How Leading Companies Build the Workforces They Need to Stay Ahead

By: Michael Mankins for the Harvard Business Review

The strategic underpinnings of most companies’ workforce plans should change dramatically as a result of technological innovation. Digital transformation, the industrial internet, advanced analytics, artificial intelligence, robotics, machine learning, and a plethora of other innovations are fundamentally changing the nature of work. Machine learning, for example, may not eliminate many jobs in their entirety. But it will impact the way many jobs are performed, requiring new skills and making many existing skills less valuable. The World Economic Forum predicts that “by 2020, more than a third of the desired core skill sets of most occupations will be comprised of skills that are not yet considered crucial to the job today.”

Beyond the skills required to perform specific jobs, technology will also determine which jobs matter most in the years to come. New innovations will change the basis of competition in many markets and alter the sources of advantage for most companies. Business-critical roles — that is, the jobs that are central to differentiating a company from its competitors and successfully executing its strategy — will also change. And companies will be forced to rethink the talent they will need to play these business-critical roles in the future.

Take insurance, for example. In years past, an important source of competitive advantage for insurers was the ability to price risk better than rivals. Armies of actuaries worked tirelessly to estimate the cost of underwriting certain risks (or risk pools). In the future, much of this work will be done by machines. In this world, insurance companies will require fewer actuaries and more data scientists — individuals with the ability to mine data to tailor insurance offers to specific market segments or even individuals. It may be possible to retool some actuaries as data scientists, but the vast majority of these roles will probably need to be filled with new talent.

Most companies have been slow to react. In part, this is because the impact of technology will be felt over time, and not overnight. This creates the illusion of having time to react. Also, with technological innovation, there will always be a high degree of uncertainty regarding the kind of talent your company will need in the future. This makes it challenging for leaders to plan ahead and place bets early.

But building a winning workforce for tomorrow starts today. The best-performing companies are already taking steps to attract new talent and widen their lead over rivals. Here are three lessons every organization should learn from what the leading companies are doing:

Delineate the skills and capabilities that will be required to win in the future, based on your company’s strategy

When Bain & Company examined the talent management practices of more than 300 large companies worldwide, we discovered that the most productive and best-performing organizations cluster their star talent in a few business-critical roles. This “intentionally nonegalitarian” model ensures that scarce difference-making talent is put in roles where it will have the biggest effect.

But the roles most companies specify as business-critical will need to change as technology changes. Advanced analytics, the Internet of Things, artificial intelligence, and other innovations are making it possible for companies to compete in new and very different ways. This should lead to new strategies and, with them, new business-critical roles.

John Deere is a case in point. The company has always focused on providing farmers with the tools they need to feed the world’s growing population. But new sources of crop, weather, and other data have created new opportunities to boost farm productivity. John Deere’s Intelligent Solutions Group has turned real-time data, crowdsourced from thousands of the company’s customers, into services enabled by Big Data. As Deere’s strategy has shifted, so have the business-critical roles at the company—from traditional manufacturing positions to analytics and services roles. Attracting workers skilled in advanced analytics will become increasingly important for the company (as will the technology and processes required to translate these skills into real sources of advantage); industrial engineering and plant management skills will become less critical to fueling the company’s long-term growth.

Objectively assess the current skills and capabilities of your workforce to identify gaps

Once your organization understands the roles that will be most critical to winning, as well as the skills and capabilities required to be a star in these roles, it is important to examine the current skills and capabilities of your workforce. How many employees are capable of being stars in the business-critical roles of tomorrow? Does your company have a sufficient supply of star talent to win? The best companies audit the current skills and capabilities of their workforces carefully in order to identify any gaps they may face.

General Electric has been particularly forward-thinking regarding the new skills it will need to be successful over the long term. The company’s embrace of the industrial Internet has greatly affected many of its core businesses. Sensors on locomotive and jet engines, for example, generate data that can be used to predict the degradation of parts — saving GE customers billions on maintenance and lost operating hours. Harnessing this data requires new skills and capabilities. In 2012, when Jeff Immelt first introduced GE’s push into the industrial Internet, the company had 50,000 engineers in its workforce — mostly aeronautical, electrical, and other traditional engineers. The company had very few software engineers. Yet software engineering skills are key to GE’s future. By recognizing this critical gap early, GE has been able to develop strategies to close it systematically, over time.

Develop and acquire the talent you need to close any gaps, starting today

A client recently remarked: “Assembling a talented workforce is very much like making scotch—unless you cellar something today, it will be very hard to have something worth drinking seven years from now.” The best companies work hard to match their hiring and talent development strategies with their future workforce needs.

At Ford Motor Company, building world-class software engineering capabilities has become a strategic imperative. Car manufacturers are facing new competitive threats from the likes of Google, Uber, Tesla and dozens of start-ups. And a new ecosystem of finance, insurance, energy, infotainment and maintenance services has emerged based on the data-driven, app economy. In response, Ford established an entirely new business unit—Ford Smart Mobility—where most of the company’s software engineers reside.

Building world-class software is not a core competence for most automakers. Accordingly, Ford Smart Mobility has partnered with Microsoft and Pivotal (a Dell Technologies portfolio company) to bring new digital skills to the company. And Ford has located its Smart Mobility unit in Palo Alto, California—just minutes away from Stanford University—in order to have better access to software engineering talent. These steps (and others) are all part of the company’s plan to “quickly add new state-of-the-art software engineering capabilities across the Ford enterprise.”

Difference-making talent is a company’s scarcest resource. Innovative new technologies are changing the nature of work, as well as the skills and capabilities required to win in the future. Given the time it takes to attract and develop star talent, it is critical that companies start building the workforce they will need. There is no better time to start than today.