Digital technologies are reshaping how humans live and work, and the impact on everything from individuals to economies is immense and growing. Mitigating the disruptive impact of tech and being deliberate about its constructive application is at the heart of Technological Social Responsibility.
PUTTING THE TECH REVOLUTION IN CONTEXT
Sometime in the 6th century BC Heraclitus wrote, “The only constant in life is change.” Lest we think the current tech revolution is unprecedented, Eric Hazan, Senior Partner at McKinsey & Company, reminds us that we have been here before. “We have experienced three industrial revolutions, even before this one. And the impact of technology on society and the economy is similar each time. It’s destabilizing. Some businesses die, some new businesses are created, and overall the equation is rather positive for economic growth and society also. But the transition is painful. That’s what has happened over the past 250 years."
Digital transformation itself, Hazan explains, has three waves to it. “The first wave, which is occurring from the middle 1990s until now, is digital technology, which includes telecommunications and the internet. The second wave is artificial intelligence, which has been present in a commercial way for the past five to seven years. And the third wave, which is coming about five years from now, is quantum computing."
"The topic of corporate social responsibility is not new, but the part Technology plays, and the impact delivered is increasing.”
The pace and extent of tech adoption is not equally distributed and not everyone is riding that first wave. Hazan says, “A lot of companies are still trying to digest the first wave, trying to move part of their sales to e-commerce. Consider, for example, a department store that had not sufficiently developed its e-commerce arm and was completely overwhelmed by the thrusts of the global pandemic. Companies that already had developed strong e-commerce capabilities managed through this period with resilience and were able to respond more quickly to the massive consumer shifts. And I’m just talking about e-commerce—imagine all of the other aspects of the first wave of digital transformation that a lot of organizations are only now trying to master, while some of their competitors may already be moving on to the second wave."
Nada Usina co-leads the Technology Practice at Russell Reynolds Associates and serves on its Executive Committee. She says, “Think about radio or newspaper going digital, and that’s become the norm. In a real business sense, where is the revenue coming from, how do they build an ecosystem? Digital transformation has clearly been a topic for 15, 20 years. Now you have Spotify or your favorite streaming services. You have e-commerce, so retail had to think about selling online.”
Digital tech adoption extends well beyond information, retail and entertainment. Usina says, “Financial services was probably the next sector on that spectrum. I think healthcare is following that just because it was more complex from a regulatory and a complexity perspective. And then the industrial environment is late to the topic of digital transformation, and many are only just understanding what digital means for them today.”
In this evolving, next-stage industrial revolution the disruption is relentless, and organizations have an opportunity to rethink their role in balancing the benefits and the pain. Yen Pin Ng is Managing Director for the Asia Consulting, Technology and Services practice at Sheffield Haworth. He says, “The topic of corporate social responsibility is not new, but the part Technology plays, and the impact delivered is increasing.”
TECHNOLOGICAL SOCIAL RESPONSIBILITY (TSR)
Hazan puts TSR in the frame of agency. “If you are working in the manufacturing industry, you know that you will be continuing to automate part of your supply chain, thanks to technology. You can decide that you want to focus on only cost reduction, or you can decide that you will retrain people who lack the skills you now need, because they know the company, they have an accumulated experience, and you can reallocate them to other tasks. We call these elements ‘technological social responsibility,’ because we think that technology should be at the heart of a company’s strategy, including the impact it has on all stakeholders.”
That impact can and will be both positive and negative.
UNDERSTANDING THE IMPACT OF TECH
IMPACT ON ECONOMIES
Technology provides individuals and small businesses access to a global market through online retail platforms. GPS technology fuels delivery services worldwide. Mobile banking applications provide financial services to millions, especially in developing countries. For example, according to McKinsey Global Institute, “The research finds that widespread adoption and use of digital finance could increase the GDPs of all emerging economies by 6 percent, or a total of $3.7 trillion, by 2025. This is the equivalent of adding to the world an economy the size of Germany, or one that’s larger than all the economies of Africa. This additional GDP could create up to 95 million new jobs across all sectors of the economy.” (“How digital finance could boost growth in emerging economies.” McKinsey Global Institute, September 21, 2016)
McKinsey Global Institute has published several analyses indicating that widespread adoption of new technologies has the potential to “create at least half an additional worldwide GDP of growth.” Hazan says, “It’s massive, but it’s not diffused everywhere, and the transition to get there is painful. But imagine the treasure of growth that is just below our feet.”
