Today’s new innovations and technologies are having a tremendous positive — and disruptive — impact on the United States and the world. These new drivers of growth, which likely will create trillions of dollars in new economic output, are transforming industries, labor markets, and the global economy at warp speed. But they also are forcing companies to redesign business models and workers to adapt or face harsh consequences.

History is replete with examples of how waves of new innovative technologies significantly boosted efficiencies, enhanced performance, and improved our lives. For example, the invention of the steam engine and its application to railroads enabled the speedy transport of mass produced goods, including steel, across large distances. This significantly contributed to the building of the United States. And the harnessing of electricity, which turned night into day, changed virtually every aspect of how we live.

But many innovations, while offering greater value and wealth, disrupted markets and industries, and displaced workers. For example, in the early 19th century, the English Luddites destroyed textile machines because they replaced weavers. And shifting from an agrarian society to an industrial economy compelled workers to leave farms in search of factory jobs. This new era — which emerged in the late 1700s in Great Britain and early 1800s in the United States and Germany — became known as industrialization. It created tremendous advantages, as well as anxiety and fear, and demanded that workers learn new skills.

But today the skills required are much more complex. And many jobs and industries not on the cutting edge are on the losing end.

It’s no surprise that automobile workers replaced buggy makers, while ATMs, voice mail and voice recognition software eliminated bank teller, receptionist and medical transcription jobs. And it wasn’t long ago that many bookstores, camera retailers, film processors, office supply shops, travel agencies, and big box electronics and appliance retailers were replaced by the current businesses occupying America’s main streets.

Pressure is put on companies to redesign business models and on workers to adapt. And it’s not easy.

Today, jobs that require left-brained routine quantitative functions are being moved offshore or automated. In fact, many knowledge-worker tasks regarded as impossible or impractical to automate just a few years ago now are being performed by machines with advanced artificial intelligence. And computers that have significantly increased computing power while coming down in price can answer unstructured questions posed by customers that were never thought possible. This illustrates how far we have come: today’s $400 iPhone offers roughly the same performance as a $5 million 1975 supercomputer, reports McKinsey Global Institute, a division of a leading global management consulting firm.

On the other hand, jobs that won’t be automated anytime soon — like those that require critical thinking and reasoning, as well as abstract analytical, intuitive and creative problem solving skills — increasingly are in greater demand. But there is a problem: there are too few people with the right skill sets to satisfy demand in the United States and abroad.

Unfortunately, this problem is getting worse as today’s new technologies — like green industries, cloud storage and computing, smart phones and tablets, hydraulic fracturing, 3D printing, advanced materials and robotics, energy storage, nano technology, and biotechnology — create tremendous new value, but require more knowledgeable and higher skilled employees.

In turn, as dynamic new technologies are implemented, and some much more rapidly than others, pressure is put on companies to redesign business models and on workers to adapt. And it’s not easy. In fact, skills cycles that once lasted several years now last only months.

For many, this means subscribing to Joseph Schumpeter’s process of creative destruction, wherein the new destroys the old, even though this means replacing winning products, services and processes while they still are valuable. As a result, it’s essential to grasp the significance and impact of new and innovative technologies on business, consumers and workers, and prepare for the changes they bring.

American Innovation Continues

In October 1957 when the former Soviet Union launched Sputnik, the first artificial satellite, the United States became acutely aware of its technological abilities and shortcomings. Since then, American ingenuity put Americans on the moon and safely brought them back, as well as developed an array of technologies that are transforming how work is done and changing how we do business.

These innovations also made the world much smaller. Thus, technological advances in telecommunications, transportation and finance promoted the integration of national markets through international trade, foreign direct investment and portfolio investment. This became known as globalization.

Since the emergence of local, regional and national economies, there has been a constant evolution in the stages of cultural and economic development. Globalization, which is another step in that evolution, has empowered companies and individuals to establish relationships anywhere in the world. However, it also created tremendous change and huge disruptions. Similarly, moving forward, policymakers, as well as societies, need to prepare for the changes new technologies bring.

To do this well, McKinsey Global Institute says policymakers and societies “will need a clear understanding of how technology might shape the global economy and society over the coming decade. They will need to decide how to invest in new forms of education and infrastructure, and figure out how disruptive economic change will affect comparative advantages. Governments will need to create an environment in which citizens can continue to prosper, even as emerging technologies disrupt their lives.”

R&D Is One Factor of Many

Since the early 1960s, the United States has continued to dominate the world in terms of investment in research and development (R&D). According to the latest data from the National Science Foundation, on a purchasing power parity basis, the United States still spends more than twice as much as China, the next largest R&D spender.

But R&D is only one piece of the pie that leads to real technological developments. For example, American entrepreneurialism is the energy that fuels the American private sector, and in turn, innovation. And American immigration is a big part of this. In fact, more than half of the CEOs and lead technicians in Silicon Valley reportedly are foreign-born.

In The Spotlight

But there are many other factors that drive American innovation. Late last year, Secretary of State John Kerry said, “The United States continues to lead the world in both innovation and education because of the nature of our universities, the structure, the number, and the openness with which they operate.” These factors can’t be easily duplicated around the world.

Keeping Intellectual Property Safe

For hundreds of years, nations with an abundance of natural resources were considered to have a competitive edge. Today, human knowledge and skills have taken the front seat. In turn, a company’s only sustainable advantage is the ability of its employees to learn faster, apply new technologies better, and boost productivity more quickly than the competition.

As a result, the importance of intellectual property (IP) has skyrocketed, and so too has IP theft with staggering costs. Since it’s now easier to rob computer code than land or minerals, it’s no surprise that IP piracy is on the rise as more and more IP thieves are learning how to illegally capture it. And it’s getting worse. In May 2014, The Wall Street Journal reported that the U.S. Justice Department charged five Chinese military officials for allegedly hacking into U.S. corporate computers and stealing trade secrets.

This, however, is unlikely to stop intellectual espionage. As a result, much stronger enforcement by governments and international organizations is extremely important to preserve the integrity of the global trading system. Plus, companies and individuals will need to implement various strategies to better protect their IP.

Connecting the World

According to the McKinsey Global Institute, “In just a few years, Internet-enabled portable devices have gone from a luxury for a few to a way of life for more than one billion people who own smartphones and tablets. In the United States, an estimated 30 percent of Web browsing and 40 percent of social media use are done on mobile devices; by 2015, wireless Web use is expected to exceed wired use.”

Connecting the world’s best and brightest minds, along with billions of others in easy and inexpensive ways, will continue to result in increasingly greater value. And as new products and services are designed, developed and distributed around the world, greater wealth and improved living standards will result.

Yet, there is a good reason why few of the companies originally comprising the S&P 500 in 1957 currently remain on the list. Change brings opportunity; it also brings chaos, confusion and destruction. As a result, the need to adapt is essential. If not, failure is guaranteed.

This articles appeared in Global Impact, a Great American Insurance Group publication, June 2014.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.

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