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Digitalization & Automation

Digitalization, automation, and the massive introduction of artificial intelligence are impacting the job market and changing the very nature of work itself. All of this is greatly enabled by the introduction of 5G and even faster telecommunications platforms. 

Digitalization in its broadest sense is the process of using computers and digital telecommunications networks to do just about anything that lends itself to their use. The impact of using digital technology can alter the fundamental economics of many businesses with enormous consequences.

Automation is the replacement of human labor with machines and this has been going on since the dawn of the industrial revolution. According to Martin Ford, what is different this time is the speed of the advancements in a range of technologies collectively known as manufacturing 4.0. This includes robotics, additive manufacturing or 3-D printing, autonomously driven vehicles, etc.

Artificial intelligence is the use of analysis and mathematics to tease out useful insight from enormous amounts of data and to be able to do things as a result of that insight. Innovations such as natural language recognition and simultaneous translation are also driven by AI technology.

One of the things that are driving the digital revolution is the plethora of data now available and the even larger amounts of data which is on their way as more and more devices and activities are connected to each other. The internet of things (IoT) is about adding the capability to store and transmit data to most objects through advanced sensors and electronics creating a web of information potentially connecting most of our civilization.

  • Conceptual frameworks

One way of looking at the digital revolution is given by my colleagues on the IESE faculty Sandra Sieber and Evgeny Kaganer. The term they use is to look at the digital density of a given space and place or in other words how far has the digital revolution gone in that aspect of human activity.

The idea is to think about what the impact on a specific activity will be when the digital density reaches 100% or close to it. Essentially, this means that everything that can be digitized has been and that the full power of automation, connectivity, and artificial intelligence has come into play.

  • Implications

Digitalization and automation are already having an impact on space, role, and place and these impacts are likely to increase over the next 10-20 years. Industries with a particularly high degree of digital density such as the music business have already gone through a profound transformation.

Today artists can produce themselves and put their music into the world at a relatively low cost. The different players in the industry make very little money from producing music and now streaming serves as a mechanism to get people to come to live concerts where the real money can be made.

While the music space has been already transformed by digitalization, other parts of the economy or spaces will follow suit over time.

In terms of role, digital technology has the potential to eliminate a number of roles such as drivers in a world of self-driving vehicles, and also to change the way many roles are carried out.

One scenario is that jobs will largely involve human interaction with robots and software systems in a collaborative way. Another is that there will two levels of service available for most things. A very expensive option with humans at the core of the experience and a low-cost, automated approach for those that can not or will not pay the extra money.

While there are many voices expressing concern over the impact on people’s livelihoods and the social fabric of society as a result of digitalization, others believe that we need automation to compensate for falling birth rates in advanced economies.

Digitalization is also having an enormous impact on place as a number of cities around the United States and the world are emerging as technological hubs and others are falling far behind. 

Enrico Moratti goes deeper into the inequalities in The New Geography of Jobs and finds stark differences in wealth and even life expectancy between people living in the emerging tech hubs and others in communities that have been left behind. 

In his book, Who’s Your City? Richard Florida describes a spikey world where wealth and innovation are increasingly concentrated in megacities and hubs. In his research, he has found that people in such places have more to do with others in similar situations, wherever they are located, than with people in other communities in their own countries.

The point that both authors make is that life in the tech hubs will be different for all of the residents regardless of whether their roles are directly related to new technology or if they fulfill other services such as working in the public or services sector.