AI, Robotics, and Cognitive Computing Are Changing Business Faster Than You Thought

The digital world of work is here, and organizations are struggling to adapt. JPMorgan Chase & Co now uses software to perform the mind-numbing job of interpreting commercial loans, reducing 360,000 hours of lawyer time each year.  AI software can now identify leukemia in photos and X-rays, learning faster than technicians. reduced new hire training to only two days because of its newest robotics used in shipping. And the stories go on and on.

Our research shows that AI and robotics are entering the workforce much faster than you may have thought. 38% of companies in our new Deloitte Human Capital Trends research (10,400 respondents from 140 countries) believe that robotics and automation will be “fully implemented” in their company within five years.

38% of companies believe AI and robotics will be “fully implemented” in their company within five years.

Will technology really create massive unemployment? Are we entering a “jobless” economy where only software engineers and designers have jobs?

Our research says no. Among the companies we surveyed, 77% believe automation results in “better jobs,” and only 20% see job reductions. 50% are investing in retraining workers to work side-by-side with machines, and 33% expect people to do “more human tasks” augmented by robotics and AI. Yet at the same time, employee engagement is flat, productivity remains low, and employees are more overwhelmed and over-worked than ever.

How do you redesign your organization to deal with the enormous rise of technology at work? How do we redesign our companies to be agile, purposeful, and engaging? And how do we design work so people can get more rest, sleep, and energy to deliver creativity and service?

While the answers to these questions are complex, I believe we have unlocked many of the secrets. In the just-released report, Deloitte Human Capital Trends 2017, titled “Rewriting the rules for the digital age,” we describe the top ten disruptive trends impacting business, with a set of “new rules” for each.

(This study included a detailed survey with more than 10,400 respondents from 140 countries and dozens of detailed interviews with business and HR leaders around the world.)

As you read the rules you will see a radical shift in mindset: a new set of management practices that will help us lead, organize, manage, and engage the 21st-century workforce.

The Fourth Industrial Revolution: What Has It Wrought?

As described by Klaus Schwab in “The Fourth Industrial Revolution,” we are in the early stages of a wholesale shift in technology, business, and economics.

  1. In the first industrial revolution (18th and 19th centuries) we shifted from an agrarian society to one more industrial and urban, driven by the steam engine, water, and mechanical equipment. This brought urbanization, the growth of cities, and rapid advancements in standards of living.
  2. In the second industrial revolution (1870-1920s) we harnessed electricity, telecommunications, and later the principles of mass production. These revolutionary advances gave us an integrated global business community and opened the door for large industrial corporations, the industrial career, and the emergence of the middle class.
  3. In the third industrial revolution (1970s-2000s) we invented and scaled the power of computing, integrated circuits, IT, and software, to build a workplace and workforce powered by intelligence, software, and personal computers. Again our productivity went up as thousands of new applications of technology (ERP, word processing, spreadsheets, electronic banking) became available.
  4. Today we are watching the fourth revolution, one characterized by mobile devices, sensors, artificial intelligence, natural language processing, bio technology, and soon wearable and always-on video. This fourth wave, which leverages the global internet as a real-time network, has yet to deliver productivity improvements, yet is changing life and work like never before.

As we studied these trends this year, we realized that today, like never before, businesses are squeezed in a vice, one tightened by accelerating changes in technology, social norms, and political and economic issues.

Fig 1: Accelerating Rates of Change

What’s going on? If you consider Figure 1, you see a world where technology advances at a near vertical rate, yet business productivity lags far behind. This fourth stage of industrial change has been the worst yet at improving productivity, as the data below indicates. This has led to income inequality, nationalism, and political unrest in many countries. In a sense, the Fourth Industrial Revolution is simply not yet paying off.

(Our new Millennial research also shows that Millennial employees in developed countries are quite pessimistic about their future earnings potential, leading to a rapid rise in citizenship.)

Fig 2: Lagging Productivity Despite Technology Growth

While economists differ on the causes, our research shows that this gap is caused by a series of pressures indicated by the chart below.

Fig 3: What’s Really Happening

As technology advances rapidly (Curve 1), individuals quickly adapt. We learn to use mobile phones, we rush to social networks and video sites like Facebook, Twitter, SnapChat, and YouTube, and we rapidly change our lifestyle to use technology for life (Curve 2). Games, online maps, text messaging, ride and home sharing, and video sharing have radically changed our behavior, often in unpredictable ways.

