Knowledge Center: Article

Future of Work

2018 heats up: Talent, digital, sustainability, and the butterfly effect

5/7/2018

2018 heats up: Talent, digital, sustainability, and the butterfly effect

This year is already significant by measure of business transformations. In the United States, your local pharmacy, CVS, is trying to buy an insurance company (Aetna) to take advantage of opportunities you never knew existed. Amazon (once quaintly referred to as an “e-tailer”), Berkshire Hathaway, and JPMorgan Chase are stepping into the healthcare ring by starting their own company that will potentially serve more than a million employees. Bitcoin was up until it was down, but blockchain and the era of private transactions seem to be here to stay.

And as is always the case, everything old seems new again. Technology continues to evolve its disruptive force, with artificial intelligence (AI) currently taking the spotlight. Tesla wants to build assembly-line electric cars for the masses. And online retailers—which many tout as the end of retail as we know it—are jumping into the physical, offline world (we’re looking at you, Amazon) to reap better margins and create a more meaningful customer experience.

Everyone’s asking—what do these changes mean for my company? Where do we need to look in 2018 and beyond? And while we are entering an era where the future is just two days’ free shipping away, we see some interesting themes taking shape.

The demand for talent will continue to outpace supply 

Today’s employees see themselves as being in the driver’s seat when it comes to career planning and development—and the companies that will win that arms race are the ones willing to rethink their hiring, development, and retention models in order to adapt.

The very definition of work itself has fundamentally changed, thanks to the effects of technology, generational shifts, and the rise of the gig economy. More workers are looking for flexible hours, work-from-home arrangements, and career paths with milestones at more frequent intervals, often as little as two years. This shift in expectations not only requires employers to rethink their value proposition to employees but also challenges models of insurance, banking, and all the other industries that rely on workers’ paychecks. While millennials (and the incoming Generation Z) strongly represent this profile, there is increasing evidence that this change is permeating all profiles of the workforce, aided by continuous learning and continuous performance-management programs.

Indeed, “perennials” (which Fast Company defines as “ever-blooming, relevant people of all ages who live in the present time, know what’s happening in the world, stay current with technology, and have friends of all ages”1) may have even more of an impact on the workforce as their behaviors challenge algorithmic distinctions based on outdated stereotypes. In the online-driven gig economy, age truly is a number; behavior is what matters. 

Improving benefits and adjusting career tracks

To keep up, employers are expanding their portfolio of benefits to attract and retain talent. For example, US outdoor company Burton Snowboards offers an infant travel policy to encourage employees who become parents to continue pursuing top-level jobs within the company (i.e., the ones that require extensive travel). Companies are also responding to a shifting tide, led by millennials,2 to increase job flexibility and adjust career trajectories in recognition that workers increasingly care less about vertical promotions than they do about growth opportunities.  Indeed, we’ve seen how companies such as CDW, Cisco, Facebook, and Google are working to change their employees’ perception of internal, lateral moves, casting them as promotions and thus removing the constant pressure to move up or on. Such moves pay dividends for the companies, whose employees develop broader skill sets and stick around longer due to the wealth of internal opportunities available to them.

Adapting to the gig economy

As always, Amazon stands out as a company that has employed creative measures to accommodate and attract gig workers during peak times of the year, such as Christmas. The company’s CamperForce program recruits RVers who travel the country seasonally to staff its distribution centers for fast fulfillment during the winter months. Amazon has even given the program its own logo and website, and in doing so has found a more engaged, loyal, and flexible workforce.

Upskilling” current employees

Like many companies, AT&T faces a future in which its legacy businesses will become obsolete; it is racing to reinvent itself for the digital marketplace. Rather than hiring new talent, AT&T has chosen to rapidly retrain its current workforce of more than 250,000 employees. The company’s Workplace 2020 program consolidates roles, simplifies performance metrics, emphasizes diversity of thought, and gives workers tools for career development. Every employee is encouraged to seek out new capabilities, roles, and experiences. In doing so, the company is attempting to become nimbler and take advantage of approaches common to start-ups, such as developing people’s skill sets through crowdsourcing and hackathons. Rather than throw out the baby with the bathwater, AT&T realized it could likely find the workforce it needed inside of its existing workforce.

