Irving Wladawsky-Berger

The Continuing Evolution of Service Science

Service Science emerged in the mid-2000s as an academic discipline aimed at applying technology and science to the service sector, - by far the largest sector of the US economy and of most economies around the world.  Since its inception, IBM has played a major role in the continuing evolution of service science, coining the term Service Science, Management and Engineering (SSME) to highlight the interdisciplinary nature of this emerging discipline.  I was personally involved in these efforts during my last few years at IBM.  Subsequently, it’s continued to be one of the main subjects I’ve talked about in seminars and written about in this blog.

A few weeks ago I had an interesting conversation on the the state of service science with analysts from an IT research organization who were preparing a report on the subject for their clients.  Our discussion led me to reflect on the evolution of service science over the past several years.  I think that we are hearing a bit less about it these days.  But is that because we’ve become tired of the subject and moved on, or because the application of science and technology to services is now so well accepted that it’s no longer a topic of debate?  I very much think it’s the latter.

The Smart London Plan

Urbanization is one of the major forces shaping the 21st century - right up there with the digital technology revolution and globalization.  Over half of the world’s population lives in urban areas, and as the 2014 UN World Urbanization Prospect noted: “The continuing urbanization and overall growth of the world’s population is projected to add 2.5 billion people to the urban population by 2050,” with the proportion of the population living in urban areas increasing to 66 percent by 2050.

Just about every study that’s benchmarked the competitiveness of major urban areas ranks London, - along with New York, - as the world’s two top cities.  But despite, - or perhaps because of, - their leadership positions, both cities face major challenges as they deal with economic growth and a growing population.

London has been much in the news lately.  First came the election of Sadik Khan last May, - the first Muslim mayor not only of London but of a major Western capital, followed by the recent Brexit referendum, where London voted to Remain in the EU by an overwhelming 60% of its vote while the UK as a whole voted 52% to Leave.

At this point, it’s very hard to predict where Brexit is heading over the next few months, let alone what it’s long term consequences might be.  But, given its many strengths I have little doubt that London will remain among the world’s very top cities.  So, let me put Brexit aside for the moment and discuss instead what London has been doing to address its major population and economic challenges.

Learning to Work with Our Increasingly Smart Machines

A few weeks ago I attended the annual conference of MIT’s Initiative on the Digital Economy.  The day-long conference featured a number of interesting talks on the impact of digital technologies on business, the economy and society.  Tom Davenport, - Babson College professor and IDE Fellow, - gave one such talk on technology and jobs, based on his recently published book Only Humans Need Apply: Winners and Losers in the Age of Smart Machines, co-authored with HBR editor Julia Kirby.

Davenport started his talk by noting that over the past two centuries we’ve seen three distinct stages of automation, based on the kinds of jobs that were replaced by machines.  The machines of the first automation era “relieved humans of work that was manually exhausting,” making up for our physical limitations, - steam engines and electric motors enhanced our physical power while railroads, cars and airplanes helped us go faster and farther.

Next came the automation of jobs involving routine tasks that could be well described by a set of rules and were thus prime candidates for IT substitution.  “Era Two automation doesn’t only affect office workers.  It washes across the entire services-based economy that arose after massive productivity gains wiped out jobs in agriculture, then manufacturing.”  It threatened many transactional service jobs that “are so routinized that they are simple to translate into code,” from bank tellers to airline reservations clerks.

We’ve now entered the third era of automation.  Our increasingly smart machines are “now breathing down our necks…  This time the potential victims are not tellers and tollbooth collectors, much less farmers and factory workers, but rather all those knowledge workers who assumed they were immune from job displacement by machines,…” including, - as Davenport and Kirby poignantly remind us, - “People like the writers and readers of this book.”

The Public Face of Science

Last month, the American Academy of Arts and Sciences launched a three year initiative to address the complex relationship between scientists and the public.  The Public Face of Science project will explore the interactions of the general public with science, technology, medicine and related areas.

Throughout the 20th century, polls have consistently indicated strong public support for science and technology, especially during the Cold War decades following World War 2.  But recent polling data, - and in particular, a recent study conducted by the Pew Research Center, -  reveals a more complex relationship between the public and science.  While scientific achievements are still recognized and valued, there is a large opinion gap between the general public and scientists on a number of scientific issues.

The Pew findings were released in a January, 2015 report based on two surveys of science-related issues conducted in collaboration with the American Association for the Advancement of Science (AAAS).  The first survey is based on a representative sample of 2,002 general public adults and was conducted by landline and mobile phones.  The second survey was conducted online, and is based on a representative sample of 3,748 US-based scientists who are members of AAAS.

Why Some Work Groups Thrive While Others Falter

I recently read an interesting article published earlier this year in the NY Times Magazine by reporter Charles Duhigg, - What Google Learned From its Quest to Build the Perfect Team.  The article is focused on Project Aristotle, an initiative Google embarked on in 2012 that examined hundreds of Google teams in their quest to learn why some work groups thrive while others falter. 

“[M]any of today’s most valuable firms have come to realize that analyzing and improving individual workers - a practice known as employee performance optimization -  isn’t enough,” writes Duhigg.   “As commerce becomes increasingly global and complex, the bulk of modern work is more and more team-based… at many companies, more than three-quarters of an employee’s day is spent communicating with colleagues.”

“In Silicon Valley, software engineers are encouraged to work together, in part because studies show that groups tend to innovate faster, see mistakes more quickly and find better solutions to problems,” he later adds.  “Studies also show that people working in teams tend to achieve better results and report higher job satisfaction.  In a 2015 study, executives said that profitability increases when workers are persuaded to collaborate more.  Within companies and conglomerates, as well as in government agencies and schools, teams are now the fundamental unit of organization.  If a company wants to outstrip its competitors, it needs to influence not only how people work but also how they work together.”

The article devotes several paragraphs to the pioneering research on group performance by MIT professor Tom Malone, CMU professor Anita Woolley and their various collaborators over the past 8 years.  Their work addressed a very intriguing set of questions: Do groups exhibit characteristic levels of intelligence which can be measured and used to predict the group’s performance across a wide variety of cognitive tasks?  If so, can you devise tests to measure the group’s intelligence using methodologies and statistical techniques similar to those that have been applied to measure the IQs of individuals over the past hundred years?

Anticipating the Future of the IT Industry

How can we best anticipate the future of a complex, fast changing industry like IT?  Which hot technology innovations, - e.g., artificial intelligence, the blockchain, cloud computing, - will end up having a big impact and which are destined to fizzle?  What can we learn from the IT industry’s 60-year history that might help us better prepare for whatever lies ahead?

A major way of anticipating the future of any economic or social entity, - be it a company, industry, university, government agency or city, - is to explore and learn from its history.  While there’s no guarantee that historical patterns will continue to apply going forward, they might well be our most important guides as we peer into an otherwise unpredictable future.

I’ve been involved with computers since the early 1960s, first as a student at the University of Chicago, then in my long career at IBM, and subsequently through my relationship with a number of companies and universities.  I’ve thus had a ringside seat from which to observe the journey the IT industry’s been on since those early days.

Let me share some of my personal impressions of this journey through the lens of three key areas, each of which has played a major role throughout IT’s history, and will continue to do so well into its future: data centers, transaction processing, and data analysis.

The MIT Inclusive Innovation Competition

About three years ago, MIT launched the Initiative on the Digital Economy (IDE), a major effort focused on the broad changes brought about by the relentless advances of digital technologies.  As its website explains:

“While digital technologies are rapidly transforming both business practices and societies and are integral to the innovation-driven economies of the future, they are also the core driver of the great economic paradox of our time.  On one hand, productivity, wealth, and profits are each at record highs; on the other hand, the median worker in America is poorer than in 1997, and fewer people have jobs.  Rapid advances in technology are creating unprecedented benefits and efficiencies, but there is no economic law that says everyone, or even a majority of people, will share in these gains.

The future of work and jobs is one of the major areas being addressed by IDE.  What will the workforce of the future look like?; Where will jobs come from in the coming years?; Will the nature of work be significantly different in the digital economy?; How can we accelerate the transformation of institutions, organizations, and human skills to keep up with the quickening pace of digital innovation?

