by Andrew White | August 21, 2018 | Comments Off on Are You Spending Enough on Training and Education?
I suspect not.
I was reading an interesting article in last week’s Economist titled, “Time to Get in Training: Companies Must Overcome Skills Shortages”. The article calls out a data point I found fascinating. It was a point made by IBM’s Diane Gherson, Head of HR. She says that employee skills stay relevant for three years. The article reports on a skills gap (we see the same – mitigate them here with Artificial Intelligence Hype: Managing Business Leadership Expectations) and suggests firm’s need to increase spending on training. But this is not the first skills gap we have seen in IT….
So I asked myself, why three years? The answer is pretty obvious but perhaps not well thought through. Innovation in general is the challenge. In the industrial era new machinery and techniques were developed and as improvements to productivity were recognized, such innovations were demanded by others and so diffused across industry. Training followed closely behind as without it, those innovations would be found wanting. Indeed, some of those innovations may never have happened without some new skills.
We will avoid the argument that today’s innovations are smaller or of less impact than those of 50 years ago (e.g. comparing the electric toothbrush to the light bulb – see my blog Are we Out of Big Ideas? and WSJ article of same name) but the ability for innovation to happen seems more visible today and has been democratized (even if the ability to profit from them has been vilified and muted).
So how has innovation evolved during the digital era? I do think that a lot of so called innovation is not really that useful. Let’s call it ‘growth-neutral innovation’. This may include new tools and products that do seem to be new and inventive, but either there real impact is slight, or their capability far exceeds any likely demand from the market (e.g. functional overshoot). I have blogged about this before- see Are We More Productive?
Then we have innovations (see Where You Spend Your Firms’ Capital Matters) that are truly value-driving (e.g. growth-inducing innovation). There are many of course and we see them all around us. But why don’t they all add up to burgeoning growth in the public data? Some academics say we are not measuring the right things. Some pessimists say that in fact all the good ideas are indeed thought up so what we see today are also-runs. I think there is another way to look at what is going on.
As noted before (see Productivity Limits and the Impact of Innovation – How to Beat Amazon) for any innovation to take hold and drive sustainable and meaningful (e.g. measurable at a macro level) productivity requires a certain alignment across three things – and I mean alignment:
- Overall spend on the innovation (in this context, IT and the split between general purpose and special purpose)
- Workforce skills
- Management organization
These three things mask a lifetime of complexity. Take for example the widget. Inventing a really useful widget is fine. But so what? Electricity was a significant innovation, yet it took many years (some research suggests as much as 40) before organizational models on the factory floor were changed sufficiently in order exploit the value of electricity and finally productive growth was noticeable at the macro level.
Then there are all the electrical gadgets we see all around us that came about only because electricity is a general purpose technology (GPT). It is not directly a productive asset itself and takes a long time and sufficient investment to develop to a point at which it MAY then spawn one or more special purpose technologies (SPC) or complementary technologies. These are the innovations you and I would recognize that use the GPT and are themselves tailored to specific opportunities or challenges.
So is the rate of growth of GPTs and SPTs increasing? I don’t know yet but being in the digital era one would expect that to be the case. I have seen in the software and world of intangibles that yes, the rate of innovation has increased. So this links back to workforce skills.
If the rate of innovation-inducing change has increased in the digital era, have we increased the rate of change (e.g. investment and focus) in our training and education programs? I would argue that collectively the answers is no. It may be that in not doing so, we are leaving productivity-trapped value on the table. We have better tools and software and gadgets around us, but we are not yet ready enough to exploit the opportunities. We may not be taking advantage of all the new software, IP, best practices and technique available. All too often we hear clients assuming they can just buy their way to success with a software acquisition.
So perhaps there is a factor here: the rate of training and (re-)education spend compared to innovation (new IT-driven) spend? Is there a magic ratio at which a firm is best prepared to extract the productivity-induced value from IT? Perhaps. But given anecdotal data, my feeling is in general most firms prefer to spend on technology first, and worry about training and new organizational models later. That may, unfortunately, explain a lot.
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