Good companies don’t “do” digital; they become it

2018 heats up: Talent, digital, sustainability, and the butterfly effect

Successful digital transformation depends on a clear strategy that specifies technology’s value proposition to the business.

Across industries, digital technologies are evolving beyond the screen to encompass many touchpoints (voice, gestures, wearables, etc.), and companies are investing big to build their own data advantage via AI and the Internet of Things (IoT). Companies that successfully “go digital” have one primary component in common: before investing in a platform, an app, an acquisition, or a whole new workforce, they define what “digital” means to their business. For example, Klöckner, a steel trader based in Germany, assembled a corporate digitization strategy, an integral part of which was the creation of a venture-capital subsidiary—kloeckner.v—to invest in disruptive technology companies in steel distribution and related industries. In April 2017, kloeckner.v invested in 3-D printing start-up BigRep, thereby establishing a presence in the additive manufacturing industry.

We expect 2018 to be dominated by companies that successfully—and seamlessly—bridge the real and digital worlds. Be it better-tailored insurance products, custom-made apparel, share-scheme bikes positioned near one’s preferred location, or medicine delivered within an hour based on an individual’s specific symptoms, insight into consumer behavior will inform better products and customer experience.

When looking at AI and IoT, we predict technology and industrial players, such as Bosch and Trumpf,3 will influence the emergence of just a few common languages and platforms, linking independent components with external features. These platforms will allow the transfer of information and machine data between different industries and individual businesses in a more consistent and transparent way.

Sustainability” is no longer optional

Companies are sharpening their focus on a range of environmental and corporate sustainability areas, including diversity and inclusion, culture, supply chain diversity, and corporate social responsibility.

Long associated with environmental stewardship, “sustainability” has been embraced by companies from Apple to Genentech to Ford to Nike and beyond to include diversity and inclusion, innovation, and corporate social responsibility. Apple has long been a leader in this space, both by measure of the environment (Greenpeace recognizes the company annually as a leader of major technology companies in sustainability4) and corporate social responsibility (for example, by ending its reliance on cobalt from the Democratic Republic of the Congo after learning about the country’s widespread child-labor practices5). Other companies are embracing the concept of a “circular economy,” where linear manufacturing and consumption are usurped by processes that encourage conservation and reuse of natural resources.

It’s not just large companies—we’re also seeing more start-ups being designed around a mission of corporate social responsibility. In insurance, Germany’s Friendsurance, the United Kingdom’s Guevara, and the United States’ Lemonade offer customers the opportunity to give unclaimed premium money to charity during a given year.

Organizations must watch out for three butterflies

Seemingly small changes can lead to monumental ones.

It’s human nature for senior managers to unwittingly take a short-sighted approach to today’s problems—focusing on the current thunderstorm—rather than considering the longer-term climate. Real market disruption often comes about courtesy of a corporate version of the butterfly effect: cause in one part of the system, albeit small, shows a big effect in another, often unforeseen, part. Some butterflies we’re watching in 2018 include the effects of legalized cannabis, the process of payments, and changes in healthcare.

Cannabis

2018 heats up: Talent, digital, sustainability, and the butterfly effect

The expanding legalization of marijuana could cause major shifts in farming, banking, insurance, and medical care in 2018 and beyond.

In the United States, medical marijuana is currently legal in 29 states, recreational use is legal in 9,6 and several more states are poised for legalization in 2018. States with legalized marijuana are collecting billions in additional tax revenues—but government coffers aren’t the only thing being transformed by this “cash crop.” Take, for example, the traditionally slow-to-evolve banking and insurance markets. To get around the fact that the federal government still considers marijuana an illegal substance, and thus federally insured banks are cautious about handling deposits from marijuana-related businesses, some states are creating state-insured banks, which will create a windfall of cash to be reinvested. In addition, new start-ups are popping up in states where marijuana is legal to help speed up frictionless payments, handle large cash deposits, and provide insurance to growers and sellers of cannabis.

The rise of legal cannabis is also beginning to change the face of urban farming, as new players are turning blighted industrial areas into large, indoor grow sites. These new “pharmers” are pushing the boundaries of seed cultivation, water usage, and growing technologies—advancements that will have an impact far beyond the cannabis industry.

