Digital transformation is underway, but is the talent function up to speed?

Rapid technological change means we face a very real digital competence gap in the coming years—a period in which technological capabilities accelerate so swiftly that talent and knowledge can’t keep up. The competence gap will create friction, slowing realization of the benefits of digital transformation. Enterprise-level digital business disruption will displace 40 percent of incumbent companies in the next five years, according to the Global Center for Digital Business Transformation.

Digital transformation is being accelerated by the explosive growth of data and connected devices. By 2025, we will live in a world with 80 billion connected devices, increasing actionable data almost ten-fold. Yet, digital business transformation is not just about automation and business model disruption; our organizations require the right knowledge, skills and experience to drive transformation and sustain advantages.

Virtually every sector is experiencing radical change. In the coming decade, the 4 A’s of technology – automation, analytics, artificial intelligence, and augmentation – will require new knowledge and skills to drive business value. No longer is it sufficient for digital know-hows to reside in IT, engineering and R&D. Now executives, managers and front-line employees need to understand how technology changes the business model and need to be able to move fast to capture value. Forward-looking talent and learning leaders are now hiring and developing digital competence across the enterprise.

This article highlights findings from ongoing research and interviews with chief talent, learning and technology leaders across the globe. What emerges from this dialogue is a picture of talent and learning organizations in flux and insights into how to support the changing business models and competence needs across the enterprise. Talent organizations surveyed demonstrate a wide range of response to digital change, from well-formulated, comprehensive strategies for bridging the gap to no appreciable plan in place.

Emerging Practices

The people-side of digital transformation is a work in progress. Some industries, those underpinned by technology for value delivery, are relative natives to the concept of digital competence. Incumbent industries face a radical transformation, either by external forces or by internal leadership. Forward leaning organizations have instituted broad-based efforts to select and develop competence toward new work and jobs emerging in the digital economy.

About four years ago, Dr. Greg Powers, vice president of technology for Halliburton, a leading oil field services company, decided to build an innovation pioneering team that could tackle the toughest product development and solution challenges to make machines smarter. To drive more value to their customers, Powers knew they needed the ability to build and run complex experiments, and to model systems from first principles or heuristics. Powers was able to find the right talent, but it was not easy. “We don’t see enough sophisticated control engineers coming out of US schools,” he noted. “Nirvana would be systems engineers who understand automation and can build and run complex simulated models. We hired from a small group of US universities with excellent programs, with the vast majority of our hires having obtained their undergraduate education in Asia. The US supply is below demand and the universities need to emphasize these skills and opportunities more to undergraduates,” Powers reports.

In the financial services sector, American Express has redirected its recruitment efforts to hire the skills needed to power its digital transformation. Brian Ruggiero, vice president of Global Campus Recruitment, said that despite widespread job cuts, the company has hired more employees for skills to transform the business towards mobile payment and digital service offerings. “We are looking for talented individuals who are fluent in code, understand parallel processing, data clustering and statistical analysis. These skill sets are very different from the ones you would expect from American Express, but being successful in the digital payments industry means we are hiring and training differently in order to innovate and grow.”

Tetra Pak, a multinational food packaging and processing company that originated in Sweden, established a Digital Board and appointed a VP Digital Officer, who has the responsibility to manage and coordinate different initiatives. Ralph Hagg, vice president of the Tetra Pak Academy, is responsible for examining how the company develops digital capability—specifically digital competence and skills, behavior, mindset and culture. Hagg notes “from a talent management point of view, digital capability includes where, how and who we recruit and how we further develop them and all other staff.”  As part of Digital Capability, the Tetra Pak talent and learning functions are working to engage employees more through digital media and e-learning.

Forward-leaning incumbent organizations are working to break down long-standing hierarchies and decision mechanisms to foster agility and drive innovation. Through the ongoing research, several key themes emerge as critical components of a strong digital talent strategy:

  • Senior leaders act as architects and advocates
  • Digital competence is being built into the entire talent lifecycle
  • Agile innovation is promoted and protected
  • Learning is becoming personalized
  • Educational institutions are engaged as critical partners
  • Talent functions take the leadership role for digital talent transformation

Now is the time for chief talent, HR and learning officers—in partnership with other executives and education partners—to articulate a digital competence framework to accelerate skills needed for the new era.

