There is a huge opportunity for blockchain to establish itself in the healthcare sector. Learn more about specific use cases that can help innovate how HR departments deliver healthcare & wellness benefits. Blockchain technology is one of the most disruptive technologies on the market today, with multiple industries adopting it to optimize processes and innovate the way companies function. It has proven to be a game changer in the business arena and the global blockchain technology market is estimated to amass US$20 billion in revenue by 2024. Meanwhile, SAP reports that 71% of business leaders who are actively using blockchain believe it plays a key role in advancing technology and reestablishing industry standards. While blockchain has already been widely integrated in processes for supply chains, banking and cryptocurrency (e.g. Bitcoin), the healthcare industry has also been identified as one of the top industries likely to be disrupted. Blockchain technology could offer solutions to some of healthcare’s greatest challenges, from securely managing patients’ medical data to tracking large databases of drugs through the supply chain or extracting healthcare data from clinical trials. As the technology advances and becomes more readily available, more healthcare organizations across the industry will be adopting blockchain solutions to redesign the global healthcare ecosystem. HR serves a critical function for the healthcare industry and is an intermediate between employees and one of the most valued aspects of life: their health. According to Bitfortune, 55% of healthcare applications will adopt blockchain platforms for commercial deployment by 2025. Meanwhile, adoption seems to be ramping up with multiple governments around the world announcing plans to invest in blockchain and encourage its implementation. For example, Singapore’s government has announced financial incentives to enterprises for adopting the technology. Amid an evolving industry, it is imperative HR professionals stay current with how blockchain’s ledger technology is disrupting the healthcare industry. They should especially keep a pulse on the implications blockchain holds for delivering the employee experience with improved healthcare and other benefits. Use cases: how blockchain can help HR transform in delivering healthcare & benefits While the use of blockchain technology is still more commonly associated with payment functions, its disruption to HR will be profound and pervasive in coming years with many possible use cases across the functions of an HR department. To prepare for the coming blockchain revolution, HR departments should focus on identifying problem areas and inefficient processes that could be addressed by the transparency, accuracy and speed that blockchain provides. The processes most primed for blockchain disruption are those that are burdensome and expensive with substantial data collection and third-party verification. For this reason, healthcare and benefits could be the ideal match for an HR department looking to adopt blockchain technology. 1. Enhancing fraud prevention & cybersecurity for sensitive data in HR. HR teams conduct some of the highest-volume financial transactions for an organization and handle sensitive employee data related to healthcare (as well as, banking, disciplinary records, performance records, expense reimbursement, and more). Unfortunately, all of the data an HR department maintains is at risk of being exploited and, as more companies face data breaches, it is becoming increasingly important that proper measures are in place to maintain security and prevent fraud. A company’s cyber risks largely emerge from an underlying lack of transparency and accuracy in its data systems. Because of its capacity for promoting transparency and accuracy, blockchain technology is being lauded as a solution for combating cybersecurity crime and protecting data. While blockchain’s popularity grows among large companies and companies that hold critical, sensitive data (for example, Lockheed Martin is trusting it to secure data), it is also being used by nonprofits to collect donations securely. It is important to consider that blockchain technology can mitigate both internal fraud and external hacks of sensitive employee records. Access to the blockchain is limited and controlled—even those who have access are not able to modify the records. This limits both internal fraud and external hacks of sensitive employee records. In the digital age, data is a major asset for a company. Blockchain essentially functions to decentralize data and places it across a large network of computer storage spaces to reduce the risk that a single hacking event could usurp all the data a company has. By using blockchain, HR departments can introduce a solid measure of security against cyber threats to protect their employees’ health information. 2. Improving health insurance, health records & patient experience with ‘smart contracts.’ Much of blockchain’s power comes in the application of ‘smart contracts’, which many organizations are using to make payments to employees, contractors and vendors. In fact, it is reported that 45% of early adopters of blockchain are already implementing smart contracts within their organizations. A smart contract codes a set of parameters using statements in ‘if this, then that” (IFTTT) language. These contracts are designed so that, once executed, the entire process is dictated by these codes. It is also made irreversible unless of course terms of a contract need to be updated. While smart contracts have many applications for HR functions in terms of payroll, there are some very important considerations HR departments should be aware of in terms of healthcare. Smart contracts have the potential to be used for insurance, including how patients buy insurance. Through a smart contract, all details of an insuree’s policy could be stored in a patient profile. This profile would then be stored on the blockchain platform in a safe and secure ledger that is less prone to hacks than the databases currently used. Smart contracts could also impact the insurance claim process by eliminating the need for lengthy forms and time lags. If an insuree undergoes a medical procedure covered by the policy, a smart contract would be automatically triggered to transfer money from the insurance company’s account straight to the hospital or medical provider. The automation cuts out delays and hassles, allowing for correct payment of the medical service. There are also numerous implications for electronic medical records, information and medical data sharing. Storing patient’s electronic health records (EHR) on secured ledgers, for example, would allow a patient to move easily from one hospital to another without having to fill out numerous forms. The blockchain network would safely store their records, allowing their new physician to access them without delay. While hospitals and healthcare providers currently rely on a number of databases filled with patient data, these can be too centralized and restrictive for sharing potentially life-saving insights around the globe. If health records were to be kept in a smart contract stored on the blockchain, the data analytics would be available to hospitals, providers and research institutions everywhere. With widespread adoption of this healthcare blockchain technology, an individual could essentially walk into any hospital in the world for treatment and, with their private key, their health data would be accessible instantly. 3. Offering better access to healthcare & other benefits. Blockchain’s ‘smart contracts’ could also change how employees gain access to healthcare and benefits. Once the employer outlines the terms of employment prior to hiring, HR is charged with upholding the conditions in the contract. These terms include provisions that employees value in their employee experience, such as healthcare insurance, wellness programs or other benefits. The current model of manually delivering benefits runs risks of errors and could get in the way of properly servicing employees. With blockchain, HR could seamlessly deliver upon these benefits by implementing smart contracts that automate the process. For example, if a company outlines that an employee’s benefits packages begins after a specific waiting period, the smart contract would be written to automate these benefits at the right time and in the right fashion. Not only does blockchain have the potential to improve security and automation of benefits, it is possible for benefits to be more personalized to each individual employee. In today’s digital world, consumers are accustomed to enjoying personalized experiences and this trend of hyper-personalization is reaching the workplace. Through blockchain’s smart contracts, which could be integrated with artificial intelligence (AI) and IoT technology, companies would be able to empower employees with benefits packages and wellness programs that are tailored specifically for them and their evolving needs. These personalized packages could become a critical tool for enhancing the employee experience. Challenges HR faces in implementing blockchain to deliver benefits Blockchain is a quickly evolving technology with new applications and trends regularly emerging. Though it is becoming more widely adopted across a variety of industries, it is inevitable that first-time users will run into issues and challenges in implementing it. For HR departments, it is imperative to consider these challenges as they explore which processes might be impacted by blockchain. 1. Data standardization & integration with legacy systems. With blockchain being a new technology, protocols and standards for its application are not yet established. When the internet began to commercialize, it initially struggled without proper protocols. But over time, controls were implemented to allow for browser compatibility, cross-platform multimedia and better interconnectivity between servers. As more sectors adopt blockchain—especially healthcare which handles sensitive and personal data—ensuring that blockchains offer an industry-wide benefit will require widespread collaboration and standardization. For example, it will have to be determined when private, as opposed to public, if blockchains make sense. Otherwise, this could impact the security and functionality of blockchain technology. All industries will have to get over a major hurdle when it comes to integrating blockchain solutions with legacy systems—or replacing legacy systems altogether. But the hurdle is especially high for HR and healthcare, which are often bound to specific legal regulations and already have very specific HR or healthcare systems in place that incorporate these parameters. Synching these systems or replacing them with blockchain technology could prove to be difficult. 2. Adoption & incentives for participation. Despite enthusiasm and a strong record of success, blockchain adoption has proven to be difficult for companies. Greenwich Associates surveyed companies that have implemented blockchain and 57% reported its integration has been harder than expected. In terms of scalability, 42% of respondents reported it as a major issue, 39% said it is a minor issue and 19% said it is no issue at all. Much of the challenges are culture or people-related, rather than technical. For example, most people resist change and, if they do tolerate it, they generally prefer it to happen gradually and incrementally. The oppositions to change could be even more pronounced for those in HR, especially with employees across an organization resisting how healthcare and employee benefits—which are very personal—is administered. Some of the proposed uses for blockchain would result in systemic changes that rapidly transform the entire system. Even if employees and management are open to change, HR still has work cut out in hiring, education and training. Blockchain will require companies to hire more research and analytical staff as well as offer training on how to properly implement it. But this is where HR thrives. By helping to cultivate a culture of digital transformation, HR departments can also guide companies on their blockchain journey. 3. High costs of developing & operating blockchain technology. The adoption of blockchain technology is likely to offer long-term benefits in regard to productivity, efficiency, timeliness, and reduced costs. However, one of the greatest obstacles to widespread adoption of blockchain is the high cost to initially install it. The software required to implement blockchain within an organization must typically be developed specifically for each individual company. This makes it expensive to obtain, whether hiring in-house or buying from a developer. Moreover, even after the blockchain software is developed, the company would also have to purchase specialized hardware to be used with it. In addition to the software development costs, companies must also find qualified personnel to operate the technology. The blockchain space is new and growing so rapidly that the demand for professionals in the field outweighs the supply. This makes hiring qualified blockchain experts—either in-house or as consultants—quite costly. Currently, it appears that the world’s largest corporations are the only ones benefiting from blockchain because they have the money, resources and data to spare. Furthermore, the technology itself seems too new and not yet fully understood for SMEs to adopt in droves. However, this is all likely to change over time. The commercialization of the internet was gradual and in the early days it required companies who wanted to go online to put up a substantial amount of money upfront and invest in customized solutions. Eventually, as blockchain becomes more mainstream, it will also become much less expensive, more streamlined and more accessible to companies. Blockchain is already demonstrating its potential to disrupt business as we know it. Because the HR department guards and manages large amounts of sensitive data that are critical to employees’ lives and how a company operates, it is likely that blockchain technology will be infused directly into the HR function to add transparency and trust to various processes. Healthcare and benefits administration is one of the processes that blockchain technology is likely to directly transform. Though there are challenges in cost, scalability and perception to overcome, HR departments could potentially use blockchain technology to provide employees with greater access to more personalized benefits packages. Furthermore, as time is freed up by automated processing, HR departments will be able to turn their efforts to more value-adding activities such as building employee engagement and experience.
