After more than a decade of positive economic growth, all too many UK companies have become bloated with unwieldy bureaucracy and inefficient business processes that are slowing down innovation.
While this is less true of huge multinationals, which are forced to keep their operations tight and lean to compete on the world stage, it certainly applies to organisations below that tier, says Robert Rutherford, chief executive of IT consultancy Quostar.
“Between the 2008 financial crash and now, many companies have seemed to lose focus on the wider world and so have got fat and lazy – and that tends to lead to innovation dropping off,” he says.
To make matters worse, there is a real IT skills shortage, not so much on the technical side, but more in the process improvement arena. “Training and education on the alignment of business systems seems to have dropped off in the last 20 years,” says Rutherford. “It’s gone very technical and application-focused, so there’s a real disconnect between IT strategy and the business. Even in large companies, IT is often just seen as a necessary evil.”
In fact, he compares the situation to the 1990s, when IT departments lacked business-savvy and organisations themselves were “just growing and hiring and buying technology with no focus on business objectives”. As a result, Rutherford fears the situation could now be causing the UK to fall behind other industrialised nations in terms of automation.
Nonetheless, he agrees with a recent contention by HR guru Josh Bersin that the current global recession could offer firms an opportunity to streamline and digitise processes that have sprung up in an ad-hoc fashion but are no longer fit for purpose – if they are willing to take it, that is.
“Some companies are now starting to analyse what they’re doing, how to become more competitive and where they could gain more margin to invest and help them grow,” says Rutherford. “But it’s not necessarily just about cutting costs – it’s also about seeing the opportunities offered by automation and the value they can get by taking advantage of it, so as to be well positioned when economic recovery comes.”
The challenges of automation
Although automation opportunities vary by industry and individual company, common possibilities for many include optimising back-office functions, such as finance, and improving customer interaction with the business. Indeed, the Covid-19 lockdown has already kick-started this process in some areas, according to Josh Zaretsky, a partner at strategy consultancy Altman Solon.
“There is certainly a case to be made that the current global situation and resulting recession have accelerated some aspects of digital transformation,” he says. “But while it is clear that software-as-a-service-based home-working tools are high priority spend areas right now, it remains to be seen whether companies will continue investing in major operational change projects – especially transformational projects such as automation – during a downturn.”
A key stumbling block, which can make it hard to come up with a winning business case for doing so, is that many companies have lost the art of mapping and documenting their ways of working to ensure a process of continual improvement.
“People expect technology to automate things, but how can you know what to automate if you haven’t even defined your processes?” says Rutherford. “You can create automation projects, but if you also don’t understand where you are or where the competition is, how can it ever drive change or improve things?”
Such lack of insight can also lead to the careless introduction of what Daron Acemoglu, a professor in economics at the Massachusetts Institute of Technology, describes in a study entitled Unpacking skill bias: automation and new tasks as “so-so technologies”. These technologies, which include automated attendant systems and self-service checkouts in supermarkets, may cut costs for businesses to a certain degree, but in reality add minimal value, he says.
To make matters worse, Acemoglu says this kind of automation also results in cuts to real wages, a situation that disproportionately hits lower-paid workers.
Benefits versus costs
So, even though customers are unenthusiastic about having to put their shopping through the checkout themselves and workers see little benefit in self-service machines either, such “so-so technologies” cause firms to believe they have “no reason to hire more workers or pay other workers more”.
The crux of the matter here, says Rutherford, revolves around opting to do something purely for profit, which rarely works effectively into the long term. “It has to be a win-win,” he says. “If something is one-sided and you just want to extract more money from a situation without providing any benefits, everyone ends up losing – employees lose, customers lose and ultimately so does the business, as it’s not good for your reputation and people go elsewhere.”
As a result, a key question that each organisation should ask itself is whether “the value-added benefits of automation outweigh the costs, and whether there are other implications and downstream effects that need to be considered”, says Zaretsky.
“It may sound old-fashioned, but we always advise decision-makers to complete a full business case ahead of adopting new technology, in which they seek input from multiple stakeholders, including those who are excited about the new technology and those who are sceptical about it. Doing so also has the added benefit of identifying all the functions and teams that will be impacted.”
Also vital in this context is setting out key performance indicators to understand which outcomes are important to both individual departments and the wider business. Measuring these outcomes and benchmarking the business against its rivals and peers are key considerations too.
As a result of all this, many organisations still have a long way to go before they will be anywhere near being able to roll out the technology du jour, artificial intelligence (AI), says Rutherford.
“There’s no point starting to introduce AI if you’ve not done the groundwork and put the basic foundations in place,” he says. “Too many organisations implement technology when their house is not in good order, but it’s not a big bang that’s required here – it’s an iterative approach.”
One organisation that has got its house in order, though, is accountancy firm Brookson.
Case study: Brookson
Brookson started its current automation journey five years ago, with the aim of transforming itself from being a traditional accountancy operation into a customer advisory services business aimed at contractors and freelancers.
The company, which currently employs about 300 people, began this transformation by rolling out Alteryx’s algorithm-based analytic process automation (APA) software. This automates administrative activities, tasks and workflows that accountants have traditionally undertaken using Excel spreadsheets and integrates them with appropriate data from a range of internal source systems.
A customer portal also consolidates customer information into one view and enables Brookson’s 15,000 clients to undertake tasks such as raising invoices, claiming expenses and viewing bank statements. It also provides a range of other services, including real-time personal tax advice.
Not only does such automation enhance the customer experience, but the amount of time staff need to spend on admin tasks or dealing with basic contact centre queries is significantly reduced. This frees up their time to focus on offering customers value-add consultancy services, supported by APA applications that provide them with real-time decision-support information and insights.
Brian Milrine, Brookson’s business strategy director, says: “While we used to spend 80% of our time on book-keeping and admin tasks and 20% on engaging and advising customers, we’re now well on the journey to flipping that on its head. But what’s more important than any savings we’ve made is how we’ve changed our cost base by taking on more of a customer advisory role – it’s this that’s the game changer and gives us a competitive advantage.”
The shift has led to “healthy growth” in the firm’s core contractor market when growth across the wider market has been flat, as well as a 75% boost to its NHS business, which provides payroll processing services for locums, says Milrine.
But there have been staff implications in making such a substantial shift in focus, he acknowledges. On the one hand, the company’s two original data scientists, who had previously generated reports for accountancy personnel in SQL, left because they were unhappy with losing control of the process as it became more automated.
On the other hand, the “high-velocity, low-coding” nature of the APA software has made it possible to “democratise” the creation of a range of new applications and workflows by enabling interested accountancy personnel to take over their role. Five currently act as permanent APA developers, and a further 15 also have high levels of skills in this area.
“A couple of data scientists could never have done all of this in SQL because of all the workflows,” says Milrine. “You really need accountancy knowledge to build and test everything, so we’re turning accountants into analysts who can take information and interpret it, and also start to target customers if they can see they need help.”
The ultimate aim, though, is to automate the entire customer experience, so it is no longer necessary for them to access the portal to perform tasks, such as raising invoices or providing bank statements. Instead, the idea is that the system will, over time, automatically integrate data from a host of different internal and third-party source systems, removing the need for manual intervention of any kind.
“With this kind of connected ecosystem, where you’re pulling in information from lots of different sources for analysis, it’ll be possible to provide a service in which customers won’t have to go to a portal at all as everything will tick over nicely in the background,” says Milrine. “If something goes wrong, you’ll just ask your accountant to call or they’ll call you, but you won’t have to worry about anything day-to-day as it’ll all be done for you.”