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InterAct Blog

The Future of the Economy

Professor Vania Sena

The Future of the Economy is one of the three substantive research streams of the InterAct programme.

Digitalisation is central to the new generation of manufacturing systems and processes. The diffusion of new digital technologies creates distinctive challenges to firms and organizations, in terms of the adoption of new technologies as well as the management of transition.

Digitalisation may disrupt existing firms while accelerating new venture creation and change the existing industrial structure. Eventually, this will affect the structure of the wider economy and it will be shaped according to the needs and benefits of digitilsation across industry.

It is the aim of our Future of the Economy workgroup to investigate these impacts and generate actionable insights that will allow businesses to prepare for major changes to the way the manufacturing sector operates.

Our focus is distributed between three key areas:

Digitalisation, diffusion, and high growth

Crucially, digital technologies can help reconfigure capabilities within companies and across industries. Eventually this may alter all aspects of the UK’s industrial fabric by reshaping the drivers of high growth. However, so far, there is limited understanding of how this will happen. There is an expectation that the digitalisation will alter the structure of the knowledge networks of the UK economy, and this will change the nature of linkages among sectors. If so, what new linkages will emerge and how can we map them? How does knowledge diffuse across industries? What are the new channels of diffusion?

Digitalisation, industrial structure, and social mobility

We know digital technologies may lead to the emergence of ‘superstar’ manufacturing firms. However, this not the only consequence of digital transformation. Crucially, the combination of new technologies and trade openness has led to rising job polarisation, wage dispersion, and regional divergence. It is argued that new digital technologies may have a similar negative impact, in particular for women and marginalised groups.

What is the impact of digitalisation on social mobility and how can the existing trends be offset? Importantly, what institutions need to be in place to maximise social mobility and inclusivity? In this respect education and training are key factors that can offset these trends.

Evidence from many countries suggests that dedicated centres of innovation linking industry stakeholders can help develop new programmes for re-skilling. The UK already has some of these types of facilities which could be better exploited to galvanise industry-wide change. This is essential so that digitalisation may lead to local technological diversification. As such, if marshalled within a broader coordinated national policy response involving all stakeholders, digital technologies have the potential to help society make significant progress on societal challenges such as inclusivity as well as social mobility. 

Digitalisation, the ‘Levelling Up’ agenda, and trade

Digital transformation creates tensions on the shape and the geography of the economy. Although often overlooked, these changes can be highly disruptive, as new generations of digital technologies replace and reshape industries, altering the geography of production as a result. Enhanced manufacturing performance can potentially help the ‘Levelling Up’ of many regions and indeed UK evidence already suggests that there are long-term local productivity advantages to the early adoption of digital technologies.

The fact that the levels of patenting activity, and particularly ICT-patenting activity, of the UK’s major manufacturing regions tends to be no more than ‘moderate’ by European standards further emphasises how important the rapid take-up of these digitalisation technologies is for the ‘Levelling Up’ Challenge.

SMEs are often at a financial as well as a technical disadvantage to deploy new capital-intensive technologies; at the same time, UK manufacturing is also more exposed to Brexit than other sectors, a trade shock which will impose significant costs to UK industry over those in other countries.

We want to address these two research questions:

  • How can the diffusion of digital technologies in UK manufacturing contribute to the ‘Levelling Up’ agenda?
  • How will the UK’s trade structures change in response to the manufacturing sector’s uptake of digital technologies?

The projects under the Future of the Economy workstream will examine the likely effects of digitalisation in manufacturing the context of the wider inter-industry, inter-regional, and international linkages evident in UK manufacturing. This will allow us to measure the impacts of digital transformations at the sectoral and regional scale and to consider the impacts of different digital-adoption scenarios across industries.

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InterAct Blog

People management, dynamic capabilities, and workplace innovation

Professor Colin Lindsay

The COVID-19 crisis and its impacts have required organisations to demonstrate dynamism in innovating their business models, developing new product and service offers, and transforming methods of work organisation. Business stakeholders and researchers are accordingly interested in tools that can help them to understand why organisations have been more, or less able to demonstrate agility and innovation in the face of the crisis.

It seems to me that there is considerable value in revisiting the already highly influential ‘dynamic capabilities’ framework developed by US scholar David Teece and colleagues from the mid-1990s onwards. For David Teece:

“Dynamic capabilities are the firm’s ability to integrate, build and reconfigure internal and external resources to address and shape rapidly changing business environments.”

For Teece and colleagues, dynamic capabilities can be understood in terms of organisations’ capacity to sense and articulate opportunities and threats, seize opportunities, and dynamically reconfigure tangible and intangible assets to transform the organisation and its operations.