To help come up with breakthrough answers to these very challenging questions, IDE just launched its first annual Inclusive Innovation Competition.  The competition aims to identify, celebrate and award prizes to “organizations that are inventing a more sustainable, productive, and inclusive future for all by focusing on improving economic opportunity for middle- and base-level income earners.” 

The Coming Robotics Revolution

Hi, Robot: Work and Life in the Age of Automation, reads the Hamlet-inspired cover of the July, 2105 issue of Foreign Affairs.  The clever cover highlights the issue’s main theme, artificial intelligence and robotics, - a set of technologies that some fear could one day threaten our very existence. 

As its introductory article reminds us “new technologies have been revolutionizing the world for centuries, transforming life and labor and enabling an extraordinary flourishing of human development.  Now some argue that advances in automation and artificial intelligence are causing us to take yet another world-historical leap into the unknown.” 

Speculations about a future radically transformed by technology are nothing new.  But, with AI and robots seemingly everywhere, the concerns surrounding their long term impact may well be in a class by themselves.  Like no other technologies, AI and robots force us to explore the boundaries between machines and humans.  Will they turn out like other major innovations, e.g., steam power, electricity, cars, - highly disruptive in the near term, but ultimately beneficial to society?  Or, will we see a more dystopian future, as smart machines increasingly encroach on activities requiring intelligence and cognitive capabilities that not long ago were the exclusive domain of humans?  Opinions abound, but in the end, we don’t really know.

What’s the Value of a Liberal Arts Education in Our 21st Century Digital Economy?

A few years ago, I came across a very interesting article about the efforts of Roger Martin to transform business education.  At the time, Martin was the Dean of the Rotman School of Management at the University of Toronto.  He had long been advocating “that students needed to learn how to think critically and creatively every bit as much as they needed to learn finance or accounting.  More specifically, they needed to learn how to approach problems from many perspectives and to combine various approaches to find innovative solutions.”

“Learning how to think critically - how to imaginatively frame questions and consider multiple perspectives - has historically been associated with a liberal arts education, not a business school curriculum, so this change represents something of a tectonic shift for business school leaders.”  Achieving this goal would require business schools to move into territory “more traditionally associated with the liberal arts: multidisciplinary approaches, an understanding of global and historical context and perspectives, a greater focus on leadership and social responsibility and, yes, learning how to think critically.”

Similarly, in a 2006 report, the National Academy of Engineering called for reforming engineering education.  “New graduates were technically well prepared but lacked the professional skills for success in a competitive, innovative, global marketplace.  Employers complained that new hires had poor communication and teamwork skills and did not appreciate the social and nontechnical influences on engineering solutions and quality processes.”

Shaping the Future of the Internet

The Winter 2016 issue of Dædalus, the Journal of the American Academy of Arts and Sciences, is devoted to the Internet.  Its 7 articles explore some of the major issues shaping the Internet’s future.  The issue was curated by Harvard professor Yochai Benkler and MIT research scientist David Clark, whose joint introduction and individual papers frame the overall discussion.

“The Internet was born in 1983,” write Benkler and Clark in the Introduction.  That year saw the adoption of TCP/IP, - the communications protocol that defines the Internet to this day.  Its technical directions and overall culture have been largely determined by the academic and research communities, who were also its early users.  With strong government support, they developed a system that “only a researcher could love: general, abstract, optimized for nothing, and open to exploration of more or less anything imaginable using connected computers.”

The Internet has since evolved “from a network that primarily delivered email among academics and government employees, to a network over which the World Wide Web arose, to the video and mobile platform it has become - and the control network for embedded computing that it is fast becoming.”  From its niche research beginnings, it’s become the universal platform for collaborative innovation, enabling startups, large institutions, and everyone in between to quickly develop and bring to market many new digital products and services.

What design choices have led to the Internet as we know it?  Could it still evolve into a fundamentally different platform than the one we use today?  What decisions could significantly shape its future?  These are among the very important questions explored in the Dædalus issue.  In their Introduction, Benkler and Clark summarized some of the key themes that emerged from the various papers, - a few of which I’d now like to discuss.

Leadership in a Changing World

What are the critical competencies needed to lead in our fast-changing business environment?  This question was the focus of a study jointly conducted by the professional services firm Heidrick & Struggles and the University of Oxford Said Business School.  The study was based on over 150 conversations with CEOs from a wide range of sectors around the world.  Its findings were recently published in The CEO Report: Embracing the Paradoxes of Leadership and the Power of Doubt.

“Declining tenure rates and levels of public trust suggest that CEO leadership has not kept pace with increased expectations,…” notes the report in its opening paragraphs.  “Indeed, the role of the CEO is becoming more complex as competing and increasingly vocal stakeholders permeate organizations.”  Leading in today’s world requires new thinking: “past experience is no longer a reliable guide for future action…  success as a CEO today hinges on continual growth in the role, even more than on the preparation beforehand.”

The key challenge confronting CEOs, - and senior executives in general, - is the relentless pace of change.  But, while speed is the major dimension of change, it’s not the only one.  Beyond speed, executives must also focus on scope and significance.  They must carefully consider a few fundamental questions about each:

Corporate Survival: Lessons from Biology

Having lived through IBM’s near-death experience in the early 1990s, respect for the forces of the marketplace is edged deep in my psyche.  It’s frankly sobering how many once powerful IT companies are no longer around or are shadows of their former selves.  The carnage might be more pronounced in the fast-changing IT industry, but no industry is immune.  It would seem as if darwinian principles apply in business almost as much as they do in biology. 

A few weeks ago I discussed a paper published last year, The Mortality of Companies, by physicist Geoffrey West and his collaborators at the Santa Fe Institute.  Based on their extensive analysis of data about publicly traded US companies, they were surprised to discover that a typical firm lasts about ten years before it gets merged, acquired or liquidated, and that a firm’s mortality rate is independent of its age, how well established it is or what it does.  While beyond the scope of their study, the authors speculated that biological ecosystems are likely to shed valuable insights into their findings.

Such similarities between business and biological ecosystems was the focus of The Biology of Corporate Survival, a paper recently published in the Harvard Business Review (HBR) by Martin Reeves, Simon Levin, and Daichi Ueda. 

“Some business thinkers have argued that companies are like biological species and have tried to extract business lessons from biology, with uneven success,” note the authors.  “We stress that companies are identical to biological species in an important respect: Both are what’s known as complex adaptive systems.  Therefore, the principles that confer robustness in these systems, whether natural or manmade, are directly applicable to business.”

Why People and Companies Die While Cities Keep Growing

The Winter issue of strategy+business includes a very interesting article on theoretical physicist Geoffrey West, - The Fortune 500 Teller.  Dr. West is Distinguished Professor and Past President of the Santa Fe Institute (SFI), a non-profit research institute dedicated to the study of complex systems.  Prior to joining the SFI in 2003, he was the leader and founder of the high energy physics group at Los Alamos National Lab.

About 20 years ago, West got interested in whether some of the techniques and principles from the world of physics could be applied to complex biological and social systems.  In particular, he wondered if we could apply empirical, quantifiable and predictive scientific methods to help us better understand complex biological organisms and social organizations like cities and companies.

In the 1990s, his attention first turned to biology.  There are enormous variations in the characteristics of living creatures, their live spans, pulse rates, metabolism, and so on.  How do these characteristics change with body size?  Why do human beings live roughly 80 to 100 years, while mice live only two to three years.  Are there some common principles that apply to all living creatures regardless of size?  Can we find empirical mathematical models that might allow scientists to ask big questions about life, aging and death?

Learning to Apply Data Science to Business Problems

This past semester I was involved in an interesting course at MIT’s Sloan School of Management, - Analytics Labs (A-Lab).  A-Lab’s objective is to teach students how to use data sets and analytics to address real-world business problems.  Companies submit project proposals prior to the start of the class, including the business problem to be addressed and the data on which the project will be based. Students are then matched with the project they’re most interested in and grouped into teams of 3-4 students.

