As the world economy begins recovering from nearly five years of stagnation, businesses developed from an industrial mindset face obsolescence. The future will see dramatic change in how, where and with whom we work.

Net.Worker Managing Editor Toni Kistner spent time recently with Charlie Grantham and Jim Ware, leaders in what's loosely called the "future of work movement." The team runs a US-based consulting firm in that helps companies including Capital One Financial, PeopleSoft, Intel and Cisco Systems develop programs that ease their transition to the future. They also founded the Future of Work, a global network committed to building work environments that are cost-effective, socially and environmentally responsible and personally satisfying.

What are the key forces changing the way we work?
Ware: Demographics, economics and technology. The workforce in industrialized countries is growing older and more diverse, with many more women and minorities. We're seeing earlier entry of single moms and lower-skilled workers, and far more people working into their mid-70s -- both because their health allows it and they can't live on a small retirement annuity based on a life expectancy of 65.

The economics of work are changing, too. You used to beat the competition by making more and more stuff, cheaper and cheaper. But today and increasingly in the future, people are willing to pay a premium for customizable products that meet individual needs. The hottest job growth will occur in the creative class -- teachers, healthcare professionals, designers (from software to clothing), financial analysts.

Yet, despite current thinking, we're suffering from a talent shortage that'll only worsen in the next five years. There are whole lot more knowledge-based jobs than qualified people to fill them. A recent Harvard Management Update (published in October 2003) cites a Bureau of Labor Statistics report that predicts that by 2010 there could be as many as 10 million more jobs available in the U.S. than employees to fill them. Why aren't human resources managers tearing out their hair?

And, of course, technology has finally made remote and mobile work as efficient as being in the office next door. While there's no substitute for face-to-face interaction when teams start a project, midway through, and at the end, the rest of the time, there's just no need to drive to the office.

What else is changing?
Grantham: The rules of engagement. Creative talent now controls how the game is played -- we see it in the entertainment industry, financial services, medicine, education, and certainly in professional sports. The stars name the terms and let their agents negotiate the employment contract. This system for matching talent and work will soon migrate into engineering and even liberal arts professions. If you need a degree to do a job, there will be more work than you can shake a stick at, and you -- the professional -- will define the terms.

There's also a renaissance brewing in how humans organize to produce things, ideas and services. We've lost our trust in large organizations, we're learning how to form our identity and find psychological support from our own circle of friends and colleagues. We don't need to be part of an organization to feel secure.

People are moving back to smaller groups, teams and micro-businesses. The only thing keeping people on big-company payrolls is health insurance and retirement benefits. Take those away, and over 50 percent would be out the door, building their own careers. This is a fundamental cultural shift, fully comparable to the agricultural and industrial revolutions. How we work, where we work, with whom we work and who's in charge -- it's all changing. As author William Gibson likes to say, the future is already here; it just isn't evenly distributed.

Take the film industry: small groups of people working on several projects at the same time; roles constantly changing; and the real power lies with the talent agency. Decades ago, Hollywood was organized vertically around major studios. Actors spent their careers with one studio, and if they got bounced, they became pariahs. This system broke down for the same reasons we're seeing now in the larger market. Mechanical processes (like film printing) became commoditized; there are shortages of creative talent; globalization makes it cheaper to shoot in India and so on. Industry leaders had to change the way they did business or perish. Remember RKO Studios? Some day we might ask, do you remember General Motors?

What does it all mean for businesses?

Ware: They could become obsolete. Think about the manufacturing industries; steel in the 1970s, automotive in the 1980s; consumer electronics today. The same thing is happening in business services, financial markets and anything dependent on technology. Who's Boeing's biggest competitor today? Motorola, AT&T, Citibank? Global companies. The best electronics engineers today are in Eastern Europe and Scandinavia; the engineering powerhouses of tomorrow will likely be in China and India -- not in the US. The global economy knows no political boundaries, and the means of production (ideas and relationships) are owned by the workers.

The jobs of the future don't even have names yet. When I entered the job market 35 years ago, I went to an office to access the tools I needed to do my job because I couldn't afford a telephone network, a mainframe computer and two library assistants.

