Today, across many industries, there’s a growing awareness of the potential impact of automation on routine business operations. The general concept is attractive; the use of technology to automate activities can create benefits of higher quality work that is both more predictable and less costly than corresponding human-based “manual” activities. Of course, this isn’t necessarily a binary selection process; we see ample evidence that the best combination is both automation AND human capital, as opposed to one or the other. We recently published insurance-specific insight that touches on this very issue.
This article on BMW is outside of financial services, but sometimes things happening in adjacent spaces are easier to see and they carry the power to suggest significant analogies. As the article points out, BMW is making large and ongoing investments in automobile manufacturing facilities, including their American plant in South Carolina. This is another example, by the way, of the increasingly heavy reliance on IT-based capabilities at auto manufacturing companies. A surprisingly high percentage of BMW’s future-state employees are expected to be software engineers, which was touched on in this article discussing R&D capabilities. So, not surprisingly, people on the production line are being augmented with, and in some cases replaced by, robotics. A tour of this plant offers an amazing view of “industrialized choreography.”
But that’s only part of the story. All that automation requires a different type of human-based support: keeping the automation working properly. The skills required to run the plant are changing from welders and painters to the people who can keep the machines running to do those same jobs, which results in a need for different training and an introduction of the concept of continuous learning. At some level, the potential use of AI and RPA as two discreet capabilities will require insurer organizations to address changing skill needs and the impact on their labor forces.
It will also force confronting a fundamental truth: Investing in advanced technology will produce benefits OUTSIDE of the IT organization. Trying to run IT on an unchanging expense ratio from year to year risks putting a carrier in an increasingly uncompetitive position, and it will be a hard transition for many business and finance leaders to recognize. But they will need to do so, just as manufacturers like BMW have.
There’s another fascinating aspect to this story, reflected in the development of the talent needed for the future. To accomplish this, the car manufacturer has set up its own apprentice training program with the promise that those who achieve results above a pre-defined target will have a position with the company. Rather than relying on others to develop critical skills, the company is taking this on internally to specifically develop the talent for their own needs.
At some level, this sounds a little bit like “Back to the Future” for human resources and IT alike. Many insurance carriers developed their own talent more than 25 years ago as they targeted developing talent that would be very specific to their needs. While this has largely slipped away from the insurance world, what is old could become new again. We see carriers once again develop internal academies with the promise to develop the specific talent they think they will need. Some programs, such as one reflecting a partnership between BC/BS of South Carolina, The University of SC, and IBM, are focused on very specific needs (e.g., development of COBOL resources).
The idea of influencing curricula to be very specific to company needs is being picked up by IT services companies as well. Recently, Infosys announced a large investment in their Technology and Innovation hub in Research Triangle Park, NC. Part of the focus here is tapping into the state’s community college system to tailor programs to their needs and to utilize an underappreciated educational resource. As our own research related to innovation has pointed out, leading companies are recognizing the need to tap into talent earlier in their development to improve their own outcomes.
2018 offers significant further proof that the future is already here. How companies react to this new reality may well demonstrate how well-prepared they are for it.