According to the findings of a Cognizant study on how businesses and jobs need to evolve in the digital era, the economic impact of being behind your peer group in digital is huge. For large enterprises, this “laggard penalty,” as the study calls it, can result in hundreds of millions of dollars of lost economic opportunity just over the next few years.
In an email interview following the release of the study, dubbed “The Work Ahead: Mastering the Digital Economy,” Paul Roehrig, global managing director of the Center for the Future of Work at Cognizant, provided some valuable commentary. A particularly keen insight came in response to my question about what the focus of students just beginning their university studies should be in order to become as well-equipped as possible to help their companies master the digital economy:
If you want to master the digital economy, be a better human. As noted in the study’s findings, it may sound counterintuitive, but in a world of more pervasive technology, activities that humans do well will be even more important in 2020 than today. Analytical thinking, communication, and learning skills are all critical now, but in the digital economy these very human activities — things we do naturally, but AI systems struggle with — will become even more essential in our personal and work lives, and for our businesses.
Roehrig said that while the revenue impact of all this will vary by industry, every sector will be affected:
The study focuses on several industries — retail, banking, insurance, manufacturing, and life sciences — that collectively generate more than $60 trillion in revenue today (roughly the scale of about 40 percent of world GDP). What we found is that the impact of digital transformation on these industries between 2015 and 2018 alone could be up to $20 trillion. That number may sound too big to be true, but when you break it down, it seems a lot more realistic.
Leaders from 2,000 companies across the globe think that within three years digital will, on average across all industries studied, influence more than 10 percent of all revenue. In gross revenue terms, this equates to around $2 trillion across the organizations we surveyed. That’s hardly chump change. While the revenue impact will vary by industry, all sectors will be affected. The trend is most pronounced in retail, where the impact of digital on revenue will rise by more than 39 percent. For retailers, it’s already a life-or-death imperative to excel in digital, because customers simply will not tolerate mediocre experiences.
As for which industries are lagging furthest behind, Roehrig said the study found that life sciences and insurance companies are currently the “least digital” sectors:
That means they currently attribute the least amount of their revenue to new technologies and digital experiences, invest less, etc. In many cases, leaders feel like regulation or a lack of clear ROI may be preventing innovation, but those arguments won’t last for long, as we’re starting to see real technology-fueled innovation in those sectors. Also, it’s interesting to see that leaders in life sciences and insurance expect revenue to be impacted by more than 30 percent over the next three years. This is simply a massive shift in how they plan to create value.
I asked Roehrig which information technology jobs that are currently considered to be in high demand are destined to become obsolete the fastest. He indicated that it’s more a question of how technology will change jobs, rather than how technology will make them disappear:
The impact of technology on jobs is a really important question, and it's on a lot of people's minds. In fact, around 77 percent of senior leaders globally said they were concerned that ‘automated technology (robots) will take jobs from people I care about (and maybe me).’ Even though there is concern about automation taking jobs away, senior leaders saw the positives in technology enabling work. For example, the study found that more than 60 percent of leaders said technology would help them be more creative and help them serve customers better; around 87 percent said new technologies would improve their productivity. The vast majority of leaders believe, as we do here at Cognizant’s Center for the Future of Work, that it would be a mistake to short human imagination. As we have throughout history, we will continue to find plenty of work for human hands and brains.
When we think about impact on jobs, it's helpful to look at the kinds of work being done that make up ‘a job.’ In fact, we believe that many — many — more knowledge jobs will be altered by technology, rather than simply being ‘automated away.’ Even so, the new machines will make some work less relevant in the digital economy. If a specific job is made up of highly repetitive, data-intensive tasks that don’t require much human judgment or empathy, it could be a candidate for process automation.
Given that Cognizant is a major offshore outsourcing services provider, I asked Roehrig how the offshore outsourcing model will change to adapt to the future digital economy. His response:
Throughout history, how we work — how we share labor, the tools we use, and so on — defines our societies as well as our specific industries and companies. From the Stone Age to the Iron Age to the Industrial Revolution, this has been the case. When the Internet — a new ‘machine’ —became accessible to many, knowledge work could be done wherever there was a smart person with a connection. This new technology opened up opportunities to distribute work in a new business model. It was similar to when physical work — like manufacturing — was able to be distributed globally once the labor and shipping costs got low enough to make economic sense.
These shifts have always resulted in massive value creation, and this won’t change as we move into the digital economy. What will matter most in the digital economy will be having the right skills to create value and innovate based on new machines — AI, algorithms, bots, big data — and new business models aligned to digital and physical products and services. And that can happen anywhere.
Finally, I asked Roehrig whether privacy is likely to become more of a casualty or more of a benefactor of the future digital economy. He said there are no easy answers:
Given all the news about hacks, phishing, and too much information on Twitter and Facebook, it’s not surprising that 87 percent of global leaders said privacy was a major concern about our digital future. The fact is that there will be a digital dark side, and it will be a bumpy ride for all of us as we decide how to manage privacy in a world where everything can be shared. There are no easy answers, but we are already learning how to make this work. We know this because this is happening around us now, and smart leaders are adapting to our digital environment at a remarkably rapid rate.
Security breaches are now expected, and often not fatal. In fact, as we shared in our findings, the targets of the biggest macro-hacks paid a steep price, but virtually all are still open for business. Our definition of privacy and what we expect will certainly change. It’s already happening. While we can’t stop this, we can steer it. Our decisions, ethics, and even optimism will be even more essential in the new digital economy than ever before.
A contributing writer on IT management and career topics with IT Business Edge since 2009, Don Tennant began his technology journalism career in 1990 in Hong Kong, where he served as editor of the Hong Kong edition of Computerworld. After returning to the U.S. in 2000, he became Editor in Chief of the U.S. edition of Computerworld, and later assumed the editorial directorship of Computerworld and InfoWorld. Don was presented with the 2007 Timothy White Award for Editorial Integrity by American Business Media, and he is a recipient of the Jesse H. Neal National Business Journalism Award for editorial excellence in news coverage. Follow him on Twitter @dontennant.