Digital transformation is here and it is disrupting HR functions in various ways. Learn about the latest digital transformation trends emerging in 2019. The digital transformation is well under way with over a third (34%) of businesses already implementing digitalization programs, representing a 30% increase over last year. Meanwhile, two-thirds of global CEOs report they will embrace a digital-first focus by the end of 2019. In recent years, digitalization has profoundly enhanced the customer experience to drive more value for brands. But digital transformation is transcending the customer experience to impact the employer experience as well. Employees, who have become accustomed to the digital experience in their personal lives, are increasingly expecting to have a digital relationship with their employers as well. This shift has implications across the human resources function, including recruitment, onboarding, training, L&D, and more. The following digital transformation trends and new technologies are disrupting the business model for companies of all sizes, across various industries. But these innovations also represent unprecedented opportunities for HR leaders to improve the employee experience and better adapt for the future of work. 1. Blockchain adoption is increasing. While just 0.5% of the global population is currently using blockchain technology, its popularity is rising and it is projected that 80% of the population will be engaged with blockchain technology in some capacity within 10 years. Blockchain technology is perhaps best known for its role in safeguarding the cryptocurrency infrastructure (e.g. Bitcoin)—but ledger technology is leaving the cryptocurrency nest to explore more business opportunities. As the technology matures, companies across various industries are reporting compelling use cases for blockchain. For example, banks can now reduce infrastructure cost by 30% through blockchain solutions. This is achieved by encrypting millions of storage points, none of which contain a full name or an account number. Because the HR department is the guardian of so much data that is critical to employees’ lives and how a company operates, the human resources space is welcoming blockchain for cybersecurity reasons. Ledger technology will likely be integrated directly into the HR function through a multitude of use cases—lending transparency and trust to an organization’s operations. Despite current challenges in cost and scalability, the case for blockchain HR is strong. To prepare for the coming blockchain revolution, HR departments should focus on identifying pain points and inefficient processes that could be improved by the transparency, accuracy and speed that blockchain facilitates The processes most suitable for blockchain disruption are those that are burdensome and expensive with substantial data collection and third-party verification. For this reason, healthcare and benefits could be the ideal starting point for an HR department looking to adopt blockchain technology. The healthcare industry has been identified as one of the top industries likely to be disrupted by blockchain and, according to Bitfortune, 55% of healthcare applications will adopt blockchain platforms for commercial deployment by 2025. HR departments will therefore need to keep a strong pulse on how blockchain is impacting the healthcare landscape so they can continue delivering healthcare plans and wellness programs to employees. As blockchain technology becomes more mainstream and accessible, it is possible that many processes of daily workflow will transform: recruitment, tapping talent pools, running background checks, verifying employment history, engaging contract workers with smart contracts, onboarding, maintaining employee data, maintaining employees’ personal data, handling financial transactions and managing payroll systems. 2. Businesses are investing in cloud platforms. Cloud computing and its various functions have been a hot topic for the human resources industry. It is not a relatively new technology but still the forecast is calling for more clouds. By 2020, a staggering 83% of global enterprise workloads will be stored on the cloud. For the HR space, cloud’s success is owed to its acclaimed ability to organize data, centralize processes, scout high-quality talent and boost performance. But most importantly, cloud computing lends transparency to an organization’s processes and can subsequently enhance the employee experience, from the recruitment process all the way through to L&D and exit interviewing. The traditional recruitment process can be rather tedious, requiring the company to advertise the position, shortlist candidates and conduct interviews. Cloud computing streamlines at least some of the process, offering everyone in the department immediate access to the data about a candidate. Feedback can be shared and decisions can be made using cloud software, all with the click of a button. The implementation of a multicloud ecosystem can also automate several HR processes for employees that include large amounts of data such as timesheet submission, performance reviews and vacation requests. Employees can take ownership of their employee data forms through the cloud, including tax information and emergency contacts. Many companies are also using public clouds to automate employee signatures on various documents, such as employee handbooks, sexual harassment training, L&D, webinars, etc. Performance reviews are also being managed on the cloud, offering employees better access and insight. Automatic software updates are another benefit of the cloud and these can simplify compliance. The HR department is often required to generate several comprehensive reports at specific intervals of time. Paperwork, time and hassle can be reduced by having the cloud software’s process automation generate these reports instead. Cloud computing technology is inherently developed with security woven into its DNA. By replacing physical filing cabinets, data can be protected from theft or natural disasters. For example, if a company’s office were to become inaccessible due to flooding, employees would still have remote access to the programs they work with on a daily basis. Furthermore, data would be protected. 3. Conversational User Interface (UI) & chatbot experiences are improving. According to Gartner, by 2021 more than 50% of enterprises will spend more per annum on bots and chatbot creation than traditional mobile app development. And, as other conversational UIs improve on voice recognition and reasoning frameworks, their understanding of the user’s needs and wants will also grow. HR departments are engaging chatbots and other conversational UIs to streamline processes and eliminate redundancies. These technologies can provide employees with immediate and consistent answers to commonly asked questions related to holiday leave, compensation, benefits, company policies and legal rights. Even some aspects of recruitment, employee reviews, onboarding, benefits and L&D can be assisted by chatbots and other conversational UI. Nudge-based technology is being implemented in tandem with conversational UI to suggest behaviors for employees and subsequently improve workflow. For example, a software program can monitor employee activity at a computer workstation and, after a certain amount of time, send a message to the employee that it might be time to take a break. Nudge-based technologies can also be used in lieu of repetitive communication from the HR department. Automatic reminders can even be sent to managers to fill out performance evaluations, with conversational UI then stepping in to assist with that process. As self-service platforms, the conversational UIs free up time for both employees and employers while still delivering the right information at the right time. This HR technology also allows the team to focus on more urgent questions and complex issues that require special attention. 4. Data & people analytics continue to be important. Information as a critical business asset is still in the infancy phase, making it a competitive differentiator for companies as they transition to the digital age. For leading companies, big data and analytics are becoming strategic priorities and key drivers for digital transformation initiatives. While fewer than 50% of documented corporate strategies currently cite data and analytics as fundamental elements for enterprise growth, Gartner predicts that this number will jump to 90% in 2022. The importance of a . data-driven culture is being especially emphasized in the world of work. For years, people analytics was mired in complexity. But today it is being leveraged as a critical people management instrument that can be applied at every level of the HR function, ranging from the recruiting process all the way to talent development and exit interviewing. For recruitment, people analytics can increase the chances of finding the right people for the right jobs. It can also be useful for building employee engagement and satisfaction, as it cultivates data about employees’ attitudes and moods. People analytics can also facilitate collaboration within an organization, providing insights about how well certain people and groups work together. When it comes to performance management, people analytics helps eliminate the human bias that often comes with manual evaluations. It also allows for an evaluation of both the process and outcome, which can help HR teams distinguish variables (such as luck or coincidence) from real, applicable skills that an employee has. It’s important to note that people analytics is more than just data—it can be translated to guiding insight. With new analytics capabilities, HR teams are unearthing deep insights into the company’s organizational health. In turn, this insight can be used as a basis for proactive programming and support. Overall, people analytics helps cultivate a digital culture where decisions are informed by data. 5. Internet of Things (IoT) adoption is accelerating. As digital transformation progresses, we are connecting more devices to the internet at home, at work and on our person. Thus, the market for the Internet of Things (IoT) is flourishing. For HR, the starting line for IoT integration is usually with mobile smartphones and tablets—central hubs in IoT. In our personal lives, these devices offer centralized, easy access to our personal data and allow us to carry about a lot of our business. For example, we can share our thoughts on social media, communicate with friends via SMS and even buy products on our mobile devices. Employees are increasingly expecting to migrate their work onto mobile devices, demanding access to data, analytics and communication. This helps employees and employers alike by enabling continuous performance management and a flexible workplace where employees can be productive no matter where they are. Employers have leveraged IoT to drive health and wellness initiatives. As companies recognize that healthy people perform better and are more engaged, they are taking measures to help encourage wellness and offering employees devices like smart watches, heart rhythm trackers and similar devices. These fitness trackers are not intended to track where employees are but how they are. IoT can be being leveraged by companies to enhance employee engagement and improve productivity. But as IoT in HR advances, companies are also delving into the data provided by user devices. If gathered collectively, the cumulative data becomes a great source of information for the company. 6. Artificial intelligence & machine learning applications continue to increase. Artificial intelligence (AI) and HR may seem incompatible at first—it is ‘human’ resources after all—but the HR department is increasingly steered by non-human capabilities. A slight majority (51%) of companies have already deployed AI and machine learning and there are a variety of trending use cases for HR. With AI, employers are in a position to greatly improve the assessment of candidates. For starters, a notable feature of AI is its potential to mitigate the effects of unconscious bias in the hiring process. With AI, candidates are sourced, screened and filtered through large quantities of data. The programs combine data points and use algorithms to identify who will likely be the best candidate. These data points are looked at objectively, completely removing the biases, assumptions and oversight that humans are susceptible to. Virtual reality (VR), by placing candidates directly into in virtual situations, can potentially provide more insight about a candidate than what is written on their resume or what they say in an interview. This can reveal candidates’ capabilities as decision makers and lead to assessment based on behavior and action rather than words. Meanwhile, machine learning tools can help with recruitment by tracking a candidate’s journey throughout the interview process. HR tools can calculate a holistic score for new talent, drawing data derived from digital screening and online interview results. This score system can help hiring managers objectively arrive at decisions based on data. On the opposite end of the interview table, machine learning tools can also help deliver streamlined feedback to applicants much faster and objectively than manual methods can. Augmented reality (AR) could be implemented to transform the employee onboarding experience into something fun and interactive. Employees might start the job with an AR tour of the office where information about key locations, company history and colleagues pops into view as they move around. Machine learning also has implications for employee retention. HR is charged with courting top talent so they stay with the company and this often involves identifying risk attrition. Through advanced pattern recognition, machine learning draws from an array of variables to recognize attrition risks and patterns in a company’s workforce. These pertinent variables can include years at company, satisfaction rates from surveys, education, department, time at company, training times, time since last promotion, attendance, etc. Once an employee is identified for possible attrition, the HR department can act accordingly. When it comes to assessment and development, L&D programs can be boosted by machine learning to identify high-potential employees with the skills and qualifications the company needs. Notably, it has been found that the employees ranked highest by the machine learning software aren’t usually those on the promotion track. Instead these high potential employees may be overlooked by traditional methods of assessment. 7. The rise of headless architecture. In today’s competitive, customer-centric business environment, the race is on for organizations to deliver innovative, personalized customer experiences across various platform. This omnichannel movement is impacting digital content publication and giving rise to “headless architecture” in website design. In traditional approaches to digital publishing, the front-end and back-end are tightly bound to each other. But in the headless model, they are decoupled and instead communicate through an application programming interface (API). With just one back-end in place, multiple front-end delivery systems can be developed to seamlessly publish the content on various channels such as desktop, mobile and IoT devices. Headless offers more flexibility and choice, allowing companies to choose the front-end framework that makes sense for them. Furthermore, because the headless architecture model keeps the back-end and front-end separated, companies can easily upgrade and customize digital assets without compromising the website’s performance. Digital assets can accumulate as the company grows. By offering the freedom to innovate, headless architecture can help companies reinvent user experiences as needed. This also helps to future proof their websites because they can revamp the design without replacing the entire content management system. It allows them to migrate existing content already on the platform and integrate it with new tools and frameworks as they emerge. As the voice for human capital, amid a rapidly evolving workforce, HR plays a critical role in guiding a company’s digital transformation journey. After all, effectively integrating new digital technology requires the right people in the right positions. Despite disruptions from AI and automation, the world of work remains people-centric at its core. As employees continue to demand a more experiential and omnichannel approach to work, HR teams must be deeply involved in a company’s digital transformation strategy. Keeping pace with digital trends will help HR do what it does best: merge the best in human skills with state-of-the-art digitalization to create a vibrant, enriching workplace.
AI and automation are constantly changing our world, including the way we work. Take, for example, NASA's 1962 spaceflight. Back then, Katherine Johnson — the central figure in the book and movie "Hidden Figures" — famously checked the math of NASA's computer manually to put a spaceflight into orbit for the first time. Within just a few short years, though, that reliance on human intelligence has shifted to calculators and computers. Today, the progression of automation seems almost scary due to the rapidly increasing sophistication of AI. The Forbes AI index shows that the volume of annual venture capital investment in AI is six times greater now than in the year 2000.1 These giant steps in AI capabilities may appear to uproot our assumptions about how work gets done but are really just a continuum of development. Understanding and harnessing this is critical to both the global economy and, on a deeply personal level, how we all make a living. Prepare Creatively While robots can easily replace lower-level, routine jobs — such as the work done in factories, farms and fast food restaurants — new indicators emerge almost daily to illustrate how even white-collar occupations in finance, insurance, law and accounting are being automated, as well. If more than just physical and rote work can be replicated, and if human creativity, relationality and intelligence can also be simulated by AI at a more cost-efficient scale, then how will the average human worker possibly compete for work? Leaders in companies of all sizes ought to be asking big questions about retaining the human elements of work, including emotional intelligence, people skills, judgment and natural genius. We need to examine how we retain those important human facets while taking advantage of the most effective tools at our disposal. In preparation for the upcoming people disruption — probably reaching its peak during the next 15 years — organizations must understand the attributes needed to make work successful. Leaders need to start anticipating different future-of-work scenarios, including areas where human productivity, creativity and intelligence are matched or exceeded by artificial counterparts. Automation is inevitable, but there are many possible outcomes. Rather than trying to guess how it will all shake out, today's leaders can prepare their organizations and their employees for an uncertain future. That requires thinking creatively about what skills and capabilities must be retained and which ones can be automated. We see an increasing degree of willingness to take the best of both worlds. Consider these four potential future scenarios to get your imaginative juices flowing, and start thinking about the future in new ways. The Genius Gap One view on the threat of AI is that it could not only cause a wealth and work gap, but it could also create a genius gap if the conditions to foster genius no longer exist. If robots take over most human jobs, we could face a future condition of human potential left unfulfilled. An increased reliance on technology could cause greater numbers of people to feel unwilling to learn or do much, so that natural intelligence would be unable to bloom and thrive. With no jobs to prepare for, children may no longer be educated in the same ways. The AI revolution could transform genius from a natural resource into one that can only be created by those who have access to the most sophisticated AI, leaving others behind. My Friend the Co-Bot When it comes to high-value knowledge work involving complex systems and facts, AI will likely develop at such a rate that people can't harness or understand it. This puts them at risk of replacement rather than co-existence. This situation is unlike automating manual or physical labor, which is prone to human error and exhaustion. The efficiencies of automating white-collar work are more subtle — cutting down on mistakes and work hours, removing emotional bias from decisions, and increasing scale and complexity. Knowledge workers must become comfortable working alongside AI and robots. One future vision might include co-bots: robots teamed with human operators and co-workers. Co-bots are a new element of the work relationship that needs to be forged as teams become a diverse mix of human and artificial intelligence. Diversity and Inclusion for the 2020s AI presents a new way to think about diversity and teams. Diverse teams make better decisions and drive better business results. That includes "cognitive diversity," or differences in problem-solving or information-processing styles. An obvious next step is factoring AI-powered robots into the cognitive diversity of your team. Their problem-solving style is known, determined by the code they run on and the data sets they are trained on. They are the perfect counterweight to unstructured, variable human team members. Optimizing a team will soon mean designing a powerful combination of creative human minds with structured AI minds, applied to different elements of the task at hand. HR's New Job The role of HR must evolve with increased automation in the workplace. Human and AI workers will exist together in a labor pool, with HR expected to deploy the best workers for any given task. This will require understanding the power and aptitudes of robots, and — perhaps more importantly — their limitations. Deploying human capabilities against the right tasks will become a key skill for HR. As HR becomes increasingly focused on data management and analytics capabilities, HR leaders need to consider the ethics of personal data obtained from employees, potential employees, contractors and customers. The digital and smart work tools that will dominate the future of business tend to collect mountains of information about their users. As a result, HR has a deeper responsibility as a guardian of personal data and human privacy. By considering these potential future scenarios, leaders can start strategizing about how to prepare their organizations and their employees for an increased reliance on AI and automation. Sources: Columbus, Louis. "10 Charts That Will Change Your Perspective on Artificial Intelligence's Growth." Forbes. Jan. 12, 2018. https://www.forbes.com/sites/louiscolumbus/2018/01/12/10-charts-that-will-change-your-perspective-on-artificial-intelligences-growth/#2314726a4758.
