The Triangle Becomes a Pentagon - The Digitally Transformed Workforce

You may have heard that digital transformation will change the nature business.  Well, you can at least count on it changing the nature of the workforce.  Digital transformation is being referred to as the fourth industrial revolution.  Each time our society went through an industrial revolution, it created a massive change in the makeup of the workforce and the skills and abilities needed.

Industrial Revolutions

The first industrial revolution occurred in the late 1700’s and early 1800’s.  It was driven by the introduction of steam power.  Prior to this time, the vast majority of the workforce was slave labor or serf labor performing low-skill manual tasks.  Thanks to the first industrial revolution, the steam engine  provided the brute force power needed by the early industrial companies.  Massive numbers of jobs disappeared and societal upheaval, such as the Luddite riots, occurred.  

The second industrial revolution started in the late 1800’s and went through the early 1900’s.  It was driven by the introduction of the mass production assembly line.  In this revolution, the workforce became adept at one task or activity.  This led to dramatically lower product cost while improving quality.  The economy boomed and the workforce transformed from mostly agrarian workers to mostly factory workers and a vibrant middle class. 

The third industrial revolution was the advent of electronics and computers in both products and processes.  Business success now leveraged complexity that was enabled by the computer systems.  Individuals in the workforce had to develop digital skills applicable to their functional role.  People required specialized training and technical certificates.   To get a job, you needed a degree.  Often the workers became isolated as they operated the computer system or equipment in use at their workstation – whether it was on a factory floor or more commonly in an office cubicle.  This led to the rise of the subject matter expert.  At the same time, many decisions about products and processes were forced higher into the organization where managers had the experience, oversight and understanding of the complex systems.  The workforce became a host of isolated specialists and a person’s career growth was based upon their functional knowledge, not their tenure with their employer.

Industry 4.0

Now we have the fourth industrial revolution.  This is driven by the introduction of smart devices and artificial intelligence.  This requires the connectivity and processing capacity to create ready access to real-time data throughout the business processes.  Real-time knowledge and information changes how people interact and the scope of their work.   The availability of data and the application of smart devices often frees both customers and the workforce to interact virtually on a 24/7 basis with respect to each unique order or account.  We used to say in the organization that knowledge and data were power.   In Industry 3.0, subject matter experts and managers held power by closely controlling the flow of information.  Decisions were forced to the highest levels in the organization.  Thanks to the Industry 4.0 revolution, the knowledge and data are available to almost anyone, and both customers and employees expect instant decisions. 

As in the other revolutions, we are starting to see a massive shift occurring in the workforce.  Many of the routine administrative processing jobs, the paper pushers and gatekeepers, have vanished.  Even some of the highly skilled positions that relied on specialized knowledge and abilities are being automated and replaced with smart devices.  If we look at the organizational chart of an Industry 4.0 company, it no longer looks like the pyramid of old with entry-level workers and process operators at the bottom of the pyramid who over time can become subject matter experts, front-line managers, and finally senior managers of the organization.  Now the organization chart looks more like a pentagon.  Many of the entry-level and process positions are replaced with digital assets, and even some of the subject matter experts are now automated systems and algorithms running the business processes. 

Workforce Transformation

This transformation of the workforce has significant impact for education, training, hiring, and careers.  The career path in Industry 4.0 is very different from the path to success that has been promoted by our education system and many HR departments.  Let’s briefly consider the role and responsibilities of each of these workforce levels in Industry 4.0 and then the educational and career implications.   

The number of process operators and entry level positions within an Industry 4.0 company are sharply reduced as compared to an Industry 3.0 company.  Much of this work is done by digital assets.  The paper pushers and gate keeper roles have disappeared.  Based upon the ROI for creating or acquiring a digital asset, entry level positions are also disappearing.  Just consider the retail environment, for example. Many stores now have self-checkout and often customers order online without interacting with a salesperson.  The base of the pyramid has already shrunk, and it will continue to shrink as the capability of digital assets grows.

The role of the Subject Matter Experts (SME) is still needed, but it is changing.  In Industry 4.0 they are often on the front line of the business processes and have been empowered to make day-to-day decisions.  Their authority has increased, and they are normally expected to be problem solvers and real-time solution providers.  They can do this since they have immediate access to all relevant data and can connect with other SMEs, both inside and outside the organization, to determine the best decision.  In an Industry 4.0 company, digital assets handle the routine process management work that SME’s have done in the past.  The Industry 4.0 SME takes on the special cases and provides the unique value-added solution for these.  This means the skill set and responsibility have expanded.  The SMEs still need the appropriate subject matter expertise.  But in addition, they need access to cross-functional process data and understand how to interpret this real-time data.  They also need the inter-personal expertise and decision-making skills that are vital to successful process management and problem-solving decisions.

