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How businesses can accelerate innovation
To compete in the digital age, businesses will need to work quicker, partner where appropriate and upskill staff, according to McKinsey & Company
For traditional businesses to compete effectively in the era of digital business landscape, they will need to work much faster than they do today.
Speaking at McKinsey’s Blink event in London, former Google CEO Eric Schmidt said: “Disruption will not slow down. Things happen more quickly. Static industries are being changed by digitisation.”
The speakers at the Blink conference discussed how business leaders and employees will need to take on-board new skills and new ways of working to enable their organisations to keep up with the pace of change.
As Computer Weekly has previously reported, the web giants are likely to impact every industry, which means every business will need to react in some way, to avoid being disrupted by their influence.
When asked about the challenge enterprises face competing with these tech giants, who generally have access to masses of personal data from their vast base of users, Schmidt said: “There is an argument that he who has the data is in control. Centralisation has given economic power, but there are also new power points.”
For instance, Schmidt explained how relatively small group can have a big impact, spreading misinformation on social media. “There is a great deal of research to build algorithms that use far less data. Whoever has the smartest algorithm will win,” he said.
Among the challenges every business faces when competing in the digital age is the ability to execute a strategy quickly when an opportunity arises.
Uber, a company often used as an example of a digital native business, is one of those companies that was somehow able to take advantage of a number of changes in market conditions and consumer behaviour.
Laurel Powers-Freeling, chairman of Uber UK, spoke at the Blink event about how Uber was able to take advantage of convergence. “Any disruption occurs when there is convergence,” she said. “The iPhone was launched 20 months before Uber. If there was no smartphone, there would be no Uber.”
The availability of the smartphone combined with the fact that more people were moving into cities and were becoming frustrated by public transport, provided Uber with the market opportunity it could service, said Powers-Freeling.
But it was not the only organisation that could see there was a market opportunity. To succeed she said Uber needed to move quicker than its rivals. She admitted that the need to get something to market quickly meant that the company did make mistakes and infringed regulations.
Speaking as the head of a traditional business, Alison Rose, the new chief executive officer of Royal Bank of Scotland, discussed how fintechs were disrupting traditional banking. “It is quite exciting seeing different ways come into the market,” she said. “If you think the old model is working, you are deluding yourself. I have to disrupt myself.”
Discussing how banks need to stay ahead of the innovation curve, Powers-Freeling said: “The approach has to be through partnerships. We have to put the customer at the heart of what we do and get out of the mindset of saying we can do it ourselves.”
McKinsey recently looked at how the skills of the workforce need to change as businesses adopt new technologies and automate certain aspects of work. “We are facing a massive disruption of the workforce,” said Rose. “As a society and large employer, we have to deal with that.”
At RBS, she said the bank was exploring how to shift from using role-based employee profiles in human resources (HR) to profiles based on the capabilities and skills people need for the future.
Tera Allas, director of research and economics at McKinsey in the UK, said: “The sorts of skills shortages we see today are only going to get worse, but businesses can have very strategies to deal with this.”
According to McKinsey’s recent The future of work paper, by 2030, more than 10 million UK workers might be under-skilled in digital, decision-making, communication and leadership skills. “Because many of these people are employed by businesses, businesses will need to take the lead on upskilling,” said Allas.
McKinsey’s paper suggested that business leaders look at building new skills among existing employees. The future of work paper warned that the cost of firing and hiring can become prohibitive.
Read more about the future of work
- Ken Charman has a track record in running IT firms. In 2018, he was coaxed out of retirement to spearhead Unilever’s spin-out software business.
- Letting others make their own decisions leads to a more dynamic approach to running a business, suited to the demands of an AI-fuelled economy.
For the majority of positions, McKinsey recommended business leaders purposefully upskill existing employees while replacing routine work with automated systems.
As an example, the McKinsey paper discussed how a hospitality business in Cornwall which faced chronic staff shortages, reskilled its frontline staff to become customer service personnel and upgraded its web site to reduce low-value customer calls. “Not only did this improve profitability; it also resulted in higher employee motivation and loyalty,” the authors of the paper noted.
“We have a range of different job roles in business. Some of these are in high demand; some are highly paid,” said Allas. “These are the occupations that will grow by 20% by 2030. But if you look at the occupations where there is currently unemployment and businesses are saying they don’t really need these skills, then these are the occupations that will shrink by 2030.”
Rather than looking to recruit new people to replace those skills that are no longer needed, she said: “Our recommendation for businesses is to get out of the traditional ways of thinking about human resources and talent.”
Instead, she urged business leaders to consider people’s skills and their qualifications backgrounds. “In the skills area there is a lot more overlap than you would think. It’s about looking for people in unusual places, using partnerships to find specialist skills and upskilling your whole workforce.”
As an example, Allas said robotic process automation and AI will inevitably reduce the need for finance clerks, who tend to run Excel spreadsheet in their organisations’ finance department, or check invoicing.
“If you look at this from a skills level, these people have exactly the same type of skills you need from taxation experts or accountants or other areas of advanced financial skills. Rather than going out to hire the extra people, and fire the finance clerks, there are a lot of opportunities to deploy the financial clerks internally.”