A-Lab received over 20 project proposals from different companies, of which 13 were selected by the students.  Each project team was assigned a research mentor to provide guidance as appropriate.  I mentored a 3-student team that worked on a project sponsored by MasterCard.  The students explored the possibility of improving on predictions of the economic performance of emerging markets by coupling existing economic indicators data with consumer behavior based on MasterCard’s transaction data.  This is a particularly interesting project because economic data in emerging markets is often not as reliable as the data in more advanced markets.

But more important for the students, the various A-Lab projects served as a concrete learning experience on what data science is all about, - how to leverage messy, incomplete, real-world data to shed light on a complex and not-so-well-defined problem.

The Rise of the T-Shaped Organization

The concept of T-shaped skills was first introduced over 20 years ago, but its importance, - to both individuals and organizations, - has continued to rise.  A growing number of articles have been extolling the value of T-shaped professionals, that is, individuals who combine deep cognitive, analytical, and/or technical skills in a specific discipline, with broad multidisciplinary, social skills.

As described by IDEO CEO Tim Brown:  “The vertical stroke of the T is a depth of skill that allows them to contribute to the creative process.  That can be from any number of different fields: an industrial designer, an architect, a social scientist, a business specialist or a mechanical engineer.  The horizontal stroke of the T is the disposition for collaboration across disciplines.”

T-shaped skills are increasingly valued in the marketplace.  For example, a recent paper by Harvard professor David Deming showed that labor markets have been rewarding individuals with strong social skills, that is, with interpersonal skills that facilitate interactions and communications with others.  Deming’s research showed that since 1980, social-skill intensive occupations have enjoyed most of the employment growth across the whole wage spectrum.  Employment and wage growth have been particularly strong in jobs requiring both high cognitive and high social skills.  But since 2000, they have fallen in occupations with high cognitive but low social skill requirements, - “suggesting that cognitive skills are increasingly a necessary but not sufficient condition for obtaining a high-paying job.”

Disruptive Innovation Revisited

Disruptive innovation was first introduced by Harvard Business School professor Clayton Christensen in a 1995 Harvard Business Review (HBR) paper co-written with Joseph Bower.  The concept was further elaborated and popularized in Christensen’s 1997 bestseller The Innovator's Dilemma, and in the articles and books he’s written or co-authored since then.  Few business concepts have been as long and widely used.

But as often happens with serious ideas once they become popular, disruptive innovation has joined the pantheon of trendy, overused business buzzwords, - stretched and applied way beyond its intended meaning.  It’s even led to a rather strong backlash in a 2014 New Yorker article by Harvard history professor Jill Lepore.

20 years after its introduction, Christensen has revisited his original concept in What is Disruptive Innovation?, co-written with Michael Raynor and Rory McDonald, and just published in HBR’s December issue.  The authors aim to define what disruptive innovation is and what it isn’t, as well as to update the theory based on the experiences of the past two decades.

“The theory of disruptive innovation… has proved to be a powerful way of thinking about innovation-driven growth…,” they write.  “Unfortunately, disruption theory is in danger of becoming a victim of its own success.  Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied.  Furthermore, essential refinements in the theory over the past 20 years appear to have been overshadowed by the popularity of the initial formulation.  As a result, the theory is sometimes criticized for shortcomings that have already been addressed.”

The Continuing Evolution of Cloud Computing

I’ve been closely following cloud computing for a number of years, having posted my first cloud blog in March of 2008.  A few months later I gave a presentation at a  cloud-based conference.  The overall sense at that conference was that something big and profound was emerging in the IT industry.  Cloud computing could well be The Next Big Thing - one of those massive changes that the IT industry goes through from time to time that really shake things up, - like the advent of personal computers in the 1980s and the Internet in the 1990s. 

Cloud has fulfilled those early expectations, having made much progress in a relatively short time.  As I look back at its evolution over the past few years, I think of cloud as having gone through three main, overlapping phases.

Early adopters viewed cloud as computing-on-demand.  Next, cloud introduced a much more disciplined approach to the architecture and management of large IT infrastructures.  And by now, cloud has become accepted as a major transformational force in IT, in business, and in the economy in general.

Let me discuss each of these phases. 

The Growing Value of Social Skills

I recently read a very interesting paper, The Growing Importance of Social Skills in the Labor Market, by Harvard professor David Deming.  Deming’s paper shows that over the past several decades, labor markets have been increasingly rewarding social skills, that is, interpersonal skills that facilitate interactions and communications with others.  He presents evidence that since 1980, social-skill intensive occupations have enjoyed most of the employment growth across the whole wage spectrum, and that employment and wage growth have been particularly strong in jobs that require both high cognitive and high social skills. 

Deming’s paper builds on the work of MIT economist David Autor, a leading authority on the impact of technological change on the US labor market.  A few weeks ago I wrote about a paper he published this past summer on the history and future of workplace automation.  In that paper, Autor summarized the sharp polarization of job opportunities that’s taken place in the US over the past two decades, noting that job opportunities have significantly expanded in both high-skill and low-skill occupations, while they have significantly contracted for mid-skill jobs. 

The reason for this polarization is that automation has been most successful when applied to mid-skill routine tasks, that is, tasks or processes that follow precise, well understood procedures that can be well described by a set of rules.  The occupations most susceptible to automation have included blue-collar physical activities such as manufacturing and other forms of production, as well as white-collar, information-based activities like accounting, record keeping, and many kinds of administrative tasks.  As a result, these occupations have experienced the biggest declines in employment opportunities and earnings. 

On the other hand, non-routine tasks are much harder to describe by a set of rules that a machine can follow.  These include manual jobs in fast-food restaurants, janitorial services and health-care aides that require relatively low skills and education, as well as high-skill jobs that involve expert problem solving and complex communications requiring strong cognitive skills and a college education.

Two-Speed IT Architectures

I recently read an interesting McKinsey article, Organizing for digital acceleration: Making a two-speed IT operating model work.  The article argues that born digital  Internet companies, - e.g., Amazon, Google, Facebook, - are setting the standards in the quest to understand and optimize the customer experience, challenging traditional companies to keep up.  These older companies have to both leverage the back-end systems, processes and overall capabilities that have served them well over the years, while adopting innovative consumer-facing technologies to enhance their customers’ experiences.

The article starts out by summarizing the best practices of born digital companies:

• Provide the appropriate information and platforms so customers can find what they need quickly and reliably. 
• Align technology and production systems with business goals. 
• Limit the size of application-development teams. 
• Focus on agile product development to enhance customer engagements. 
• Encourage product managers to think about digital experiences rather than discrete applications or components. 
• Collect and learn from consumer data.
• Engage in frequent testing and experimentation.
• Don’t be afraid to fail.
  

Design Thinking and the Workplace Experience

Design has long played a major role in product innovation.  But in the last few years, a shift has been underway bringing design to the very core of the business.  “The Evolution of Design Thinking: It’s no longer just for products. Executives are using this approach to devise strategy and manage change,” read the cover of the Harvard Business Review’s September issue, which featured several articles on the subject. 

Leading-edge companies are leveraging design thinking to translate technological advances into compelling customer experiences in order to seize market share from more traditional competitors.  As noted in one of the HBR articles, design-centric organizations are adamantly focused on their customer’ needs, rather than on their internal operational efficiencies.

A second HBR article explored a different kind of application.  To help overcome the stiff resistance often encountered by disruptive innovations, - both within one’s own organization and in the marketplace, - the article proposed that design thinking should be applied to their actual introduction, - a process it calls intervention design.

I would now like to turn to another recent article, Management by Design, by professors Mark Gruber, Nick de Leon, Gerry George and Paul Thomson.  As the authors argue, design principles should be applied within the management domain itself, to help rethink business processes, workflows and the overall structure of the organization and thus create what it calls a New Workplace Experience (NWX).

Bridging the World’s Knowledge Divide: Technology + Competition, Skills and Institutions

A few months ago I attended the 12th annual Brookings Blum Roundtable on Global Poverty, a meeting that brought together around 50-60 policy and technical experts from government, academia, business, investors and NGOs.  This year’s event was focused on the impact of digital technologies on economic development in emerging and developing countries.  It was organized around six different sessions, each of which explored the links between technology and development through a different lens. 