The frontline manager role also changes in an Industry 4.0 company.  They are not as involved in day-to-day decision-making. That is done by SMEs.  But the speed of change, both technical and organizational, is rapid in Industry 4.0 companies.  So, the frontline managers are coaches, trainers, and change agent leaders that help their people gain and maintain the evolving skill set needed to do their job.  These positions are not based upon seniority, but rather on the leadership and facilitation skills of the individual.  These individuals must be leaders of change who are constantly hiring and training the workforce to equip them to perform the evolving business processes.

The role and scope of senior managers in Industry 4.0 is similar to that of managers in Industry 3.0 companies.  They are responsible for strategic direction, resource allocation, and monitoring the execution of all aspects of the business.  However, although the role and scope are similar, the means by which they do this and the pace of their decision-making is radically different.  They do not sit at the top of the pyramid and wait for filtered and sanitized data to work its way up.  Instead, they have instant access to real-time data of product and process performance throughout the business.  While this provides improved insight and understanding, it is also can be an enabler for micro-management.  To be effective, these individuals must delegate the authority for real-time decision-making and then focus their decisions on strategy, asset allocation, and personnel development.  They shouldn’t try to make all the decisions, instead they should point the direction, enable the teams of SMEs, and help frontline managers cope with mid-course corrections.  And there will be the need for many mid-course corrections because the business environment is constantly changing.  Five years plans, annual strategy meetings, and quarterly reporting is much too slow for Industry 4.0.  But chaotic and continuous redirection and micro-management will exhaust and frustrate the organization.  These individuals must be outstanding leaders to guide and direct their organizations.

Industry 4.0 Personnel Development

Finally, let’s consider a few implications for education, training, hiring, and careers within an Industry 4.0 organization.  First with respect to education, everyone needs basic skills for using technology.  And, of course, they need the ability to communicate well and understand basic concepts about the world and the people they interact with.  These are the traditional academic disciplines of reading, writing, math, science, history, and sociology.  The individual will also need foundational knowledge in their selected discipline.  But a key here is that they have foundation knowledge that they can rely on as they adapt to the ever-changing environment in which they establish their area of functional expertise.  The education should encourage the student to explore new ideas and concepts using these as appropriate to make decisions and solve problems. 

While education is important for foundational understanding, the rapidly changing business environment and technologies will require continuous training for subject matter experts.  The subject matter expertise rapidly becomes stale.  An Industry 4.0 company must create a strong training program that helps the subject matter experts remain experts.  In addition, the training and development system should lead the new hires into positions of subject matter expertise.  This will often require developing their interpersonal and problem-solving skills.  This means the learning management system for an organization will become a strategic asset and a critical portion of the organizational infrastructure.  This is the most significant value-added activity of the HR department.

In the Industry 4.0 environment, products and processes are constantly adapting.  Some of the individuals in the organization may choose to adapt to the change by following the technology or process to a different company rather than changing their skill set and remaining with their current company.  Added to this, the need for companies to quickly scale up and scale back as their fortunes ebb and flow in the digital economy leads to high degree of employee turnover and the use of temporary employees.  In fact, many people in the workforce want and expect to change jobs frequently – they are part of the “gig economy.”  The front-line managers will be in a constant mode of recruiting hiring and assimilating new employees – some temporary and some permanent.  The organization will be constantly filling the pipeline with candidates and rebuilding their workforce.

One of the most significant changes from a workforce perspective is the impact that Industry 4.0 has on promotions and careers.  Promotions are not based upon seniority.  They are based upon subject matter expertise.  To move from the entry level position to a Subject Matter Expert within a company will be based upon technical knowledge and problem-solving skills.  Leadership and team management skills are required to move from the SME role to front-line manager.   The opportunity for promotion within a company is associated with the changes in the company and the growth of the individual, not the retirement of someone’s supervisor.

 Organizational charts are fluid.  Positions will be created and disappear again, perhaps within a matter of months.   The old maxim that each individual is responsible for their own career is more true than ever before.  The individual’s ability and desire to adapt to change, and their personal leadership skills determine their career path.  HR organizations must also be nimble to create urgently needed positions and eliminate suddenly obsolete ones.  The HR organization should be prepared to explain and guide individuals through this sea change in workforce management.

What I have described is the likely result of a company embracing Industry 4.0.  But we must also recognize that change is difficult.  The previous industrial revolutions took decades before the majority of companies had adopted the new practices.  We are about 10 years into this revolution.  So, if your company is not on-board yet, there is still time to catch up.  But don’t delay too long.  As more companies embrace the Industry 4.0 business model, your old workforce and people management practices will soon be viewed as an oddity and anachronism.