As this adjustment quickly takes place in the consumer world, organizations adapt more slowly (Curve 3). While we love using social media at home, at work it feels like a chore. People spend 25% or more of their day dealing with email and our research shows that stress, lack of sleep, and the constant need to maintain focus is making work harder than ever. Corporate L&D has fallen so far behind consumer learning that it now has a -31 net promoter score among employees!

Fig 4: The Overwhelmed Employee

While business leaders want to adapt to technology quickly, the business practices of organization design, job structure, goal-setting, and performance management were largely developed in the 1950s, and companies have to continuously revise them to keep up. Small companies and tech companies can quickly innovate in management practices, but it takes a decade for others to feel ready, leading to a long gap in organizational response to a changing world of consumer technology and lifestyle.

(A recent survey by Gallup, for example, just found that 31% of US employees now work remotely “most of the time.” This has given birth to remote offices, team management tools, video conferencing, and new ways of coaching and engaging people.)

This report, which largely focuses on the needs of organizations and business leaders, shows that a new set of “rules” have emerged: rules to help leaders redesign the organization, rethink the employee experience, implement digital tools, rethink careers, and change the way we lead. I believe this transition, the gap between curves 2 and 3, will take several more years to close.

Fig 5: How Management Thinking Evolves

As organizations adapt, another more urgent pressure is now at work: public policy, citizenship, and political change. As curve 4 point out, public and social policy, including discussions about income inequality, unemployment, immigration, and trade, impact our organizations as well. These issues, which directly affect businesses through regulation, taxes, and legislation, adapt at an even slower pace. Laws and policies on issues like minimum wage, trade tariffs, immigration, and education only change after years of public debate. And organizations are caught in the middle.

(Read my article on “Citizenship On the Rise” for more information on the impact of these topics on HR and business.)

Understanding These Issues Leads To A New Set of Rules

Understanding these four curves, and the relationship between technology, individuals, businesses, and public policy, is now key to building a high performing organization. And that is what our report is all about.

As we analyzed this data and talked with many clients, we became convinced that HR has a significant new role to play. While business leaders must support the new rules for human capital, HR must take the lead. I believe HR today must redefine its identity, taking on a role as the owner of employee productivity, helping to redesign the organization, and learning to leverage data and deep HR skills to help the company adapt to changes in technology, social norms, regulation, and public policy.

The 10 human capital trends: New Rules for the Digital Age

The trends in this year’s report identify 10 areas in which organizations will need to close the gap between the pace of change and the challenges of work and talent management.

Trend 1: The organization of the future: Arriving now

As I discussed in the article “The Future of Work is Here, and It’s Not As Scary As You Think,” (video here) organizations are rapidly shifting from functional hierarchies to a network of teams. People work on projects, customer engagements, and new products, often changing roles throughout the year. The concept of a “job description” is being replaced by a series of “projects,” driven by your skills, experiences, and connections. The article “Is It Time To Do Away With The Organization Chart? Pretty much.” explains this issue.

Fig 6: Future of Work Keynote at Singularity University

This requires a different way of organizing ourselves, changing the way we set goals, reward people, and lead. 88% of companies cite this as an important issue (59% urgent), yet only 11% know how to make this work, so this is by far the #1 “new rule” for the coming year. Click here to read this chapter.

Trend 2: Careers and learning: Real time, all the time

As companies build the organization of the future, continuous learning is critical for business success. The new rules call for a learning and development organization that can deliver learning that is always on, easy to use, and consumer-like in experience. Coupled with this transformation is a huge change in the way we manage careers: our research clearly shows that the traditional structured career is fast going away.

Our upcoming High-Impact Learning Organization research shows that L&D departments are struggling to keep up. The net-promoter score for L&D is actually negative (people are going elsewhere to learn), and 45% of companies cite the issue of careers and learning urgent today (83% important), making this the #2 trend. In fact, almost 80% of the companies we surveyed are trying to redesign their career and learning models. Click here to read more.

Trend 3: Talent acquisition: Enter the cognitive recruiter

Recruiting is a massive industry, more than $400 billion in size (Bersin by Deloitte research). In the US alone more than 20% of the workforce changes jobs every year and our research shows that companies spend $1400 to tens of thousands of dollars each time they hire a new person.