Prior to the event, the Brookings Institution commissioned a policy brief for each session to help set the stage for the ensuing discussions.  I wrote one of the briefs, - Will the Digital Revolution Deliver for the World’s Poor.  I would now like to discuss another brief which I found quite interesting, - Will the Spread of Digital Technologies Spell the End of the Knowledge Divide?, by Deepak Mishra, lead economist at the World Bank.  Dr. Mishra is also co-director of the World Development Report 2016: Internet for Development, which will shortly be released by the World Bank.

The Importance of Empathy in Our Services-Centric, People-Oriented Economy

A few days ago I read an excellent article in the Harvard Business Review, - Empathy Is Still Lacking in the Leaders Who Need It Most, - by Ernest Wilson, Dean of the Annenberg School of Communications and Journalism  at the University of Southern California (USC).  The article is based on the Third Space, a research project to better understand the key competencies companies are looking for, and whether these talent requirements are being adequately addressed by universities.

The study conducted face-to-face, in-depth conversations with dozens of senior executives across companies in a broad range of industries and consulted with a number of other academic institutions.  It gathered additional data through online surveys and partnered with Korn Ferry, - the world’s largest executive search firm, - which gave them access to data on almost 1,900 executives with a broad range of professional backgrounds. 

Their initial findings were published in a working paper, The one-trillion dollar global talent gap: What it is and what we can do about it.  Their research discovered that talent is the greatest competitive challenge companies face.  More specifically, beyond the traditional skills typically provided by engineering and business schools, companies need a new kind of talent that is currently undersupplied in the workforce.

Future leaders must be strong in quantitative, technical and business skills.  But these must be complemented with a unique set of attitudes, perspectives, experiences and other so called softer skills.  Good leaders need to be good strategic thinkers and must have strong social and communications skills.  Finding and retaining talented individuals with these capabilities is a challenge regardless of geography or industry.

Intervention Design: Overcoming Stiff Resistance to a New, Disruptive Innovation

The September issue of the Harvard Business Review features a spotlight on The Evolution of Design Thinking.  With four articles on the subject, HBR’s overriding message is that design is no longer just for physical products, being increasingly applied to customer experiences, innovation, business strategy, and complex problem solving. 

Last week I discussed this expanded view of design thinking based on one of the articles, - Design Thinking Comes of Age.  I now want to turn my attention to a second article in the HBR issue, Design for Action, which applies design thinking not to the actual artifact being designed, - whether product, service, business strategy, or complex system, - but to a very different kind of problem: the introduction of the designed artifact into the world.

When first introduced, disruptive innovations are likely to encounter stiff resistance, both within one’s own organization and in the marketplace, - otherwise we wouldn’t call them disruptive.  The article argues that we should apply design thinking to the launch of the disruptive innovation itself - a process they call intervention design. 

Design for Action was co-written by Tim Brown and Roger Martin.  Tim Brown is the CEO of IDEO, - the firm most associated with this more general view of design.  Roger Martin is in the faculty of the Rotman School of Management at the University of Toronto, where he served as Dean from 1998 to 2013.  He’s a strategic advisor to CEOs around the world and the author of a number of books.

The Evolution of Design Thinking

Design Thinking is the featured topic in the September issue of the Harvard Business Review with four articles on the subject.  “It’s no longer just for products.  Executives are using this approach to devise strategy and manage change,” reads the tagline in its cover.

The application of design thinking beyond products, - in innovation, problem solving and business strategy, - isn’t new.  Nobel laureate Herbert Simon discussed the concept in his 1969 classic The Sciences of the Artificial.  IDEO, a firm best known for pioneering this expanded view of design, traces its roots back to 1978.  The School of Design in London’s Royal College of Art has long been pushing the boundaries of industrial design.  Stanford’s Institute of Design, aka the d.school, was founded a dozen years ago.  “But many companies still aren’t sure how it can improve their business,” notes Adi Ignatius, HBR’s editor-in-chief.

It’s not surprising that many companies don’t understand what is meant by design thinking, let alone its potential value to their business.  It’s much easier to appreciate the role of design when it comes to physical objects: cars, bridges, buildings, dresses, shoes, jewelry, smartphones, laptops, and so on.  But, it’s considerably harder to appreciate its importance when it comes to more abstract entities like systems, services, information and organizations.  Their very nature is vague.  You can’t touch them.  Yet, they account for the bulk of the growing complexity in our daily lives.

Realizing the Potential of the Digital Economy

A few weeks ago I attended the 12th annual Brookings Blum Roundtable on Global Poverty.  Organized by the Brookings Institution, the Blum Roundtable brings together policy and technical experts from government, academia, business, investors and NGOs from all over the world.  This year’s event, - Disrupting Development with Digital Technologies, - explored the impact of the digital economy on the ways business and development organizations now engage with emerging and developing countries.

In a pre-Roundtable blog, Kemal Derviş, - Brookings VP, Global Economy and Development, - identified three major trends with the potential to redefine global development over the next 10 years: the growing adoption of digital payments serving people everywhere with near-frictionless transactions; the spread of Internet connectivity and digital literacy; and the harnessing of data to better serve the poor and to generate new knowledge.

 Discussions were organized around six different sessions over three days.  Each session looked at the impact of digital technologies on economic development through a different lens, including electronic payments, access to information and the future of work.  Prior to the Roundtable, Brookings commissioned a policy brief for each session to help set the stage for the ensuing presentations and discussions.

Is a Backlash Brewing Against Silicon Valley’s Perceived Insularity?

“Empire of the geeks… and what could wreck it” was the featured cover story of The Economist’s July 25 issue.  “Silicon Valley should be celebrated.  But its insularity risks a backlash,” reads the tag line of its leader article.  Last year’s anger at the private buses that take employees who live in San Francisco to their workplaces 30 or 40 miles south, is but one of the signs that a backlash might be brewing.

You can sense the reaction against the perceived excesses of its culture in a pair of recent articles, - Silicon Valley’s Youth Problem in the NY Times Magazine, and What Silicon Valley Thinks of Women in Newsweek, the latter visually making its point in its cover.  You can feel it in HBO’s no-holds-barred namesake TV series. And then there is Peter Thiel, - one of Silicon Valley’s most successful, outspoken, and wealthy entrepreneurs and VCs, - who adds fuel to the backlash fire with his controversial views on a wide range of subjects, including women, democracy, capitalism and education.  

Becoming a 21st Century Digital Tinkerer

I like to tell people that the key to being and/or sounding smart is to hang out with smart people.  And, one of the names that would quickly comes to mind if asked to recommend who to hang out with is John Seely Brown, aka JSB.  JSB, - who’s been a friend for over 25 years, - was chief scientist at Xerox and director of its Palo Alto Research Center (PARC) until June of 2000.  He is now the independent co-chairman of the Deloitte Center for the Edge and a visiting scholar at USC.  But, as noted in his personal website, his chief occupation is Chief of Confusion,“helping people ask the right questions, trying to make a difference through my work- speaking, writing, teaching.” 

Transform our learning paradigms for the digital age is one of the main topics JSB has long been exploring, most recently in Cultivating the Entrepreneurial Learner in the 21st Century, - an article based on a presentation of the same title.  Entrepreneurial learners aren’t necessarily entrepreneurs, but like entrepreneurs, they are “constantly looking for new ways, new resources, new peers and potential mentors to learn new things.” 

Why is it so important to foster a more entrepreneurial style of learning?  Our educational system has long been based on the assumption that learning is mostly about acquiring knowledge as well as critical skills to enable us to apply whatever we learned in school throughout our careers, say 30 - 40 years.

Man, Machine, and Work

The June, 2015 issue of the Harvard Business Review includes a spotlight on Man and Machine: Knowledge Work in the Age of the Algorithm.  Another example that, as a recent article observed, “Artificial intelligence is suddenly everywhere…”

People have long worried about the impact of technology on society, whether discussing railroads, electricity, and cars in the Industrial Age, or the Internet, mobile devices and smart connected products now permeating just about all aspect of our lives.  But the concerns surrounding AI may well be in a class by themselves.  Like no other technology, AI forces us to explore the very boundaries between machines and humans.