Sensing involves searching and exploring across networks, technologies and markets, identifying latent or emerging demand, spotting changes in sector and market structures and business models, and processing threats from competitors and insights from supply chain partners and customers.

Seizing involves responding through the development of new products or services and/or innovating the business model or ways of working (facilitated by investments in new technologies, systems, and capabilities). Reconfiguring and transforming requires the modification and re-alignment of product or service offerings in line with the organisation’s (renewed) systems, processes, ways of working and capabilities.

Examining dynamic capabilities is a helpful approach to understanding organisations’ handling of COVID-19 challenges, given the theory’s focus on responsiveness to change and crisis. Indeed, several reports have used the framework to assess the agility demonstrated by some organisations in pivoting and innovating in response to COVID-19. For example, Gloria Puliga and Linda Ponta’s recent research with Italian firms notes the importance of external networking to dynamic capabilities in organisations responding effectively to COVID-19 challenges.

However, perhaps a key weakness in much of the existing dynamic capabilities research is its relative failure to factor in the role of people management (or indeed just people at different levels and roles within organisations) in promoting dynamism and innovation. This isn’t to say that HRM and people management is completely absent from dynamic capabilities research. The original research by leading dynamic capabilities scholars makes some (albeit limited) reference to HR investments to promote a flexible workforce that is willing to buy-in to transformative change processes.

Recent work by Paula Apascaritei and Marta Elvira in Human Resource Management Review journal has been helpful in scoping out what ‘HRM dynamic capabilities’ might look like, focusing on:

  • Knowledge building capabilities (strategies to support workforce diversity to contribute to innovation; the valuing of relational ties brought to the organisation that can lead to knowledge, talent and/or customer acquisition).
  • Social integration capabilities (enabling relationship-building with customers and partners; building social capital within and across teams).
  • Reconfiguration-enhancing capabilities (a focus on upskilling employees for ‘functional flexibility’; but also practices helping employees to manage change and mitigate stressors associated with organisational transformation).   

There remains a need for further research on how these sorts of capabilities are made real by people managers in different organisational contexts. We also think that there may be important lessons for dynamic capabilities researchers that we can draw from the broader evidence base on how targeted HRM strategies can support ‘workplace innovation’.

Our previous research in this space warns against pursuing a single, de-contextualised best practice, but identifies a number of recurring themes around HR practices that have supported employees to innovate in different organisational contexts: job design that values high levels of autonomy; consistent and good quality feedback; strong communications and peer support networks within teams; and sufficiently challenging job content that nonetheless guards against employees becoming burnt out.

Manufacturing can be a challenging context within which to redesign work to maximise autonomy and innovation at the individual-level. However, even here there are examples where thinking creatively about people management has empowered employees at all levels to participate in innovation and drive change.

What more can we learn about the combination of workplace and people management practices that work well in tapping the innovative potential of employees to drive dynamic capabilities? What challenges do manufacturing employers face in aligning people management with their priorities for sensing and seizing opportunities and transforming their operations to build back better post-COVID-19?

These are some of the issues that our Strathclyde Business School InterAct team will be exploring with UK manufacturers in the coming months. If you are a manufacturing sector stakeholder or an employer interested in maximising the innovative potential of employees at all levels, we would be excited to hear your views and to discuss our research.

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InterAct Blog

Will digital technology help Scotland’s manufacturers recruit and retain a more diverse workforce?

Professor Jillian MacBryde

Earlier in the year I wrote a blog about the importance of diversity in the manufacturing sector. Diversity is about encouraging participation by people from different backgrounds, listening to different views and trying to understand others’ experiences. Inclusion (often talked about hand in hand with diversity) is about ensuring everyone feels welcome and valued.

In my earlier article I argued that diversity and inclusion can lead to clear business benefits including innovation and problem solving. A recent Make UK report suggests that manufacturers who embrace diversity and inclusion are 25% to 36% more likely to outperform their competitors in terms of profitability and performance. It is also a moral and ethical imperative that we are not excluding people.

Manufacturers in Scotland are dealing with significant change. The pandemic has changed many manufacturing businesses, and while some markets have been hit hard, many manufacturers are busier than ever. Meanwhile technology is also advancing apace, and during the past 18 months many companies have accelerated their digital journey. Recruiting staff is a major challenge for many manufacturers today, so more now than ever we need to be attracting a diverse population into the sector.

Diversity, inclusion, and wellbeing in the manufacturing sector are issues that the Scottish Government are taking very seriously, and I have recently been asked to join the Equalities and Wellbeing in Manufacturing short life working group. We know that we need to attract more people into manufacturing jobs in Scotland, we see the value of diversity and inclusion, and we also want to make sure that people are healthy and happy at work.

Wearing another of my hats, I am also involved in the UK government investment in digital technology in manufacturing through Made Smarter Innovation. This recognises the need for manufacturing firms in the UK to embrace new technologies and reap the rewards of the digital era of manufacturing.