Today 61% of CEOs tell us they do not believe they are recruiting fast enough or well enough, and the process has become enormously complex . Not only do companies have to deal with social sourcing, creating an employment brand (on a myriad of social websites), but the entire industry has become data driven and one of the fastest growing areas of AI. Recruiting teams must embrace video interviewing, new tools to score and assess candidates, and a whole new industry of end-to-end recruiting management systems (replacing the traditional applicant tracking system).

To make it even harder, the candidate experience now directly drives employment brand and reputation. Research by the Talent Board shows that almost half of job applicants hear nothing from employers for at least two months, indicating how hard it is to manage the flood of resumes companies receive. Today cognitive tools for scoring, assessment, testing, and culture fit are starting to revolutionize the process.

82% of companies cite this area an important problem and 46% rate it urgent, making it the third “new rule” for focus in today’s digital age. Read more here.

Trend 4: The employee experience: Culture, engagement, and beyond

Employee engagement, a tremendously important issue in today’s economy, is flat to declining. My research with Glassdoor over the years shows no increase in average employee engagement since 2007, and in fact we know that employees are now working more hours and taking less vacation than ever before. Project:PTO research shows that the US workforce has lost an entire week of vacation in the 20 years since 1998.

Our research shows that the entire employee engagement “industry” (an industry of survey providers) has not been able to keep up. The digital work experience is quite complex, overwhelming, and filled with activity and stress. Our research shows that the solution is to focus on the “end-to-end employee experience,” not a narrow measure of engagement. (The article Five Elements of the Simply Irresistible Organization explains this in more detail.)

Rule 4 is to focus on this issue. Just as we focus on the end-to-end customer experience, we must do the same for employees. Companies are starting to look at employee journey maps, segmenting their workforce, and deeply understand the “moments that matter” in your experience at work. A new marketplace of pulse feedback tools, wellness and fitness apps, and integrated employee self-service tools is helping, but it still takes focus and a whole new way of listening, curating, and supporting employee journeys. This is a fascinating and critical new strategy, I encourage you to read more.

Trend 5: Performance management: Play a winning hand

For many years we have been reading about companies doing away with performance ratings, eliminating the forced ranking, and making performance management easier. (Read the article “The Myth of the Bell Curve” for more on this topic.)

Our research this year clearly shows that the new models for continuous performance management are here, and companies are rapidly adopting these approaches now. This includes creating agile and transparent goals, forcing managers to have regular check-ins with their people, and embracing feedback in many new ways throughout the organization. (Read the article Feedback is The Killer App to learn more about the exciting feedback systems market.)

92% of companies in our survey have either recently redesigned or are in the process of redesigning this process, and it is now becoming a secret weapon to empowering and enabling the organization of the future. While the trend to redesign is now rampant, the HR technology market has yet to catch up, so companies are looking at a wide variety of new tools to implement these new practices. (Read the article The HR Software Reinvents Itself for more on this). I encourage you to read the new rules in this area and make sure you are on the right path.

Trend 6: Leadership disrupted: Pushing the boundaries

78% of companies tell us their leadership pipeline is an important or urgent challenge, and organizational readiness in this area dropped this year. This year we see a radical shift in the leadership issues within companies, and they focus on the issue of “digital leadership.”

Today, as never before, organizations do not just need experienced leaders, they need a completely different kind of leader—younger, more agile, “digital-ready.” This is a challenging area, one where CEOs continue to struggle as they continue to use old, dated models for leadership. Companies are reinventing their leadership models, greatly expanding their leadership pipeline, and changing the way they assess and develop leaders. (Read the article Better Pond, Bigger Fish to read our newest research on a new approach to developing leaders).

What is a “digital leader” and how do you find, assess, and develop them? Read this chapter to learn more.

Trend 7: Digital HR: Platforms, people, and work

What is HR’s role in this new, 21st century organization?

Our research shows that HR leaders are being pushed to take on a larger role in helping to drive the organization to “be digital,” not just “do digital.” As digital management practices and agile organization design become central to business thinking, HR is focusing on people, work, and platforms – becoming more agile, designing employee-experiences, and using apps to deliver solutions.