Digital transformation is here and it is affecting companies in various degrees. Learn what it is and why it is important. Digital transformation is generating some of the most impactful improvements to the customer experience, with two-thirds of global CEOs reporting they will adopt a digital-first focus by the end of 2019. But the trend is transcending beyond the customer experience to also steer the employee experience. A company’s employees—all digital consumers in their personal live—are also expecting to leverage digital experiences to enhance performance and gain professional development. The human resources industry—no longer viewed as just a support function for employee services and benefits—has stepped up to the front lines to greet the digital transformation that is disrupting how organizations worldwide operate and thrive. The HR department, in addition to talent management, is now expected to lead a company’s digital transformation journey and deploy effective change management strategies. For an organization to succeed in implementing new technology, they must find ways to embed digital transformation—and the innovative mindset it requires—into their company culture or they risk falling behind the competition. What is digital transformation? Emerging technology is often the main focus of the digital disruption conversation. Through transformation programs, HR teams are helping companies enter the digital age and transition from using legacy technology to embracing new technologies, such as machine learning, the internet of things (IoT), blockchain, artificial intelligence (AI), big data, data analytics, cloud computing, a multitude of mobile devices, smartphone integration, social media, and more. But digital transformation is actually guided by innovative approaches, people and business processes—not just the technology itself. Digital transformation cannot be defined by a single transformation project nor a single technology. The technology is constantly changing and updating itself. The only fixed element of digital transformation is the innovative mindset that drives it. With this mindset in place, HR teams can identify faulty processes and user challenges—and subsequently determine what technologies should be infused as solutions. The end goal is to better understand, engage, satisfy and deliver on the user’s expectations for a multi-channel experience. Why is digital transformation important? Adopting a digitally driven business model with next-generation capabilities isn’t just critical to beating competitors—it’s an imperative for surviving in today’s competitive corporate environment. Business leaders are focused on results, innovation and continuous improvement. To this end, they must constantly challenge their organizations to ensure that new technologies and processes are being implemented to push productivity gains and offer significant competitive advantage—all while delivering exceptional user experience for a multitude of stakeholders. For HR teams, digital business transformation is the ultimate challenge in change management because it affects all levels of an organization (every process, department and stakeholder) and even extends to its supply chain or network of partners, in some cases. But this omnipresent disruption is what makes digital transformation so critical for organizations. Digital transformation is helping companies make transitions to new business models. An external example would be a longstanding retail store that is struggling to attract millennial customers who prefer to shop online. This business can leverage digital technology to optimize its website for e-commerce, set up responsive customer service capabilities online, collect location data and gain insights into customer expectations and behaviors (to drive both online and in-store interactions). But more importantly, digitalization is impacting internal operations to help companies deliver the digital experience from the inside out, starting with employees. For the HR industry, harnessing the digital experience is critical for sustainable talent recruitment, retention and training. HR professionals are using technology to continuously transform how they design and deliver the employee experience—anytime and anywhere. They are combining the human element with the power of technology to gain insights and adapt processes that add new value. Important elements of successful digital transformation Although the roadmap for digital transformation varies based on organizations’ specific challenges and demands, there are a few common attributes that a digital strategy should incorporate: 1. Integrates digital technology to optimize process efficiency. As with any HR change, whether digital or not, there should be a clearly defined objective that makes a process more efficient. Most of the time for the HR department, this goal will be to solve an issue employees encounter or one that the HR department faces in its talent management. It is recommended that companies start simple and small and consider the areas of the HR process that might benefit from a digital makeover. This could include recruitment, onboarding, learning & development, payroll management, benefits administration, performance reviews, etc. 2. Improves user experience. Digital transformation aims to solve problems and ease pain points for the end user and, when it comes to HR service delivery, the end user is the employee. Business leaders and employees are accustomed to being digital consumers and they—just like customers, clients and partners—expect a digital experience relationship with the company. Technology plays a critical role in the relationship that millennials have with their employer, including how long they stay at a company, how productive they are and how they contribute to company growth. The increasing importance of technology implementation—especially its implications for longevity and productivity—is narrowing the focus of HR departments across all industries on creating end-to-end consumer-grade experiences for employees. 3. Modernizes company culture. Digital leaders focus on vision, management, agility and empathy for the end-user. Digital transformation is therefore more about company culture than it is about installing one particular type of technology or improving a single process. Transformation efforts can only succeed when company culture inspires innovation and creativity in its human capital, inspiring workers to adopt new processes, ways of working and approaches to breaking down silos and relating to stakeholders in more meaningful ways. Company culture also plays a critical role in attracting millennial talent and improving employee engagement in the digital age. The dynamic qualities of digital culture are different than, and often in conflict with, analog culture at traditional companies. Where analog culture is defensive, digital culture aims to be proactive. For processes that analog companies choose to complete in-house, the digital company seeks out a network of expertise. Analog companies report on past performance while digital companies gain real-time insights for decision-making. 4. Reduces traditional expenditures. Cost savings is a primary driver of digital transformation, according to data from the Cloud Industry Forum. But digital transformation demands that companies cut costs with a purpose, namely to drive innovation and enhance competitive capabilities. An example of this would be implementing cloud platforms, which can accelerate digitization for numerous processes within a business. In addition to greater speed and agility, this innovation also offers lower costs in the long term. Though digitalization should be imagined as a revenue generator rather than a cost reduction function, companies should be cautioned against using cost savings as the only justification for transformation initiatives. This narrow focus can end up limiting the scope and impact of process improvements and present long term ramifications. 5. Researches, strategizes & sets goals based on evolving tech/digital landscapes. The digital landscape is constantly in flux and companies need to strategize to adapt. The digital transformation process can be especially painful for well established companies. Some large brands have disappeared or are currently struggling to stay relevant in the digital age. It is important for companies to develop a formal organizational digital business strategy that involves research and goal setting. Yet just one-third of companies have this in place. As a working document, the plan should be updated in response to the evolving landscape. Regular analysis of current digital infrastructure can assess current challenges and anticipate future needs. A sound digital strategy, based on in-depth analysis, can help a company anticipate possible risks, formulate budgeting needs and better deliver desired results. Why companies put off digital transformations Human life is a constant conflict between progress and inertia. Change is often difficult, whether in our personal or professional lives. For most people, especially managers and leaders, changes within a company can feel like chaos is wreaking havoc on their once predictable workplace. This is part of why it is called the digital disruption. In order to transform a company, the points of contention that make companies resist digitalization must be addressed: 1. Requires a system-wide overhaul. It can be easy to fall into the trap of believing that digitalization needs to be implemented immediately and everywhere throughout business operations. That task can appear quite daunting, with some leaders choosing to put it off altogether. While it is safe to say that digitalization will eventually require a system-wide overhaul in the way most companies operate, processes and projects can be digitalized and changed incrementally. The main point is that companies overhaul their long term vision for how they plan to adapt and innovate in the digital age. 2. CIO/CEO need to believe in it. As a company prepares to digitalize, it is often the case that employees embrace the change while management and leadership are resistant. For this reason, it can again be said that digital transformation isn’t just about technology—it’s also a leadership issue. Change-agile leaders have a clear purpose and can readily answer the question of “why” a technology is being adopted. They know they’re not just adding technology to add technology. It’s being implemented to maintain a strong competitive advantage, enhance productivity on a specific process and push the company toward innovation. These leaders are also willing to fix what’s broken and, in the process, take risks that may require some experimentation. Another key leadership trait, especially in the context of digitalization, is the ability to forge positive partnerships that help streamline the transition and avoid common pitfalls. 3. Upfront costs are high. Very often, leadership poses two questions when confronted with digital transformation: Will digital transformation require new spend that is not currently accounted for? Do I need a specific budget for it? The answer to both of these questions is a resounding “Yes.” However, as previously stated, this can be implemented incrementally across the organization. Many companies are finding benefit transitioning digitalization from a capital expense model to an operating expense model. The goal for digital transformation, when implemented strategically, is to yield enough cost savings that it becomes a self-funding mechanism. But how much are companies spending? Expenditures for digitalization are growing worldwide at compound annual growth rate of 16.7% and by 2020 it is expected that 30% of G2000 companies will have allocated capital budgets equal to at least 10% of revenue to fuel their digital strategies. 4. The company needs specific technology for their industry or feels comfortable with the status quo. Every industry is being confronted by digital disruption in some capacity. But how it plays out and the degree of impact it has on a company will vary widely depending on the specific sector and the market space in which the company operates. The pace of disruption is chamges by industry. Digitalization can be a challenge within certain industries as some companies require highly specific technology or processes for the work they do. Many times, this specialized technology is too expensive or hasn’t even been commercialized yet. Another case of resistance to digitalization comes from businesses who feel comfortable with the status quo. If a brick-and-mortar shop feels it is doing well, it won’t likely seek an online platform to conduct e-commerce. There may be a tendency for companies with specific industry challenges or comfort in the status quo to put off digitalization efforts. But it can be argued that these companies especially need to be outlining a digital strategy. The speed of disruption is increasing and disruption is likely to touch businesses in every industry and all sizes. The winners will be companies that combine traditional industry expertise with a deep understanding of how digital innovations could potentially disrupt their business. Tips to get your digital transformation strategy started Digital technology has the potential to transform HR and talent management as we know it. But it won’t come without backing from leadership and staff. Before a concrete strategy can be developed and executed, there are a few first steps an organization and its HR department can take to prepare: 1. Get buy-in from C-level leaders. Having the support and understanding of executive leadership is critical for digital strategy. Digitalization, just as it impacts all roles in management and staff, can also impact the C-suite. The new COO must revamp operational processes and align front and back-office staff with the CMO’s strategy for consistent digital engagement. Meanwhile, the new CMO becomes data driven and omnichannel in approach. To fully compete in the digital revolution, some companies are even adopting a holistic model where a new chief digital officer is appointed to serve as a key enabler of transformation. 2. Identify pathfinder projects. In order to build momentum for digital strategy, it can be helpful to identify some pathfinder projects to kickstart a company’s digital transformation journey and help pioneer the transition. What HR processes are currently presenting challenges for the department? Or more importantly, what processes can be improved for candidates, employees and leadership? Some applied examples of digital transformation technology within the HR space are augmented writing technology for job postings to better focus the search, chatbots to handle commonly asked questions from employees, AI-driven insights to guide the sales team on demographic trends, machine learning training customized for a team member or nudge-based technology for managers to complete performance reviews by deadline. 3. Communicate early and often with everyone in the organization. Effective communications will play a key role in launching a digital strategy and creating the innovative mindset that fuels it. The strategy should have a timeline that incorporates a communication strategy with all team members on the status. Before any specific initiatives are outlined and put into action, an ample amount of time and effort should go into talking with executive leadership, management and staff. These critical stakeholders should be active participants in the strategy. Ask each employee about the challenges they face and their experiences with already laid out processes. Sometimes this is done in survey format so that insights and data can be gathered to help guide the strategy. 4. Hire people that embrace new technology and processes. As a result of the digital age, the workforce is shifting from fixed job titles and detailed job descriptions to ever-revolving roles. A widening skills gap is also a residual effect of the digital revolution, posing an imminent threat to organizations that don’t hire people open to learning new technology and processes. At the current pace of technology growth, it is likely that many of the technical skills a company’s workforce boasts today will become obsolete within a few short years. Hiring for today’s skills is not enough. Digital companies instead need to focus on upskilling and recruiting lifelong learners who have the ability to constantly learn new skills and navigate technology that might not even yet exist. Rather than seeking industry-specific skills, organizations are shifting toward “technology application within the industry” skills. Other core work-related skills include complex problem solving, active learning and cognitive flexibility. Curiosity, creativity and collaboration are key soft skills that are becoming increasingly valued by companies as they look to foster a high-commitment culture with strong employee engagement. To show how systemic the transition can be, many companies are now deploying digital technologies, like virtual reality (VR) simulations or gaming tools, in the interview process to help gauge skills that can’t always be verified on a resume or in a traditional interview setting. This allows recruiters to observe how a candidate handles unfamiliar situations in real-time or how well they absorb new information to troubleshoot problems. Conclusion A company’s transition from analog to digital requires a systemic overhaul of business operations, renewed company ethos and an influx of critical human capital to power it all. After all, technology itself does not drive success. Albeit important, the tool is merely an enabler of the innovative vision. Effectively integrating new digital technology requires the right people in the right positions, which is why the HR department has been appointed to lead digital transformation strategy for many companies. As the voice for human capital amid an evolving workforce, HR can lay the foundation for digital strategy by cultivating the necessary elements for digital transformation. Customer experience has received much of the attention in the digital revolution. However, HR galvanizes the transition by empowering employees so a company can offer a digital experience from the inside out. This lights a company’s path toward becoming an intelligent enterprise— one that is continuously innovating, delivering, superior user experiences, creating new business models and reimagining processes to drive even more value.