Some experts fear that at some future time, sentient, superintelligent AI machines might pose an “existential risk” that “could spell the end of the human race.”  Others are dismissive of such dire concerns while agreeing that we must work hard to ensure that our complex AI systems do what we want them to do. 

Whether right or wrong, these long term worries are still decades into the future.  Much more immediate is the impact of our smart machines on jobs and the economy.  Will AI turn out like other major innovations, - e.g., steam power, electricity, cars, - highly disruptive in the near term, but ultimately beneficial to society?  Or, will our smart machines take over not just low-skilled tasks but high-skilled ones too?  What will life be like in such an AI future, when highly intelligent machines, - many far surpassing human cognitive capabilities, - are all around us?

Open Letter on the Digital Economy

A few days ago I received an e-mail from MIT professor Erik Brynjolfsson inviting me to consider supporting an Open Letter on the Digital Economy that a small group had recently drafted.  As he explained in the e-mail: 

“We met out in Silicon Valley to discuss how technology was driving an economic transformation.  We concluded that the effects on wealth and income are already significant, and emerging technologies promise greater effects in the coming decade.  While the economic pie is bigger than ever, wages for the median worker in America and other advanced nations have stagnated, increasing inequality.  With more powerful technologies available than ever before, the challenge before us is to create a better society than ever before.  We decided to draft an open letter expressing some of our ideas.” 

Since the steam engine in the late 18th century, we’ve had major waves of innovation every 50-60 years, including railroads, steel, electricity and heavy engineering in the 19th century; and automobiles, airplanes and telecommunications in the 20th century.  

Each such wave was accompanied by periods of creative destruction, when older industries and jobs where displaced by the new technology-based innovations.  Over time, these innovations transformed the economy, re-shaped the institutions of society, and ultimately led to the creation of all kinds of new, more productive industries and many new kinds of jobs.  

“Previous technological innovation has always delivered more long-run employment, not less.  But things can change,” is the tag line of an article on the future of jobs published in January of 2014 in The Economist.  “Nowadays, the majority of economists confidently wave such worries away.  By raising productivity, they argue, any automation which economises on the use of labour will increase incomes.  That will generate demand for new products and services, which will in turn create new jobs for displaced workers…”

“For much of the 20th century, those arguing that technology brought ever more jobs and prosperity looked to have the better of the debate…  Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently.  They start from the observation that, across the rich world, all is far from well in the world of work. The essence of what they see as a work crisis is that in rich countries the wages of the typical worker, adjusted for cost of living, are stagnant.”

Game-Changing Basic Research: Benefits and Challenges

In April, MIT released The Future Postponed: Why Declining Investment in Basic Research Threatens a U.S. Innovation Deficit, - a report on both the long term benefits of basic research and the impact on those benefits of declining federal investments.

“2014 was a year of notable scientific highlights,” notes the report in its introduction, “including: the first landing on a comet, which has already shed important light on the formation of the Earth; the discovery of a new fundamental particle, which provides critical information on the origin of the universe; development of the world’s fastest supercomputer; a surge in research on plant biology that is uncovering new and better ways to meet global food requirements.” 

“None of these, however, were U.S.-led achievements,” it then adds.  “The first two reflected 10-year, European-led efforts; the second two are Chinese accomplishments, reflecting that nation’s emergence as a science and technology power.  Hence the widespread concern over a growing U.S. innovation deficit, attributable in part to declining public investment in research.” 

According to the American Association for the Advancement of Science (AAAS), the percentage of the federal annual budget devoted to R&D has fallen from 9.1%, ($16.2 billion), in 1968 to 3.4%, ($131.0 billion), in 2015.  As it has for many decades, the US continues to lead the world in total R&D outlays, which includes all the R&D carried out in companies, universities, research institutes, government labs and so on.  But other countries, China in particular, are catching up. 

In 2014, says R&D magazine, the US spent $465 billion in R&D, while China was second at $284 billion.  But, it estimates that given the current rate of growth and investments, China will be spending $600 billion in R&D and surpass the US around 2022 due to its faster growing economy.

Reflections on Ten Years of Blogging

The Internet era was born around 20 years ago, when Netscape went public in August of 1995 and caught the world by storm with its highly successful IPO.  For many people, myself included, the Netscape IPO marked the passage of the Internet from a network primarily used by universities, research labs and the technical community in general, to the universal platform for content, communications and commerce it’s since become. 

The Internet ushered the rise of a highly connected economy all around us, whose magnitude and implications were nicely captured by NY Times columnist Tom Friedman in his 2005 bestseller The World is Flat.  But it’s a measure of how fast things are changing that, as Friedman observed in a conference in 2011, the environment he described was already out of date.  In a short 6 years, we were already transitioning from the connected world of PCs, browsers and web servers he wrote about, to the hyperconnected world of smart mobile devices, cloud computing and broadband wireless networks, a transition that in 2015 is now in full swing.  

Friedman’s words came to mind as I was reflecting on the evolution of blogging since I posted my first blog in May of 2005.

According to Wikipedia, something like blogging got its start with the advent of the Internet era in the mid 1990s, although the term weblog, later abbreviated to blog, didn’t come into being until the latter part of the decade.  In its early years, blogging was mostly viewed as something geeks did, - technical knowledge was required since the tools were fairly primitive, - or as a narcissistic endeavor, - early blogs often felt like online personal diaries.

This all started to change in the early 2000s.  The advent of easy-to-use tools and platforms brought blogging to a much larger, non-technical population.  People started to blog about a wide variety of topics, from politics and journalism to business and technology.  Internal company blogs, only accessible to employees, began to appear.  By the mid 2000s, blogging was growing quite rapidly and had made its way from the fringes to the Internet mainstream.

Imagination as a Journey of Survival and Discovery

On April 18 I participated in a TEDx conference at my local community library in Westport, CT.  TEDx programs were developed to help independent organizations create their own TED-like events in the spirit of TED’s mission, - ideas worth spreading.  As is the case with TED, TEDx talks should be carefully curated, compelling and short, lasting no more than 18 minutes. 

Imagination was the overall theme of the Westport Library conference.  Five different speakers applied the theme to their various talks, ranging from Imagining Risk to Boredom - A Source of Inspiration.   Imagination as a Journey of Survival and Discovery was the title of my own talk.  I’ve given many seminars and taught semester-long courses on the subject.  But, boiling down your key message into a meaningful, 18-minutes-or-less TED talk is quite a challenge.  It forces you to think really hard about the very essence of the story you are telling, as well as why the audience should be interested in what you have to say. 

I focused my talk on the role of imagination during times of major economic and societal change.  At such times, when survival and discovery are at a premium, imagination is badly needed to help us accept the need to deal with a fast-changing present, as well as to encourage us to take the necessary actions and embark on a journey toward an uncertain, and possibly perilous future.

I followed the wise advice once given by Leo Tolstoy - Describe your village, and you will describe the world.  Part of my talk was about Westport, the village or town where I’ve lived for the past 24 years, and in particular about our community library with which I’ve been closely associated for most of those years.  But first, I talked about IBM, which while not quite a village, was for me a kind of extended family for over 40 years, from the time I joined in 1970, - right after school and shortly after my 25th birthday, - until my retirement in 2007, followed by an additional 3 years as a consultant.

The Promise and Challenges of Health Analytics

On February 24 I attended a workshop in MIT on the Future of Health Analytics.  The event was sponsored by MIT Connection Science, a recently organized research initiative aimed at leveraging data science to quantify and analyze human behaviors, and to leverage the new insights thus obtained in key societal applications, including healthcare, transportation and finance.  Connection Science, - with which I’m affiliated as a Fellow, - was founded by Media Lab professor Alex “Sandy” Pentland.  He’s the author of several books, including the recently published Social Physics: How Good Ideas Spread.  

I’ve worked with Pentland for the past several years, and have previously written about his research on Reinventing Society in the Wake of Big Data, as well as his work with the World Economic Forum and others on the creation of trust frameworks for the sharing and protection of personal data.  In his opening remarks at the workshop, Pentland talked about Big Data and Health.  The little data breadcrumbs that we leave behind as we move around in the world can now be reality mined to help us better understand our behaviors and thus improve our lives and health.  He discussed several applications of big data to health, based on research at his MIT Human Dynamics Lab, as well as startups he’s involved in.

