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Destructuralization: Companies, Brands and You.

I met an old photographer friend recently from London, England, of some notoriety. And I was explaining our business innovation consultancy, The Super Market Inc, and this other passion area I had that helps address the “elephant in the room” for governments – the underemployed. And he mentioned that society is going through a “destructuralization”. So how does this affect you?

Firstly, what is this “underemployed” group? Though most governments do a great job of reporting the unemployment rate, they all do a terrible job of reporting the total numbers i.e. unemployed and underemployed. The underemployed are those workers only marginally attached to the workforce either because their companies have scaled back hours or they are working at a job well below their training.

The current figure is about 11%. So yes the unemployment figure, depending on the country is between 4% and 7%, but if you include those that are working at a subpar job because of their company’s lacklustre results or because of the economy, or some industry that’s been decimated by true disruptive innovation, the number is huge! About 11% according the Bureau of Labor Statistics in the U.S. This is about 3x the unemployed only group. And I don’t think governments are prepared for this. But that’s not the point of this.

The point of this is this! Joseph Schumpeter, the man the coined the phrase “creative destruction”, purported that when new technologies take over, people in specific employment sectors get employed elsewhere. For example, with the establishment of the assembly line of the industrial revolution, people working on horses when the automobile was invented went off to go work on these assembly lines or went to build roads. But in my opinion, and there are a slew of economists now saying the same thing, that this movement and displacement of employees to new jobs because of technology, may not happen this time. We are now in a state of “destructuralization”.

What is structure? Structure is ” the arrangement of and relations between the parts or elements of something complex”. So for example think about the total healthcare system, or the dissemination of news. More specifically, think about the distribution of film. In the dark ages, you would go to something they called a “video store” like Blockbuster, to rent a movie. This was already a disruptive innovation to cinemas. You would enter the store and search through literally thousands of titles, likely be upsold on some junk food and off you returned home. This was displaced briefly by a mail system to return your videos, which lasted about an hour, which was in turn was supplanted by Netflix – no need to go anywhere, on-demand delivery to your TV, where and when you wanted it. So where did all those Blockbuster employees go to work? Putting aside Terantino, who became a famous film director, I suspect the rest of them did not go to work at Netflix, nor anything to do with Netflix.

So unlike the Schumpeter-well-embraced model, now when McDonald’s brings in kiosks to take your order, likely McDonald’s is not going to need more employees to make burgers. And there are many examples i.e. newspapers, mail, food delivery, Airbnb, Uber. You get it. So what are the implications for companies, brands and you.

For companies, there’s nothing but upside – maybe. Lowering their cost per unit, keeping pricing the same. All good. The only challenge for them is the other five businesses competing in their space(s) can do exactly the same. And perhaps their customers now have less discretionary income.

For brands, again, likely nothing but upside, with the exception that there are no moats to insulate any differentiation they’ve gained. And perhaps because their consumer based has lower income, perhaps they start buying private label brands.

But what about the employee – you? The woman/man that’s spent fifteen years as an engineer with a company, growing through the ranks, becoming an institutional asset because of her/his learnings, knowledge, or understanding of best practices? Likely they get turfed because a company needs to report its quarterly earnings lift and the money to pay for this new technology, the new A.I. customer service widget, the new MarTech SDK that quantitatively assess key trends out there like Quid. So what do these engineers, accountants, journalist do? Sadly some of them go work as a greeter as some successful mass warehouse retailer that drove it’s costs down by sourcing labour from outside of North America – ironically on the backs of their soon-to-be smaller, and poorer customer base.

So this is not a rant against technology, or value innovation creation. Quite the opposite. Our company the Super Market Inc. has championed value innovation thinking, and customer experience design thinking for years. Countries and companies need to drive innovation across all sectors of their economies.

It is a rant about recognizing that the structures that were once established and taken for granted, that guide our advice to our kids about what to study at university, that guide to our own career management, are shifting under us like an earthquake, but are happening at a pace that make them hard to see, and prepare for. We have to figure out how to deal with it as countries competing globally, understand it as part of our civic duty, and deal with it and manage it. Yes it is important for company leaders to understand it so they can drive shareholder value, stakeholder value, and keep a sizeable customer base, that can afford their offerings.

But as employees navigating our careers, we have to understand this dynamic, and manage effectively through it. Do we continue our training past the conventional years? Do we accept that at some point we have to stop getting raises. Do we all accept we might work for three or four different types of companies throughout our careers? Do we all accept the “gig economy”?

Or do companies have to do a better job of understanding the real quantitative ROI of each employee, which affects the division ROI as evidenced by the leading indicators of value, which affects the total SVA – shareholder value added?

More on this subject soon.