There is a significant opportunity for blockchain to establish itself in human resources. Learn about HR blockchain use cases. Blockchain technology is perhaps best known for its role in safeguarding the cryptocurrency infrastructure (e.g. Bitcoin), making financial transactions secure without the need for a bank or a middleman. But the technology is eyeing a landing in the human resources space, which will inevitably change the way that HR professionals handle large amounts of sensitive employee data and deploy various HR processes. As blockchain technology becomes more mainstream and accessible, all members of the HR department—from recruiters to the senior leadership—will likely find it disrupting their daily workflows, including the recruitment process, tapping talent pools, running background checks, verifying employment history, engaging contract workers with smart contracts, onboarding, maintaining employee data, maintaining employees’ personal data, handling financial transactions and managing payroll systems. It can even simplify cross-border payments by automating real-time exchange rates and other jurisdiction parameters, which hold implications for businesses that hire and operate globally. One of the first challenges HR professionals face is understanding the fundamentals of what blockchain is and how it functions. Simply put, a blockchain is a distributed digital public ledger used to keep track of records. The term block is simply another word for record. A blockchain, at its core, is simply a chain of records. Blockchain is special and distinct from other recordkeeping systems because it relies on a distributed ledger, meaning the chain of records is subsequently stored across a large network of independent computers. This decentralizes and encrypts the data, making it safe and secure. The high level of security makes blockchain technology a good match for the HR industry, which is often charged with managing large amounts of sensitive data about a company and its employees. Despite all the ways blockchain technology could potentially disrupt human resource management, HR teams need not panic. There is still some time to prepare for the coming blockchain revolution—and the technology has a strong track record of success in the industries it has touched so far. For example, banks can now reduce infrastructure cost by 30% through blockchain solutions. This is achieved by encrypting millions of storage points, none of which contain a full name or an account number. While just 0.5% of the global population is currently using blockchain technology, the demand is rising and it is expected that 80% of the population will be involved with blockchain technology in some capacity within 10 years. For HR teams, the mainstream adoption of blockchain could unlock value and benefit for employers and employees alike, starting with the ability of hiring managers to put the right people in the jobs. To show how it could work on both sides of the employer relationship, blockchain can enable individuals to maintain, secure and offer controlled access to a comprehensive blockchain-driven digital ID that includes critical information about them to employers. This could include education, skills, training and professional performance. Through this digital ID, individuals would be able to turn their credentials into real value in the employment market while employers are able to identify the right employees more accurately and effectively through data-driven insights. If its success in banking and supply chain is any indication, blockchain is poised to innovate the ways we manage human capital in many different capacities. Now is the time that the industry is piloting and envisioning various use cases. Examples of use cases for blockchain HR Blockchain is disrupting many of the industries that HR departments work alongside with in order to manage human capital. For example, aside from blockchain’s prevalence in the banking industry, Forbes has identified the healthcare industry as one of the top industries likely to be disrupted. According to Bitfortune, 55% of healthcare applications will adopt blockchain for commercial deployment by 2025. HR departments will therefore need to be on the forefront of the evolving healthcare landscape—including the implementation of blockchain—so they can continue to be an authority on delivering healthcare plans and wellness programs to employees. But the use of blockchain will be more than just a concept HR professionals need to be aware of for partnership purposes. Because the HR department is the keeper of so much of the data that is critical to employees’ lives and how a company operates, blockchain technology will be integrated directly into the HR function through a multitude of use cases—lending transparency and trust. 1. Strengthen security for sensitive personal & financial data. HR teams are tasked with conducting some of the highest-volume financial transactions for an organization as well as handling sensitive employee data related to pay, healthcare, finance, banking, disciplinary records, performance records, expense reimbursement, and more. All of the data an HR department maintains is at risk of being exploited and, as more companies face data breaches, it is of utmost importance that safeguards are in place to prevent fraud and maintain security. In the face of rising cybersecurity crime, blockchain technology is being lauded as a solution. Blockchain’s role as a game-changer for human resources is defined by its security capabilities. In fact, blockchain has proven itself to be so effective for risk management and software security that even aerospace and defense giant Lockheed Martin is using it. Implementing blockchain can help thwart both internal fraud and external hacks of sensitive employee records. Access to the blockchain is limited and controlled and even those with access can’t arbitrarily make changes to the record. This limits both internal fraud and external hacks of sensitive employee records. With the rise of the Internet of Things (IoT) in HR, there is growing concern as hackers often get in the door by strategically exploiting weaknesses in edge devices. The vigilance applied to computers is often neglected when ensuring the security of IoT devices, leaving organizations vulnerable to hacks. Blockchain offers strong protections against data tampering by locking access to IoT devices and shutting down compromised devices within the IoT network if a security event is suspected. Blockchain serves to effectively decentralize data as a key defense against hacks and fraud. Data is part of a company’s currency in the digital age. It is fast becoming one of the most prized assets a company has. If you store all your jewelry, cash and other valuables in one location of your home, what happens if a burglar enters your home and finds this location? Because blockchain spreads data across a large network of computer storage spaces, it is like placing your most valuable belongings across a multitude of locations to mitigate your risk of being severely impacted or wiped out by a single hacking event. 2. Improve recruiting processes, verification of job qualifications & background checks. Whether we call it lying, embellishing or stretching the truth about work history, we know that sometimes what you see on a candidate’s CV is not always what you’re getting. A reported 75% of HR managers have identified a lie on a CV. With nearly 20% of hiring managers also reporting they spend less than 30 seconds looking at a CV, it is impossible to know how many fabrications actually go undetected. Perhaps the greatest advantage that blockchain can offer is trust in the veracity of its data. In current recruitment systems, it is difficult to determine the accuracy of a potential employee’s work and education history. Even the most seasoned recruiters can be deceived by a candidate’s falsified employment history and education credentials. Traditionally HR managers have relied on CVs, which applicants can modify and embellish. While LinkedIn and reference calls can be used to verify some information, these methods only provide a thin layer of verification. Additionally, these analog processes can also be time consuming and a hassle. As many HR professionals can confirm, conducting a traditional background check can be slow and expensive. It can also place a burden on candidates, requiring numerous forms to be filled out. Blockchain can reduce the labor and expense currently associated with background checking. Although blockchain cannot guarantee all inaccuracies or exaggerations will be detected, it can effectively reduce incidents. It also provides employers with the most accurate snapshot of a candidate’s credentials and background. The benefit of blockchain is also passed on to candidates in the form of confidence, allowing them to apply to roles that they know they are qualified for. It also mitigates the concern that other candidates might be getting ahead of them by applying to the same job with fraudulent resumes and qualifications. This transparency levels the playing field for all candidates 3. Streamline payroll, contractor payments & vendor tracking. One of the most common use cases for blockchain HR involves a company’s largest expense and the process that employees appreciate the most: payroll. Blockchain has the power to replace many of the manual tasks and eliminate time lags within current payroll systems. Blockchain also offers ‘smart contract’ solutions that allow a company to automate and secure payments to contractors and vendors. Global companies in particular could enjoy benefits with blockchain when it comes to issuing cross-border payroll to employees in overseas jurisdictions. Blockchain automatically sifts through exchange rates and communicates with intermediary banks so employees can be paid quickly—and at a lower cost to employers in the long term. Through smart contracts, some organizations are using blockchain to pay out employees, contractors and vendors. In fact, it is reported that 45% of early adopters of blockchain are already implementing smart contracts within their organizations. A smart contract writes out in code a set of parameters using statements in ‘if this, then that” (IFTTT) language. These contracts can be designed so that, once put in motion, the payment process is made entirely dependent on these codes. It is also made irreversible unless of course terms of a contract need to be updated. When a certain number of hours of work have been completed (this would be a potential ‘if this’ variable), the smart contract automatically pays the employee, contractor or vendor the correct payment (a ‘then that’ variable) by deploying the ascribed piece of remotely executable code. This code is linked to an instruction from the company’s bank account to the contractor’s bank account, which ultimately facilitates the payment. HR would not need to contact their company’s bank or do a monthly payment run. Instead, the transparent, real-time blockchain ledgers help track invoices and facilitate distribution, billing and reporting of transactions. There is also no need to wait for the usual payroll processing time. The smart contract functions as a guarantee that work is completed and that the payment will make it to the employee, contractor or vendor properly and in a timely fashion. 4. Automate taxes & mitigate the strain of audits. Taxation plays a critical role in the life of a business or an individual. For HR professionals, constantly evolving tax laws and regulations across jurisdictions ensure they often have their hands full properly issuing taxes. Payroll taxes are then only further complicated by other factors like bonuses, commissions, overtime pay, back pay, accumulated sick time pay, human resources expenses, and beyond. Blockchain’s keen ability to record and update employee tax considerations and provisions automatically is catching the attention of the HR industry. By wielding the capability to streamline and secure the taxation process, it is likely that blockchain-powered platforms will become the record of choice for HR departments around the globe. Speaking of taxes, no business wants to be hit with an audit but it does happen. Audits are so daunting that it has actually held back countless businesses that only feel comfortable maintaining physical record systems, despite the time, energy and money they require to properly upkeep. If presented with an audit, having blockchain technology already in place is like having a life preserver thrown out to you while you’re struggling to stay afloat in choppy waters. The blockchain makes it easier for a business to sustain an audit because it can securely share its records with regulators in near real-time. The time and cost spent for document collection is subsequently reduced drastically. Furthermore, the blockchain’s cryptographic hashes and source verification build a strong barrier against document manipulation and fraud. 5. Enhance employee experience with better access to benefit packages & a dynamic expense reimbursement system. HR and employees alike will appreciate blockchain’s ability to expedite access to benefits packages. Once employers outline the terms of employment prior to hiring, it is HR’s responsibility to uphold the conditions in the contract. The traditional model requires manual implementation of provisions that might impact an employee’s benefits package, running risks of errors or preventing proper delivery of benefits. Inputting these terms into blockchain technology instead allows HR to seamlessly deliver upon these benefits. For example, if a company outlines that an employee’s healthcare benefits are due to kick in after a 90 day waiting period, the blockchain technology can be engineered to implement those benefits at the right time. Again, this is coded through the same IFTTT language that governs smart contracts. Apart from healthcare benefits, Blockchain can potentially offer a more robust approach to pay scales by applying defined salary increases for identified skills or key capabilities that are deemed valuable to the company. They can also administer performance-based bonus awards to employees in a more measurable, data-driven way. Blockchain expands on the employee experience even in the realm of expense reimbursement. In its current format, reimbursing employees can be nebulous and time consuming. For employees, they are often forced to wait for paperwork to go through and checks to clear. For HR, it can also create pain points and expend time and energy. Blockchain is disrupting the expense reimbursement scene by allowing organizations to create their own company currency. In developing an individualized cryptocurrency unique to their company, organizations will reduce expenditures associated with the current expense reimbursement process: elimination of processing fees, accounting for international exchange rates, reducing in-house HR staff, etc. This also appeals to both parties in the transaction and provides corporate mobility, with businesses now having the ability to easily reimburse between various jurisdictions. With current reimbursement system, there is an ongoing conflict between employer and employee about what should be compensated, what should not, how, when, etc. Blockchain-led solutions ensure transparency, with all company-funded transactions linked into the blockchain network. Though initially cultivated in the cryptocurrency industry, blockchain is branching out into the world of work. There are many potential uses for blockchain technology, which could disrupt hiring, payroll, taxation, benefits administration, data storage, and so much more. Despite current challenges in cost and scalability, the case for blockchain HR is strong. Promoting transparency and trust in company processes are two priorities for HR professionals as they manage human capital and face a competitive hiring landscape. While the technical performance of blockchain technology and its ability to encrypt and offer laser sharp accuracy are hardly up for debate, blockchain’s success will ultimately depend on how well it is able to infuse trust and transparency into an organization’s operations.
