This post is focused on the second of three themes on how companies can successfully thrive through a digital transformation.
It’s what I call Utilization3 (utilization cubed). The successful companies I study have extended beyond traditional means of driving productivity through high utilization of resources. They are innovating and successfully executing new methods with the effect of yielding high levels of productivity for themselves, their partners and their customers.
The first dimension of utilization is the traditional method. It’s basically Lean methodology. Cut wasted efforts out of your processes and your resources will become more productive. Mark Graban writes extensively about this for healthcare and does a great job explaining it in very simple terms. John Frehse specializes in labor strategies at Ankura and I wrote a book on this subject several years ago, called Lean Labor.
The second method of improving utilization is to take full advantage of not only the physical attributes of your workforce but also the skills they bring or have developed on the job. In healthcare, Mark Graban talks about working to full licensure. This idea has been around a long time but not as many company takes advantage of it for two reasons. The first is that often companies simply think of their most expensive resource (usually equipment) as the highest priority to utilize. But this can lead to a sub-optimal customer experience because the overall process is not optimized. Secondly, it’s relatively easy to optimize one resource. Optimizing a process including labor skills means thinking through the entire process, redefining jobs and potentially targeting different segments of a market. This is not easy, but those that get it right wield significant advantage.
Manufacturers have done this historically by training their line operators to perform simple tasks such a adjusting machine parameters such as tooling alignment, temperature, speeds and feeds to keep the line running rather than the traditional method of calling a more expensive maintenance mechanic for every adjustment. The benefit is this frees up the mechanic to spend more time on preventative maintenance.
As I write about in my latest book, Walk-in medical clinics in Pharmacies have redefined a healthcare service by focusing on non-acute patients and hiring nurse practitioners versus trying to create a more efficient primary physician service delivery model.
Southwest Airlines has a fleet of approximately 550 planes in its system. It’s the Boeing 737 with a couple of variations. Is the plane optimal for every route? No, but Southwest has designed its business model and target markets for where it is efficient. And guess what, it’s significantly easier to train mechanics, and move crews throughout their system when everyone can perform their role efficiently on every plane in the fleet.
The last method is the hardest to achieve but is turning industries upside down. This method is crowd-sourcing. Simply put it’s leveraging a network of “part-time resources” in a more efficient way than if a company simply owned/managed the resources full-time. The trick in this technique is at the heart of digital transformation. Companies must first attract and then efficiently co-ordinate those resources to deliver an even better customer experience than if resources were dedicated to that particular task for a single company. This is well explained in the book The Digital Matrix by Professor N. Venkat Venkatraman
The most well-known examples are Uber with cars and drivers and Airbnb with short term housing and hosts. If you are not familiar with how they work (and the controversies they are causing) simply type their names into your browser.
I’m continuing to see interesting examples along these lines with more traditional companies. Walmart has woken up since hiring Marc Lore through its acquisition of Jet.com and is now innovating like never before. Last June, it announced a method and experiment to improve customer experience and reduce delivery costs by paying their own employees to drop off packages on their way home from the store.
It turns out customers don’t really love assembling their own furniture…but were willing to put up with Ikea’s business model because they loved the furniture and prices…until customers began to find people willing to assemble the furniture for them on Task Rabbit. In order to scale this, Ikea purchased Task Rabbit and can now has more control over the total customer experience.
Airbnb continues to evolve this crowd-sourcing model to extend what it can offer to its customers beyond housing/hosting to include Experiences. It has developed a platform that allows small businesses and individuals to offer a local experience to its customers. This solves two problems…Airbnb’s customers now have more transparency in what activities and tours are available locally as well as reviews. Secondly, local providers have an inexpensive way to market their services to a global, highly targeted audience.
It’s an exciting new world out there and as these companies have demonstrated, it is not simply building robots and developing artificial intelligence. Managing traditional resources, including people, remain squarely in the center of these successful companies’ strategies.