Jobs in the Age of Digital Innovation

The rising trend line of R&D investment in software and service offerings suggests there will be major changes in the kinds of jobs that will be created — and in the opportunities for those jobs that will continue to exist — over the next decade and beyond.

Companies are already feeling the effects of the shift within their R&D operations as they compete to increase their ranks of software engineers and other specialists. “It’s very hard today to make a distinction between an engineer and a software engineer,” says Soumitra Dutta, dean of the Samuel Curtis Johnson Graduate School of Management at Cornell University. “Almost every product you create either has software embedded in it or requires using a software product to create it in the first place. Software has become a kind of basic language, like mathematics, which you need to know just to work successfully as an engineer.”

Familiarity with software is becoming a necessary skill for managers as well. At Cornell’s Johnson School, more MBA students are signing up for programming courses in the engineering department. “They’re not necessarily interested in programming — though most of them do program things themselves; they’re taking these courses so they are able to understand the language and interact with professional software engineers,” says Dutta. “We are also seeing increasing interest in courses focused on the service economy and on technology.”

The shift toward software and service offerings is also changing the skill sets needed for other jobs in a wide range of industries. For example, in today’s advanced manufacturing workplaces, a factory worker is more likely to be carrying a tablet computer than a wrench, and may have the skills to configure software for new situations, or understand how to program CNC (computer numerical control) machines. To prepare people for these jobs, companies and governments at the federal, state, and local levels in the U.S. have launched dozens of initiatives to improve skills in science, technology, engineering, and math (STEM) subjects over the last decade, at both secondary schools and community colleges.

The rise of software and services can be viewed as just the latest effect of the computer age, which has radically changed the nature of employment in many industries over the last 30 years. Welders have been replaced by robots, bank tellers by ATMs, and phone operators by automated switchboards. The phenomenon was foretold — even given a name — by the British economist John Maynard Keynes in 1930: technological unemployment.

But as an increasing number of the world’s leading innovators accelerate the shift away from purely physical products to software and service offerings, the employment effects will become much more dramatic and far-reaching. Several books and a welter of scholarly papers and articles have argued the pros and cons of the shift over the last few years. In “The Future of Employment: How Susceptible Are Jobs to Computerisation?” (pdf), Oxford University professors Carl Benedikt Frey and Michael A. Osborne review this literature and employ a novel methodology for quantifying the effects of digitization. They come to a stark conclusion: “According to our estimates,” they write, “about 47 percent of total U.S. employment is at risk.”

Frey and Osborne list the probability that computerization will eliminate jobs for 702 detailed occupations, including most workers in office and administrative support, production, and transportation and logistics. Some of the job classifications with the highest degree of risk are drivers, sales workers, loan officers, and insurance underwriters. Repetitive white-collar and service vocations are most vulnerable to digitization today.

Where will new jobs come from to replace the many that will disappear? The answer is not clear. Modern society has experienced employment shifts of this magnitude before. In 1900, for example, more than 40 percent of the U.S. workforce was employed in agriculture. Today the number is just 1.4 percent, thanks to technological advances. Manufacturing jobs took up some of the slack for many decades, but their numbers, too, have been falling since the late 1940s, and they account for only 9 percent of the workforce today. As the first industrial robots were being developed in the 1960s, U.S. president John F. Kennedy warned that preventing massive unemployment in an age of automation would be the major economic issue of the decade. Nearly all the net new job growth in the country since the mid-20th century has been in services, and between 1950 and 2016, the U.S. workforce increased from 62 million to more than 160 million.

The sunniest outlook going forward will be for employees who have the skills and knowledge to manage or orchestrate automation, and for those who have the people skills and experience to bridge the gap between technology and the human needs of customers. A key skill for innovative companies in the future will be to channel that creativity in ways that create both business value and new kinds of employment.

For further insights, read “Software-as-a-Catalyst.”