The next society

A survey of the near future – November 3rd 2001.

  • The dominant factor in the next society in the developed countries will be the rapid growth in the older population and the rapid shrinking of the younger generation.
  • A growing number of older people-say those over 50-will not keep on working as traditional full-time nine-to-five employees, but will participate in the labour force in many new and different ways: as temporaries, as part-timers, as consultants, on special assignments and so on.
  • Within 20 or 25 years, however, perhaps as many as half the people who work for an organisation will not be employed by it, certainly not on a full time basis. This will be especially true for older people.
  • In every single developed country, but also in China and Brazil, the birth rate is now well below the replacement rate of 2.2 live births per woman of reproductive age. Politically, this means that immigration will become an important -and highly divisive issue in these countries.
  • Growth in family formation has been the driving force of all domestic markets in the developed world, but the rate of family formation is certain to fall steadily unless bolstered by large-scale immigration of younger people.
  • The next society will be a knowledge society. Knowledge will be its key resource, and knowledge workers will be the dominant group in its workforce. Its three main characteristics will be:
  • Borderlessness, because knowledge travels even more effortlessly than money.
  • Upward mobility, available to everyone through easily acquired formal education.
  • The potential for failure as well as success. Anyone can acquire the “means of production”, i.e., the knowledge required for the job, but not everyone can win.
  • This is because the Internet will keep customers everywhere informed on what is available anywhere in the world, and at what price.
  • But the most striking growth will be in “knowledge technologists”: computer technicians, software designers, analysts in clinical labs, manufacturing technologists, and paralegals. These people are as much manual workers as they are knowledge workers: in fact, they usually spend for more time working with their hands than with their brains. But their manual work is based on a substantial amount of theoretical knowledge, which can be acquired only through formal education, not through an apprenticeship. They are not, as a rule, much better paid than traditional skilled workers, but they see themselves as “professionals”.

  • Against that background, this survey will seek to answer two questions: what can and should managements do now to be ready for the next society? And what other big changes may lie ahead of which we are as yet unaware?
  • By 2030, people over 65 in Germany, the world’s third-largest economy, will account for almost half the adult population, compared with one-fifth now. And unless the country’s birth rate recovers from its present low of 1.3 per woman, over the same period its population of under-35s will shrink about twice as fast as the older population will grow. The net result will be that the total population, now 82m, will decline to 70m-73m. The number of people of working age will fall by a full quarter, from 40m today to 30m.
  • Life expectancy-and with it the number of older people-has been going up steadily for 300 years. But the decline in the number of young people is something new.
  • All this means that winning the support of older people will become a political imperative in every developed country. Pensions have already become a regular election issue. There is also a growing debate about the desirability of immigration to maintain the population and workforce.
  • By 2020 Germany will have to import 1m immigrants of working age each year simply to maintain its workforce.
  • Among developed countries, only Australia and Canada have a tradition of immigration similar to America’s.
  • The mass migrations of the 19th century were either into empty, unsettled spaces (such as the United States, Canada, Australia, Brazil), or from farm to city within the same country. By contrast, immigration in the 21st century is by foreigners-in nationality, language, culture and religion-who move into settled countries. European countries have so far been less than successful at integrating such foreigners.
  • The markets of the developed world have been dominated by the values, habits and preferences of the young population. Some of the most successful and most profitable businesses of the past half-century, such as Coca-Cola and Procter & Gamble in America, Unilever in Britain and Henkel in Germany, owe their prosperity in large measure to the growth of the young population and to the high rate of family formation between 1950 and 2000. The same is true of the car industry over that period.
  • In future there will almost certainly be two distinct workforces, broadly made up of the under-50s and the over-50s respectively. These two workforces are likely to differ markedly in their needs and behaviour, and in the jobs they do. The younger group will need a steady income from a permanent job, or at least a succession of full-time jobs. The rapidly growing older group will have much more choice, and will be able to combine traditional jobs, non-conventional jobs and leisure in whatever proportion suits them best.
  • A 50-year working life-unprecedented in human history-is simply too long for one kind of work