The race to the cloud we wrote about several years ago continues to move forward, but as cloud-based HR platforms become more prevalent, companies now realize they need many more applications and a focus on productivity, not “HR” to drive value. We believe the coming year will mark an entirely new identity for HR, refocusing the function on employee productivity, performance, wellness, and engagement, instrumented with data like never before.

Click here to read more about Digital HR, with examples of leading companies driving digital transformation throughout their businesses.

Trend 8: People analytics: Recalculating the route

People analytics has been a major topic for many years, and we have watched the market shift from one of interesting examples to mainstream interest. A year ago I wrote the article “People Analytics Takes Off,” highlighting the Human Capital Trends research showing rapid increase in investment in this area.

But as companies now implement analytics, often staffed by a small team of PhDs or statisticians, we are seeing a major shift take place. This year, we see a need to “recalculate the route,” and shift analytics away from modeling and statistics back toward “industrialized analytics” that give line managers and leaders real-time information on their workforce.

As you will read about in this trend, companies now realize that doing “analytics projects” is interesting but not business-critical, and they want actionable analytics about all aspects of the workforce available for decisions every day. I believe this represents a major “growing up” of people analytics, moving beyond a “science project” to a focus on operational improvement and focus on giving the business the broad and deep people data managers need to make decisions on a regular basis.

The HR software vendors are catching up to this wave, and I believe this will become a major new theme for analytics going forward, as companies have better and more integrated cloud platforms.

Trend 9: Diversity and Inclusion: The Reality Gap

Inclusion and diversity, topics which have been in public discussion for decades, are now urgent strategic problems. Our research shows a dramatic uptick in urgency in these areas (almost a 50% increase in urgency in the last three years), yet a continued gap in organizations’ ability to make change.

The issue we face, as we discuss in the report, is that companies cannot simply “train people to become less biased.” While training plays a major role in educating and informing the workforce, bias is inherent in much human behavior (and in our history and personal experiences), so it must be impacted through leadership, accountability, and business process.

While diversity and inclusion is not a new topic, it now takes on a more urgent tone because of the growth in citizenship, social awareness, and transparency. (Read the article Citizenship On The Rise: What This Means to Business and HR for more). In this chapter we give you many of the new rules, examples, and a new way of thinking about this problem. And we explain in detail how inclusion and diversity is a critical performance issue if you want to be a high performing organization of today.

Trend 10: The Future of Work: The Augmented Workforce

Finally, one of the hottest topics for discussion today, we give you the new rules for dealing with AI, robotics, and new cognitive technologies impacting work. As the economist Andrew McAfee wrote, “One could argue that today digital technologies are doing for human brainpower what the steam engine and related technologies did for human muscle power during the Industrial Revolution. They’re allowing us to overcome many limitations rapidly and to open up new frontiers with unprecedented speed. It’s a very big deal.”

How will AI then impact our organizations, jobs, and our people? Our research shows that software and robots are not “automating jobs” they are “automating tasks,” a theme you should consider as your company embraces more and more such tools.

AI and Robotics do not “automate jobs” they “automate tasks.”

This research clearly shows is that companies are rapidly adopting automation (over 50% of respondents believe their companies will be “fully automated” within 5 years), and these systems are more cognitive, intelligent, and powerful than ever before. Yet while this takes place, the issue is not one of “eliminating jobs” but rather “redesigning work,” and shifting people from technical roles to more hybrid jobs, adding more “essentially human skills” to our companies.

Examples of this include the growth in nurse and doctors while automation enters healthcare; the growth in bank branches while ATMs get smarter and smarter; the growth in analyst and design positions while more computer programming is automated.

As we discuss in this chapter, I believe we have unlocked this issue, and it is not one of “jobs going away” but rather one of redesigning jobs, organizations, and careers to adapt.

In Summary: Now Is The Time – These Rules Are Here

As I think back about our research this last year, and all we have learned, I leave you with one simple message. All the changes we discuss are no longer “interesting” or “informative” – they have become real, and essential mandates for the future. We decided to call them “rules” because we believe they are now clear, and we want you to understand them so you can experience greater levels of productivity, performance, and employee excitement in your company.

As always we look forward to explaining the Global Human Capital Trends to you in person this year, and hope to hear your comments and feedback as we all learn how to build the thriving organizations of the future.