Tuesday, August 27, 2013

Creating jobs with innovation

There's been a slight ripple in the blogosphere force.  A ripple caused by a careful inward look at the results of automation, technology and, yes, innovation.  What's clear is that these forces are creating a bifurcated population.  One segment of the population is highly compensated, creative, analytic and sustains an excellent lifestyle and is very employable.  The other segment of the population is poorly compensated, focused on manual labor or services that can't be outsourced.  This segment faces little upward mobility, and constant pressure from new entrants who are willing to do their work for even lower wages, creating great job insecurity.  Increasingly, we see the population sorted into an hourglass shape, with highly educated workers at the top, and individuals with less education at the bottom.  This has always been the case, but what's different is the middle.  In the past 100 years or so a "middle class" formed, that was a bridge between the two classes.  The middle class is slowly being squeezed out of existence as jobs and businesses change and efficiency, automation and innovation force changes to businesses.

How innovation and technology wreck the middle class

On Sunday in the New York Times, an op-ed was published that is entitled How Technology Wrecks the Middle Class.  It is an honest examination of the impact that technology has had on middle class jobs.  Automation, information technology and robotics have led to less need for a middle class that translates executive instruction into meaningful work.  As the middle class often served as a bridge between the "labor" class and the "creative" class, forces that impact the middle class tend to create a chasm between the other two classes and make the transition from labor to creative class difficult.  Of course in the recent recession we've learned that some "creative class" jobs or individuals can make the unfortunate transition to the "labor" class, because all jobs and titles are subject to disruption.

These factors shouldn't come as a surprise.  Schumpeter and others have written about the nature of  innovation, technology and automation as "creative destruction".  When the Luddites attacked the looms they were fighting a losing battle against automation.  Jobs and the nature of work changes as technology, automation, innovation and a growing educated populace rises everywhere.  There is some good news however.  For every job innovation, technology or automation destroy, they often create several other jobs.  When a robot on a shop floor replaces a worker on the line, jobs are created to design and build the robot, to create and maintain the software necessary to manage the robot, to maintain and upgrade the robot and to install the robot.  But efficiency and automation are always focused on doing more with less, so even if innovation creates new jobs, there are two problems:
  • efficiency, technology and automation are destroying jobs 
  • the jobs innovation creates are typically ones that require creative or analytic skills
There's another factor at play as well - political forces.  As more regulations are created, as health care, pensions and labor laws increase, labor becomes increasingly expensive and inflexible.  As these factors occur, executives resist hiring full time employees and run on the bitter edge of productivity, supplementing with contractors, consultants or part-timers.  Today, with an uncertain economy and significant regulatory burden, there's little incentive to hire at any level, especially when the promise of more automation or efficiency should reduce many jobs in the next few years in the labor class.

Does innovation offer an answer?

This question was posed by Paul Hobcraft recently.  Can innovation offer solution that both provide customer and corporate value AND create new job opportunities?  As I've noted before, disruptive innovation creates new jobs, but those jobs are typically in the "creative" or analytic fields.  Incremental innovation is at best job neutral or perhaps a job killer, in that incremental innovation seeks to sustain an existing product or service and make it either more attractive or less expensive.   If innovation has an answer to creative destruction, we need to turn our attention to disruptive innovation, and most likely to business model innovation.  Business model innovation has the potential to kill categories or industries, and at the same time create new jobs in all segments of society.

A close look at NetFlix will explain my hypothesis.  NetFlix, through its original business model of  delivering movies through the mail, killed Blockbuster and its retail model.  Thousands of low tech, retail jobs were lost when Blockbuster closed, but a lot of new jobs were created in different fields as NetFlix grew. Retail jobs were lost, but jobs in distribution and information technology were created.  This cycle will continue as other firms like RedBox attempt to disrupt NetFlix, and movies and content are distributed directly to consumers. 

We should also turn our attention to disruptive innovation and its impact because we can anticipate seeing more disruptive innovation in industries and areas where it hasn't been a factor yet.  Places like healthcare and university education, where regulations and traditional business practices have stymied change.  The more we understand about the impact and possibilities of disruptive innovation, the more we'll be prepared for the "jobs of tomorrow".  These industries and others have exceptionally high barriers to entry and are protected from competition through regulation.  Increasingly the disrupters for these industries will be sited in places where regulations are different (Costa Rica or India for health care as an example). 

