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We are entering an age of hyper-challenges to which innovators must adapt
From climate change to intelligent automation, the word's industrialized nations face a new category of problems that are unlike anything we have seen before
Last Friday I had the chance to speak with the COO of a major global consulting firm whom I have known for many years. During our conversation, he made a statement that I found intriguing. In brief, he believes that the most important innovation challenges facing industrialized nations are ones that will require unprecedented collaboration between leaders in the public and private sectors. In other words, what he is seeing in his firm's most cutting-edge work is an evolution of the traditional model in professional services that divides clients (and their challenges) into public and private sector business units managed by separate teams with typically distinct backgrounds. The future, he explained to me, will see increasing integration of both of these sectors, driven by the nature of the challenges society is facing.
His perspective came to mind once again last night as I watched American Factory, which won the Best Documentary Academy Award in 2020. The film tells the story of a factory in Ohio that was closed by General Motors and then bought by the Chinese glass manufacturer Fuyao. At the start of the film, we see the optimism in the American business and political leaders, who believe Fuyao will usher in a new era of investment that will save the (mostly) older men and women who make up the factory’s American workforce. As the story progresses, however, we see a dramatic clash of cultures that illustrates just how different Chinese and American factory workers are. Moreover, the clash highlights how little planning and care went into the U.S. public leaders’ decision to bring a Chinese owner into an American factory. In the end, the factory survives but only because the American workers are largely replaced by robots, the adoption of which finally makes the plant profitable.
The sad story this film chronicles ends with a very serious question: how will societies cope with a world in which automation continues to replace human workers? This is a question not just for the factory floor. Indeed, last week Elon Musk claimed that Tesla is working on a humanoid robot that would take over "boring" repetitive work. Musk is famous for selling hype as much as products, and I, like others, think this particular claim is more of the same. However, given what real experts have told me about the future of robotic process automation, I do not think Musk’s vision of robots taking over everyday tasks is that far-fetched. If that view is correct, a world in which robots break free from the shop floor and are integrated into many more aspects of human life will create challenges for the economy and social policy that neither government nor industry will be able to solve alone. As we are already seeing in the debates over AI and autonomous driving, new innovations in humanoid robotics will push regulators and infrastructure strategists to rethink some of the most basic assumptions about how society works. From clashes between people and robots, to ascertaining the amount of power that should be permitted to AI systems, new problems will arise that will require extensive public-private collaboration to solve.
As with the intelligent automation challenge that American Factory explores, the climate change crisis is yet another phenomenon that is already breaking down the public-private barriers of the past. I wrote recently that as the realities of climate change start to impact the value of assets held by private and public entities, both groups will have to agree on a variety of analytical mechanisms and response strategies as we transition to a warmer world. For example, I can envision that in the future the world will need an "International Weather Fund" that plays a similar role to the one the International Monetary Fund plays today. As areas of the industrialized world become uninsurable due to climate risk that can not be priced by commercial underwriters — similar to what happens when a currency's value becomes impossible for a government to calculate and markets to price — someone will have to step in to provide insurance and capital until the private sector is able to resume those functions. Treasury Secretary Janet Yellen has said correctly that climate change poses “an existential threat” to the global financial system, and the U.S. Treasury’s new “climate hub” is an example of an innovative response along with FEMA's Risk Rating 2.0 initiative. As with automation, however, the public and private worlds could soon collide, if, for example, as some analysts speculate, these new initiatives raise the cost of flood insurance for nearly 80% of policy holders in an effort to reflect the increasing financial risk of vast expanses of U.S. property. As a recent analysis noted:
Increasingly, experts see a collective threat to the U.S. economy. As the risks of owning a home in places affected by climate change stack up, economists and policymakers say climate-induced flight from threatened areas could shock the U.S. economy as home prices plummet, lending dries up and the local tax base diminishes in hard-hit regions.
There is no way that governments will be able to deal with climate change without levels of private sector innovation that were unthinkable a decade ago. From new climate-focused insurance and risk transfer products, to building materials that can withstand higher temperatures, to new healthcare solutions for heat-vulnerable populations, governments and companies will have to collaborate in more ways if industrialized nations are to adapt successfully to a changing climate.
Hyper-challenges: features and tensions
I explored two examples of this new class of challenges above, but many others come to mind. For example, cyber risk already requires extensive integration of private sector agents with law enforcement entities around the world. The COVID-19 crisis is yet another example of private industry leveraging NIH research and EU funding to create the first wave of vaccines. Fake news and cyber threats are often tackled both by law enforcement and private-sector platform providers. Many of these new problems require regulatory responses that balance innovation with regulation, much as the debate over data privacy and information ownership is forcing a sometimes painful dialogue between policymakers and Big Tech.
Reflecting on all of the above, I think the hyper-challenges we face are characterized by the following features:
Global: they affect more than one nation or even region
Ambiguous: they contain both known and unknown elements that are constantly shifting
Transcendent: they cross traditional innovation boundaries such as private/public, research/development, prototyping/production, evolutionary/disruptive, etc.
