Business Report

The Rise of the Virtual Office

As the definition of the workplace changes, dramatic increases in productivity could be ahead.

Editor’s Note: Today Business Impact begins a new monthly report. Throughout August. we’ll explore the ways that technology is changing how, when, and where we work.

Rethinking work: Andrew McAfee of MIT’s Sloan School argues that white-collar productivity will continue to rise because of technologies that make it easier for people to work from anywhere.

The idea that the office is a specific place where our professional lives happen is becoming less universal, and less important. These days many knowledge workers can be productive anywhere, thanks to smarter, more numerous mobile devices, faster network access, and a growing number of online collaboration tools. Telecommuting is no longer merely something that the phone company is trying to sell you. And wherever the office may be, wider and better use of social networks, data analytics, and smart technologies such as voice recognition could be poised to increase productivity dramatically—meaning that both real and virtual offices may have fewer people in them.

But while the physical office is changing, certain connotations of the word “office” are not. I can think of at least two —“hierarchical organization” and “place for human interaction”—and there’s no indication that these are becoming any less important. Even the most progressive high-tech companies retain many of the organizational trappings of their industrial-age predecessors: full-time managers, org charts, job descriptions, and so on. And since humans remain social animals, conventional gathering places will remain important in business. These spaces—whether they be conventional offices, temporary ones, or conference facilities—must be made conducive to collaboration. They must also become physically healthy places to spend hours of time, since sedentary work has emerged as a significant health threat.

As the office expands beyond its conventional boundaries, key challenges must be met, including the privacy and security issues posed by a distributed global workforce of people who work digitally and use multiple devices. New tools like cloud-based office productivity apps must be made not only user-friendly but resistant to attacks and data loss. And workers will need better tools—including improved voice-recognition software, e-mail-organizing technologies, and intelligent agents that help handle complex tasks once reserved for specialists—to streamline work processes, make sense of the overwhelming volumes of data besieging them, and improve productivity.

To date, IT-driven productivity gains within the office have been somewhat modest, at least compared with those seen in manufacturing. In 1989 the U.S. manufacturing sector employed 18 million people; by 2009 that figure had declined to 11.8 million. But though the workforce shrank 34 percent, the value added by U.S. manufacturers—that is, the value of their output minus the cost of raw materials purchased—surged 75 percent, to $1.78 trillion.  We’ve definitely observed white-collar productivity improvement as well, especially since the mid-1990s, but it hasn’t been as big.

That may soon change. Consider that people already routinely deal with computers rather than office workers when they make an airline reservation, buy products and arrange for delivery, or troubleshoot a problem with a product they own. If a task involves simple and predictable forms of communication without much nuance or emotion, computers can do just fine, leaving humans to handle an ever-dwindling number of exceptions to the usual procedures or questions.

More far-out advances in artificial intelligence could push productivity even further. Voice recognition, speech synthesis, and automatic translation have improved significantly. And we’ve seen that computers can now accurately understand and reply to questions: IBM’s Watson supercomputer beat human competitors at Jeopardy! earlier this year. Skeptics will point out that futurists have been promising an AI-driven revolution in knowledge work for decades. But by now even the skeptics are finding phone numbers with the help of computer-based operators. When the productivity enhancements from these innovations are tallied, I predict that they will be striking.

On top of this, software and social tools can boost the productivity of the remaining human office workers. For example, a customer-service rep who deals with technical questions can work with just one customer at a time on the phone, but it’s easy to handle two or more customers simultaneously if the medium is instant messaging. Whole office-based industries may become vastly more efficient; the legal profession, for one, may be in the early stages of a deep transformation, especially since the prices clients are willing to pay are going through the floor. A new breed of legal outsourcing offers much cheaper ways to accomplish certain tasks: contract lawyers and digital tools scan documents during discovery processes, for example. Intelligent software will only get better at finding associations in those documents and mining meaning from it all.

One of the biggest barriers to higher office productivity was articulated best by the late Lew Platt, former CEO of Hewlett-Packard: “If only HP knew what HP knows, we’d be three times more productive.” Most knowledge-intensive organizations, in other words, do a lousy job of capturing relevant information and sharing it among all the people who could benefit from it. But digital tools that address Platt’s frustration have gone from inadequate to industrial-strength in the past few years. These tools include blogs and microblogs, social-networking software, and wiki-style tools that allow collaboration without tightly constraining it. They give individuals a voice, allow groups and communities to form easily and spontaneously, and help knowledge both accumulate and spread. They will be a major force shaping office work in the coming years.

For that to happen, however, devices and data need to be secure. The growing prevalence of tablet computers and smart phones presents a double-edged sword. People often grab these devices first thing in the morning, and much of their life—including work—revolves around them. That means an employee can get work done anywhere, but the flip side is that company data goes wherever the worker goes, and the company can’t easily control it. A manager wants to be able to lock you out of your mobile devices if you are fired, so you can’t pilfer anything. And a chief information officer doesn’t want you downloading malware. For some companies, the iPad model solves the latter problem: no application can run unless Apple reviews and blesses it. Internet-freedom purists may not like that, but CIOs do; they want to sleep soundly at night. In the near future, however, the major mobile platforms will probably introduce some interesting solutions that preserve the benefits of mobile and social computing while imposing some access and security constraints that limit the risk to company data. And when the security issues get sorted out, we may finally achieve the full potential of the distributed workforce.

Even as technologies proliferate and their problems are overcome, offices—no matter how virtual—remain collections of people. In my work, I’ve seen a positive feedback loop between what we do when we get together face to face and the ways in which we reinforce those relationships digitally with new tools. And it’s important to remember that even in this world of freelance and part-time contractors, companies are still desperate to hire good people and retain them. That’s not going to change anytime soon, no matter how many snazzy digital tools we get. The office of the future might have fewer people in it, but the ones who are there will matter more than ever.

Andrew P. McAfee is principal research scientist at the Center for Digital Business at MIT’s Sloan School of Management and author of Enterprise 2.0: New Collaborative Tools for Your Organization’s Toughest Challenges.

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The Future of the Office

The explosion of mobile devices, together with social technologies and smart apps, is creating a new distributed workforce. It’s transforming physical offices and how work gets done. This month, Technology Review examines the implications of this trend for business efficiency, productivity, and security.

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