Defining Digital Competence

It’s a VUCA world: volatility, uncertainty, complexity and ambiguity. Proliferation of information and communication technologies, globalization and accelerated change have contributed to the VUCA state of our world. The “VUCA world” is the context in which the digital transformation of business occurs. Having VUCA-capable leaders is correlated to financial performance, yet in a Conference Board Global Leadership Forecast, less than two-thirds of leaders said they were confident in their ability to meet VUCA challenges. The skills required for the assembly line of the Industrial Revolution are giving way to innovation, collaboration, problem-solving and communication.

In Dancing with RobotsFrank Levy and Richard Murnane examine the structural economic changes brought about by technology. They argue that the future of work will focus on three human activities:

  • Solving unstructured problems
  • Working with new information
  • Carrying out non-routine manual tasks

The bulk of the rest of the work will be done by computers or offshore labor. Digital-era business requires flexibility, innovation, collaboration and personal responsibility. Employees are expected to adapt to and thrive in a VUCA world. In this context, digital competence is more than simply computer, software or data related skills. As the 4 A’s of technology take center stage, industry requires a holistic framework for digital competence that reflects the systematic, strategic, innovative and collaborative skills required to transform business models.

An adaptive understanding of competence, such as the definition put forth by the Organization for Economic Co-Operation and Development, is critical: A competency is more than just knowledge and skills. It involves the ability to meet complex demands, by drawing on and mobilizing psychosocial resources (including skills and attitudes) in a particular context.

Searching for a digital competence framework reveals significant public sector economic and education policy works, but little of that has been translated for industry. Two notable models have been promulgated: DIGCOMP: A Framework for Developing and Understanding Digital Competence in Europe and the World Economic Forum’s New Vision for Education: Unlocking the Potential of Technology. Based on these reference frameworks and the ongoing research and input of industry leaders, a cluster of adaptive skills and abilities emerge that begin to inform digital competence for industry. The industry framework centers on seven critical abilities:

  1. Comprehend and Engage the Digital Environment
  2. Effectively Create and Consume Digital Information
  3. Communicate Effectively
  4. Collaborate with Diverse Stakeholders
  5. Innovate Rapidly/Agile
  6. Think Critically/Solve Problems
  7. Maintain Cybersecurity

This digital competence framework extends Levy and Murnane’s three elements to include an overarching need to comprehend the digital environment, and to interact with data and people to effectively innovate and solve problems. Risk management requires that employees and leaders understand cybersecurity and take an active role in protection—rather than simply relying on IT to prevent damage.

Closing the Digital Competence Gap

At the World Economic Forum in Davos, Switzerland, earlier this year a CEO panel all agreed that technological change brought by AI would create more jobs than it would eliminate. Fortune quoted Dow CEO Andrew Liveris as saying, “There will be more employment, just different.” But they acknowledged two serious societal challenges: first, educating and training workers to take advantage of the change; and second, assuring the benefits of productivity gains are widely shared.

Talent and learning leaders have exciting and challenging years ahead, as we work to retool our functions and roles within organizations. Taking the lead to engage senior leaders as architects and advocates is no small challenge. As Rami Rahim, CEO, Juniper Networks put it, “True innovation requires an understanding of the value that technology brings and enables. The C-Suite doesn’t need to code, but leading a company strategy for growth requires a strong relationship between those who set the strategy and those who execute.”

Building digital competence requirements across the employee talent life cycle is the most fundamental strategic challenge ahead. Talent and learning leaders must articulate and constantly reinforce the vision for transformation. Inertia in organizations and cultures will slow progress and occasionally make the quest seem Quixotic, but the external realities of digital transformation will ultimately prevail.

Other critical developments needed include enhancing personalized and adaptive learning and expanding agile innovation to ensure all employees are engaged and empowered to push the organization forward. Finally, as organizations further define digital competence needs, working partnerships with educational institutions, from early childhood to university level, are needed to shift education towards this new reality.

Most significantly, talent and learning functions must take a lead role as ‘futurists’ to drive change. Bonnie Houston, chief administrative officer for NOV, explained the self-examination and willingness to change required to take on the challenge of transformation: “The Talent and HR function needs to ‘step out on the balcony’ and look at all of our systems, processes and assumptions—formal and informal. Where are we creating inefficiencies or not serving the digital transformation of the business? We need to be ‘futurists’ and to look around the bend.  We need to set the critical competence profiles for the future.  The Talent function must become leaders for growth and innovation thinking.”

Our mission as talent and learning leaders is clear: to develop life-long learners with the skills and aptitudes to close the digital competence gap and renew our organizations.