The Future of Service Operations Part 2: Opaque Journeys and Race to Success
3 min read
This is Part 2 of a two-part series on the future of services operations:
Part 1: Digitalization and Knowledge Workers
Part 2: Opaque Journeys and Race to Success
Journeys have historically been more opaque in service operations. Manufacturing operations have benefitted from Taylorization since the late 19th century, defining clear paths to understand and link manufacturing processes together across a multitude of actors (people, machines, materials, etc.)..Manufacturing benefitted from a tangible list of physical components creating a product. In contrast, services operations have historically remained opaque and composed by intermingled processes. For example, if you wanted to precisely measure the performance of processing a payment in banking, the only real and tangible number was to divide the total cost of the payment operation (often involving thousands of workers) by the number of payments performed – a crude measurement at best. To really know what a specific step in the process cost effectively required specialized analysts while most outputs could not be reliably modelized. The simple notion of intermediary outputs was also vague and variable and was not standardized across banks. Therefore, reliable benchmarks did not exist. The lack of transparency stemmed from a variable definition of intermediary steps, inputs, and outputs. The advent of highly digitalized environments combined with the use of artificial intelligence is rapidly transforming the opacity into clear inputs, outputs and work/tasks that are performed by machines and/or humans. In addition, the indisputable access to machine generated audit or event logs permits a direct linkage between all parties involved. Finally, the emergence of advanced real-time process mining tools facilitates the visualization and the analyses of service operations processes in real-time. At long last unambiguous measurement tools exist to provide performance indicators and to drive real comparisons within a company or across companies. The result is that we are now in a position to affect processes in real-time for a better output, both from a service provider and a customer viewpoint.
Efficiency / Productivity and Improved Service Levels Race
Competition is enabled through lower barriers to entry which creates an accelerated race to efficiency/productivity and service levels. In a digitalized world, many generic solutions can be leveraged at a lower cost. We have now fully entered the age of the information economy. And the velocity of useful information or recommendations determines how quickly a service operations manager can test and implement changes and benefit from new outcomes. In a digitalized environment it also takes very little time for competitors to quickly change their cost base and/or react to client demands. Digital management will therefore make the competitive forces react faster based on readily available data. Digitally enabled competitors will be able to remedy their service deficiencies faster, will adjust their prices faster, will achieve efficiencies sooner, and will improve service levels readily. All these actions are achieved with less guessing than before, based on hard data. The advent of digital management will thus lead to increased competitive pressure and to more need for digital management. The companies that will not have these capabilities will become less competitive and will either disappear or be acquired by stronger and more mobile competitors.
“I believe in intuition and aspiration. Imagination is more important than knowledge. For knowledge is limited, whereas imagination embraces the entire world, stimulating progress, giving birth to evolution.” – Albert Einstein
The short-term benefit is increased efficiency and productivity NOW. While digital intelligence engines identify readily 35-50% efficiency opportunities, only 20% can be achieved quickly, whereas the full opportunities take a year to achieve. What is unique with a digitalized approach is that gains in productivity are achieved at the same time where engagement with clients and employees is increased and where service is improved; it does not cost more to achieve ambitious goals across multiple dimensions because the digitalized enterprise is better informed, in a timely manner, and non-valuable tasks can readily be identified and eliminated. The ability to leverage AI to complement human intelligence is also providing a new platform to identify new targets. The real understanding of actual journeys, not theoretical ones, allows everyone to impact their journeys positively. The continuous digitalized information flow makes testing and expanding new ideas much more dynamic. Time to market is greatly shortened. The ability to forecast also allows these digitalized environments to avert the worst before it materializes. Finally, the link between observation and execution is shortened and can even be connected together. The time to action and real impact can be greatly reduced.
In Conclusion – Brace for Change
What is slowing adoption is, as often, how we (humans) deal with new domains. It takes time, for organizations and individuals to accept that there is something new, that can or will change the fundamental nature of work, that can or will improve the relationship between humans and machines, that will enable us (humans) to be more what we are, thinking animals with an ability to understand and adopt new methods for success. And as usual, failed digitalization (in automation, in understanding algorithms, in implementing some of the proposed changes) gives credence to all the devil’s advocates around us. We should always remember what Robert Kennedy once said: “Progress is a nice word. But change is its motivator and change has its enemies”.