Everything old is new again

By Martin Conboy, President – Australian BPO Association

The ‘invisible hand of the market’ is the term economists use to describe the self-regulating nature of the marketplace. The invisible hand concept was created to explain the conjunction of the forces of self-interest, competition, and supply and demand. There is always the temptation for governments to intercede with protectionist policies, but the prevailing wisdom is that the allocation of resources should be left to the markets to decide.

It’s clear that we are at an inflexion point in our society and yes it’s true that as we change from a manufacturing to a services economy, there will be real people causalities. After all it’s not very easy to turn from being a low skilled factory worker (demand declining), to a health worker i.e. a nurse (demand accelerating) overnight. It was exactly the same when we transitioned society in the 19th century when everything was being made by hand to most things being made in factories, as a result of the industrial Revolution.

There was massive social dislocation, starting in the later part of the 18th century. There began a transition, Great Britain’s previously manual labour and draft-animal–based economy moved towards machine-based manufacturing. It started with the mechanisation of the textile industries, the development of iron-making techniques and the increased use of refined coal. Trade expansion was enabled by the introduction of improved roads, canals, and railways.

The Industrial Revolution was a period in time where major changes in farming, manufacturing, mining, transportation, and technology had a deep effect on the socioeconomic and traditional way of life. It began in the UK, and then subsequently spread throughout Europe, North America, and eventually the world.

The Industrial Revolution marks a major turning point in human history; almost every aspect of daily life was affected in some way.

So fast forward to today; the roads, canals and railroads of yesteryear have become the information super highway along with incredible technological developments and the totally interconnected social media instant world of today.

According to a white paper by IBM – ‘A new way of working’, Work is no longer bounded by co-worker proximity or time zone. It also involves a much broader set of ‘workers’ – not just employees, suppliers and partners, but customers, freelancers and an increasingly capable network of smart devices and interconnected systems, all tied together by business processes that span organisations, time and distance.

Society adjusted after the industrial revolution (eventually) and people will adjust now (eventually). The 20th century’s factory worker has adjusted to become today’s online eBay merchant or they have re-skilled to become a knowledge worker and sell their skills via platforms like Guru.com.

From a historical perspective, we are in the middle of another structural shift. Look what’s happening with unemployment; first world companies do not need the same number of workers because of globalisation and the Internet. Australia has a 5% unemployment rate, which is considered to be full employment, whereas the US has an unemployment rate of 9.1%. The US has a skills / worker mismatch. The lower people are on the education curve and their relative socio economic status the more likely they are to be unemployed. Thus we see African American and Hispanics with an employment rate of double the national average.

Companies are looking for skills that reflect the new types of work spawned out of the age of Infotronics (the merging of information and electronics) Look at the names of the companies that now dominate the most powerful corporations on earth, Google, Facebook, Microsoft, Apple, the skills that these types of companies need are in short supply. Graduates are not belting headlong into the professions any more, they are looking for the new and exciting and well paid jobs in the new economy and they want to work on their terms.
People who do not have the required skills are marginalised and thus we have a mismatch in the demand for and the supply of skilled labour.

Throw in the availability of highly skilled and available knowledge workers from Asia who can telecommute via the Internet and it’s easy to understand that society has got some serious thinking to do. Adding to the conundrum is that productivity from robots and Asian workers out strips US workers ability to produce.

As they say ‘there but for the grace of God go I’, and if Australia did not have the mining industry to fall back on we would have an unemployment rate similar to the US.

Transfer of knowledge

During the industrial revolution knowledge of modernisation was spread by several means. Workers who were trained and had the knowledge might move to another employer or might be poached. A common method to spread the word was conducting study tours, gathering information where one could. During the whole of the Industrial Revolution and for the century before, all European countries and America engaged in study-touring; some nations, like Sweden and France, even trained civil servants or technicians to undertake it as a matter of state policy.

In other countries, notably Britain and America, this practice was carried out by individual manufacturers anxious to improve their own methods. Study tours were common then, as they are now. So history is repeating itself, call centre agents and knowledge workers with skills are being poached and this feeds into the 60% staff turnover in BPO vendors. Asian trade delegations are coming down to Australia for study tours and major corporations are sending their executives into the new markets as evangelists of BPO. The new ground is not the serving of first world markets but the internal markets in China and India.

Australia’s strength is our knowledge of contact centres and customer service and we are blessed to be in such close proximity to the fast growing Asian markets and by and large, uncoupled from the tarnished and under performing markets of the US and Europe. The Asian markets have plenty of highly educated and highly motivated knowledge workers but lack the managerial and creative know how. That of course will change very quickly, the Asian markets have had ten years to develop their skills and get their house in order. There are 3 billion people to the north of Australia and within this enormous group is a huge middle class, who are hungry for all of the goods and services that one would expect, are characteristic of the demands of the middle class.

Australia’s opportunity is to sell its knowledge of innovation and expertise as China and India start to refocus on their own internal markets.

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