Digitalization is not easy, It involves many choices that have to be assessed carefully against a finite amount of resources available. In addition, day-by-day operations tend to absorb the entire daytime of most top executives.
This becomes even more evident when it comes to the service sector. From retail to hotels, restaurants and hairdressers, decision makers and innovators meet an additional challenge. They live in sectors that have been built on human interaction – the famous “human touch”. They are understandably skeptical towards replacing a millennial-proven business practice with machines and algorithms. So they wait.
In order to get CEOs and innovators out of this paralysis situation I decided to build a simple management decision tool specifically developed for the service sector. Based on several contacts with top executives in Norway, desktop research and many conversations with innovators and industry experts the tool soon became a framework based on two simple parameters:
- Relevant Information asymmetry between the customer and your personnel
- Matureness of the digital solutions available
I will explain these four strategies based on real- life examples.
Standardizing and/ or Outsourcing. Consider an average restaurant. In 2018, your meal still has to be delivered to your table by a human being. However, all the information you need is on the menu. Even the information about allergens will probably be more accurate on the menu that if you ask for it. There is little information asymmetry between you and the waiter.
Thus, the logical thing to do is to standardize their behavior and establish processes in order to minimize costs, adopting digital technologies at the back end – like replacing notepads by tablets delivering the orders directly to the kitchen. Could this service be anyway outsourced too? Probably. It almost is already. Many waiters are students or have other parallel jobs. Sometimes, personnel is managed by a temporary work agency. Uber is another poster example of this strategy. Driving cars is still an analog skill. In addition, the information asymmetry between the customer and the driver is non-existent: Both know the destination address. As a result, Uber has decided to outsource the drivers and has focused on improving the back-end through the app and a frictionless payment moment.
Knowledge and specialization. What happens if the restaurant you have chosen offers exotic food or some kind of new experiences instead? In this case, the information asymmetry is very real. The customer will be lost without guidance or suggestions from the waiter or at least the experience would be less valuable and not worth the higher price. Standardization can be probably done at a certain level, but knowledge delivered by educated and specialized humans will be highly appreciated. A sommelier for instance will recommend you the better wines that combine best with your food. The same can be said about luxury hotels with many different amenities, services and exclusive offers for regular clients that may change regularly. In this cases digital technologies should be used also for training, specialization and know-how.
Do it now. When there is little relevant information asymmetry and at the same time there are digital solutions ready to execute the “job to be done” , the transition of replacing human interaction with digital solutions must be done as soon as possible. An example are, of course, web shops. Another example is self-service check-in for flights from your mobile. Self service check out at grocery stores are another example. These digital technologies are usually “off the shelf” or easy to develop by third parties, with many vendors offering similar products.
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Disruptors and innovators choose, though, another strategy: Testing and developing. Their vision is to digitalize their promise to the customer even with a high grade of information asymmetry as a starting point. Indeed, they use digital transformation to eliminate information asymmetry, giving more power to their customers. These leaders don’t wait for someone else to develop the technology they need. Instead they develop their own solutions and let the value of their services soar. The amazon GO retail concept, as depicted below, is an example.
Amazon has put together technology until now available to self-driving cars to create a store “with no lines and no check outs”. The human interaction is totally unnecessary even if the stores are high end and offer fresh food and bakery. In the health sector, many companies around the world are trying to replace typical nurse-tasks with digital devices.
As a CEO your job is to choose which services you provide to your customers along their journey should belong to which category. Then you should identify “jobs to be done”, skills to be built and investments to be made. Because if you don’t make a decision for yourself, your competitors and customers will do it for you.
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