Startups drive labor market changes

Augmented reality Photo: Shutterstock ASAP Creative

A new report by Deloitte describes the "future of labor" in Israel and maps the Israeli technology companies affecting it.

Two months ago, Amazon began considering a new technology capable of preparing packages five times as fast as people. This is not a glittering new technology or robots the way we imagine them; it is an automated assembly line. If this technology is successful, the number of jobs eliminated will be minor - according to estimates published by Reuters, only 1,300 employees at Amazon will be involved.

Automation forecasts usually include frightening scenarios of the day when we will discover that robots have taken over the labor market. For example, according to the McKinsey & Co. consultant firm, one third of jobs are likely to vanish by 2030 as a result of automation processes. Robots and automation processes are replacing workers - sometimes more, sometimes, less - but they also work side by side with people, enabling them to spend their time on more important work. A 2017 study by Dell and the California-based Institute for the Future (IFTF) found that 85% of the jobs that will exist in 2030 have not yet been invented.

These processes arouse many questions: which jobs will remain relevant and which will be eliminated, what should be done so that people are trained for the new jobs, what relations between workers and employers will be like, what workplaces will be like, etc.

These processes are very important for the labor market, but they of course depend on technological developments. A new report by consultant and accounting firm Deloitte for the first time describes the "future of labor" in Israel and maps the Israeli technology companies affecting it.

According to the report, development of technologies for the future labor market is growing, and Israel dominates in both the number of companies and the amounts of capital raised. The report shows that in the past decade, Israeli startups dealing with the future labor market raised over $1.2 billion, $960 million of which was in the past five years, indicating a growing market.

In comparison, Deloitte says that Israeli companies in transportation, one of the prominent sectors among startups in Israel, raised $1 billion in the past five years. In comparison with technology fields such as artificial intelligence, cyber, fintech, and digital health, however, the market is still small - Israel startups in each of these sectors raised $800 million-$1.5 billion in 2018 alone. Nevertheless, mapping the labor market sector and its players is important, because it is likely to shed light on future changes in it.

"We always talk about cyber, health, and transportation, but the future of labor is one of the most powerful forces for change in the lives of all of us. Israel is dominant in this sphere, and is shaping this world, and no one is talking about it," says Deloitte Israel startups practice leader Amit Harel. "For example, Fiverr and Monday.com are two very big players in this sector, but up until now, there was no specific description of what they were doing in the future labor market," he adds.

Deloitte US global human capital leader Jeff Schwartz chimes in: "Usually, when we evaluate startups, we focus on the technologies that they are developing. We decided to take a look at this group of startups from a different angle - their business uses. We identified 80 startups dealing with the future of labor in Israel, backed by venture capital funds, and we estimate that there are at least twice as many."

Most developments are in automation

The report presents the technological changes affecting the future labor market. It divides their effect into three categories: work itself, the labor force, and the workplace. The first concerns the work that can be carried out by machines or through cooperation between people and machines. 63% of the companies mapped in the report belong to this category, indicating that an especially large number of technological changes can be expected in it.

Israeli companies operating in this sphere include Taranis, which uses machine learning technology to supervise fields of crops; WalkMe, which develops technology for automation processes on internal organizational digital platforms for both workers themselves and for customers of the business; and CommonSense Robotics, which develops and operates automated logistics centers in urban centers.

The second category, the labor force, involves identifying new types of workers and work and developing employees' skills. One prominent company in this sector is Fiverr, which operates a trading theater for freelancers in various areas. The company is now planning an offering on the New York Stock Exchange, on which it will reportedly try to raise money at an $800 million company value. 25% of the companies mapped in the report are in this category.

The third category is the workplace - either physical or virtual. This includes startups dealing in remote work technologies and virtual cooperation, among other things through augmented reality and virtual reality. This category accounts for 12% of all the companies in the report. One prominent example of such a company is Monday.com, which developed a tool for cooperating between teams in workplaces. The company has raised a total of $84 million, with its most recent financing round having been at a company value of $500 million.

Creativity in organizations will increase

The report maps seven different technology spheres affecting the future labor market: analytics and data processing, which attracted 31% of the investments in the field; machine leaning (27%), trading theaters and online communities (12%), virtual cooperation (12%), smart automation (9%), robotics (7%), and natural language processing (2%). Adoption of these technologies depends on global developments in the character of the labor market on the one hand and affects these developments on the other.

According to the report, one of the important developments in this area is automation and "augmentation" of the labor force - the use of virtual technology to enrich or add to concrete reality. Examples include the use of augmented reality spectacles to train employees and the creation of virtual communities for specific professions or workplaces. "At a time when many people think that cognitive technologies augur a future in which people will not work, there is increasing realization that the future is likely to belong to people and machines enhancing each other," the report states.

A second development is the rise of human resources technologies for use by personnel managers in organizations. "At a time when humanity is redefining what constitutes work and how it takes place, human resources managers and business leaders will have to adjust the way their labor force operates. It is likely that in the future, employees will have personal and unique expectations that businesses will have to meet by utilizing new technologies and platforms that create interesting and involvement," the report states.

The report refers to the last development as an "open skills economy." Two dominant factors are behind this development: commons-based peer production and the gig economy. According to the report, this new economy changes the definition of a workplace and an organization, therefore exerting a great effect on the nature of the workplace and the identity of the employees. "Instead of factories and business companies, the new models look like networks with different approaches to management, hiring, and use of skills," the report authors state.

For example, Fiverr's trading theater for freelancers includes services in over 200 categories, including graphic design, marketing and advertising, broadcasting announcing, writing, translation, copywriting, and software development. Fiverr collects a commission on every deal taking place through the platform from both the service purchaser and the service provider. This is an example of a technology that affects the type of employees (freelancers) and the workplace (work at home for changing customers). This is how a deal model works in the gig economy, which provides jobs according to opportunity. Employees are independent, but lack a stable long-term source of income.

The report presents the challenges that this poses to both employers and employees: constant training for changing and developing jobs and for future skills, flexible but unstable work that makes it impossible to predict income and arrange a regular schedule, and new employment relations based on personalization and freelance jobs that threaten to eliminate concepts such as organized labor and workers' benefits.

Published by Globes, Israel business news - en.globes.co.il - on June 4, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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Augmented reality Photo: Shutterstock ASAP Creative
Augmented reality Photo: Shutterstock ASAP Creative
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