The Work Ahead: Europe's Digital Imperative
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EUROPE Europe’s Digital Imperative By Euan Davis The Center for the Future of Work The Work Ahead is a research series providing insight and guidance on how businesses – and jobs – will evolve in the digital economy. In this instalment, we compare and contrast the digital viewpoints of European businesses; identify ways in which new digital technologies will enable workplace (and work process) innovation; and analyse the magnitude of the impact that emerging digital technologies will have on the region’s future economic performance. THE WORK AHEAD | EUROPE’S DIGITAL IMPERATIVE 2 THE WORK AHEAD IN EUROPE Despite bold quantitative easing and record-low be so for decades to come. Europe’s business and interest rates, anemic demand continues to hobble political leaders must seize this once-in-a- gross domestic product (GDP) growth throughout generation opportunity to re-engineer and the European Union. In several EU countries, more revitalise Europe’s role in an increasingly hyper- than a quarter of the population has been connected global marketplace. This is the digital unemployed for close to a decade, and political imperative. discontent is on the rise.1 Europe needs a new North Star – a goal around which country, If Europe succeeds with this imperative, it will corporations and citizens can coalesce to reignite marry its historical strengths – culture, education, the growth that will propel Europe into the middle ingenuity – with the mores of the digital world to of the 21st century. create a “hybrid economy,” enabling it to re-assert its rightful place in the world. If it fails, Europe By harnessing the power of digital, European will fall further adrift from the entrepreneurial businesses can create a foundation for meeting power of the U.S. and be eclipsed by the rising that goal, that new North Star. Injecting “digital” economies of Asia Pacific. into every aspect of work, life, culture and society can force an uptick in employment and The stakes could not – literally – be higher. productivity, while building greater social cohesion across the continent. To understand the changing nature of work, the changing nature of commerce and the changing The digital technologies emerging now are not characteristics of what constitutes success in this simply the latest offerings from the whiz kids over new world, Cognizant’s Center for the Future of in Silicon Valley; they are the seeds of an entirely Work – in conjunction with the renowned new economy – a digital economy – that will erupt economist Nouriel Roubini – surveyed top into a changed landscape of innovation. This new executives at leading companies around the world economy – powered by platforms, data, algorithms, to gain insights into how the future of work is “bots” and connected “things” – introduces the coming to life. This report – the latest installment possibility of generating massive amounts of cash in The Work Ahead series – focuses exclusively from ideas that represent the future. Digital is on the responses from European respondents. the opportunity in front of Europe today and will (See Methodology on page 23). THE WORK AHEAD | EUROPE’S DIGITAL IMPERATIVE 3 The impact of new technologies applied to all aspects of business and society — what we’re now calling digital — is so large that there is no way to escape its gravitational pull. The executives surveyed in Europe understand this explicitly. Making meaning from data and algorithms will dominate the next economic cycle. New fortunes will be built, and others will recede, based on the evolution in how we use the new “machine tools” – machine learning, artificial intelligence and smart networks – to create value. Five Key Themes Major findings revealed by our research include: Building a platform unlocks digital revenue. Platforms gather and synthesise data and prescribe a more fluid approach to product and service experimentation that can catalyse stodgy cycles of innovation. Business leaders who don’t use technology to lower costs, automate aggressively or glean insights from the data generated by business processes will find the digital switch jammed in the off position. Strong, confident leadership is required. Finding the money, talent and grit needed to navigate the shift to digital is the key to European companies seeking to secure their digital futures. THE WORK AHEAD | EUROPE’S DIGITAL IMPERATIVE 4 THE DIGITAL MESSAGE RECEIVED LOUD AND CLEAR Unlocking the Value of Code Europe is under pressure. Squeezed between a smart-based U.S. economy, and a fast-growing China that is rapidly expanding its research and development capabilities, Europe needs a plan. The impact of new technologies on all aspects of business and society – what we are now calling digital – is so large that the economic windfall could power the region for decades to come. New technologies are now emerging in rapid-fire – virtual