Following Pentland, Dr. Dennis Ausiello talked about Quantitative Human Phenotyping and the opportunities it offers to transform the practice of medicine.  Ausiello is professor of medicine at the Harvard Medical School, Chief Emeritus of Medicine at Massachusetts General Hospital (MGH), and director and co-founder of the Center for Assessment Technology and Continuous Health (CATCH), a joint MGH-MIT initiative aimed at finding new ways of measuring the human condition, i.e., phenotypes.

The Big Data Era Is Here

In mid-January, the Transportation Research Board (TRB) of the National Academies held its 94th Annual Meeting in Washington DC.  The conference attracted around 12,000 transportation researchers and practitioners from around the world.  During the meeting, the TRB Executive Committee held a policy session on the impact of big data on transportation systems.  I was one of three panelists invited to the session.  Each of us made a short presentation which was then followed by an extensive discussion between the panel and the Committee.

Big data and related information-based disciplines, - e.g., data science, artificial intelligence, - are everywhere.  Why are we so excited about them?  Is it mostly hype, or is there something truly profound going on?  In my presentation, I tried to briefly address these questions based on three key observations.

As Big Data and AI Take Hold, What Will It Take to Be an Effective Executive?

Big data, powerful analytics and AI are everywhere.  After years of promise and hype, technology is now being applied to activities that not long ago were viewed as the exclusive domain of humans.  Our digital revolution had led to amazing applications, but also to considerable pain for many workers who’ve been experiencing declining employment and wages.  Mid-skill jobs have been particularly threatened.  Many of these jobs, - which include blue-collar production activities as well as information-based white-collar ones, - are based on well understood procedures that can be described by a set of rules that machines can then follow. 

But, what will be the impact of our increasingly intelligent machines on senior management positions?  In principle, such jobs deal with non-routine, cognitive tasks requiring high human skills, including expert problem solving, complex decision-making and sophisticated communications for which there are no rule-based solutions.  “As artificial intelligence takes hold, what will it take to be an effective executive?” asks a recent McKinsey article - Manager and Machine: The new leadership equation.  “What would it take for algorithms to take over the C-suite?  And what will be senior leaders’ most important contributions if they do?” 

After asking these questions to senior managers across a broad range of industries, McKinsey  concluded that two key things need to happen for technology to more deeply transform their jobs.  First, much still needs to be done to create the proper data sets that would enable intelligent computers to assist in decision-making.  Garbage in, garbage out applies as much to data analysis today as it has to computing in general since its early years.  Organizations must have a data-analytics strategy that cuts across internal informational silos and properly incorporates external information sources like social media. 

And most important, senior managers must learn to let go, something which is quite difficult because it runs counter to decades of organizational practices.  Given our rapidly rising oceans of data, the command-and-control approach to management, where information flows up the organization and decisions are made at high levels, would sink the senior executive teams.  As data science and AI permeate the organization, it’s important to delegate more autonomy to the business units that hopefully have the proper skills, the advanced tools and the necessary information to make better decisions on their own.

Preparing Students for an Increasingly Complex Business World

Are engineering and management schools adequately preparing students for our fast-changing, highly complex business world?  Not quite, say a number of recent studies.  A good education should include soft as well as hard competencies.  Universities generally do a pretty good job when it comes to teaching hard skills, - engineering methods, technology, analytical tools, finance, marketing, and so on.  But they don’t do so well with the softer competencies, including communications, teamwork and systemic thinking. 

For example, a 2007 study on MBA education found significant gaps between the competencies companies are looking for, and what students are taught in business schools.  Companies generally want MBA graduates with good social skills who are good at leadership, communications, and innovation.  However, the students frequently complain that such skills will not get them the kinds of jobs they want, and they pressure the schools to offer them courses that are more functional, analytical and technical.  This particular study focused primarily on MBA programs, but similar skill gaps are likely to be found in engineering and other STEM programs. 

Three years ago, USC’s Annenberg School of Communications and Journalism embarked on the Third Space, a research project to better understand the nature of the so-called soft competencies companies are looking for, as well as the talent requirements not being adequately addressed by engineering and business schools.  The project’s initial findings were recently described in a working paper, The one-trillion dollar global talent gap: What it is and what we can do about it, by Ernest Wilson, Dean of the Annenberg School.

In its first phase, the study conducted face-to-face, in-depth conversations with 75 senior executives across companies in a broad range of industries, including automobile, banking consulting, consumer products and technology.  Online surveys were used to gather additional data.  A number of academic institutions were consulted as well.

The Science of Innovation

 “Innovation - identified by MIT economist and Nobel laureate Robert Solow as the driver of long-term, sustainable economic growth and prosperity - has been a hallmark of the Massachusetts Institute of Technology since its inception.”  Thus starts The MIT Innovation Initiative: Sustaining and Extending a Legacy of Innovation, the preliminary report of a yearlong effort to define the innovation needed to address some of the world’s most challenging problems.  Released earlier this month, the report was developed by the MIT Innovation Initiative, launched a year ago by MIT President Rafael Reif.

I found the report quite interesting, both because I’ve been closely involved with innovation activities through a great part of my career, and because since 2005 I’ve been affiliated with MIT.  Beyond MIT, the report should be of value to anyone interested in the growing importance of innovation to institutions, economies and societies around the world.

A decade ago I was part of the National Innovation Initiative, a major effort convened by the Council on Competitiveness to develop a US innovation agenda.  Its final report, - Innovate America: Thriving in a World of Challenge and Change, - was released in December of 2004.  The report did an excellent job in explaining the role innovation plays in US competitiveness.  It included more than 60 detailed recommendations in three major areas: talent, investment and infrastructure. 

Since then, technology has continued to make dramatic advances.  But for a variety of reasons, job creation, entrepreneurship and US global competitiveness, - the key measures of a thriving innovation economy, - have not fared so well.  A number of recent studies have observed that startup rates, - the nation’s job creative engine, -  have been declining across the country, especially since 2000.  And while US employment keeps improving, serious questions remain about the impact of the digital revolution on the job prospects and wages of a large fraction of the workforce.  In addition, the US is now in 10th place in R&D investments as a percentage of GDP among OECD nations, - having fallen from 2nd place in 1992.  Innovation remains a subject in need of serious attention, especially given the emergence of our highly complex and unpredictable digital economy.

Leveraging the Passions of Fans

On November 21 I participated in a Think & Do workshop at USC’s Annenberg Innovation Lab (AIL).  AIL was founded in 2010 as part of USC’s Annenberg School of Communications and Journalism to study the transformational impact of technology and cultural changes on the media industry.  I’ve been a member of AIL’s Advisory Board since its founding.

The Lab conducts research projects in a number of areas at the intersection of media and technology.  From time to time it hosts what it calls Think & Do events that bring together students, faculty members, research staff, industry executives, artists, entrepreneurs and policy makers to collaboratively explore new research ideas.  The topic for this particular workshop was Leveraging Engagement.  It was aimed at exploring new frameworks for fan engagement in a variety of media, including entertainment, music and sports.

Like few others, the media industries have been severely disrupted by the digital revolution and the forces of creative destruction.  Everything seems to be changing at once, from the way content is produced and delivered, to the sources of revenue and profits.  One of the major changes is the relationship between the creators and distributors of media content and their audience, especially their most committed audience members or fans. 

What do we mean by fan?  The briefing book prepared for the workshop draws a distinction between an audience of relatively passive listeners/spectators and fans.  Fans are “enthusiastic followers or admirers… have a passion, are emotionally connected to the object of their passion, and experience their passion through their own subjective lens.” 

The Internet, smartphones and related technologies, are enabling fans to play a more central and active role in the evolving media ecosystem.  They are active participants in social networks.  They are critics, co-creators, and brand influences.  They are also potential consumers of all kinds of goods and services related to their passion.

