By Jeremy Cox

Today’s faulty thinking about digital technology in service organisations is rooted in a dim view of human nature and an over-optimistic view of automation. Managers typically think of staff as ‘resources’ and automation as a means of reducing costs by replacing people with machines and latterly digital technology. Digital is cheaper, faster, more reliable and more modern… it’s just better, isn’t it?

Sadly, expectations are often confounded when technology makes things harder rather than easier for customers and staff, and renders work processes more cumbersome than before they were automated. E-enabled IT helpdesk requests produce multiple rework loops to clarify a problem, where before an expert and user would sort it out in direct conversation. Document imaging and workflow systems in both public and private services such as benefits, insurance claims or mortgage sales create fragmented, inflexible processes that paradoxically slow down the work, multiply failure demand and reduce revenue, all contradicting management’s assumption that automation would have the opposite effect.

Defaulting to digital in services for reasons of cost is a trap. Instead, we must learn to put technology to work for us and our services – explicitly designing it to complement human activity and enhance value creation. Counterintuitively, this turns out to be the route not only to improved service, revenue and morale, but reduced costs as well.

The origins of faulty thinking

Where does the prevailing attitude to automation come from? Can understanding the origins of the digital obsession help us to frame a better approach?

A century ago, industrialisation triggered the emergence of the ‘command-and-control’ management archetype, with Henry Ford, F.W. Taylor and Alfred Sloan of General Motors among notable pioneers. In grappling with the challenges of building large, complex mass-production manufacturing enterprises, they were instrumental in formulating two critical pillars in subsequent thinking about management and automation: the ‘machine view’ of work’, and the separation of decision-making from that work.

The ‘machine view’ of work sees industrial processes through a reductionist lens as simple, stable and repeatable. Adam Smith’s observation of ‘the division of labour in pin manufacturing, and the great increase in the quantity of work that results’, is illustrated on the reverse of a British £20 note, and this mechanistic perspective has been subconsciously internalised by most managers. In his 1978 Harvard Business Review article ‘Where Does a Customer Fit in a Service Organisation?’, Richard Chase applies the machine view to service, setting out the necessity of isolating customers from the delivery of work. A customer-facing ‘front office’ is used for intake, allowing work to be processed as standardised and automated ‘factory work’ in a ‘back office’ for maximum efficiency.

The separation of decision-making from work makes management responsible for planning, directing and controlling the work of front-line staff who are treated as passive recipients of management orders – a Taylorist construct that has come to seem normal and unremarkable. Managers spend their time in meetings making decisions using aggregated measures and arbitrary targets, planning and orchestrating change top-down. Functional hierarchies keep decision-making removed from the reality of front-line customer-facing work and the experience of real customers.

We default to digital

Both ideas have made the leap from manufacturing to service and dominate management thinking in service organisations to this day. Managers constantly strive to reduce costs by replacing human activity with top-down imposition of standardised automated processes.

Customers are encouraged, and increasingly coerced, to transact online and self-serve. We are ‘channel switched’, through the use of physical menaces (‘you need to check in at the kiosk’), financial penalties (extra charges for transactions with humans) or withdrawal of service (queries can only be submitted online). The initial digital-access-only design for the Universal Credit programme unravels as the reality of dealing with vulnerable people with multiple interrelated issues dawns.

The NHS Connecting for Health programme was a multi-billion pound debacle rooted in the erroneous assumption that technology is ‘just better’ and therefore the point of departure for a transformation programme. Commercial organisations from banks and insurers to utilities and telecoms firms have all introduced technology-driven front-office/back-office designs with digital channels at the front end and IT-driven back offices that produce slow, expensive and poor service.

We have all experienced situations of technology degrading our experience and causing frustration, delay, confusion, and repeat demand, in the process discouraging us from coming back to spend more. The machine metaphor of work is simply incompatible with the true nature of service provision. Health and social care, financial and emergency services, social housing organisations, utility companies and charities do not manufacture millions of identical pins – their challenge is to absorb an almost infinite variety of demand and create value for customers for each of whom ‘what matters’ is something quite different.

Standardisation, functionalisation and automation can disastrously undermine an organisation’s ability to meet those challenges. The separation of decision-making from work compounds the ‘machine view’ problem by making managers blind to the reality of the issues customers and staff alike experience.

There is a clear alternative

The hopeful alternative is to reframe our approach to technology. We should consider it as something that should be designed to complement rather than replace human activity. Putting technology to work in service organisations means learning to listen to customers and understand what matters to them on an individual basis, and learning to absorb variety. By using that as a starting point for better services design, we can leverage technology to work in our favour. At my squash club I can book courts online, over the phone, and in person at the club reception. Sometimes I have a complex request with multiple overlapping bookings and different people paying for courts, and a conversation works best. At other times I’m happy to do all the work myself online; the system can absorb variety and do what matters for me at different times.

An insurance company client found that re-integrating responsibility and decision-making into front-line work and switching the role of management from controlling to supporting staff led to reductions in fraud. Staff were better able to identify suspicious transactions when dealing with live demand than the previous script-driven automated systems. Similarly, levels of fraud in a benefits system fell when expert staff switched (under their own initiative) from back-office processing to face-to-face support and assessment with customers. In both cases, IT was then used to track background patterns and flag suspicious cases for investigation – an example of value-driven, human-by-design customer processes, with technology configured to complement rather than control.

While Airbnb, Uber, and Amazon are notable examples of technology enabling real benefits to customers and disrupting older market models, to consider them as a justification for ‘digital-by-default’ is to miss the point – instead they reflect the way technology can be exploited to better meet what matters to customers. Airbnb and Uber don’t work without good drivers and hosts. The technology complements human activity rather than replacing it.

Putting technology to work

Our inheritance of outdated and inappropriate mass-production thinking has led to a pessimistic view of human nature and an over-rosy view of automation. ‘Digital-by-default’ thinking prevails in service organisations, but the idea of using technology to put people out of work is ripe for consignment to the dustbin of history. Shifting the perspective to one of ‘human by default, put technology to work’, is a profound and to many counterintuitive idea.

‘Putting technology to work’ entails first building service organisations that recognise and respond to what matters to customers. It entails systematically enabling staff to create value for customers. It entails managers and staff learning and improving together to create service systems that absorb variety. Then and only then should technology be pulled to add more value to the delivery of service and truly act as a complement to human activity.

Jeremy Cox

Read similar articles in Edition Three of The Vanguard Periodical: The Vanguard Method and Digital. Ask for your FREE hard copy or PDF.