Automation is a Paradox in Twenty First Century

I know what you are you thinking of my last post. Is it my story? Do I know the Protagonist? The answer is ‘No’. But it could have been me…it could have been you as well. The point is not about who is the Protagonist. Then what is the point?

There exists a subtle message in the story but with a much larger context. An ever increasing pressure to improve profitability and deliver hyper growth to be able to return better share holder’s value is at the center of every enterprise. Let us talk about profitability. How does a company deliver improved profitability year on year? It is perhaps one single agenda enough to keep the CEOs awake in the night.

Profitability is primarily driven by two factors - by selling goods /services at a premium cost and by optimizing /cutting operational costs. Let us discuss the first driver. To be able to enjoy high profit margins, a company should have highly differentiated products from its competitors. The product should be able to deliver values like nobody else and should be sold at place where it has least competition.

Simply put, an organization should do everything to protect its products /services become commodity. One way to accomplish this is by creating a culture of innovation and by continuously reinventing products and services to be able to stay differentiated, stay ahead in the curve.

The second factor that attributes profitability for organizations is Automation or Robotization. Often it becomes a preferred approach to attain greater efficiency and economy of scale, and used as a primary tool for cost optimization. Profitable organizations continuously look for areas of operations that can be automated. Technology breakthroughs play a big role in bringing in automation.

For over a century companies have relied on automation to achieve profitability. The dawn of industrial automation can be found during the Industrial Revolution period, staring from 1760 all the way till 1940. It was the transition to new manufacturing processes that occurred in the period. This transition included going from hand production methods to machines, new chemical manufacturing and iron production processes, improved efficiency of water power, the increasing use of steam power and development of machine tools. The end result was better yield and profitability.

However automation led by technology, machine, and tools also brings unemployment to our society. There are dozens of such examples shining in our society today and it is just a beginning. We are at a point where most clerical, accounting and audit jobs can be almost automated. Customer care has been long put up on IVR system. Thanks to campaign automation tools such as Unica and Coremetrics marketing automation is a reality today. Retail has been steadily moving from brick and mortar stores to convenient online portals. Apple’s SIRI will soon take over your PA’s job. Business analysts and forecasting professionals will find hard to retain their jobs as big scale Analytics software will eventually bite into these jobs.  Many back office clerical jobs such as scanning and digitization are automated easily. Many developed cities have fully automated their traffic signals. Even aircraft will soon fly in complete autopilot mode.

Slate's business and economics correspondent Matthew Yglesias recently wrote in his arcticle The Myth of Technological Unemployment, ‘Machines are replacing workers, in other words, but they've been doing so since the cotton gin and the spinning jenny.’

Andrew McAfee, principal research scientist at the Center for Digital Business in the MIT Sloan School of Management has been writing on this topic for a while. In his blog, andrewmcafee.org, McAfee highlighted joblessness concentrating on US manufacturing output and jobs over the past 40 years.

Courtesy: andrewmcafee.org

He said this phenomenon is not necessarily restricted to manufacturing but is true for technological unemployment too.  According to McAfee, ‘employment changes are not due to jobs moving around the world in search of cheap human labor; they’re due to machine labor becoming at least as capable as and cheaper than humans.’

While I don’t want to sound like a communist or a socialist, but there is a solid reason to be concerned.  Despite strong government support and protection West could not stand the heat coming from first wave of outsourcing and automation. If automation takes a priority seat for developing nations where job creation is a fundamental need for next few decades, we are up for a bigger mess. While we cannot undermine the benefits of automation for turning our organizations more profitable, the adverse impact on employment is undeniable. It is a strange paradox. In one hand the quality and quantity of education is on the rise, our population is growing, on the other hand employment is shrinking.

My previous post was just a fictitious example to bring the consequences of automation alive at a workplace. I have been talking about this subject with many colleagues and peers in the industry and trying get their views. It is a common consensus across the board but no one is sure of the way out.

In future I will try to draw specific examples of roles on the lines of fire (Wave 1.0) as an impact of automation and discuss a few protection measures.

Unexpected Friday

It is a beautiful Friday morning and I am all excited to get to office. Finally the weekend is here and I simply cannot wait to see the clock ticking 5 pm. There is a weird silence at office today. I wonder what’s wrong. Like always I start the day sipping my quick cappuccino and checking mails. What happened? Boss has called for an urgent meeting with the entire business analytics department staff members in next fifteen minutes. 

The conference room is filled with heavy air. Everybody seems have a question mark slapped on their faces. The silence is awkward, somewhat scary. I wonder if there is something I have missed out during the week. 

Last couple of weeks has been quite busy for me, mostly due to personal reasons. My little one is going to start her prep school. It is so hard to get an admission in a good school. I haven’t left any stone unturned. There is an assurance from one of the top schools in the city, but they are expensive. I know it is going to be hard, but cannot let go the opportunity. 

Just yesterday my bank called me to collect the home loan approval papers. Finally the EMIs are here. It feels good to be settled.

‘Good morning guys’, a heavy voice breaks the minute long silence. It is my boss. Dressed in Friday casuals, he looks as elegant as ever. He asks everyone to take seats. There is no computer or power point charts. A sense of anticipation is pervasive across the conference room. All eyes are set at the rare end of the table where Boss is seated.

 ‘Thank you all for making it to the meeting.’ There is a substance in his voice.  

‘Our business analytics competency is a great success. Over last five years we were able to reduce the data errors by 70% and improve forecasting by 80%. This was possible due to your hard work and ability to embrace new automation technologies. ’ he is speaking fast, almost without a pause.

‘However our operational costs as a competency center have gone up several folds during last five years. We have invested heavily in new talents as well as on new technologies.’ he takes a pause and leans forward to get a glass of water.

I can see he is trying to make a point but fail to figure out what it is. 

He continues, ‘our leadership team is under tremendous pressure to increase profitability. The new analytics system installed at our competency recently revealed a need to optimize our costs. It turned out as a result of recent automation of our data analysis and reporting process we have freed up significant bandwidth for the business analytics team.’

He takes one more pause and looks around the room. There is absolute silence. Nobody wants to guess what’s coming. 

‘Our new intelligent automated system not only produces faster reports and but offers more variety and granularity. Data quality too has improved due to integrated networked system resulting improved forecasting capabilities and predictability.’ 

Suddenly there was brightness on his face. Last two sentences reflected a lot of pride in his voice. 

‘Our leadership team has indicated it is a time to relook at the business competency center, particularly on resource utilization rate. The new system is able to do twenty member jobs alone at one fourth of time and twice better accuracy.’ 

He picked up his water glass and emptied at once. For the first time people in the room started looking at each other.

‘I am afraid we are asked to right size.’ There is almost a sense of apology in his voice.  

I feel a cold sensation running through my spine. Or is it hot? May be! I cannot figure what it is. A cluster of random thoughts run passes my mind. May be I need some fresh air.