reality, drones, 3-D printing, blockchain to name a few – and are landing thick and fast. Never has our technological future seemed this close. At their root, these technologies enable the “new:” New business models, revenue streams, types of customer relationships and cost structures are coalescing to radically change the nature of work. THE WORK AHEAD | EUROPE’S DIGITAL IMPERATIVE 5 As Figure 1 shows, the many executives we surveyed in Europe “get” the fact that something big is going on. Business leaders recognise that value is found in the virtual: Scanning a barcode at a cash register generates a rich stream of data for retailers about their customers and what they might like to buy next. In the U.S., Oscar, an insurance start-up that pumps health data from the fitness bands issued to its customers alongside their policies, is gaining stature, and a growing legion of customers Figur T D orc M Europe The Digital Force Multiplier on Work in Europe The power behind the region’s future economic performance is data. Respondents were asked to rate the impact of the following forces on work by 2020. (percent of respondents who answered “moderate” or “strong”) T D orc M Europe T w ur ormanc a. Busines s formation) 99% Artif telligenc t ceiv e eason) 98% ervice osts 96% Conc ecurit ac s actices 96% Demogr e. orkforce tc) 94% Hyperconnectivit s vice onnected 92% Digit e. w ternet ystems) 90% Softwar oces . oftwar e omation) 89% Ris alen eplac art empor s 86% Glob alen tage equirement 80% Figure 1 Source: Cognizant Center for the Future of Work, 2016 appreciate the discount offered for physical fitness. How long before Europeans demand a similar service? Even the rapid rotations made by a jet engine as it flies through the air means Rolls-Royce can radically change its business model by selling aircraft thrust by the hour instead of requiring customers to make a huge upfront capital expenditure.2 The power behind Europe’s economic performance will be data, algorithms and the science of meaning-making.3 The power behind Europe’s economic performance will be data, algorithms and the science of meaning-making. The Work Ahead study reveals that business analytics and the science of meaning-making are set to dominate Europe’s economic cycle for the next 30 to 50 years and beyond. Media headlines today fixate on Industry 4.0 in Germany, or the thriving fin-tech scene in Madrid, but what truly counts in this new digital world is the ability of an organisation to marshal data through its value chain to drive innovation and efficiency. THE WORK AHEAD | EUROPE’S DIGITAL IMPERATIVE 6 Whilst the importance of analytics may not be a great surprise – given the ongoing tsunami of press attention around big data – what is more surprising, and genuinely eye-catching, is that artificial intelligence (AI) ranks almost as important (98%) as big data anaytics (99%) for our respondents. Given the massive amount of hype and buzz that has surrounded AI since its emergence in the late 1950s, it comes as no surprise that executives have placed this leading-edge technology high on their agendas. Respondents clearly believe that AI is more than hype and is, in fact, a cornerstone of the work ahead. The message is getting through that intelligence is growing in the things that surround us all – from the cars we drive to the loans we need to buy them. Look down at your tablet or smartphone to see this very human-like AI in action. Banks and financial services firms increasingly deliver automated wealth management advice to customer devices in real time and in small doses; this type of “nudge” can change behaviours much more effectively than limited, in-person sessions and at much lower cost. Of course, headwinds could slow things down. Data security and privacy are red-hot panic buttons on both sides of the Atlantic, and the new EU data protection legislation being put in place allowing individuals to “be forgotten” and have sovereignty over their data, is an understandable (and needed) step in the evolution of data-based economies. However, over-regulation (a fear among many) could set the region back if the regulation is misguided or mishandled. Another issue respondents name as an inhibitor to their digital ambitions is the looming shortage of digital talent across the region. Three-quarters of our survey respondents worry about there being enough people in the workforce with the right skill sets for 2020 as the shift to digital accelerates. This fact tallies with our previous research report “People — Not Just Machines – Will Power Digital Innovation,” in which a majority of executives cited a severe digital skills gap. Three-quarters of our survey respondents worry about there being enough people in the workforce with the right skill sets for 2020. THE WORK AHEAD | EUROPE’S DIGITAL IMPERATIVE 7 THE ECONOMICS OF DIGITS The 2,000 companies from across the globe that participated in our study had combined total revenue of about $7.3 trillion in 2015.