The Vital Role of Research in Preserving the American Dream

This past September, the American Academy of Arts and Sciences released Restoring the Foundations: The Vital Role of Research in Preserving the American Dream, - a report on the state of US leadership in science and technology.  The report makes the case that over the past half-century, research-based scientific and technological advancements have been the main drivers of economic growth and job creation, and their impact will likely rise in our increasingly complex, knowledge-based society.  It further notes that since having a good job is one of the primary factors influencing quality of life and well-being, “research is the lifeblood of a high-tech economy and plays a critical role in the economic and personal well-being of most citizens.” 

A good job has long been the foundation of the American Dream, - the possibility that anyone can get ahead and achieve prosperity through talent and hard work regardless of social class or circumstances of birth.  But, the report warns that the American research enterprise, - and the American Dream, - are at a critical stage.  Federal support for basic research as a percentage of GDP has declined 13% over the past decade.  In 1992, the US had the second highest R&D investments as a percentage of GDP among OECD nations.  It has now fallen to 10th place.  While the US is losing some of its competitive edge, emerging nations are increasing their research investments in order to stimulate economic growth.  China is projected to outspend the US in R&D within the next 10 years. 

The Academy’s study was based on three basic premises: 

• “a strong U.S. economy is vital to the welfare and prosperity of the American people”; 
• “competitiveness in today’s accelerating high-tech, knowledge-based economy requires innovation and the rapid infusion of new knowledge and technologies”; and 
• “while applied research and applied development are both undeniably important, pathbreaking discoveries are most likely to come from basic research sustained over long periods of time, which is mainly funded by the federal government and carried out in the nation’s universities and national laboratories.”

The Rise and Potential Fall of the Talent Economy

Roger Martin is a professor at the Rotman School of Management at the University of Toronto, where he was Dean from 1998 to 2013.  He’s been a strong advocate of the need to transform business education, in particular that students need to learn how to think holistically and creatively, to better prepare them to deal with the complex problems they will encounter throughout their careers.  Professor Martin is also a prolific writer, having published a number of books and articles over the years. 

About a year ago he co-authored a very interesting short article, Capital vs Talent: the Battle that’s Reshaping Business, with his Toronto colleague Mihnea Moldoveanu.  Their basic thesis is that in our emerging digital economy, talent has become the key competitive asset for companies. 

Until early in the 20th century, most companies were organized around their physical assets, such as land, minerals or oil.  Later in the century, the key competitive assets shifted from natural resources to plants and equipment, sales and distribution, and finance.  These capital assets enabled companies like IBM, GM and Eastman Kodak to achieve the necessary scale to compete across the country and around the world. 

Then late in the 20th century the terms of competition changed again, with physical and capital assets no longer being the keys to success.  “By 2000, many of the world’s top 15 firms by market capitalization began with little or no physical or financial assets - including Microsoft, Cisco, Intel, and Wal-Mart,” notes the article.  “The vast majority depended on superior human assets for their advantage - great research scientists, inspired code writers, distribution geniuses, product innovators  - and knowledge assets - patents, brands, know-how, experience.  In short, in increasing numbers, leading companies were depending on talent.”

How Is Our Digital Revolution Doing?

“It was the best of times, it was the worst of times… we had everything before us, we had nothing before us…”  I was searching for the right words to characterize our present times, when Charles Dickens’ memorable opening sentence from A Tale of Two Cities came to mind.  One week I’m writing about our amazing digital revolution, and another I’m discussing the pain many are experiencing in our jobless recovery. 

Are we “in the midst of the greatest one-time event in history,” as MIT professor Erik Brynjolfsson said in the opening keynote of the recent MIT Second Machine Age conference, or are we going through what he later called the great decoupling,  - while GDP and productivity continue to grow, employment and income are declining.  “Digital progress makes the economic pie bigger,” he added.  “But there is no economic law that everyone, or even most people, will benefit.”

All-in-all, how’s our digital revolution doing?  “Technology isn’t working: The digital revolution has yet to fulfil its promise of higher productivity and better jobs,” argues The Economist in a special report on Technology and the World Economy in its October 4th issue.

Its lead article reminds us that, for better and for worse, technological revolutions disrupt economies and societies.  Electricity power, the internal combustion engine and other great 19th century innovations ultimately benefited everyone, but for the workers that made them happen, the experience of industrialization was truly harsh: “full of hard toil in crowded, disease-ridden cities.”

The MIT Second Machine Age Conference

A couple of weeks ago I attended MIT’s Second Machine Age Conference, an event inspired by the best-selling book of the same title published earlier this year by MIT’s Erik Brynjolfsson and Andy McAfee.  The conference presented some of the leading-edge research that’s ushering the emerging second machine age, and explored its impact on the economy and society.  It was quite an interesting event.  Let me discuss a few of the presentations as well as my overall impressions. 

In his opening keynote, Brynjolfsson explained what the second machine age is all about.  “Like steam power and electricity before it, the explosion of digitally enabled technologies is radically transforming the landscape of human endeavor.  Astonishing progress in robotics, automation, and access to information presents major challenges for institutions from small businesses and communities to large corporations and governments, but it also creates opportunities to rethink how we live and work in profoundly positive ways.” 

The machines of the industrial economy, - the first age, - made up for our physical limitations, - steam engines enhanced our physical power, railroads and cars helped us go faster, and airplanes gave us the ability to fly.  For the most part, they complemented, rather than replaced humans.  The second age machines are now enhancing our cognitive powers, giving us the ability to process vast amounts of information and make ever more complex decisions.  They’re being increasingly applied to activities requiring intelligence and cognitive capabilities that not long ago were viewed as the exclusive domain of humans.  Will these second age machines complement or replace humans?

A Useful Framework for Analyzing the Impact of Technology on Jobs

Last week I discussed a recent Pew Research report on the impact of AI, robotics and other advanced technologies on the future of jobs.  The report was based on the responses of nearly 1,900 experts to a few open-ended questions, including “Will networked, automated, artificial intelligence (AI) applications and robotic devices have displaced more jobs than they have created by 2025?”  The expert’s responses to this question where divided down the middle. 

Beyond predictions based on responses to a survey, can one develop an overall framework to help analyze these critical issues?  Along this line, I like a recent paper by MIT economist David Autor, - Polanyi’s Paradox and the Shape of Employment Growth.  The paper was presented at the annual Jackson Hole Federal Reserve symposium, a gathering of some of the world’s most prominent central bankers, finance experts and academics, where the theme this year was “Re-evaluating Labor Market Dynamics”.  The paper carefully laid out its arguments based on existing empirical evidence.  Let me summarize its key points. 

Computers have made huge advances in automating many physical and cognitive human tasks, especially those tasks that can be well described by a set of rules.  But, Professor Autor argues, despite continuing advances in AI and robotics, the “challenges to substituting machines for workers in tasks requiring flexibility, judgment, and common sense remain immense.”

AI, Robotics, and the Future of Jobs

The Pew Research Center has been marking the 25th anniversary of the World Wide Web with a series of reports on the Internet and our digital lives.  I’ve discussed two of the reports, first The Web at 25 in the US, followed by Digital Life in 2025.  I’d now like to discuss a third Pew report, - AI, Robotics and the Future of Jobs, - which was published in early August.

The impact of technology on jobs is a very important subject.  “The economic challenge of the future will not be producing enough.  It will be providing enough good jobs,” wrote Harvard professor and former Treasury Secretary Larry Summers in a recent WSJ article.  These concerns are not new.  In a 1930 essay, English economist John Maynard Keynes wrote: “We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come - namely, technological unemployment.  This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.”

As it turned out, the 20th century saw the creation of many new jobs and industries.  But, fears of technological unemployment have been rising in the emerging digital economy, as our increasingly smart machines are being applied to activities requiring intelligence and cognitive capabilities that not long ago were viewed as the exclusive domain of humans. 

The Pew Research report explored the impact of AI and robotics on the future of employment based on the responses of nearly 1,900 experts to a few open-ended questions, including: “Will networked, automated, artificial intelligence (AI) applications and robotic devices have displaced more jobs than they have created by 2025?; and “To what degree will AI and robotics be parts of the ordinary landscape of the general population by 2025?”

What Will Digital Life Be Like in 2025?

The Pew Research Center is marking the 25th anniversary of the World Wide Web with a number of reports on the current state and potential future of our digital lives.  Last week I discussed the first such report, The Web at 25 in the US, which looked at the fast growth of the Internet and mobile usage and presented the findings of a national survey on their impact on everyday life.  “The internet has been a plus for society and an especially good thing for individual users,” was the survey’s overall verdict. 

