Ready for Disruption?

An article in The Economist compared the situation of American workers displaced by Japanese industries in the 1980s with that of workers displaced by Chinese industries in more recent years. They found that, in the earlier case, workers were better able to rebound and shift to something else, whereas the more recent situation led to unemployment problems and subsequent economic effects on cities.

What was the difference here? Why would a Japanese-led disruption have one effect, and a Chinese-based one have another?

The answer, of course, had nothing to do with the country of origin, but instead, is linked more closely to the maturity of the industry being disrupted.

The article showed how the Japanese disruptions largely affected industries that were early in their innovation cycle. That means the affected American industries were largely based in innovative centers, with better educated and more adaptable populations that could more easily shift into other roles. The Chinese disruptions, however, tended to hit industries such as toys and shoes that were more mature and had moved from the more innovative cities into areas where stability and consistency were the norm. The populations in these areas tended to be less adaptable and thus less able to shift from something old toward something new.

What does this mean for you? Well, it’s worth looking at your own industry and the processes your company uses, and asking yourself if you’re still innovative or if you’re in a more mature, stable setting. If it’s the latter, that means you are more susceptible to negative effects from disruption. Your company culture probably emphasizes consistency, and so it will be harder to adapt to a challenge from a new competitor or to a change in technology or processes. You should take proactive steps to build a sense of innovation into your organization, because once you’re faced with a disruption it’s too late to be changing your culture.

Secondly, it’s also going to be difficult for your employees to recover if a disruption leads you to reduce your workforce. You will be doing them a great service if you can help them develop the “soft skills” that are useful no matter what job they are in, In addition to developing the “hard skills” they need for their current role. Not only will they be better employees for you if you help them develop, they will also be better prepared if things go bad for them and they need to adapt. Don’t wait until a disruption comes along, because again, that’s too late. Instead, he’ll make soft skill development a regular part of their job, so you can get the benefit of that yourself while they are also better prepared for an uncertain future.

Plenty of cities across the US have seen what happens when industries go through changes and they are not prepared for it, but it’s not just an American phenomenon. Many manufacturing firms are leaving China for Vietnam, for example, which is disruptive to both countries. The companies and people who can adapt to that kind of disruption are the ones who will meet new challenges and take advantage of new opportunities. Make sure your company, and your employees, are among those who are ready.