Preparing for the jobs

Here's another place where innovation can help create and prepare others for jobs - education.  Our educational system needs a significant revamp, and since the best jobs are in the creative economy, and require education, we need to rethink and revise our education process.

Today in the US our educational system needs rethinking from the bottom up.  We educate our kids on an agrarian calendar that worked when the majority of people were farmers, but today we sacrifice months of potential education time to summer vacation.  We must rethink the schedule, the content and curriculum that kids in kindergarten and first grade receive.  We need to reintroduce the creative arts - music, art, drawing, etc because creativity is vital to future jobs.  We need to experiment with a range of different class styles, educational programs and ramp up the expectations of all students.  This needs to start at the lowest levels and work its way up to secondary education.  And we need to demonstrate that while college is important for many people, deep skill building and expertise is important and valuable, so start many kids on a track to vital technological education very early, and raise the profile of that educational experience.

Then we can tackle what is the main driver and barrier of creativity and the foundation of the creative class:  college.  The collegiate education needs a rethink in terms of what people learn, how they apply what they learn, but more specifically the value and cost of the experience, and what that experience prepares people to do.  Too many people are leaving high school and college with no distinguishable improvement in skills or thinking capability, having matriculated but not learned or improved their skills.  We need far more innovation at the collegiate level, and MOOCs or other programs may become the tipping point that forces colleges and universities to change.

Amanda Ripley's book Smartest Kids in the World points out some key differences between educational systems in other countries and our own.  Some I've noted above, but perhaps the most compelling difference is the focus on the status of teachers.  We need to elevate the teaching profession and recognize the value of people who create the "raw material" that will become our new competitive edge.  Daniel Pink in his book A Whole New Mind demonstrated over a decade ago the importance of creativity, by noting that anything that could be outsourced or automated would be, leaving value in creativity, analytics, design and other fields that demand education.  Pink identified Asia (for outsourcing) abundance and, wait for it, automation, as the three factors that would transform our economy and place higher value on education and creativity.

In other words, we know how to change, and we know where innovation can help.  The resistors to the change necessary are enormous.  We're talking about hundreds of years of educational history and bureaucracy, being asked to adapt to rapidly changing conditions with very uncertain outcomes in a period where funding for education is being cut at the lower levels and being called into question at the collegiate levels.  This is the point where all the forces combine to create a singularity - the systems will actually fold in on themselves in the physical sense. 

The reality

Innovation, automation, efficiency and innovation technology are all job creators and job destroyers.  The creation/destruction cycle is simply speeding up, at a time when we are ill-equipped to deal with the speed and direction of the change.  Our educational processes, starting at the earliest ages, are configured for rote learning, with little deviance or creativity allowed.  Of course it would be very difficult to react to the rapidly changing circumstances, especially considering the size, funding and expectation of the educational systems.  But we need to place our bets somewhere, and a rapidly reconfigured and constantly evolving educational process is what I believe can create more jobs and more prepared workers and innovators.  If you want to see the place where innovation can create jobs, and the potential for more jobs and more wealth creation, focus your innovation attention on the educational process, from the ground up.


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posted by Jeffrey Phillips at 6:57 AM

2 Comments:

Blogger Mark Underwood said...

I agree with the drift of the analysis, and the NYT article as well. But I think the problem is more dire than either essay suggests. Consider that Netflix has a lowly 2000 employees, whereas Blockbuster at its height had 60,000. Apple lists 72,000, whereas General Motors, even in its post-BK state already has 213,000 -- 3 times as many direct employees. The supply chain around GM is large, and easier to demonstrate than for Apple. Last, I'd point out that due to internationalization of labor markets for technology and cheap cloud-based services, there is a lot of downward pressure on salaries for The Disruptive Class. And these are the engineers and designers that are intended to lift up wages for the middle class. Yes, disruptions are needed, but are they enough to alow a steady downward quality slide for jobs? As one of my former team leaders on an IT project said, "the goal [of every technologist], folks, is to reduce cars in the parking lot."

12:12 PM  
Blogger sangavi prashanth said...

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