But what about the future?  A second report, Digital Life in 2025, analyzed the responses of over 1,800 experts to an open-ended question:  “Good and/or bad, what do you expect to be the most significant overall impacts of our uses of the Internet on humanity between now and 2025?” 

“Experts predict the Internet will become like electricity - less visible, yet more deeply embedded in people’s lives for good and ill,” was the report’s overriding consensus.  But, beyond this general agreement, there were widely different views on the Internet’s impact on the economy and society.  The Pew study grouped its diverse responses into 15 different theses about the digital future, - with eight classified as hopeful, six as concerned, and the last one as neutral, sensible advice.  Let’s discuss a few of the theses.

From Mass Production to Mass Individualism

A few weeks ago, NY Times columnist David Brooks posted an OpEd on The Evolution of Trust. The OpEd is focused on Airbnb, the online platform where people list and book  accommodations all over the world, which now has over 600,000 listings in more than 34,000 cities and 190 countries.  Brooks thought that people would never rent rooms in their homes to total strangers.  “But I was clearly wrong,” he writes.  “And Airbnb is only a piece of the peer-to-peer economy.  People are renting out their cars to people they don’t know, dropping off their pets with people they don’t know, renting power tools to people they don’t know.”

He attributes the growth of this peer-to-peer economy to 3 main trends.  First is middle-class stagnation.  Technology and globalizations have significantly reduced the employment opportunities and earning of middle-skill, middle-wage jobs.  Many have thus had to invent their jobs and sources of income, including renting out rooms, cars and other possessions, and offering child care, pet boarding and a variety of other services.

Second, quite a number of people find the less expensive, one-of-a-kind goods and services now being offered by unique individuals more appealing than the mass-produced goods and services offered by companies.  People with time to travel but little money prefer to stay in someone’s moderately priced spare room rather that in a more expensive standard hotel chain.

And, adds Brooks, “the big thing I underestimated was the transformation of social trust.  In primitive economies, people traded mostly with members of their village and community.  Trust was face to face. Then, in the mass economy we’ve been used to, people bought from large and stable corporate brands, whose behavior was made more reliable by government regulation.  But now there is a new trust calculus, powered by both social and economic forces.”

A Growing Backlash Against the Relentless Advances in Technology?

Otherwise serious concepts sometimes end up as overused buzzwords.  If the books and articles that introduced them become popular, the concepts can get stretched and applied way beyond their intended meaning.  The business world is particularly awash with such trendy buzzwords.  After a while, most of them quietly return to their academic roots or disappear altogether, and the public moves on to the next popular buzzword.  Examples abound, including core competencies, paradigm shift, and synergy. 

Few business concepts have been as long and widely used as disruptive innovation.  Disruptive innovation was coined around 20 years ago by Harvard Business School professor Clayton Christensen to describe “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.”  His 1997 bestseller, The Innovator's Dilemma, further elaborated and popularized the concept.  Over the years, he has continued to author and co-author books and articles on the subject, including The Innovator’s Solution, The Innovator’s Prescription, and The Innovative University.

A few weeks ago, The New Yorker published The Disruption Machine: What the gospel of innovation gets wrong by Harvard historian Jill Lepore.  I looked forward to the article.  Given the relentless impact of technology-based innovation on just about all aspects of society, I like reading the views of different people on the subject, especially those outside my own worlds of technology and business.  I particularly like to read the opinion of scholars in the humanities, who might well be in the best position to describe these societal changes through the lens of history and human nature.

I was frankly taken aback by Professor Lepore’s article.  The article makes a number of good points, in particular, that the concept of disruption has been overused and misused in business.  But it then turns into what some have described as an “absolutely devastating takedown of disruptive innovation.” It does so, as noted in Businessweek, by accusing Christensen of poor scholarship, misreading history, and myopia.  

The Complex Nature of Cloud-based Innovation

By now, most will agree that cloud computing is a major transformational force in the world of IT.  But, cloud has not the easiest concept to grasp.  Not that long ago, even people who agreed that something big and profound was going on, were not totally quite sure what it was they were excited about.  “There is a clear consensus that there is no real consensus on what cloud computing is,” was the overall conclusion of a June, 2008 conference on The Promise and Reality of Cloud Computing.  Cloud has continued to evolve and advance over the ensuing years.  People are no longer starting their sessions by saying: “let’s define cloud computing,” said an article on a 2013 cloud conference.

I find it helpful to look at cloud along two key dimensions: as a technology to improve IT productivity, and as a platform for enabling business innovation.  A 2012 survey of business and technology executives found that two thirds of respondents viewed cloud as a leading priority for their IT organizations, while one third said that it was a company-wide business priority.  Only one company in six viewed cloud as a way of fostering business innovation.

An increasing number of companies are now deploying cloud-based solutions.  Most are focused on improving the economics of IT.  They are looking to cloud to help them expand their current offerings without major investments in additional IT infrastructure.  Cloud offers financial flexibility, reducing fixed IT costs by shifting from capital to operational, pay-per-use expenses, as well as the ability to easily and economically scale business operations by provisioning IT resources on an as-needed basis.  In addition, cloud can help business users become more agile and keep up with the fast pace of technological and market changes.  Turning to an external cloud service provider is often a faster and less costly way of prototyping and deploying a new application than relying on the internal IT organization.

The Changing Nature of Globalization in Our Hyperconnected, Knowledge-Intensive Economy

In April, 2005, NY Times columnist Tom Friedman published The World is Flat: A Brief History of the Globalized World in the Twenty-first Century.  Friedman’s bestseller did much to explain to a wide audience the impact of the Internet and related technologies on the connected, global economy that was rising all around us.  

A few years later, Friedman was a keynote speaker at a 2011 conference commemorating IBM’s Centennial.  To illustrate the incredibly fast pace of change, Friedman noted that in the short time-span since World is Flat was published, we were already transitioning from a connected to an increasingly hyperconnected world.  Many of the companies and technologies that are now part of our every day conversations, - Facebook, Twitter, Cloud, Smartphones, Big Data, LinkedIn, 4G or Skype, - were not mentioned in the connected global economy he wrote about only 6 years earlier because they had not been born or were in their infancy.

What do we mean by a hyperconnected economy?  I recently found a really good answer in an excellent study by the McKinsey Global Institute (MGI), Global Flows in the Digital Age.  The study takes an in-depth look at the expansion of cross-borders flows in the economy.  It carefully analyzed these flows in 5 different categories:  goods, services, finance, people and data and communications.  It then developed the MGI Connectedness Index, which measures these 5 flows in 131 countries, examined how the flows had changed over the past 10 - 20 years, and predicted how they are likely to evolve over the next decade.

Is a College Education Still Worth It?

NY Times editor David Leonhardt recently wrote a column with the provocative title: Is College Worth It?  The question has been raised by articles which note that college graduates are still struggling to find meaningful work and often end up accepting jobs for which they feel overqualified.  Then we have the student debt crisis.  The average student debt for college graduates is over $25,000, and the aggregate debt for student loans now exceeds $1 trillion.

“The decision not to attend college for fear that it’s a bad deal is among the most economically irrational decisions anybody could make in 2014,” is Leonhardt’s succinct answer to his question.  He cites a recent article by MIT economist David Autor which points out that a college-educated worker can expect an additional lifetime earning of over $500,000 compared to one whose highest degree is a high school diploma.

“Over the long run, college is cheaper than free,” remarks Leonhardt.  “Not going to college will cost you about half a million dollars.”  Experts and journalists questioning the value of a college education are most likely obsessing to get their toddlers into an elite nursery school, so they are on-track for the right schools over the ensuing 20 years. 

Professor Autor’s article, Skills, education, and the rise of earnings inequality among the “other 99 percent”, was published in the May issue of Science.  “The singular focus of public debate on the top 1 percent of households overlooks the component of earnings inequality that is arguably most consequential for the other 99 percent of citizens: the dramatic growth in the wage premium associated with higher education and cognitive ability,” he writes in the abstract.