Medicinal cannabis will also, of course, make waves in healthcare—and not just in the United States. Medical cannabis is legal in Canada, the Netherlands, Russia, Spain, Uruguay, and even parts of Iran. Last year, Germany began enforcing a revision to its Narcotic Drugs Act that allows doctors to prescribe medical marijuana to patients with serious illnesses and requires patients’ health insurance, including federal plans, to cover treatments.7

Payments

2018 heats up: Talent, digital, sustainability, and the butterfly effect

The payments landscape will continue to change in dramatic ways.

The entire notion of how we complete transactions is evolving. From the recent launch of the Amazon Go store in Seattle, where shoppers simply put items in their bags and skip checkout, to retailers experimenting with stores not accepting any cash payments, how we think about paying for goods and services is evolving at lightning speed.

The recent flux in Bitcoin suggests that cryptocurrencies have a long way to go before they truly disrupt payments—but they are far from a fad. Indeed, cryptocurrencies are one symptom of society’s move toward decentralization, where large players must reorient their models to play, as the banks are trying to do with person-to-person payments such as Venmo and Zelle. “Fintech” may be the Silicon Valley buzzword of the moment, but the rise of initial cryptocurrency offerings and the demand for new and faster payments mean the spoils will go to companies that make transactions as frictionless as possible.

Furthermore, we see 2018 being a big year for blockchain. The number of companies stepping forward to make bets on this technology, which allows for coded, anonymous transactions, suggests it has permanent and potentially huge disruptive value. The anonymity of the coded payments made possible by blockchain technology helps assuage individual and business privacy concerns that have come to the fore in recent years, as customers want highly sophisticated, technology-enabled products, solutions, and offers—without handing over their data. Blockchain is one example of how to address this paradox.

Healthcare

2018 heats up: Talent, digital, sustainability, and the butterfly effect

A new US healthcare venture could create more industry competition and put pressure on small organizations.

The future of healthcare, while always in flux, received a shock in January when Amazon, Berkshire Hathaway, and JPMorgan Chase announced a joint venture with the goal of cutting healthcare costs for their more than one million combined employees.8 The move would disrupt every corner of the industry, from insurers to local pharmacies to Big Pharma. While the venture is still in the early stages, we expect to see the usual food fight around what is or isn’t covered. But since it’s a private, employer-sponsored plan, the companies can do whatever they want, which means they will likely be progressive in their coverage, with an emphasis on wellness care (as opposed to acute care, which is what most public health plans focus on). And given the global footprint of the players involved, the venture could have an international butterfly effect, as it will put pressure on smaller players that don’t have the scale to offer competitive health insurance.

Companies should embrace change

Clearly, the way we live, work, and connect is evolving, and no company will be left out of the transformation; the question is whether organizations are already making efforts to change. While there will always be shiny objects—AI, Bitcoin, IoT—there are just as many obstacles to companies’ achieving their full potential. What remains a constant is that the winners will be the companies that build agility and resilience into their business models, and the ones that build sails that catch the wind of a butterfly and turn it into Mach speed. Is your company one of them?


About the contributors

Charles Macdonald (cmacdonald@heidrick.com) is a principal in Heidrick & Struggles’ London office and a member of Heidrick Consulting.

Karla Martin (kmartin@heidrick.com) is a partner in the San Francisco office and a member of Heidrick Consulting.

Tal Potishman (tpotishman@heidrick.com) is a principal in the London office and a member of Heidrick Consulting.

Arjen van den Berg (avandenberg@heidrick.com) is a partner in the London office and a member of Heidrick Consulting.

References

1 Gina Pell, “Your obsession with millennials won’t survive 2017,” Fast Company, October 26, 2016.

2 Simon Kuper, “Why the 30-hour work week is almost here,” Financial Times, February 15, 2018.

3 Economist, “Does Deutschland do digital?” November 21, 2015.

4 Greenpeace, Guide to Greener Electronics 2017, October 17, 2017.

5 Eric Onstad, “Apple leads way in tracing cobalt from Congo, Microsoft lags: Amnesty,” Reuters, November 14, 2017.

6 Melia Robinson, “Here’s where you can legally smoke marijuana in 2018,” Business Insider, April 20, 2018.

7 Library of Congress, “Germany: Medical marijuana act enters into force,” Global Legal Monitor, March 13, 2017.

8 Angelica LaVito and Jeff Cox, “Amazon, Berkshire Hathaway, and JPMorgan Chase to partner on US employee health care,” CNBC, January 30, 2018.


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