduction of automation and crowdsourced labour will impact their existing workforce

In 2013 a well-regarded and often-quoted study, The Future of Employment: How susceptible are jobs to computerisation? by Carl Benedikt Frey and Michael Osborne of Oxford University’s Martin Programme on the Impacts of Future Technology examined over 700 occupation types, noting the types of tasks that workers perform and the skills required The report concluded that almost half (47%) of job roles currently available in the US could be susceptible to computerisation over the next two decades

Few executives surveyed for this report want to see jobs cut from their organisation: only 25% of respondents believe that their organisation needs to reduce the number of full-time staff it employs

in order to be competitive Seven out of ten, meanwhile, believe that “businesses have a moral obligation to create and maintain human employment”

Nevertheless, workers will have heard the public debate and may have justifiable fears about the impact of automation and on-demand labour on their livelihoods If they are to maintain a loyal and engaged human workforce, executives will need to acknowledge these concerns and have a strong response to them

Meanwhile, they must also consider how the digitisation of labour will impact their competitive position within their markets

Putting strategy into practice

Mark Skilton, professor of practice in information systems and management at Warwick Business School in the UK, says that most pioneering work in robotics and AI is being led by companies such

as Google and Amazon, and growing adoption will further tip the balance in their already rable favour “There’s a risk of ‘brain drain’ from companies and countries not able to compete with these huge R&D-centric cloud companies,” he warns

conside-Beyond that, there are macroeconomic questions about how society will function in a more tomated era “There’s also the issue of how wealth and skills will be distributed in the global eco-nomy and how governments that rely on taxation from employment will protect their economies,” Professor Skilton says

au-“It’s not all doom and gloom,” he adds “I think there are several generations of development yet before the physical world of humans is replaced with fast and cost-effective [digital] alternatives, but it is right to consider the ethical and economic repercussions of this technological scaling of computing.”

These are questions that executives should consider sooner rather than later

Robots on the payroll

3 Robots on the payroll

In May 2015 Ocado filed a patent application with the United States Patent and Trademark Office that provides some interesting insight into how the UK-based online grocery retailer plans to ex-pand its already extensive use of robots to further increase efficiency in its vast customer fulfilment centres

What Ocado proposes is to reduce the width of the aisles between shelves and instead have duct-picking robots operating on a frame positioned above shelves The reclaimed space will, in turn, be used to store more inventory

pro-This is just one facet of a multi-pronged R&D effort into robotics at Ocado, according to chief technology officer Paul Clarke “We have multiple applications for robotics across our end-to-end solution, and we have had R&D programmes working on these for several years now,” he says

“Potential applications include inbound product processing, food processing, autonomous tems including driverless vehicles, and automated picking of goods into customer orders.”

sys-Ocado is ahead of the game Of the three areas under investigation in this report, robotics is the least-adopted: 38% of respondents say their organisation is using robotics today Of these, 15% say they use it extensively, while 23% say that its use in their company is limited Only 11% say that they do not use robots today but plan to do so in future

CHART 5: Only 38% of respondents say their organisation makes some use of robotics today

To your knowledge, to what extent does your organisation currently use robotics?

No use today and no plans to use in future

Limited use today

Don´t know

No use today but we plan to use in future

Extensive use today

Source: The Economist Intelligence Unit survey, August 2015