Existential: they have the potential to completely change the nature of industrialized societies
Persistent: they cannot be "waited out" in the hope that time or an organic solution will eliminate the problem
In thinking about hyper-challenges, I have discovered a few specific tensions that are especially important for leaders in public and private roles to consider. Some of the most critical are noted below:
Core vs. Edge
A major challenge in managing innovation efforts in corporations is enforcing a core organizational strategy while at the same time encouraging independent efforts at the edge. This is a difficult balance to strike inside of a single company. Doing so across an ecosystem of government regulators and labs, university research centers and private innovation teams is a daunting issue. While successful collaboration exists in specific areas such as health care and science, these models will have to be expanded and refined to tackle our emerging set of problems. Failure to do so will result in wasted time and investment, neither of which society can afford.
Exploration vs. Exploitation
As I have noted before, the majority of commercial innovation efforts focus on expanding the value of existing technologies and solutions. Only a minority seeks to create truly novel technologies or products. Unfortunately, the nature of the problems of the next generation will call for more exploratory innovation than the usual exploitative kind. Thus, innovators will find themselves navigating unknown waters to a greater degree than in the recent past. Indeed, as one senior innovation leader said to me recently: “The world is facing a dozen Apollo projects happening simultaneously, and we need to step up to that challenge."
Good vs. Bad Ambiguity
One of the mistakes innovation teams are prone to make is failure to distinguish between good and bad ambiguity. Again looking to science as a model, we should define the aspects of innovation that are naturally ambiguous from those that are not. As a researcher once told me: "In my lab, we accept that there can be ambiguity in certain results and sequences of activities that are required to find a solution; however, we don't accept that ambiguity is also part of things such as goals, processes, and outcome measurement techniques." In short, this innovator was clear with her team about what was good ambiguity in their work and what was not. Applying this distinction in complex problems such as worker displacement and climate change will be a major challenge for all involved in creating the next generation of solutions.
Investment vs. Returns
In even basic innovation efforts, the challenges of funding and measuring progress are omnipresent. Given the scale of problems such as climate change, data privacy, displaced workers, etc., the need to clearly define funding strategies, what constitutes progress, and what regulatory oversight is required will challenge the best of leaders. Usefully, some of these efforts are already underway in limited bilateral agreements between companies and governments, a phenomenon that COVID accelerated. However, as societies, we are far behind the curve in areas such as climate change and automation, with the clock already ticking.
Problem vs. Solution
We do not have the luxury to study every aspect of our hyper-challenges or every risk of a solution before taking action. Unfortunately, innovators will have to work with imperfect problems statements and iterated problems statements as well as imperfect solution designs for the foreseeable future. This circumstance is more common in scientific research than business innovation, and it will force public and private leaders to operate under greater levels of uncertainty.
Signal vs. Noise
A recent New York Times article noted how COVID-19 exposed ordinary people to the way in which science really works, which involves ideation and experimentation that continuously updates the understanding of problems and solutions. To paraphrase the historian of science Arthur Koestler, over time science does not get more right, it just gets less wrong. As we have seen with the pandemic, this process of "getting less wrong" can seed doubt and cause confusion in many ways. Neither public nor private sector leaders anticipated this phenomenon at the start of the pandemic, and we continue to pay the price for that oversight today. As the same Times article noted: "It does not help that the C.D.C. and the World Health Organization, the two leading public health agencies, have disagreed as frequently as they have in the past 18 months — on the definition of a pandemic, on the frequency of asymptomatic infections, on the safety of Covid-19 vaccines for pregnant women." This lack of coordinated communication is an error that should not be repeated as the next generation of hyper-challenges confronts the public.
As my discussion with the COO ended, we reflected on the need to strike a nuanced strategic balance in his firm that enables his most creative teams to solve these new hyper-challenges, while at the same time protecting the firm’s existing businesses. This is the same strategic dilemma governments and their private sector partners will face in the coming decade. Each side has existing constituents who must be served and protected. Yet each side also faces an evolving agenda that will require new solutions. To find them, innovators will have to rethink many of the techniques and approaches that made them successful in the past. Koestler said as much in 1959 when, writing about scientific innovation, he noted that major advances in our understanding of the world never result from combining previously developed ideas. Real breakthroughs are “only possible after a certain amount of de-differentiation, a cracking and thawing of the frozen structures resulting from isolated, over-specialized development.” In other words, to solve the toughest problems we sometimes break down solutions that have served us in the past.
In the past two years, I have spoken with researchers who are challenging many of the established innovation paradigms. From machines that can troubleshoot (and even create) complex software to biology-based manufacturing materials to new ways of using human abilities in the workplace, it is in society's interest to accelerate the design and deployment of these new innovation models to tackle our complex 21st Century problems. It is also in our interest to strengthen the (often weak) ties that bind innovators in the public and private sectors in novel ways, such as the effort being proposed to leverage the NIH’s COVID-19 expertise on a global scale. If the challenge is met, we will move our societies and planet forward with a fighting chance for success. If it is not, we may soon find ourselves — like the workers in that Ohio factory — overwhelmed by new forces we do not understand and overcome by powers we cannot control.