One of the questions that I’ve been thinking about over the past few weeks is whether digital technologies will have a positive or negative effect on diversity in manufacturing.  I have been speaking with some inspirational people and asking this question. In this short article I hope to open this up for discussion.

The first thing I wanted to know is: do we have an issue with diversity in Scottish manufacturing? Often the conversation starts by focusing on under-represented groups or protected characteristics under the Equalities Act 2010 (age, disability, gender reassignment, marriage and civil partnerships, pregnancy and maternity, race, religion or belief, sex, and sexual orientation). But for me diversity of thought is also important for innovative and stimulating workplaces, people from different educational backgrounds, different social groups, different experiences. This is harder to unpick using statistics!  

Let’s look at what we can see from the statistics, according to the Office of National Statistics the Scottish manufacturing workforce is 76.6% male, 98% white, 10.4% are classed as disabled and just 1.9% identify as minority ethnic. In addition, 36.5% are aged over 50 and 25.6% have a long-term condition or illness. 8.8% work part-time. (Annual Population Survey 2019, Office for National Statistics). So, to be frank, there is work to do in tackling diversity, inclusion, and wellbeing.

We need more information before we can really tackle some of the problems. Statistics themselves don’t tell us is where the issues lie. Is it that manufacturing just isn’t attractive to certain people? Is it that we don’t talk enough about manufacturing in schools and in the media? Is it that we lack diverse role models? Is there discrimination in recruitment? Is it that environmental factors such as pay, hours, etc., do not work for some people? Is it an issue of leadership? Or maybe flexibility? There are many questions that we are seeking answers to. Understanding people’s perceptions of manufacturing is something I am committed to investigating as part of the ESRC Made Smarter InterAct Network.

Is digital technology likely to help or hinder diversity in manufacturing? And what will the impact be on wellbeing? Digital transformation will undoubtedly bring changes in the workplace and in the labour market. New jobs will be created, some occupations may disappear, but mainly we will see changes to jobs. Technology will assist people with tasks and change the way we recruit staff and the flexibility we can offer. Digital manufacturing should open new possibilities, as well as offering manufacturers the opportunity to become more sustainable and flexible.

New jobs will be created. Digital manufacturing requires a workforce with a broad range of skills. I have said before in earlier blogs that it frustrates me that in the media talk of manufacturing is often accompanied by images of heavy engineering. Manufacturing itself is diverse and there are so many jobs in manufacturing, particularly in a digital environment, that do not require engineering skills – manufacturing companies need people to manage the supply chain, analyse data, plan production, design products, run their social media, along with all the other administration that is needed to run a business.

If we can get the message out there, that manufacturing companies need a diverse range of skills, then perhaps we would appeal to a broader range of people. Digital technology also helps us to become more sustainable – both through becoming more efficient in our use of resources, as well as in more novel ways of working. Sustainability, we know is something that drives many people to choose who they work for, so the more manufacturers can show their sustainability credentials, the more people might be attracted to working in the sector.

But what of the jobs that might disappear? A recent report from Abi Hird at KTN warns us to be wary of the unintended effects of technology. She points out that females and ethnic minority groups occupy many of the lower paid administrative and operator positions in manufacturing. If digital technology displaces these jobs, then there could be negative consequences for workforce diversity. This is one area we do need to watch as it could be at odds with what we are hoping to achieve.

On a positive note, industrial digital technologies should offer us safer workplaces with less human exposure to harsh environments. It could be for example, technology is better suited to do certain tasks, and this could free up humans to focus on elements of the job where they are best suited or perhaps take on other roles, that are potentially more fulfilling. It also opens up the possibly be more inclusive.

I know an engineer of advancing years used to jump in and out of machines, climbing ladders and crawling under small spaces in manufacturing plants. Today this isn’t something he really wants to be doing with his creaking knees! With digital technology and the use of sensors, he needs to do these physical inspections much less, and can focus on the part of the job that he really enjoys, solving problems. Similarly, there are many instances where robots are taking the heavy lifting out of some manufacturing jobs, making it easier for people with less strength or mobility.

Finally, before leaving this topic we also need to design our industrial digital technologies with people in mind. In the Made Smarter report, Abi Hird makes a special plea to innovators to think about equality and diversity when designing digital technologies. She points to issues with virtual reality, largely developed with men in mind where not only are headsets often too large and heavy for women but also there are depth perception differences between men and women (largely ignored by tech developers) that cause more women to experience motion sickness.

I would be delighted to hear what you think about the impact of digital technologies on equality and inclusion in manufacturing. In particular, what you think we should be doing to make sure we build a more diverse manufacturing workforce going forward.