  • Few businesses, or even government agencies or programmes, last for more than 30 years.
  • “Second career” and “second half of one’s life” have already become buzzwords in America.
  • The truth is that we simply do not understand what determines birth rates in modern societies. So demographics will not only be the most important factor in the next society, it will also be the least predictable and least controllable one.
  • A Century ago, the overwhelming majority of people in developed countries worked with their hands: on farms, in domestic service, in small craft shops and (at that time still a small minority) in factories. Fifty years later, the proportion of manual workers in the American labour force had dropped to around half.
  • Of all the big developed countries, America now has the smallest proportion of factory workers in its labour force. Britain is not far behind.
  • To some extent this is a matter of definition. Data-processing employees of a manufacturing firm, such as the Ford Motor Company, are counted as employed in manufacturing, but when Ford outsources its data processing, the same people doing exactly the same work are instantly redefined as service workers.
  • “Knowledge workers”-people whose jobs require formal and advanced schooling.
  • The terms “knowledge industries”, “knowledge work” and “knowledge worker” are only 40 years old. They were coined around 1960, simultaneously but independently; the first by a Princeton economist, Fritz Machlup, the second and third by this writer.
  • First, the knowledge workers, collectively, are the new capitalists. Knowledge has become the key resource, and the only scarce one. This means that knowledge workers collectively own the means of production.
  • Effective knowledge is specialised. That means knowledge workers need access to an organisation-a collective that brings together an array of knowledge workers and applies their specialities to a common end-product. The most gifted mathematics teacher in a secondary school is effective only as a member of the faculty. The most brilliant consultant on product development is effective only if there is an organised and competent business to convert her advice into action. The greatest software designer needs a hardware producer. But in turn the high school needs the mathematics teacher, the business needs the expert on product development, and the PC manufacturer needs the software programmer. Knowledge workers therefore see themselves as equal to those who retain their services, as “professionals” rather than as “employees”. The knowledge society is a society of seniors and juniors rather than of bosses and subordinates.

  • They are knowledge technologists-people who do much of their work with their hands (and to that extent are the successors to skilled workers), but whose pay is determined by the knowledge between their ears, acquired in formal education rather than through apprenticeship. They include X-ray technicians, physiotherapists, ultrasound specialists, psychiatric caseworkers, dental technicians and scores of others.
  • In the next 20 or 30 years the number of knowledge technologists in computers, manufacturing and education is likely to grow even faster.
  • And it is no accident that yesterday’s “secretary” is rapidly turning into an “assistant”, having become the manager of the boss’s office and of his work. Within two or three decades, knowledge technologists will become the dominant group in the workforce in all developed countries, occupying the same position that unionised factory workers held at the peak of their power in the 1950s and 60s.
  • The most important thing about these knowledge workers is that they do not identify themselves as “workers” but as “professionals”. Many of them spend a good deal of their time doing largely unskilled work, e.g., straightening out patients’ beds, answering the telephone or filing. However, what identifies them in their own and in the public’s mind is that part of their job involves putting their formal knowledge to work.
  • Such workers have two main needs: formal education that enables them to enter knowledge work in the first place, and continuing education throughout their working lives to keep their knowledge up to date.
  • But for knowledge technologists, only a few countries so far provide systematic and organised preparation. Over the next few decades, educational institutions to prepare knowledge technologists will grow rapidly in all developed and emerging countries, just as new institutions to meet new requirements have always appeared in the past.
  • Schooling traditionally stopped when work began. In the knowledge society it never stops.
  • For the purposes of skill training, therefore, it was reasonable to assume that whatever had been learned by age 17 or 18 would last for a lifetime.
  • Conversely, knowledge rapidly becomes obsolete, and knowledge workers regularly have to go back to school. Continuing education of already highly educated adults will therefore become a big growth area in the next society. But most of it will be delivered in non-traditional ways, ranging from weekend seminars to online training programmes, and in any number of places, from a traditional university to the student’s home. The information revolution, which is expected to have an enormous impact on education and on traditional schools and universities, will probably have an even greater effect on the continuing education of knowledge workers.