IMPACT ON WORK
Additional McKinsey research on the impact of technology on work shows that while tech adoption will eliminate some jobs, the larger impact will be the elimination of tasks, freeing workers to do more things that machines can’t do. Hazan explains, “In the next 10 years, not a lot of jobs will be fully automated. Probably between five and 10 percent of developed economies. But if we think about tasks, approximately 60 to 70 percent of the occupations in a developed economy will be automated up to 30 to 40 percent. Meaning if you have a job today, let’s say, in a finance department of a large company, you can expect that 30 to 40 percent of your job will be automated in the next 10 years. That doesn’t imply that you will lose your job, but at the very minimum, it would suggest that you will need to be reskilled.”
The issue is whether employers will choose to reskill employees or remove them. Ng describes a CIO for a government organization. “At that time, they were doing a huge automation. It was a big transformation. And the CIO gave a quote that I still remember, that ‘the project is not about doing more with less resources. It is really about doing much more with the same resources, after the investment.’ He actually addressed the fears and anxiety of people who know that their jobs will be replaced substantially with automation. Retraining was focused on letting them generate higher value, getting them to do more and using the automation as a tool, to do more for the organization.”
"It’s really quite exciting to see what may come of [TSR] as the world becomes a little bit more serious on the topic, the crescendo of how this broader topic has entered into the forefront of the dialogue over the last couple of years. I think it’s more than just words. It’s real deep thinking about, okay, now what does this mean? What is the investment around it, and what is the impact?”
-Nada Usina,co-leader, Technology Practice, Russell Reynolds Associates
IMPACT ON HEALTH
Hazan says we have the opportunity to “better monitor people who have a chronic disease through technology.” Telehealth, for example, allows greater speed of care delivery with increased convenience for both caregivers and patients.
Robotic-assisted surgery can help doctors perform with precision beyond the limits of human hands. Electronic health records provide for more efficient and accurate care. Connectivity and big data are changing diagnostics.
Ng describes the risks and potential of virtual medicine. “Over the last two years there has been a lot of investment into remote health care, specifically having simple outpatient visits replaced by using either a virtual consultation or even AI as a triage.”
"If people are made redundant or if they lose their jobs, they will appear in the government eye as part of the social service system. But is there a softer landing? Is there a way to give them the ability to retrain, to give them the same tools, the same options that the larger corporation that has a better TSR program would have?"
—Yen Pin Ng, Managing Director, Sheffield Haworth
“There have been a lot of concerns around whether the AI can really do the proper triage or in some cases whether the AI can do proper prescription,” Ng says. “So the adoption of technology to replace the medical staff is moving at a very slow clip for the right reasons. It’s really difficult to replace a doctor.”
IMPACT ON THE ENVIRONMENT
Hazan describes how AI could optimize energy grids. “Recently, a tech company specializing in artificial intelligence systems created a model through AI that analyzes the energy consumption of the British economy, looking at the way energy is produced and consumed.”
What did this analysis lead to? “It was able to reduce up to 10 percent of consumption,” Hazan says. “So imagine the impact on the environment if this AI algorithm were implemented in every developed economy’s energy production system?”
Similar AI can be applied to create efficiencies in traffic patterns and waste management.
The tech sector itself is an enormous energy consumer. Ng says, “There is a push for how to be greener and how to move towards a zero-carbon footprint. Where they run multiple data centers within the organization, they are looking at sustainability as part of their social responsibility, and at the same time, they do see a business improvement. Because if a greener data center is built correctly. They could have a lower operating costs over the years. At the same time, it is a social responsibility for them to be greener and for the data centers to be more sustainable.”