Today, I own my own computers, wired and wireless phone systems, a wireless LAN, a PDA, a fax machine and several printers. And I have online access to more information than I can process. Why do I need a corporate affiliation? To bring me work? No. Historically, competitiveness has been based on an ability to manage things and people within a relatively known, stable environment. That world doesn't exist anymore.

Are businesses being built based on this change in social psychology?
Grantham: Yes, in Scandinavia and central Europe, particularly in Sweden and Slovenia. Hermes Software was launched by four people with a vision to create a world-class software firm after the collapse of Yugoslavia in the late 1980s. They approached the government for funding and immediately went global by forming a partnership with HP. Then they built "social capital" by holding an annual software-engineering contest for university students, hiring the winners. Twenty years later, Hermes is one of the software powerhouses of Europe. National pride and locked-up entrepreneurial talent were unleashed.

In Sweden, we watched Ericsson transition an entire factory from making telephone handsets to producing software for the wireless network in only 18 months. Ericsson's management realized that value for employees would be in the creative arts (software development) and moved the entire operation in that direction. The investment made for a few ugly quarters, but Ericsson had its eye on a much larger picture.

Sustainability is more than next quarter's financial performance. Neither could have moved into the future of work without understanding the difference between short-term profit and longer-term sustainability.

Are any companies moving toward sustainability?
Grantham: Sure, but they're not the ones you read about in Business Week. Rebecca Ryan, the founding CEO of Next Generation Consulting, has just completed a study of what makes companies sustainable. She found six key characteristics: meaning (making the business mission meaningful to workers); voice (an ability to have a say in decisions); enrichment (opportunity for growth); membership (identity); appreciation; and harmony (work/life balance). SAS Institute is one; it has less than 5 percent workforce turnover in an industry that averages over 20 percent -- and it's highly profitable.

If you were a CEO today, what would you do to make your company sustainable?
Ware: Sustainable means a company will be around for more than 100 years. It focuses on long-term goals, is driven by a clear vision, places a priority on finding and developing talent, and gives something back to the community. First, we'd decide explicitly on our company's core competency. Then get rid of the other 60 percent of our workforce, buildings and other non-essential stuff that isn't related to it. We'd sub that work out, or better, help our middle managers in non-core areas set up their own businesses, invest in them and then contract the work back to them.

Next, we'd invest in educational, and social and public service institutions that build talent pools of potential workers, make the physical community attractive, and preserve the environment for the next generation. We'd renegotiate our contracts with the talent in the organization, and for God's sake, we'd quit calling them employees! The employee/employer relationship is not a shared responsibility partnership. The new contracts have to be about life/work balance, performance standards and co-investments in our future. This way we can put output-based performance standards in place that we can audit.

Next, we'd take the company private. New sustainable companies need to invest in building talent pools, long-lasting relationships with business partners and increase the quality of life in their communities. That kind of investment won't fly far in a market that only sees quarter-over-quarter financial measures.

Grantham: Realize, Toni, this isn't 20 years out. There's a major social and political earthquake coming within three years. The marvelous book The Fourth Turning by William Strauss and Neil Howe traces the cycles of social change from the 15th century to today. Just as there are cycles to business, there are cycles to social change. The U.S. and its major Anglo-English trading partners are at a crisis point. Think in terms of the American Revolution, the Civil War, the Great Depression and World War II. Strauss and Howe call the next one the "Millennial Crisis" and believe it will become evident by 2005-2007.

What will this crisis look like?
Ware: The family structure will strengthen as a result of better work/life balance; the gender role gap will widen; new institutions will replace old ones that are crumbling; and a widely shared world view will form. A cultural shift from the primacy of the individual (for example, John Wayne) to the community. Think about a Second Constitutional Convention and a major overhaul of the Electoral College process; think about the economic impact of a 35-year global war on terrorism.

Or put it this way: It's 1775 and you're living in New York City. Do you join a political party that supports King George? Do you invest in British sailboat builders? Agricultural holdings in Ireland? Or do you join ranks with Alexander Hamilton and create entirely new ways of doing business based on local values, resources and culture?