  • Knowledge workers of all kinds tend to identify themselves with their knowledge. They introduce themselves by saying, “I am an anthropologist” or “I am a physiotherapist”. They may be proud of the organisation they work for, be it a company, a university or a government agency, but they “work at the organisation”; they do not “belong to it”. Most of them probably feel that they have more in common with someone who practices the same speciality in another institution than with their colleagues at their own institution who work in a different knowledge area.
  • Knowledge workers are highly mobile within their speciality. They think nothing of moving from one university, one company or one country to another, as long as they stay within the same field of knowledge.
  • Knowledge workers may have an attachment to an organisation and feel comfortable with it, but their primary allegiance is likely to be to their specialised branch of knowledge.
  • Knowledge is non-hierarchical. Either it is relevant in a given situation, or it is not. An open-heart surgeon may be much better paid than, say, a speech therapist, and enjoy a much higher social status, yet if a particular situation requires the rehabilitation of a stroke victim, then in that instance the speech therapist’s knowledge is greatly superior to that of the surgeon. This is why knowledge workers of all kinds see themselves not as subordinates but as professionals, and expect to be treated as such.
  • Money is as important to knowledge workers as to anybody else, but they do not accept it as the ultimate yardstick, nor do they consider money as a substitute for professional performance and achievement. In sharp contrast to yesterday’s workers, to whom a job was first of all a living, most knowledge workers see their job as a life.
  • The knowledge society is the first human society where upward mobility is potentially unlimited. Knowledge differs from all other means of production in that it cannot be inherited or bequeathed. It has to be acquired anew by every individual, and everyone starts out with the same total ignorance.
  • Anyone can acquire any knowledge at a school, through a codified learning process, rather than by serving as an apprentice to a master.
  • Until 1850 or perhaps even 1900, there was little mobility in any society. The Indian caste system, in which birth determines not only an individual’s status in society but his occupation as well, was only an extreme case.
  • In 1958 John Kenneth Galbraith first wrote about “The Affluent Society”. This was not a society with many more rich people, or in which the rich were richer, but one in which the majority could feel financially secure. In the knowledge society, a large number of people, perhaps even a majority, have something even more important than financial security: social standing, or “social affluence”.

  • The upward mobility of the knowledge society, however, comes at a high price: the psychological pressures and emotional traumas of the rat race. There can be winners only if there are losers. This was not true of earlier societies. The son of the landless labourer who became a landless labourer himself was not a failure. In the knowledge society, however, he is not only a personal failure but a failure of society as well.
  • Given this competitive struggle, a growing number of highly successful knowledge workers of both sexes-business managers, university teachers, museum directors, doctors-“plateau” in their 40s. They know they have achieved all they will achieve. If their work is all they have, they are in trouble. Knowledge workers therefore need to develop, preferably while they are still young, a non-competitive life and community of their own, and some serious outside interest-be it working as a volunteer in the community, playing in a local orchestra or taking an active part in a small town’s local government. This outside interest will give them the opportunity for personal contribution and achievement.
  • The decline of manufacturing as a producer of wealth and jobs changes the world’s economic, social and political landscape. It makes “economic miracles” increasingly difficult for developing countries to achieve.
  • The decline in manufacturing as creator of wealth and jobs will inevitably bring about a new protectionism, once again echoing what happened earlier in agriculture.
  • The corporation was invented around 1870.
  • The corporation is the “master”; the employee is the “servant”. Because the corporation owns the means of production without which the employee could not make a living, the employee needs the corporation more than vice versa.
  • The great majority of employees work full-time for the corporation.
  • The most efficient way to produce anything is to bring together under one management as many as possible of the activities needed to turn out the product.
  • Suppliers and especially manufacturers have market power.
  • To any one particular technology pertains one and only one industry, and conversely, to any one particular industry pertains one and only one technology. This means that all technology needed to make steel is peculiar to the steel industry; and conversely, that whatever technology is being used to make steel comes out the steel industry itself.
  • On this assumption were founded the industrial research labs, beginning with Siemens’s, started in Germany in 1869, and ending with IBM’s, the last of the great traditional labs, founded in America in 1952. Each of them concentrated on the technology needed for a single industry, and each assumed that its discoveries would be applied only in that industry.

