When it comes to assessing the link between productivity and technology should the figures governments are concerned about be re-evaluated, asks Professor Andy Neely of the Cambridge Service Alliance.
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Nov 11, 2015 • Features • Management • management • Professor Andy Neely • Cambridge Service Alliance • Service Management
When it comes to assessing the link between productivity and technology should the figures governments are concerned about be re-evaluated, asks Professor Andy Neely of the Cambridge Service Alliance.
There’s been much debate in recent months about the productivity paradox - put simply there’s a long standing concern that technology, particularly information technology, does not seem to deliver the productivity gains that might be expected.
This concern has resurfaced in the UK, with the Government raising questions about why the UK’s productivity has not grown as much as other countries. In fact, George Osborne recently called the UK’s low productivity growth “the challenge of our time”.
The same topic came up in a recent email discussion with colleagues from ISSIP - the International Society for Service Innovation Professionals, this time prompted by an article in the Wall Street Journal entitled “Silicon Valley Doesn’t Believe US Productivity is Down”. In essence the Wall Street Journal argument was that developments in technology are not captured in the Government’s productivity figures - apps that help people find restaurants more quickly or hail cabs from their phones clearly improve the efficiency with which we can do things.
Doing more with less is a classic definition of productivity - so these apps must be improving productivity, argues the Wall Street Journal (and those it quotes - including Hal Varian, Google’s Chief Economist).
While I accept the argument that apps and associated technologies allow us to do more with less, I think there’s a need to unpack the relationship between these developments and measures of productivity more carefully.
When talking about productivity - or the lack of productivity - we need to think about the economic impact of these cheaper and/or free services.
However, there’s an interesting new phenomenon which complicates the picture.
Take, for example, Uber. I’m a fan of Uber - the app is great. It’s convenient. I’ve never had a bad service from an Uber driver. I love the fact that I can rate drivers and they can rate customers at the end of journeys. I love the fact that the cost of the ride gets charged to my credit card and the receipt automatically emailed to me. But I also love Uber because it is cheaper - I pay less for a Uber car than I do for a black cab in London. Better service, pleasant drivers, and lower prices - what’s not to like?
Other firms have similar business models – think Amazon or Airbnb. Still others provide me a service for free – Google and TripAdvisor - and don’t charge me for the information they provide, instead making their money through third parties.
When talking about productivity - or the lack of productivity - we need to think about the economic impact of these cheaper and/or free services.
Lower prices to consumers must mean lower GDP. The efficiency gains are there, but they are not being captured in productivity gains because the benefits are being passed on to consumers in the form of lower prices, rather than captured in the official GDP statistics.
Maybe a more nuanced discussion about productivity is needed where we look at both sides of the equation: increases in value and hence GDP, and increases in efficiency reflected in lower costs to consumers.
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Jun 22, 2015 • Features • Future of FIeld Service • China • IoT • Servitization • Service Innovation and Design
Andy Neely, Founding Director of the Cambridge Service Alliance, hears about the challenges and enablers of servitization, the importance the country puts on technology, and the growth of e-platforms...
I recently spent a week in China, visiting...
Andy Neely, Founding Director of the Cambridge Service Alliance, hears about the challenges and enablers of servitization, the importance the country puts on technology, and the growth of e-platforms...
I recently spent a week in China, visiting the Southern China University of Technology (Guangzhou) and Ceibs, the international business school in Shanghai. While at Ceibs I participated in the first seminar on “Servitization and Service Innovation”.
Attended by around 100 people, industrial speakers at the seminar included eCoal (an online coal purchasing platform), HP, Sevalo (a construction and mining equipment services business) and SKF from the world of industry, whilst Professors Marjorie Lyles (Indiana University), Chris Voss (Warwick Business School), Xiande Zhao (Ceibs) and I delivered academic presentations.
It was a great trip, fascinating in so many ways, and here are my thoughts on some of the themes that came out for me at the seminar.
The importance of technology to China.
All the speakers talked about the way technology is changing China’s approach to business. They talked about all the traditional topics - cloud computing, big data, mobile, the need for better security. But they also talked about Internet Plus, China’s equivalent to Germany’s Industrie 4.0 and the rest of the world’s Internet of Things.They recognise that as more and more devices are connected to the net, ever greater volumes of data will be created and these data can potentially deliver new and valuable business insights if analysed and interpreted correctly.
Platforms were also a major theme.Many of the firms that spoke, including many of those in the audience, were looking to create platforms, often to combine buying power and/or to utilize spare capacity.
eCoal, for example, has created a coal buying platform which allows it to drive significant cost savings by pooling purchasing across multiple organisations. HP claimed to be the world’s biggest retailer of paper. With their print on demand services, where you pay per page rather than for the printer, HP is forced to buy large volumes of paper. But with large volumes comes the opportunity to negotiate discounts for bulk purchasing.
Many firms were looking to create platforms, often to combine buying power and/or to utilize spare capacity.
One reason so many firms were interested in platforms was the massive success of China’s three stars of eBusiness - Baidu, Alibaba and Tencent (the Chinese refer to them as BAT). These three firms dominate China’s discussion of eBusiness and have all successfully created platforms, which in turn create multi-sided markets. Tencent, for example, offers users access to free online games, sells the eyeballs to advertisers, but also sells the players of games equipment upgrades.
A dominant question underlying many of the comments at the forum, was how do we create platforms that will allows us to capture multiple, complementary sources of revenue for our businesses.We also talked about challenges of servitizing. The fact that having a strong product heritage or brand sometimes makes it more difficult to offer services. Interestingly a number of the speakers referred back to the roots of their organisations, obviously a product of their firm’s history, but I wondered whether history also constrained their thinking about the future.
Services and solutions often cross multiple products and categories.
SKF asked some fantastic questions about servitization. How do we persuade our customers to buy solutions from us before we have proved their value? Who buys services and solutions? Procurement is typically not structured that way. It thinks about products and categories, yet services and solutions often cross multiple products and categories.And finally we talked about enablers of servitization. What would make the transition to services easier?
Through the course of the seminar I heard five key themes:
- Get inside the mind of your customer’s customer. Understand what is value to them, so you can better help your customer create value for their customer; to understand you need deep relationships - ask yourself are we really close enough to our customers;
- Seek to balance control and collaboration in the ecosystem - not everyone needs to control or create a ecosystem. Sometimes you have to accept you are part of one and the best you can do is seek to influence
- Think about creating win-win-win across the ecosystem to drive change;
- Learn from your experience, codify it and share it; and
- Think about solutions - SKF has created solutions factories where they can work with customers to solve their problems. Using your own ideas and technology collaboratively with the customer is a great way of getting inside their minds and building a deep relationship with them.
One of the great privileges of life as an academic is the opportunity to travel, to experience different countries and cultures. I never fail to be inspired when I go somewhere different and meet someone new. My latest trip to China was no exception.
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