Artificial intelligence (AI) and automation are global main-stage players in many industries, with seemingly limitless opportunities. You can have your food made by robots, or even let your car do the driving for you — but what's next?1 This upward trend has been far-reaching, disrupting the ways certain industries operate and shifting how employers hire. With no slowdown in sight, let's explore what's in store for businesses navigating this new era. Automating Jobs in Key Industries Automating work isn't a one-size-fits-all approach. Certain industries, firms and jobs are more likely to be impacted than others. For instance, manufacturers have long used this approach and tend to seize automatable opportunities whenever possible. Take the South Korean Ministry of Trade, Industry and Energy for example, which has been investing money into the development of industrial automation for the past few years and shows no sign of stopping.2 This is just one country, but it represents the direction of the industry and process overall — the goal is to keep costs low while maintaining efficiency. The auto industry has seen similar gains within the manufacturing process, as well as in the production of self-driving vehicles. While there have been fits and starts with this tech, The Verge notes that it's being continuously refined and may soon change automobile production entirely.3 While these industries serve as golden examples of what AI and automation can do, others struggle with implementing key functions of this tech. Hospitality, food service and health care all exemplify this lag: These industries are heavily driven by labor, which makes automating operations tricky. While there are opportunities to embed technology to scale services, not every customer in these industries is ready to have their service automated, as aptly noted in a recent CNN news story.4 Measuring the Impact on Economies and Employment The idea that artificial intelligence will eliminate jobs is a real fear for workers. It echoes concerns previously heightened in the U.S. in the 1960s regarding the bump in automated processes and unemployment, as MIT highlights.5 However, Lyndon B. Johnson said it best: "The basic fact is that technology eliminates jobs, not work." This distinction and how employers handle role changes is what will make or break many organizations shifting to automated operations. For developing economies, automating certain jobs could create better opportunities by eliminating dangerous roles or roles that rely too heavily on physical labor. While it may cause some degree of unemployment during the short-term transition, it's likely to open opportunities for other safer, more satisfying jobs for those affected individuals. It all comes down to a shift in workplace skills. Research shows that the future skills of the workforce should prioritize leadership and other soft skills to remain relevant and competitive. In a recent interview, the CEO of LinkedIn explained the most important skills of the future aren't coding or technical; they're soft skills, such as communication and collaboration, and the workforce will need to readily prioritize these as automated operations grow.6 Aging in an Automated World The intersection of an aging workforce and increasing automation is a very real threat to today's workers. Those with 30 or 40 years of experience are more likely to be doing tasks that can be automated — a fact that is only more troubling when examined on a global scale. In certain areas, such as Vietnam and China, between 69% and 76% of tasks managed by older workers are at risk of becoming automated. For reference, in the U.S., jobs held by more senior workers are believed to be about 52% automatable. What's also potentially worrisome is that older populations of workers in areas, such as Japan, are growing rapidly, creating a spiraling effect. The good news is employers are responding by eliminating forced retirement and looking for additional options to alleviate this pressure. Automation is bringing an incredible amount of positive opportunities into the workplace, but it's important not to lose sight of those who may be negatively impacted. Whether that means prioritizing training in soft skills to ensure a more "future-proof" workforce or looking for more appropriate ways to leverage automated work in highly manual jobs and industries, the truth is this trend isn't going away. Competition and globalization will continue to push employers to find new, creative ways to automate processes, but those who seek visionary ways to reshape their workforce around this technology will have the real competitive edge. Sources: 1 Constine, Josh, "Taste test: Burger robot startup Creator opens first restaurant," Tech Crunch, June 21, 2018, https://techcrunch.com/2018/06/21/creator-hamburger-robot/. 2 Demaitre, Eugene, "South Korea Spends $14.8M to Replace Chinese Robotics Components," Robotics Business Review, October 20, 2015, https://www.roboticsbusinessreview.com/manufacturing/south-korea-spends-148m-to-replace-chinese-robotics-components/ 3 Statt, Nick, "New documentary Autonomy makes the convincing case that self-driving cars will change everything," The Verge, March 13, 2019, https://www.theverge.com/2019/3/13/18262364/autonomy-film-review-self-driving-cars-malcolm-gladwell-documentary-sxsw-2019. 4 Andone, Dakin and Moshtaghian, Artemis, "A doctor in California appeared via video link to tell a patient he was going to die. The man's family is upset," CNN, March 10, 2019, https://www.cnn.com/2019/03/10/health/patient-dies-robot-doctor/index.html. 5 Autor, David H., "Why Are There Still So Many Jobs? The History and Future of Workplace Automation," MIT: Journal of Economic Perspectives, Vol. 29, Issue 3, summer 2015, https://economics.mit.edu/files/11563. 6 Umoh, Ruth, "The CEO of LinkedIn shares the No. 1 job skill American employees are lacking," CNBC, April 26, 2018,https://www.cnbc.com/2018/04/26/linkedin-ceo-the-no-1-job-skill-american-employees-lack.html.
The power of AI will shape the future of work and optimize productivity. As digital transformation continues to accelerate business operations, our work and personal schedules are becoming increasingly integrated. Never before have parents, professionals and entire communities of people been forced to harmonize such escalating demands on their work and private lives. Orchestrating the responsibilities of modern life can feel daunting. Raising healthy and well-adjusted children, supporting a struggling partner or friend, impressing your boss and coworkers, and not purchasing those chocolate chip cookies (who has time for dinner?) can overwhelm the human soul. Thankfully, AI platforms are not only changing how professionals organize information and interact with data, but how they navigate the challenges of everyday life. Introducing Warren Warren, Mercer consulting's AI digital assistant, is a sophisticated AI platform designed to leverage real-time data with learned patterns to enhance workforce productivity. It works 24/7 to ensure your personal and professional obligations are well organized and your career trajectory is moving forward. It does this by contextualizing data from your past, present and future and streamlining your responsibilities and schedule in ways that encourage better decision making. In other words, Warren is your dedicated personal coach, confidant and teammate — the ultimate convergence of people and technology. Every day, people struggle to maximize the value of their time. Too often, our work is undermined by inferior data that results in poor choices, inefficient scheduling and time-consuming distractions. Many people lack the time or resources to adjust to inevitable changes in our pressing daily priorities. Warren is here to help people focus on what is most important, when it's most important. It's less about how tech informs us and more about building a hybrid existence of machines and people working together. You bring the human element to the relationship with your creativity, strategic thinking and empathy, and Warren augments your human capabilities by suggesting recommendations based on designated goals and targets. It then makes adjustments according to previous conversations with you. All professionals, not just those at the top of the hierarchy, deserve a personal assistant to help clear their headspace. This democratization of the workforce due to AI will revolutionize how ideas come to fruition and businesses grow. The days of compartmentalizing your personal and professional lives are gone. Warren allows you to prioritize and immediately address anything life throws at you: Your child's school principal expects you to answer the phone at 1 p.m. on a Tuesday, and your boss emails you at 8 p.m. on Thursday night anticipating a quick reply. No problem. Warren is here to help you thrive in a world that demands so much of your time, energy and sanity. Warren will take it from here: No, your child does not have a peanut allergy. Yes, you have briefed the team about the sales meeting and printed the glossy reports for each stakeholder. Done and done. Modern life is a fully integrated experience without boundaries. Welcome to the new normal. Work at the Speed of AI Working at the speed of AI means never having to ask yourself if you left the stove on, the location of the room for your 9 a.m. meeting or the accuracy of the data in the graph illustrating last quarter's output numbers. Forget reminders taped to your computer, those awkward moments in conference rooms when your PowerPoint presentation won't load and having to memorize yet another password. Say goodbye to staring into your glass of red wine late at night and wondering if you're a good parent. You are because Warren reminded you not to schedule that important call with the Hong Kong office during your daughter's debut as the Cheshire Cat in her school's rendition of "Alice in Wonderland." Warren recognizes your human idiosyncrasies and fallibilities. It fact checks and performs quality control for each step of your busy day. Every aspect of your professional life will be optimized through AI technology, which consequently, will profoundly increase the quality and enjoyment of your personal life, too. By predicting and mitigating our own very human mistakes and lapses in judgement, AI can make the human experience more meaningful, rewarding and impactful. Just as email, instant messaging and in-person video calling has changed the way people communicate with others, Warren is changing the way people communicate with themselves, their work duties and their entire careers. An Era of Democratized AI As businesses pivot to growth, people will increasingly have the freedom to think beyond the minutia of day-to-day obligations and dedicate that found time, brain space and capacity to keep looking and moving forward. In the workplace, Warren empowers change at every level of an organization, which will forever alter the dynamics of influence and flow of ideas. No longer will the big ideas and future-thinking changes come from the top down. From the CEO, the summer intern and the stately boardroom to the bustling mailroom, groundbreaking solutions and cutting-edge revelations will arise from everywhere. Through the democratization of AI, the people closest to the products, solutions and services will finally have the necessary time and capacity to think through improvements and invent the next best practice or idea. AI will inspire employees at every level to think smarter and faster, drive game-changing strategies and identify new ways to co-create and innovate. Warren and other AI technologies will enable employees — regardless of title, level or rank — to grow personally and professionally. The future of work, much like in the past, will be defined by access to information and opportunities, as well as the integration of technology and human potential. AI now presents businesses with a universe of unprecedented possibilities, and employers must do everything they can to empower their people to compete in the future and continue to provide value to the company. Warren is AI's version of a dedicated collaborator who barely sleeps, only deals with facts and accurate data, and will never steal your lunch from the refrigerator. Finally, Warren is a colleague for a new era of people, technology and the symbiotic workforce.
Is the next global financial crisis just around the corner? If so, will it be markedly different from the last crisis? And is there a possibility the contagion will come from today's emerging markets, such as China, Turkey or Argentina? While the future is uncertain and uncontrollable, you can take calculated steps as a business leader to prepare now for what may come later. Emerging Market Economies Are on the Rise The strength of emerging market economies was one of several top concerns for leaders in 2018, according to the Mercer Global Talent Trends study, and it continues to be a concern today. While Asia, Latin America and Africa steadily replace the North-Atlantic-centric economies as the world's engines of growth, the global economy is experiencing increasing impacts due to their growing strength. Ardavan Mobasheri, managing director and chief investment officer at ACIMA Private Wealth, believes the global leadership baton will have been completely passed to the faster-growing economies by 2030. He states, "By the end of the third decade of the century, the transition will likely be complete, with the anchors of global economic growth cast across the Pacific and the Southern Hemisphere." But as the world adjusts to the growing strength of emerging market economies, it must also adapt to those economies' inevitable speed bumps. "Speed Bumps" Are Starting to Form Globally Emerging market assets are now retreating in the face of increasing headwinds across their geographies, including production slowdown, rising debt, higher inflation rates and slides in currencies.1 "The contagion in emerging markets happens through different channels, and it tends to be greater in periods of monetary tightening in developed markets," Pablo Goldberg, a senior fixed-income strategist with BlackRock, tells CNBC.2 "Liquidity is an issue. Investors will sell what they can sell." Desmond Lachman, a resident fellow at the American Enterprise Institute and former deputy director for the International Monetary Fund's Policy Development and Review Department, writes that U.S. economists and policymakers are ignoring risks posed by emerging economies at their own peril. "They fail to see that years of massive Fed balance sheet expansion and zero interest rates created the easiest of borrowing conditions for the emerging markets," Lachman writes. "By so doing, they removed economic policy discipline from those economies and allowed large economic imbalances in those economies to develop, especially in their public finances." Now that more capital is flowing back into U.S. assets deemed safer than emerging market assets, the acute economic vulnerabilities built up within the emerging market economies during the years of "easy" money are being revealed. These vulnerabilities, if left unchecked, will likely continue to grow and spread globally, extending their implications even further into the years to come. Business Leaders Can Adapt — Here's How To best prepare for an uncertain financial future and avoid those vast repercussions, you'll want to first take notes on the aftermath of the last financial crisis — it can teach some strong lessons on how the global economy and financial system work. For example, according to the Mercer report, "10 Years After the Global Financial Crisis: 10 Lessons to Learn," one of the most important lessons from 2009 shows that U.S. policymakers' policies, record low policy interest rates, vast liquidity injected into the banking system and quantitative easing produced unexpected outcomes across the globe. While the monetary policies haven't been inflationary in terms of consumer prices, they have been inflationary in terms of asset prices. Now, policy rates are increasing in some economies, but the full consequences of the last crisis' aftermath on all of the world's economies are still unknown, even today. Keeping that in mind, you can take these three steps as a business leader to prepare for the next crisis: 1. Don't abandon diversification, widely known as "the only free lunch in investment." 2. Be dynamic, and be prepared to rotate out of assets currently at close-to-record highs if they become unfavorable once investors realize their valuations may not be based on strong fundamentals, such as underlying growth in profits. 3. Don't abandon active management, as conditions will inevitably change. Taking these three simple steps will allow you to stay nimble and flexible enough to adapt to any situation — even a financial crisis. As markets endure various metamorphoses, remember these lessons and keep these tips in mind to ready your organization for any crises to come. Sources: 1. Teso, Yumi and Oyamada, Aline, "Emerging Markets Retreat Amid Global Growth Concerns: EM Review," Bloomberg, February 15, 2019, https://www.bloomberg.com/news/articles/2019-02-15/emerging-market-rally-abate-as-trade-concern-returns-em-review./ 2. Osterland, Andrew, "Emerging markets, despite strengths, still get no respect," CNBC, October 1, 2018, https://www.cnbc.com/2018/10/01/emerging-markets-despite-strengths-still-get-no-respect.html. 3. Lachman, Desmond, "We ignore risks posed by emerging economies at our own peril," American Enterprise Institute, September 17, 2018, http://www.aei.org/publication/we-ignore-risks-posed-by-emerging-economies-at-our-own-peril/.