  • Every one of these assumptions remained valid for a whole century, but from 1970 onwards every one of them has been turned upside down. The list now reads as follows:
  • The means of production is knowledge, which is owned by knowledge workers and is highly portable.
  • Many employees, perhaps a majority, will still have full-time jobs with a salary that provides their only or main income. But a growing number of people who work for an organisation will not be full-time employees but part-timers, temporaries, consultants or contractors.
  • One reason is that the knowledge needed for any activity has become highly specialised. It is therefore increasingly expensive, and also increasingly difficult, to maintain enough critical mass for every major task within an enterprise. And because knowledge rapidly deteriorates unless it is used constantly, maintaining within an organisation an activity that is used only intermittently guarantees incompetence.
  • The second reason why maximum integration is no longer needed is that communications costs have come down so fast as to become insignificant.
  • The customer now has the information. As yet, the Internet lacks the equivalent of a telephone book that would make it easy for users to find what they are looking for. It still requires pecking and hunting. But the information is somewhere on a Website, and search firms to find it for a fee are rapidly developing. Whoever has the information has the power. Power is thus shifting to the customer, be it another business or the ultimate consumer. Specifically, that means the supplier, e.g., the manufacturer, will cease to be a seller and instead become a buyer for the customer. This is already happening.
  • General Motors (GM), still the world’s largest manufacturer and for many years its most successful selling organisation, last year announced the creation of a major business that will buy for the ultimate car consumer. Although wholly owned by GM, the business will be autonomous, and will buy not only General Motor’s cars, but also whatever car and model most closely fits the individual customer’s preferences, values and wallet.
  • Practically no product or service any longer has either a singly specific end-use or application, or its own market.
  • Cardboard, plastic and aluminium compete with glass for the bottle market. Glass is replacing copper in cables. Steel is competing with wood and plastic in providing the studs around which the American one-family home is constructed.
  • A “glass company” may therefore have to redefine itself by what it is good at doing rather than by the material in which it has specialised in the past. One of the world’s largest glass makers, Corning, sold its profitable business making traditional glass products to become the number one producer and supplier of high-tech materials. Merck, America’s largest pharmaceutical company, diversified from making drugs into wholesaling every kind of pharmacy product, most of them not even made by Merck, and a good many by competitors.

  • The modern company was invented simultaneously but independently in three countries: America, Germany and Japan.
  • Knowledge workers expect continuous learning and continuous training.
  • GM is still the world’s largest car manufacturer, but for the past 20 years Toyota has been the most successful one. Like GM, Toyota is building a worldwide group, but unlike GM, Toyota has organised its group round its core competence in manufacturing. The company is moving away from having multiple suppliers of parts and accessories, ultimately aiming for no more than two suppliers for any one part. These suppliers will be separate and independent companies, owned locally, but Toyota will in effect run their manufacturing operation for them. They will get the Toyota business only if they agree to being inspected and “advised” by a special Toyota manufacturing consulting organisation. And Toyota will also do most of the design work for the suppliers. This is not a new idea.
  • Britain’s Marks & Spencer, although in deep trouble now, was the world’s most successful retailer for 50 years, maintaining its pre-eminence largely by keeping an iron grip on its suppliers. It is rumoured in Japan that Toyota intends ultimately to market its manufacturing consultancy to non-car companies, turning its manufacturing core competence into a separate big business.
  • The recent failure rate of chief executives in big American companies points in the same direction. A large proportion of CEOs of such companies appointed in the past ten years were fired as failures within a year or two. But each of these people had been picked for his proven competence, and each had been highly successful in his previous jobs. This suggests that the jobs they took on had become undoable. The American record suggests not human failure but systems failure. Top management in big organisations needs a new concept.
  • Change agents. To survive and succeed, every organisation will have to turn itself into a change agent. The most effective way to manage change successfully is to create it. But experience has shown that grafting innovation on to a traditional enterprise does not work. The enterprise has to become a change agent. This requires the organised abandonment of things that have been shown to be unsuccessful, and the organised and continuous improvement of every product service and process within the enterprise (which the Japanese call kaizen). It requires the exploitation of successes, especially unexpected and unplanned-for ones, and it requires systematic innovation. The point of becoming a change agent is that it changes the mindset of the entire organisation. Instead of seeing change as a threat, its people will come to consider it as an opportunity.

  • The first industrial revolution brought forth, among many other things, intellectual property, universal incorporation, limited liability, the trade union, the co-operative, the technical university and the daily newspaper.
  • All this suggests that the greatest changes are almost certainly still ahead of us.