IMPACT ON COMMUNITIES
Ng describes an agricultural client who is using tech to mitigate the negative consequences of displacement. “When they acquire land for their plantations, there is sometimes the need to displace the people living in the area, and they use technology to make lives easier after the displacement, including access to technology, giving them access to remote education. Because the people who are displaced by the plantations usually are people who are poor and have no access to technology.”
Also, he says, “With the clever use of analytics and drones, they find out what is exactly needed for the business purpose so that they do not need to displace people en masse. They do not need to do as drastic an action as they would have maybe 10 or 20 years ago.”
The use of AI and data raise several important ethical considerations: surveillance, data privacy, and embedded bias. According to McKinsey & Company’s recent MGI report, “the rapid recent progress in AI and other frontier technologies means that cars that drive themselves, AI-powered mass surveillance systems, autonomous weapons, and other smart applications that can affect human life–potentially catastrophically–are no longer science fiction but a new reality. At the same time, we are increasingly using algorithms as tools to make decisions in highly sensitive areas, including hiring, criminal justice, and healthcare, sometimes without fully understanding how these algorithms reach their conclusions.”
Furthermore, the research states that these developments have sparked growing debate about the ethics of this new technological era: Can we teach machines to “behave” according to accepted human ethical norms–and if so, what are those norms in a world with such a variety of cultures and values? How do we counteract bias in algorithms that are trained on data sets that largely reflect our human bias? And what should business and government do to draw the line between right and wrong in a machine learning world?
These are questions that need to be answered.
TSR IN THE C-SUITE
“Board and C-suite leaders have a real opportunity for TSR to make a difference,” Usina says. “Tech social responsibility initiatives have impact when embedded into the fabric of the business by the Board, the C-suite, and the customers.”
Should TSR be the purview of the CIO, or the lead digital officer in a company? Hazan says, “The mistake would be to say, ‘There is someone in charge,’ and that it’s not the CEO’s role.”
What approach does Hazan recommend? “We think that technology strategy and overall strategy are not only correlated or connected, they’re almost the same. Global strategy is larger than technology, but technology is now one essential pillar of all strategy. We believe that technological social responsibility should be personified by the CEO and put at the center of his or her strategy. And the CEO should work hand in hand with the senior leadership team to drive adoption and change across the entire organization.”
"So many of the technology titans are driving what is happening in the world today, so it’s not surprising that there’s an increased interest & focus around how this sector brings their perspective into the societal impact.”
For Usina, “TSR is really connected to a broader mood that’s in the world today. We are seeing a lot just around ESG in general, this whole broader sense of environmental and social and corporate governance. If you are following the themes of discussions at Davos, it’s on every leader’s mind. Not surprisingly, so many of the technology titans are driving what is happening in the world today, so it’s not surprising that there’s an increased interest and focus around how this sector brings their perspective into the societal impact.”
BALANCING RESPONSIBILITY AND GROWTH
Is there a cost to organizations that adhere to corporate social responsibility and ESG principles? Do companies have to weigh business losses or gains against societal costs or benefits? Usina considers a longer-term view. “There is something to be said for a long-term investment in how a company operates. It will impact the type of talent it attracts. Think about how people are selecting employers and why they’re remaining with employers. Often, it’s well beyond the job itself. It is the culture of the organization. It’s the impact that an organization has more broadly, and it’s around the values that an organization has. Whether it’s from a talent perspective or a customer perspective, there is certainly something to be said around a longer-term, less immediate, pure-profit focused lens on the world."
“What is interesting about the technology sector, because there’s been such growth and innovation and venture minded acceptance in this sector, it’s not always been purely about profit,” Usina says. “It’s been around innovation and driving for the future. And so I think there’s a really interesting alignment between this sector and the general principles that organizations that fall within technology typically employ. The types of people who are being hired and the focus of institutional investors around companies that have a sustainable focus is, in our view, not going to slow down anytime soon.”
