During the 20th century, companies managed the staggering feat of providing incredibly low cost, yet high quality, manufactured goods. The economies of scale were the main driving force behind this achievement. In addition, effective management of the production process, international reach of the distribution system and global standardisation of the supply chain played a major role in making this happen. Meaning, for example, the labour cost of manufacturing a washing machine has plummeted over the decades to the benefit of the customers.
The challenge for businesses in the 21st century is to repeat this achievement for services. We tend to think about high quality, individualised, services as critically depending on human discretion. A five-star hotel will have an abundance of highly qualified staff ready to assist. A one-star hotel might not. As the 20th Century mass-manufacturing broke the intimate link between the products and the individuals making it. I predict that 21st century will break the tight coupling between good individualised service and the person providing this service.
This development has of course already begun, and although in its infancy, there are clear signs of things to come. The popular smartphone platforms offer a very good example. Whereas a mobile phone just a few years ago only provided the service of telephony and SMS, we now have around 1.3 million apps on both Apple and Google’s app platforms. Around the globe hundreds of millions of users are continuously adapting their smartphones to exactly their needs and preferences by adding own movies, photos, books, and importantly apps, which each in turn represent added services.
The shift from manufactured goods to manufactured services imposes the challenge of moving away from engaging in one-off customer encounters to maintaining ongoing customer relationships. Smartphone owners may well tailor their smartphones to suit their needs, but it only works if they have an on-going active account with Apple or Google, who will know exactly what apps are installed or deleted. Furthermore, a large majority of these apps are really service relationships embedded within an app — try using a smartphone without an internet connection and most apps will not function.
Automated self-serviced relationships will enable organisations to provide very high quality and highly personalised service journeys for the customers at a very low cost. This, however, also transforms most IT as the core interface between customers and the organisation, and customers will require an even more diverse set of touch points, which will be tightly integrated. For increasingly complex service relationships, the high degree of automated self-service will need to be complemented with direct access to human discretion when problems occur or when particularly important negotiations are needed. Here, face-to-face video connections offered by vendors such as Polycom, can and will provide a competitive edge.
Internally in the production of automated customer self-serviced relationships, organisations will be required to formalise, streamline and codify processes that previously largely have been either done by customers on their own or by complex organisational processes. Such effort will require complex IT infrastructures for all functions within the organisation working closely together.
The significant challenge of successfully providing highly personalised service relationships through automation and customer-engagement will require tight integration of functions across the organisation and the IT function to engage critically in boardroom strategising regarding such relationships. It will require the organisation to rapidly learn by continuously monitoring and engaging customers to innovate relationships.
Dr Carsten Sørensen is Associate Professor (Reader) in Digital Innovation, Department of Management at The London School of Economics and Political Science.
