A human customer service agent at Amtrak in the 1970s, using “a rotating file system commonly called the ‘wheel’ or ‘drum.’ Agents sitting around the ‘wheel’ penciled in a passenger’s name on a paper diagram to reserve space, and the compartments were used to organize each date’s bookings.” Photo: Amtrak archives
By James Myers
The drive to increase business automation is powered by the profit motive. It’s especially so in times like now, with fierce competition for customers and economic challenges like high costs and interest rates that emerged from the global pandemic. Investors and algorithmic traders are unforgiving to companies that fail to report increased profits quarter after quarter, driving stock prices down sharply as they exit for better short-term returns.
Investing in technology has always been a risky proposition, and perhaps especially so now given the fast pace of change and uncertainties about future directions. A new innovation can make a once-popular technology rapidly obsolete, and history offers many cautionary tales of this – does anyone recall how Apple’s introduction of the iPhone with its graphic interface buried the once-invincible and hugely-profitable Blackberry and its physical keyboard?
The particular risks for technological investment today include:
- Lack of foresight: while poor management can often be the cause, an experienced tech investor told me that ‘fear of missing out’ is now driving much activity as businesses follow the lead of competitors when none have a clear picture of eventual outcomes.
- Rapid change in technological needs: With offices and schools closed, the pandemic caused a rapid adoption of video and mobile technology delivering simpler, reliable, and personalized experiences. It also accelerated the transition to cloud-based computing and services. The pandemic’s disruption could not have been predicted, and the introduction of generative AI in November 2022, with OpenAI’s ChatGPT, seemed to take the world by surprise. The question is: what other unpredictable events could turn the technological landscape on its head tomorrow?
- Increased due diligence and lower valuations: The post-pandemic global economy is very different from the one that existed at the end of 2019 when, as the tech investor told me, “money was flowing freely.” In contrast to the situation less than four years ago, he said, financiers are now engaging in a far more rigorous due diligence process before investing, and they’re demanding a greater proportion of the profits which often dilutes the capital of the innovators who created the business in the first place.
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Microsoft founder Bill Gates underestimated the potential of the internet.
Quantum computing: While many think a viable quantum computer is a decade away, huge amounts of capital are already being invested in the technology. A sudden breakthrough, for example the discovery of a superconducting material that operates at room temperature, could reduce costs radically and spark a wave of innovation with the speed and accuracy of quantum that can’t possibly be predicted now. In 1995, Microsoft founder Bill Gates joked that the internet wouldn’t replace radios and tape recorders, but he was very quickly proven wrong; could there be a similar forecasting error with the quantum future?
- The unknown consequences of proposed and potential regulations: The AI Act that the European Union is in the process of adopting applies a risk-based approach to technologies and will restrict the riskiest, such as face recognition. Nations outside the EU may begin to adopt similar, or more restrictive, rules. Events like the November 2022 collapse of the cryptocurrency trading platform FTX may result in greater regulation of technology in the financial sector. Desperately needed measures to curtail cyber-crime, if they ever arrive, could have significant consequences for existing technologies, as could the development of quantum-safe encryption.
Can all functions be automated?
The immediate profits that technological automation can deliver are evident everywhere. New processes are introduced, efficiencies are increased, and time is reduced when costly human labour is eliminated. Humans are more expensive to employ than computers. Humans require time to train. Sometimes we get sick and can’t work, or we misrepresent our skills during hiring, and each year we tend to want higher wages and more benefits. Computers are much more compliant, and they don’t require paid vacations either (except for a bit of downtime for the occasional hardware repair or software update).
Can every business function be automated? A huge amount of research and development is ongoing to discover more ways to automate tasks that humans currently perform, whether it’s picking customer orders from warehouse shelves or preparing financial forecasts. ChatGPT and other generative AI tools promise far greater automation for tasks like writing letters, marketing materials, and even software code.
But is there a limit to cost-effective automation? Is there a point of diminishing return on investment in automation?
Consumers can benefit from technological automation, often in the form of lower prices and faster service delivery. But can automation become more costly to a company, in the form of lost business and customer dissatisfaction?
The problem with customer satisfaction is that there’s no reliable way to measure it. In a time of economic constraint, customers are becoming naturally more demanding and more fickle. Customer bases are now global, and don’t connect with a local human point of contact. As the tech investor told me, many businesses know little about their customers, other than some basic contact information obtained at the point of sale or signup and the data they might buy from a broker. It’s one of the reasons the data brokering industry is flourishing, as business try to piece together as much information as they can to understand the profiles of their current and potential customers.
As a customer of many businesses, I see a real risk of diminishing returns from dissatisfaction with automation, when the first priority of some businesses turns to serving the needs of their investors and places their customers in the back seat.
How many times have you, like me, tried to contact a human customer service agent when the online help (now often a chatbot) is unclear, doesn’t address your one-of-a-kind problem, or refers to menu options that no longer exist?
Finding a telephone number that’s often buried in small type under layers of menus is challenging enough, and then there’s the sometimes-epic time on hold waiting for service from the few-as-possible agents that companies maintain to handle a flood of questions and issues. And don’t get me started about the infuriating layers of telephone prompts I have to navigate before being put on hold for an agent. Not long ago, I had to wait 90 minutes on hold with a cable company before a human would speak to me to sort out a billing problem, all the while being told by the company’s recorded message that I really should try to deal with the problem online (for a solution that didn’t exist).
Last year, I wrote about my experience with Lufthansa and an airline ticket that should never have been sold. No doubt, their automation told the company that a 1-hour layover in Frankfurt is sufficient – most of the time – for an able-bodied passenger to make his way across a vast terminal, from domestic arrivals to international departures. And no doubt they calculated the cost of hotel and transportation for a stranded passenger, like me, was more than covered by the profits from the successful 1-hour connections. It’s only because there was no accounting in their profits for the cost of my time.
In cases like this, is the business serving the humans who provide it with its profits, or is it serving its investors? Putting the investors ahead of the customers could, in the end, harm the investors most. Who wants to invest in a business with unhappy customers? Competitors will quickly fill the satisfaction void.
At the end of the day, the real question with technology is the “why” question.
Why do we prioritize one technology over another, and for whose benefit? What is the philosophy behind our technological options? The world now faces, as we wrote in October 2022, two fundamental technological choices: either prescriptive technology, that requires humans to adapt to its methods and limitations, or holistic technology, which is flexible and adapts to evolving human needs.
My vote goes, wholeheartedly, to holistic technology. And in the long run, I think businesses will find that to be the more economically sustainable and profitable type of technology.