Migration in the business world has evolved into a complex, global exchange of human power and intellect among nations with distinct cultures and workforce needs. This ongoing balancing of human capital with economic needs continues to impact the geopolitics of the world. However, digital transformation and the Fourth Industrial Revolution are changing the role and value of migrant workforces in profound ways. From Muscles to Motherboards Machines and computers are increasingly able to perform jobs once held by low-skilled migrant workforces — with greater efficiency and lower costs, too. This worldwide development poses unprecedented challenges for migrant workers, nations and the global economy, as automation and tech continue to replace human labor in various industries, such as farming, automotives and manufacturing. A potential surge in unemployed workers with diminished earning prospects has many countries worried about widespread economic strife and political chaos. What, exactly, will the world look like when automation in the Fourth Industrial Revolution replaces the livelihoods of the 258 million international migrants who make a living by traveling to destinations that offer unskilled unemployment?1 The Promise of the Unknown Like previous industrial revolutions, the Fourth Industrial Revolution will mean different things to different people. Digital transformation has made it easy to access almost any information via the Internet, and it's given entire populations — especially migrant workers — new opportunities to receive an education and learn new skills, trades and professions. Countries once hindered by poverty and economic isolation are embracing these new opportunities. For example, India, which has a population of 1.3 billion, expects its digital transformation market to reach $710 billion by 2024.2 For migrant workers, upskilling and professional development is critical to job security. Many countries and governments have recognized the need to provide their citizens with the skills and knowledge needed to compete in the age of automation — and that starts with workers having access to these technologies to edify their value and marketability in a competitive world. However, in countries like Argentina, Brazil and the U.S., people feel strongly that their fates are up to themselves instead of their governments and that they are individually responsible for handling the sweeping changes of digital transformation.3 For some, this means migrating to nations and economies that offer better prospects than their current circumstances. A World of Evolving Needs As witnessed throughout history, migrant workers are drawn to regions where suitable jobs are available. In a world defined by automation and computer technologies, a new era of needs has emerged. In developed countries, such as Japan, South Korea, Spain, and the U.S., birth rates are declining at an extraordinary rate.4 Of particular concern in South Korea and Japan is societal aging, where the number of elderly people is increasing dramatically, while birth rates are declining — there's a lack of younger people who can care for the aging population and generate much-needed taxes through employment to fund retirement for older populations. Japan and South Korea are employing robots and automation to tend to the psychological, emotional and physical needs of elderly citizens, but these technologies are unable to provide the financial resources and domestic services these nations need to continue operating. Japan's Prime Minister, Shinzo Abe, has introduced extensive reforms, often referred to "Abenomics," which proposes to loosen long-held cultural constraints by integrating more women into the workplace at every level of influence. However, the most controversial aspect of Abenomics is the intention to open Japan up to migrant workers to alleviate internal workforce deficiencies that require uniquely human capacities — a move which many Japanese citizens consider to be a threat to their cultural identity.5 But without younger workers to stabilize the economy, Japan might not have a choice. The Fourth Industrial Revolution is changing the game, and many countries will need migrant workers to fill the gaps between the evolving roles of man and machine. For centuries, migrants have worked hard to fulfill their personal needs — which, in turn, also serves the needs of the employing countries that require their labor. In this modern economic landscape, automation and tech may force change upon job functions, but the need for human capital endures. Sources: 1. "International Migration Report," United Nations, 2017, https://www.un.org/en/development/desa/population/migration/publications/migrationreport/docs/MigrationReport2017_Highlights.pdf。/ 2."India Digital Transformation Market to Reach $710 Billion by 2024: P&S Intelligence", Prescient & Strategic Intelligence, 5 de março de 2019. https://www.globenewswire.com/news-release/2019/03/05/1747720/0/en/India-Digital-Transformation-Market-to-Reach-710-Billion-by-2024-P-S-Intelligence.html。 3. Wike, Richard and Stokes, Bruce, "In Advanced and Emerging Economies Alike, Worries About Job Automation," Pew Research Center, September 13, 2018, https://www.pewglobal.org/2018/09/13/in-advanced-and-emerging-economies-alike-worries-about-job-automation/。 4. Kotecki, Peter, "10 Countries at Risk of Becoming Demographic Time Bombs," Business Insider, August 8, 2018, https://www.businessinsider.com/10-countries-at-risk-of-becoming-demographic-time-bombs-2018-8。 5. Yoshida, Reiji, "Success of 'Abenomics' hinges on immigration policy," https://www.japantimes.co.jp/news/2014/05/18/national/success-abenomics-hinges-immigration-policy/#.XJr1GK2ZOgR。
Musicians, poets and philosophers have spent entire lifetimes asking the question, "Who am I?" In the not-so-distant future, the answer to that question may be stored in our personal blockchain profiles — digital "arks" that contain the details of every decision, action and purchase we've made since the day we were born. Say goodbye to your birth certificate, credit score, passport, professional resume and medical history, and say hello to the future of blockchain: your blockchain profile. Your unique answer to the question "Who are you?" will be a chronological, hyper-detailed, immutable record that says with unprecedented certainty, "This is who I am." Blockchain will not live inside our thoughts, emotions, dreams or nightmares. It will not capture the inner dialogues people reveal in personal diaries or while talking to the bathroom mirror in the morning. Blockchain will, however, never forget when you broke your arm at the age of five (climbing a bannister), how your heart rate spiked when you first met your spouse (you dropped your drink) or that you paid extra for rush delivery of a new pair of black shoes (your cousin's wedding). Blockchain may not be the "you" robed Greek philosophers had in mind, but it will be the "you" the rest of the world sees — ideally, with your permission. Know Your Rights in a Digital World Businesses want access to your decisions. Information detailing why you choose to vacation in Vietnam, eat mussels at your favorite Italian spot every Tuesday night or only use a medium-bristle toothbrush is valuable to companies that want to sell you — and people like you — airline tickets, fresh seafood and toothpaste. Every online decision you make and action you take is data that reveals part of your personality and thought processes. In recent years, businesses and policymakers have debated how much access companies should have to an individual's personal decisions — especially what they read, click on and buy online. While there are powerful forces seeking to retain control over the data individuals create when using online services, the winds are shifting, and regulatory momentum is beginning to favor the individual. In May 2018, the E.U. set forth the landmark General Data Privacy Regulation (GDPR) that firmly establishes basic legal rights regarding data privacy, ownership, control, consent and portability for all of its citizens, regardless of where they live.1 In the U.S., the HIPPA Privacy Rule establishes national standards to protect individuals' medical records and other personal health information.2 These regulations are in place to protect citizens from organizations who may seek to use personal data for purposes other than what it was collected for, or for which consent has been explicitly given — and provide instruments to exact considerable penalties on entities that violate those laws. In an era of digital transformation, it is critical that people appreciate the value of their personal data and the extent of their rights to privacy. For Sale: Sleeping Habits and Exercise Routines Personal data is now part of the supply-and-demand dynamics driving capitalistic enterprises. Consumers not only possess purchasing power but also access to the thoughts and activities that precede particular purchases. This information is invaluable to companies that use data-driven strategies to sell their products and services to targeted consumers. Before blockchain technology, it wasn't possible to have a comprehensive record that kept track of an individual's purchases and behaviors within the context of everything else happening in their lives. But now, it is possible. Today, blockchain makes it possible for people to have an immutable profile of unimaginable detail, one that begins on the day they're born and develops throughout their entire lives — recording everything from when they lost their first tooth to the names of their grandchildren. Every doctor visit, every homework question, every mouse click, every page view. Businesses, naturally, will develop innumerable ways to incentivize people to allow access to their data. With individual rights established as the legal default, consumers will hold the power in this relationship and can monetize their data by renting access to various aspects of their blockchain profiles — from their sleeping habits to exercise routines. As deeper access is granted and more data sources are connected, behaviors can be predicted with greater accuracy, increasing the value of an individual's profile. In effect, individuals will be able to self-identify as willing marketing targets who offer their comprehensive descriptive profiles for sale in an emerging digital marketplace for personal data — a development that will radically alter the business of advertising, data research and analytics. A World of 8.5 Billion "Personhoods" In 2030, the global population is expected to reach 8.5 billion. By that time, blockchains could consistently, reliably and securely organize data around the individuals who comprise the world's communities and nations. This makes person-centric societies technically possible, where citizens' actions and behaviors are digitally recorded in their "personhood" — an immutable record that serves as a single source of truth to their experiences and sensibilities. People, in essence, will regularly create real-time data that is chronologically added to their collective profile — which includes health records, educational backgrounds, professional credentials, voter registrations, driver's licenses, criminal histories, financial status and any other notable aspect of being a person. "Personhood" could become the universally accepted record to which all identity-related information can be tied. All the processes once needed to validate identity will be replaced by an individual's comprehensive blockchain profile. The commoditization of personal data will profoundly impact how people relate to businesses and each other. Will being held accountable to one's own "personhood" — and knowing that the details of our lives will forever be recorded in our blockchain profile — change how we behave? Will attempting to increase the value of one's "personhood" become an extension of trying to improve their own lives? Or vice versa? The rise of "personhood" could change our collective understanding of ownership in ways the human race hasn't witnessed since the concept of personal property rights first emerged. The Future Challenges to a Blockchain World There are always casualties to sweeping technological advancements. With the proliferation of blockchain technology and the rising value of individuals' data, societies risk becoming even more polarized along financial and class lines. Individuals with more purchasing power inherently possess data that is more valuable to businesses that sell products and services or governmental institutions that could benefit from their financial support or influence. Those without money or access to modern technologies will face profound disadvantages unless governments — especially those in growth economies — implement regulations that protect vulnerable citizens from being left behind. Growth economies must also find ways to integrate intermediaries who will fight the prospect of obsolescence as blockchain technologies become more popular. Though the future is difficult to predict, and change always creates challenges, history teaches us that where value is created, technology eventually wins. The future of blockchain presents the human race with the opportunity to understand each other, and ourselves, in unprecedented ways. By providing new insights into human behaviors, relationships and business interactions, we can learn from each other and improve conditions for everyone. Perhaps blockchain data will even convincingly demonstrate to humanity how similar we all are. In the future, the most important questions people can ask themselves is not, "Who am I as a person?" but, "Who are we as a society?" The answer to that question may create the type of civilization only dreamed of by musicians, poets and philosophers. Interested in learning more about blockchain? Check out: Mercer Digital's Blockchain 101 Overview. 1Palmer, Danny. "What Is GDPR? Everything You Need to Know About the New General Data Protection Regulations." ZDNet, https://www.zdnet.com/article/gdpr-an-executive-guide-to-what-you-need-to-know/. 2"The HIPAA Privacy Rule." Office for Civil Rights, https://www.hhs.gov/hipaa/for-professionals/privacy/index.html.
Vincenzo Peruggia was born on 8 October, 1881. Some thirty years later on a Monday morning in 1911, the diminutive 160-cm Italian man strapped on a white smock—to blend in with the other employees at the Louvre in Paris—and walked out carrying the Mona Lisa. He simply lifted it off the wall. For the next two years Leonardo Da Vinci’s iconic masterpiece lay stuffed in a trunk in the thief’s Paris apartment. Vincenzo eventually grew anxious and returned to Florence in his beloved homeland where he contacted an art dealer and attempted to peddle the famous painting. The police arrested him in his hotel room. What makes this story fascinating is not that it was so shockingly easy to walk away with a world renowned Renaissance-era treasure, but that Vincenzo’s crime was doomed from the very beginning. Everyone in the art world knew the origins of the Mona Lisa, the value of the Mona Lisa and the journey of the Mona Lisa to her home in the Louvre. The painting’s entire provenance was well documented and agreed upon. Introducing the stolen masterpiece back into the art world without setting off alarms everywhere was impossible. Blockchain technology offers that same level of transparency and authenticity for everything from a Persian tapestry and a toro sushi roll to a refinanced mortgage loan, or even a single lemon. Here’s how: Mutually Agreed Upon Single Source of Truth The first step to documenting data on a blockchain requires operational processes that focus on first-time accuracy. From the initial step, all parties involved in a transaction must confirm the identity, value and controlling stipulations that regulate the blockchain asset. In our story featuring Vincenzo Peruggia, for instance: This is Da Vinci’s painting, the Mona Lisa. She hangs on this particular wall in the Louvre. She is worth $800 million. No, she is not for sale. The value and circumstances have been established. If anyone attempts to steal or tamper with the Mona Lisa, the involved parties—the world, in this case—will notice. With blockchain, once the mutually agreed upon initial information is captured accurately, it becomes the single source of truth. It never needs to be verified. Once the integrity of the data related to the information asset has been established, blockchain technology prevents any nefarious actors from being able to manipulate it because everyone in the blockchain is looking at the same information, at the same time, from their respective computers, distributed throughout the world. Everyone is privy to the original confirmed and verified asset and what happens to that data moving forward. Attempting to exploit or plunder that digital asset would be like trying to steal the Mona Lisa from countless, well-protected Louvres all over the world. Intermediaries Are Not Needed Blockchain technology eliminates the need for an intermediary, or middle man. Intermediaries are commonly tasked with providing integrity to transactional processes involving parties that are not familiar with each other. Banks serve as intermediaries for financial transactions between individuals and businesses. Real estate agents act as intermediaries to navigate the paperwork of real estate sales. Even illegal intermediaries, such as illicit music downloading platforms, steal significant amounts of royalties from musicians who have their songs stolen or plagiarized online. Blockchain can eliminate the necessity and impact of all of these types of intermediaries. Take Eriko Matsuyama, a hypothetical 23-year-old art student at Tohoku University in Japan, who is attending a study abroad program in Paris. Eriko, a talented painter, spends every morning camped in front of the Mona Lisa composing elaborate watercolors, each offering a unique interpretation of Da Vinci’s muse. She even has an online store where she sells her original paintings to her fans around the world. Through blockchain technology Eriko is able to authenticate the time, date and development of each original painting, and send both the original watercolor and an exclusive digital copy to her purchasers. Should the purchaser decide to sell either the original print or the digital copy, the blockchain can serve as proof of authenticity. Perhaps, 30 years in the future, Eriko has become a famous artist whose work commands millions of dollars. Those same watercolors, and their digital copies, will hold more value because the blockchain guarantees their origin and authenticity throughout the years, regardless of how many times they’ve been bought or sold…without ever needing an intermediary to verify authenticity or assist in the process. Data Becomes Like a Physical Object The Mona Lisa is, of course, a physical object. So are Eriko’s original watercolors, which she signs by hand; but the digital copies of her paintings are digital assets. Today, digital assets can be anything from an individual’s health records to the deed for a parcel of land. Blockchain makes it possible for a data asset to exist in the digital world just like a physical object does in the real world. The data asset can exist as just one usable copy of a data file. With a blockchain there is always only one usable and protected copy—just like the unique digital rendering of an original Eriko Matsuyama painting. It can be bought and sold, but never manipulated, illegally copied or misappropriated. In the span of 30 years, the digital copy of an Eriko Matsuyama watercolor migh be bought and sold a dozen times to individuals or businesses who may want it to print it for everything from T-shirts to wallpaper. But only one digital copy will ever, and always, exist. Supply and demand determines the price of any product or service. If the quantity of a digital asset is limited, then that asset is considered scarce—and supply and demand dynamics come into play, just as in the physical world. This desirability by the market creates quantifiable value that can be applied to everything from an individual asset to a cryptocurrency. Technology is constantly driving the world forward. In the future, the digital realm will be characterized by a matrix of digital trade routes of all sizes—each protected by the blockchain, free of piracy and disinformation. If blockchain and modern technologies had been around in 1911, the Mona Lisa would have been reclaimed in less than two hours, instead of two years. Today, the iconic face of the Rennaisance has even more reasons to smile. To learn more about blockchain read Mercer Digital’s Blockchain 101 Overview.
