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Yaroslav Kuzminov: No One Is Afraid of Going Digital Anymore

Yaroslav Kuzminov: No One Is Afraid of Going Digital Anymore

© HSE University

What new opportunities does the pandemic present? How have Russian and international companies adapted? Will remote work continue? What skills will be in demand due to the transformation of the labour market? On November 12, HSE University Rector Yaroslav Kuzminov discussed these questions in his talk, ‘Digitalism and the Pandemic Are Coming: Consequences for the Labour Market and Corporate Culture’ at the TMK Horizons International Forum.

The rector began his talk with an overarching question: What will happen after the pandemic? Most global analysts predict a decline in demand for mass events, onsite services, and international travel, as well as the withdrawal of a significant portion of retail from the market (even before COVID-19, in China, these types of activities were being crowded out of the market at a high rate). A restructuring of the world economy is taking place, which gives rise to long-term uncertainty and ambiguity. Questions about the expediency of investments, the creation of new production facilities, and the expansion of existing capacities have become all the more acute.

The other side of this, according to the rector, is the imminence of digitalization.

Digital operation has established itself as the new routine. Everyone has tried it, from consumers to managers. No one is afraid of going digital anymore, and now it is impossible to ignore it. This is just a new reality that involves you and me, or simply exists independently of us

Every minute, 3.7 million online searches are conducted, 208,000 people organize conferences, 41.6 million messages are sent, and $1 million is spent online. It is an economy created by new technologies.

The revolution in the digital economy has led to a revolution in the information capabilities of every enterprise and every individual. It became possible to see the market in more detail, to find your niche. This in turn led to an increase in the share of ‘transparent’ and poorly regulated markets, which include, for example, the sectors of online services and sales in the global economy. This digital economy is transforming traditional industries, allowing business owners to better see their situation, get rid of intermediaries, and eliminate parts of ‘management floors’. Consequently, value added centres are shifting towards systems integration and engineering, as well as design and marketing.

Meanwhile, when assessing the effects of the coronavirus pandemic on the labour market, one can note a large-scale underutilization of the labour force — a reduction in hours worked, a drop in labour income, and an increase in unemployment. According to the ILO, about 400 million people in the world could lose their jobs. In tourism alone, the number of jobs in 2020 decreased by 43% (142.6 million people). New patterns of employment are starting to spread. According to the WEF, before the outbreak of the new coronavirus, only 22% of companies in the world were prepared to transfer their employees on a massive scale to remote work, and after the COVID-19 pandemic, over 20% of full-time employees in the world will continue to work remotely (this number was less than 10% before the pandemic).

New, unregulated practices in the field of flexible employment are emerging. Most of the new jobs that have been created during the pandemic are in the field of ‘complex’ precarious work: excessively limited time part-time work, contracts for short periods of time, work without a contract, joint hiring of employees, and so on.

There is an increase in the need for professional skills: 43% of companies have already faced a skills gap; 22% think they will face a gap in the next two years; another 22% think they will in the next 3-5 years; and 5% think they will in 6-10 years (McKinsey). At the same time, the demand for ‘soft’ or ‘flexible’ skills is growing. According to data from Boston College, Harvard University, and the University of Michigan, soft skill development increases employee productivity by 12%.

Other effects include increased competition for talent, changes in corporate culture and ethical codes, increased corporate responsibility, and the automation of work processes. McKinsey estimates that by 2030, 375 million workers will have to change careers or acquire new skills due to labour automation.

Speaking of those who have been most affected by the pandemic, Rector Kuzminov noted that as of 2020-2021 this group includes young workers, self-employed, SMEs, informal workers, the service sector, and this year's graduates entering the labour market. However, over the next 5-10 years, the negative effects will affect to a greater extent ‘office plankton’, intermediate managers, accountants, ordinary corporate lawyers, dispatchers, drivers, security guards, and office centre owners. In turn, those who will benefit from the pandemic include creative workers with good soft skills, IT specialists, business analysts, marketers, medical professionals, and specialists in the field of online education.

The main challenge of the current crisis, according to the rector, is the new structural unemployment in large cities. This includes laid-off workers of routine mental labor who are not ready to go to jobs related to physical labor and an unfamiliar environment.

Another side of the new reality is the accelerated digitalization of companies, which is reflected in big behavioral changes. If we consider the change in strategy of companies over the last year, 81% are focused on investments in accelerating process digitalization, 81% are focused on preserving a remote work format, 33% are focused on advanced training and retraining, 31% are focused on organizational transformation, and 47% are focused on accelerating the automation of separate tasks.

The future of the labour market promises a reduction of the number of office workers, lower rent costs, the use of back offices, and a transition from hierarchically arranged companies to cloud-type structures or horizontally arranged campaigns. The priority is to control results, not processes.

Given these prospects, the Russian population is ill-prepared for digitalization. In Russia, the general population has a rather low level of digital skills, which, according to the rector, will slow down the country’s digital transition to some extent.