The workforce will transition, as well. Hazan references “new collar” workers, a term that was coined by former IBM chief executive Ginni Rometty, who recognized the need to invest in high-tech skills development for the future workforce. Hazan explains, “Because of the automation of certain tasks, organizations have to reinvent some jobs. We’re not talking about blue collar jobs, or people who are working in the manufacturing industry. We’re not talking about white collar jobs, or people in the service industry. We are talking about people who, after having been reskilled, know how to work with AI and automation as an input to a new job, or, they are a specialist in a new kind of work, for example programming or user experience, and new jobs around technology. That’s what we call ‘new collar’ because it’s a job which is not really blue collar, not really white collar; it’s something that didn’t really exist. It’s working with the machine to perform a new job."
A 2019 analysis from Oxford Economics predicted that up to 20 million manufacturing jobs could be replaced by automation by 2030, and those displaced are more likely to find jobs in sectors equally vulnerable to automation.
Hazan says, “The net equation is positive. The real difficulty is the transition.”
CAN TECHNOLOGY THAT IS GOOD FOR BUSINESS ALSO BE GOOD FOR SOCIETY?
The answer is up to us, Hazan says. “Do we manage this transition—which we have no choice but to manage— reactively or proactively? And on the other end, do we use technology in a conservative way, meaning essentially to reduce costs or substitute labor, or do we use technology in new ways, to focus on innovation and social responsibility? We’ve looked at different economic scenarios and when you use technology in a proactive, innovative and socially responsible way at the level of a country, GDP grows faster. We’ve also designed a new measure of GDP with economists, which we call GDP+. In addition to classic GDP, it includes the positive impact of technology, such as increasing longevity, global health, retaining jobs, et cetera. Actually this measure also shows GDP increasing drastically when you address the technology revolution in a proactive way and with a focus on innovation.”
If you have a job today, let’s say, in a finance department of a large company, you can expect that 30-40% of your job will be automated in the next 10 years.
Hazan reflects on the ability, or even perhaps the duty, of business to make choices about how to use the tools available. He says, “As technology is so present in the fabric of our society, if we harness it, it will do good and it will contribute to inclusive capitalism, help manage environmental impact, and so on. How will we solve global warming without technology? Could we have found a COVID-19 vaccine in less than one year without technology? Technological social responsibility is just us doing the right thing or not. It’s not technology having its own mind and doing things.”
For Usina, TSR “aligns really well with the idea of being future-facing and forward-thinking. Profitability isn’t always first on the mind of many of these organizations. It is often about disruption and creating new paradigms. It’s really quite exciting to see what may come of it as the world becomes a little bit more serious on the topic, the crescendo of how this broader topic has entered into the forefront of the dialogue over the last couple of years. I think it’s more than just words. It’s real deep thinking about, okay, now what does this mean? What is the investment around it, and what is the impact?”
The impact of disruption is different for the employees of small and medium sized companies. Ng cautions that while large corporations have the resources and ability to plan for and mitigate disruption, the majority of the world’s workers are employed by businesses that may not. “In every part of the world, there are a lot of small businesses. And when the businesses disappear, get disrupted by technology, then the employees are left to fend for themselves.”
What can be done? Ng thinks, “We need to be more proactive at identifying probabilities made increasingly possible by technology, so we can look into the future a little bit. For example, if people are made redundant or if they lose their jobs, they will appear in the government eye as part of the social service system. But is there a softer landing? Is there a way to give them the ability to retrain, to give them the same tools, the same options that the larger corporation that has a better TSR program would have?”
Ng thinks about using technology as an enabler, “using the same tools that companies use to make money, like data analytics, to deliver the right help at the right level to the right people.” He says, “We need to be more proactive rather than reactive. And we have the tools to do it.”
“Technology is a superb tool, especially when pursued with technological social responsibility in mind,” Hazan says. “We can focus on innovation, proactively manage the technology transition, and also address social and environmental issues. If we do all that at the country level, we grow faster; if we do that at the company level, we grow faster.”