The meteoric rise of cryptocurrencies such as Bitcoin thrust blockchain to the forefront of the daily news in late 2017, and its subsequent epic fall cast a new pall over a technology that was just beginning to overcome its early reputation as a perfect vehicle for swindlers, drug dealers and traffickers. While awareness of blockchain has increased markedly over the last few years, most organizations and people are still unable to grasp what this new technology will really mean to their businesses and lives. Today, blockchain technology is about where the Internet was in the early 1990s. It’s an exciting and important technology, but one that is still in its fledgling stage. The truth is, similar to how people were trying to figure out the Internet in the early 1990s, no one really knows exactly how it will revolutionize economies and cultures. But we do know—much like the Internet in the early 1990s—that blockchain is going to be a game changer. Blockchain: The Efficiency Revolution Blockchain will profoundly impact the intersection of business and individuals by unleashing a new era of connectivity and efficiency. Because blockchain is secure, streamlined and can be both transparent and anonymous simultaneously, the technology will revolutionize operational processes by eliminating costly intermediaries. Suppose, for example, a VP of engineering in Beijing, China is being relocated—along with his wife and two daughters—to a new long-term position based in Perth, Australia. Historically, just finding and securing housing across borders has involved an overwhelming amount of paperwork, people and processes. Local real estate protocols are fraught with legacy registry systems, sprawling bureaucratic channels and intermediaries including brokers, title agents, title attorneys, notaries, escrow agents, land registry officials and bankers in both countries. These processes are bloated, expensive and susceptible to fraud. The streamlined transparency and security provided by blockchain technology will eradicate many of those wasteful and vulnerable practices. Blockchain enhances efficiency not by collecting data, but by securely connecting data across a decentralized network of participating computers called nodes. Nodes store the blockchain’s data, follow the rules of the blockchain’s specific protocols and communicate with other nodes, which can be located anywhere. Each follows the same rules and maintains an identical copy of the network’s immutable data set. New information is added only when the nodes agree, and the change is distributed simultaneously to each node. To alter it, would-be hackers would not have to simply hack one node, but all (or most) of the individually protected nodes distributed throughout the world. By ensuring the data is simultaneously tied together and yet independent, anonymous and secure, blockchain ensures the integrity of the data network. This allows all participating parties to know that the shared data is valid, and no intermediaries are needed to confirm that a home buyer has enough money, or if the house has water damage, or if the title deed has been signed, notarized and delivered. Blockchain In Growth Economies Blockchain is gaining traction and disrupting growth economies at an increasing rate. Not only is it being touted as a possible solution to endemic and institutionalized corruption, but it is also gaining acceptance in important industries, especially financial services, healthcare and government. Financial Services Blockchain first gained traction in growth economies as the technology behind Bitcoin, the first digital currency. However, experts soon recognized that blockchain’s transparency and security features could significantly change the financial services industry—much as the Internet changed the media and entertainment industries 20 years ago. Banking institutions across the globe are adopting blockchain and advanced distributed ledger technologies for a wide range of functions, including trade settlements, payment processing and cross-border transactions. In fact, India recently launched India Trade Connect, a trade finance strategy that uses blockchain platforms to empower an unprecedented collaboration between IT juggernaut InfoSys and seven of the nation’s biggest banks.1 Modern blockchain technologies allow these financial entities to streamline trade finance systems and oversee international supply chain transactions at every step of the operation. Healthcare The global healthcare industry manages vast amounts of clinical and administrative data, from the pharmaceutical supply chain to patient medical records to claims management. The introduction of smart medical devices including everything from personal fitness trackers to connected surgical suites, is introducing an entirely new ecosystem of information to mine. The pool of data collected from healthcare-related devices is growing exponentially. Accurate, accessible data is critical to improving clinical outcomes and reducing waste, and blockchain’s immutability and ability to connect currently siloed information and serve as the “single source of truth” are key enablers. In South Korea, the healthcare industry has been very proactive in implementing blockchain to centralize patient information and marginalize the prevalence of counterfeit drugs through transparent supply chain management. Blockchain records of patients’ medical histories provide Korean hospitals and caregivers with a single, accurate record of a patient’s treatments, procedures and pharmaceutical needs.2 Government Governments in growth economies around the world are using blockchains for everything from property records and voting registries to driver’s licenses and financial histories. Its ability to provide a chronological and immutable digital record makes it ideal for transactions that impact populations and economies—from single individuals to entire industries. Blockchain increasingly allows governments in Africa to better organize records and services through improved identity management systems—which legitimizes processes key to successful societies, from collecting taxes to counting votes.3 For many growing nations, blockchain may soon offer the potential to leapfrog from antiquated and bloated operational processes, fraught with malfeasance, to streamlined, incorruptible systems that attract international investment and encourage entrepreneurship. Blockchain is gaining rapid acceptance with businesses and policymakers in part because the continent doesn’t have deeply entrenched incumbents or legacy systems that might resist this new technology in an effort to maintain their influence. Blockchain: The Unknowns When the Internet gained acceptance in the early 1990s we knew that the ways human beings communicated and interacted with information was about to experience extraordinary changes. We didn’t know, however, that it would lead to the rise of other revolutionary forces such as Google, peer-to-peer file sharing platforms like Napster, ubiquitous smartphone devices such as the iPhone, or the invention of social media channels like Twitter, Instagram and Facebook. All cultural disruptors that continue to shape the world in significant ways, from unhealthy personal digital addictions to the influence of government-sponsored disinformation campaigns. Blockchain promises similar benefits and risks. The impact it will have on growth economies, international commerce and human culture cannot be fully assessed or appreciated at this point. But its potential is real and pervasive in every region of the world. Businesses, CEOs and governments should adopt strategies that don’t necessarily mandate a call to action, but a call to awareness—an earnest effort to gain a sophisticated understanding of the technology and how it can create positive changes, or negative consequences, in a world that is still figuring out how the Internet of the 1990s has transformed the human condition. To learn more about blockchain read Mercer Digital’s Blockchain 101 Overview. 1Infosys Finacle Pioneers Blockchain-based Trade Network in India in Consortium with Seven Leading Banks: Infosys Limited - https://www.infosys.com/newsroom/press-releases/Pages/pioneers-blockchain-based-trade-network.aspx 2Will Blockchain Transform Healthcare in South Korea: https://techwireasia.com/2018/06/will-blockchain-transform 3Why Africa’s Emerging Blockchain Movement Is Growing So: https://media.consensys.net/blockchain-month-in-africa-920945771100
Kenya’s vaunted Silicon Savannah continues to advance the prominence of e-commerce and online shopping throughout the continent of Africa. Online retailer Jumia, headquartered in Nairobi, grossed $597 million in 2017, expanding its reach from four countries to 14. Now, as Africa’s startup epicenter seeks to attract more international investors, tech-savvy entrepreneurs and local suppliers, it is catalyzing a profound shift in consumer behavior across Africa. Leapfrogging the Retail Divide Megacompanies like Amazon and Alibaba have changed the core of retail shopping in western and eastern markets, but the continent of Africa has yet to witness the ascendance of tech gurus like Jeff Bezos or Jack Ma. For Africa, that’s just fine. A new generation of young tech pioneers is driving digital transformation throughout the continent, and changing the way consumers not only purchase products, but organize their lives. For decades, markets in Africa have been incredibly challenging places to shop. Online shopping and digital banking, however, are enabling African retailers and consumers to leapfrog from shopping experiences defined by antiquated infrastructure, unreliable banking mechanisms and poor distribution processes, to streamlined e-commerce experiences. The impact of improved online connectivity (Kenya ranks among the world’s fastest internet speeds) and M-Pesa, the mobile banking platform that streamlines financial transactions and microfinancing, are leading a revolution in consumer expectations throughout Africa. This elevation of consumerism, will not be spread evenly throughout the continent. The Incomparable Future of Africa Investors are learning that digital transformation in Africa will not evolve in the same ways as in western and eastern cultures. Human intuition posits that economic priorities and trends in one area of the world can serve as precedence for other areas of the world. But this ilk of thinking is misguided with respect to the circumstances in Africa. The explosion of the middle class in places like China will not be reflective of increasing wages across Africa. Multinational corporations must be mindful that different cultures espouse different values, and those values guide how populations perceive, save and spend money. The African continent, and its 1.2. billion people, live in very different nations and cultures. Investors and financial prognosticators cannot approach Africa with the same strategies and expectations as they do other large populations, such as India’s 1.32 billion people or China’s 1.38 billion people. Africa’s spectrum of governments, cultures and economic scenarios span a vast array of unique obstacles and opportunities. Africa’s rising middle class isn’t as intent on purchasing products that symbolize societal status or seeking individual attention. Instead, Africa’s consumers are proving to be more conservative, and are reallocating extra income to savings or family networks in areas with less economic viability. Africa, Technology & Time One of the top-selling items on Jumia is disposable diapers, which provides a glimpse into how consumers in Africa are prioritizing their financial resources. The obsolescence of traditional cloth diapers for more expensive disposable diapers indicates that convenience and time management are leading drivers of purchases in an evolving continent. Though luxury items such as cosmetics have failed to gain traction, e-commerce is changing consumer behavior when it comes to providing the most valuable resource in anyone’s life: time. It all begins with access to the internet. Eighty-five percent of Kenya’s population is online. As the country’s hubs in Nairobi and Mombasa continue to attract innovative companies and ambitious entrepreneurs, the businesses arising from the Silicon Savannah such as Twiga—which connects local farmers to stores in more urban settings—are changing everything from supply chains and distribution to the transparency of operations. In fact, technologies such as blockchain could significantly reduce corruption throughout Africa, saving tech startup entrepreneurs time (not months, but years) navigating costly bureaucracies and political quagmires when establishing their businesses. Though the continent of Africa is full of rich and disparate cultures and countries, Kenya and the Silicon Savannah have proven to the international investment community that positive changes transcend borders and barriers. Kenya’s tech hubs are incubators for ideas and businesses that will transform not only Africa, but the world. After all, there was a moment when Amazon and Alibaba were small startups with big dreams. All they needed was a place to call home and time to grow. For African entrepreneurs that home is the Silicon Savannah… and the time is now. 1 Meet the Startup Building a Market From Scratch To Become Africa's Alibaba Matina Stevis-Gridneff https://www.wsj.com/articles/with-c-o-d-and-goat-promotions-jumia-aims-to-be-africas-alibaba-1527073200?mod=e2tw 2 Kenya's Mobile Internet Beats the United States For Speed Lily Kuo https://qz.com/1001477/kenya-has-faster-mobile-internet-speeds-than-the-united-states/ 3 3 Things Multinationals Don't Understand About Africa's Middle Class William Attwell https://hbr.org/2017/08/3-things-multinationals-dont-understand-about-africas-middle-class 4 Africa Internet Users, 2018 Population and Facebook Statistics https://www.internetworldstats.com/stats1.html
Cybercrime is not only rampant in South Africa, but could soon pose a significant threat to every economy, business, and person in the world. For example, the data breach at South African insurer, Liberty, in June this year, demonstrates how vulnerable companies are to cybercrimes. Liberty admitted hackers infiltrated its IT system and stole customer data. The hackers threatened to reveal the data if a ransom was not paid. In another breach targeting the government, 934,000 personal records were made public online. Cybercriminals focus their efforts on a common vulnerability found in security systems: people. In a report on cybercrime and cybersecurity trends in Africa, cybersecurity provider Symantec reported that one in every 214 emails sent in South Africa was a spear phishing attack, which is the fraudulent practice of sending emails purporting to be from a known or trusted sender. In South Africa, one in three cybercrime attacks sought access to businesses by deceiving people. The rise of flexible workforces is directly linked to the proliferation of cybercrimes. A new era of employees who use their own computers and devices for both their personal and professional lives has provided cybercriminals unprecedented opportunities to breach systems. A new era of Bring Your Own Device (BYOD) places businesses at risk as flexible workforces are not subject to the same security protocols as other employees, which means in some cases, those workers—and their technologies—can bypass firewalls, password protections, and other security measures. Simply opening up a nefarious email can provide hackers access to a company’s infrastructure. Many businesses have inadequate IT security policies in place, especially ones that account for human fallibility, and employees who view security measures as a barrier instead of an enabler for business. With employees at the heart of these vulnerabilities, HR professionals must play a greater role in combating cybercrimes by following these steps: Keep abreast of security policies HR professionals, in South Africa, should fully understand the Protection of Personal Information Act (PoPIA). This act legally requires local businesses to ensure that all client, supplier and employee information is stored, processed and destroyed in a manner that upholds the privacy and protection of personal data. This includes protecting sensitive employee data from falling into the wrong hands. Most markets have similar security policies and protocols. Regardless of where in the world you are based, it’s important to familiarize yourself with them. Address the potential risks posed by employees The 2017 IBM X-Force Threat Intelligence Index revealed that 60% of cyber-attacks are the result of internal activities. HR professionals must educate employees about the risks of cybercrimes and implement policies and procedures for employees who do not adhere to the rules. Define the rules when working from home The continued rise of the BYOD era is inevitable. The 2018 Mercer Global Talent Trends report noted that 82% of executives say that flexible workforces are essential to their core business operations. HR professionals need to ensure that the right policies are in place to enable this trend to evolve within a South African context. Employees should understand the need to keep their security software up to date at all times—including when working from home. Over the next five years, cybercrimes are projected to cost businesses US$8 trillion. Businesses that fail to address the severity and inevitability of cyber attacks are not fulfilling their professional—and now legal—obligations to their employees and customers. By embedding policies and rules to manage the era of BYOD and educating employees about the sophisticated tactics criminals use in the digital age, HR professionals can play an integral role in limiting exposure to risk and costly security breaches. 1 https://www.libertyholdings.co.za/investor/Documents/20180802-media-release.pdf 2 https://www.fin24.com/Companies/Financial-Services/liberty-falls-victim-to-hackers-20180617 3 https://www.troyhunt.com/questions-about-the-massive-south-african-master-deeds-data-breach-answered/ 4 https://www.symantec.com/content/dam/symantec/docs/reports/cyber-security-trends-report-africa-interactive-en.pdf 5 https://www.leadersinsecurity.org/component/phocadownload/category/11-2017-cybersecurity-publications.html?download=185:2017-cybersecurity-publications 6 https://www.mercer.com/our-thinking/career/global-talent-hr-trends.html
The sophistication and ability of cyber-criminals to successfully penetrate IT infrastructures is growing at a rapid pace. The Middle East’s financial institutions are increasingly being targeted and are not ready for the tidal wave of threats. There is cause for concern among Gulf Corporation Council (GCC) executives. Cybersecurity is critical. You’re either ready, or you’re not. The alarm has been sounding for quite some time. It is no longer a question of if your organization may be subject to the risks of cyber-threats, but when. The paradigm has shifted, and the harsh realities of cybersecurity are no longer an emerging risk, they have emerged and are a business imperative. Things are only heading in one direction and, left undiagnosed and untreated; the prognosis is alarming. The assets and wealth of financial institutions in the Gulf Corporation Council (GCC) have been identified as prime targets for cyber-criminals. While this is a global issue, the Middle East’s response to combat the threat lags behind the rest of the world. While asset managers in the GCC seek to grow assets under management, they are failing to attract assets from sophisticated and discerning institutional investors who have already woken to the seriousness of the cyber-threat. GCC institutional investors and investment managers need to protect themselves and their investors from the fallout of financial losses, confidential data compromise, unlimited reputational damage and disruption associated with successful cyber-attacks. The statistics are not comforting. In a recent Marsh & McLennan Companies and Firefly survey of European institutions, 23% of respondents acknowledged they had been a victim of a successful cyber-attack in the last 12 months. Nearly two-thirds of survey respondents said cyber-risk is among their organization's top five risk management priorities; only 45% of respondents said they formally estimate the financial impact of a potential cyber event as part of risk management. 2017 was the most damaging year for cybersecurity; Wanna Cry ransomware and NotPetya’s “wiper” malware permanently changed the global cyber-landscape. NotPetya is said to be responsible for US$1 billion in economic losses. If not sufficiently alarming, August 2017 saw the loss of 150 million consumer credit customers’ personal records and wiped US$5 billion off market cap. Whichever way you look at it, the prognosis is worrying. Cyber-incidents, once considered extraordinary, have rapidly become commonplace. The cost of cyber-crime to businesses over the next five years is expected to be US$8 trillion. In a world with 7.6 billion people, there were an estimated 8.4 billion internet-enabled devices in 2017. The figure is projected to grow to 20.4 billion by 2020. The world is experiencing the rise of cyber-dependency due to increasing digital interconnection of people, things and organizations. Greater cyber-dependency and the exponential rise in cyber-crime are inextricably linked. In response, the World Economic Forum’s Global Risks Report 2018 upgraded the risk of cyberattacks and data fraud or theft to top five risks by likelihood. In 2017, cyber was not even a standalone risk in The Global Risk landscape rankings. Ernst & Young suggest cyber-risk has evolved as a standalone critical risk category to be viewed not only as a technology issue but as a pervasive business and operational risk with the potential for significant impact on assets, revenues, reputation, confidentiality, and profitability. In an effort to bring greater investor and consumer protections, while increasing the cyber-standard expected of organizations, a new wave of sweeping regulation is emerging. The General Data Protection Regulation (“GDPR”) will be introduced in 2018 and imposes far-reaching obligations surrounding cyber-breach disclosure. Commentators suggest GDPR will “change the world as we know it” and, while GDPR is EU legislation, other leading global financial centres are rapidly adopting similar, sweeping cyber-laws. GDPR breaches and non-compliance are expected to result in billions of dollars of fines annually. Governments, regulators, supervisory boards, media, and consumers will scrutinize executives’ responses to newly disclosed cyber-incidents which have previously remained below the surface. Financial Institutions in the GCC should not wait for regional regulators to impose similar requirements. Consider these five steps to managing inevitable cyber-threats: 1. Embed C-Suite Accountability The stakes have changed for the C-Suite: cybersecurity has firmly taken its place on the corporate risk register and cyber-accountability rests with the Board. While the concepts of cybersecurity may be foreign for many executives and board members, protecting your organization against risk is not. Experienced executives understand their limitations and leverage resources to fill the gaps. Setting the tone from the top, Boards should implement formal data and cybersecurity policies with appropriate governance and cybersecurity awareness processes. 2. Understand the Threat Undertake an expert assessment to understand the scope of the threat and your organization’s vulnerabilities. Understand the volume and criticality of unpatched software vulnerabilities within your organization’s IT environment. 3. Implement the Change Strengthen your IT infrastructure by comprehensively tackling the vulnerabilities identified in the threat assessment. Further mitigate the risks of penetration by reducing your organization’s attack surface. 4. Educate your People The role of human error in successful cyber-attacks should not be underestimated. Human behaviour lies at the core of security strategy. Creative and ongoing employee cyber-awareness and training programs should be implemented. 5. Monitor your Infrastructure Establish a framework for continuous IT network monitoring, including responsibility for identifying and applying critical software patches, and escalation to the C-Suite. Re-assess the IT environment and emerging threats regularly to ensure ongoing appropriateness versus the changing landscape. Failure to take the reality of cyber-threats seriously is reckless. By embedding C-Suite accountability, understanding the threat, implementing the change, educating your people, and continually monitoring your IT infrastructure, you will be taking important measures towards mitigating the countless cybersecurity risks we all now face.
Although the economic story of the twenty-first century is still very young, its first two decades can arguably be summarized as a period of transition in global economic leadership. The North-Atlantic-centric economies that have dominated the global economic landscape for the better part of the past century and a half are handing the baton off to the faster-growing or “emerging” economies of Asia, Latin America and Africa. By the end of the third decade of the century, the transition will likely be complete, with the anchors of global economic growth cast across the Pacific and the Southern Hemisphere. With an ever-larger and increasingly educated middle class, particularly in Asia and Latin America, growth in consumption and business investment in these regions will not only lead the way as the engines of global economic activity but will contribute to a gradual transition toward higher-end consumer goods and business services, such as healthcare, insurance and investments. Transition in Global Economic Leadership Since 2008 and the peak of the financial crises, faster growing economies have dominated new economic activities globally. According to estimates from the World Bank, the global economy has added US$10.655 trillion to its GDP during this period, of which roughly US$8.28 trillion — or more than 77 percent — have come from the faster-growing economies. Since the beginning of the century, nearly 65 percent of all new activity has occurred in these economies, which, as of the end of 2015, represent slightly more than 42 percent of the global economy, up from almost 30 percent at the end of 2000 (see Chart 1). Chart 1: Share of Global GDP Economic recoveries post financial crises have, in general, proved to be weaker than other recoveries, impacting investments, employment and regulatory environments disproportionately. However, the outperformance of faster-growth economies over the North Atlantic-centric ones (where the financial crises originated) since 2008 has been largely due to significantly stronger fiscal balances, favorable demographics and a growing and consuming middle class increasingly confident about its future income prospects. Relatively stronger fiscal balances have permitted continued government investment in national and regional housing and transportation infrastructures (especially across Asia, Latin America and the Persian Gulf), contributing to the fast rate of urbanization. Investment in healthcare and educational infrastructures has continued to increase longevity, contributed toward productivity growth, and improved the relative competitiveness of the agriculture, manufacturing and even certain services sectors. Faster-growing economies are likely to see a slight downtick from their 2000–2015 average as Chinese growth converges to more sustainable levels. But with an average growth of 4.0 percent, we expect the faster-growing economies will surpass their North Atlantic-centric peers and complete the transition in global leadership by 2030 (see Chart 2). The Rising Middle Class The North-Atlantic-centric economies have benefited greatly from their consumers’ size and growth over the past half century. As the transition in global leadership progresses over the coming decades, the faster-growing economies of Asia and Latin America, in particular, will begin to experience this stabilizing economic force as their investment in the infrastructure of consumption begins to pay off. By 2025, 10 of the top 25 cities ranked by GDP will be located in the faster-growing economies. When measured by the number of individuals making more than US$20,000 per year (a figure that could be considered upper middle class even by the higher-cost standards of larger cities by 2025), 14 of the top 25 will likely be cities located in faster-growing economies (see Table 1). The historical experiences of the North Atlantic-centric economies teach us that, as urbanization evolves and the middle class begins to dominate the landscape of cities and economic activity, growth in demand for services such as healthcare, education, leisure and financial (that is, insurance and investments) accelerates. But the middle class of Asia, Latin America, the Middle East, Africa and even Eastern Europe will be a different middle class than in the North Atlantic. Cultural, educational, and religious traditions and qualities will need to play a significant role in “new” offerings, particularly in services. Success for many multinationals in this arena may very well be defined in terms of “innovation differentiation.” Chief among these differentiating factors are: • Investment, financial services and insurance for retirement: Retirees and savers in these countries will play a significant role in the transfer of capital to companies (as they have done in the advanced economies), but meeting their needs will require different innovations and product offerings. To be successful, companies will need to cater to the specific needs of the market instead of relying on the models of advanced economies. • Transition to a service economy: Although much of the infrastructure of the growing economies will still be pivoting off of their competitive advantage in manufacturing and agriculture over the coming years, a larger, better-educated and wealthier middle class will demand more and more services. Human capital plans designed around meeting the labor market needs of agriculture and manufacturing will thus be grossly inadequate. The new competitive advantage will be a workforce that is prepared for this transition to services. • The role of technology: Technology is not all about robotics and the assembly line replacing humans. Over the past three decades, the agricultural and manufacturing sectors have seen significant productivity gains in growth economies thanks to technology. However, investments in analytics, data gathering and management, e commerce/marketing, intelligence and security will be just as important in the years to come. Investing in the technology skills of human capital, including in the services sectors via education and training, will be key to earning a competitive advantage over companies in advanced economies. Today’s Challenges With tailwinds come headwinds that can disrupt and delay but not derail this transition story. The relatively anemic economic recoveries from the financial crises of 2008–09 have left most of the North Atlantic-centric economies reeling, with government deficits and ever-larger debt burdens, intensified by prerecession trends like the aging workforce and the decline of the manufacturing sector. The resulting rise of the voices of populism, protectionism and economic nationalism, as exemplified by the results of the Brexit referendum in the UK, elections in the US and constitutional referendum in Italy, are not likely to abate any time soon. The upcoming 2017 elections in the Netherlands, France and Germany will heavily test the staying power of the political movements that support globalization, regional economic unions and looser regulation of the cross-border movement of capital and labor. How policymakers in Asia, Latin America and elsewhere in the growing economies handle this challenge will be key to their own successes in not only avoiding trade wars but in how the transition in leadership is completed. Meeting the challenges of an ever-growing and consuming middle class in the growing economies — while simultaneously steering themselves through the challenges facing globalization in the coming decade or so — will need to be the priorities for multinationals desiring to be one step ahead of competitors. 1 Countries outside the European Union, Switzerland, Norway, Iceland, United States, Canada, Japan, Australia and New Zealand 2 World Bank 3 IMF Working Paper. Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten, 2013. 4 McKinsey Global Institute. Urban world: Cities and the rise of the consuming class, 2012.