The much touted causes of the current global recession are many and varied but generally blamed on financial factors such as, interest rates, over indebtedness, inflated house prices, record oil prices, poor lending decisions and so on. There is also a whole raft of companies that have gone into administration whose time had clearly come, i.e. their business model or strategy did not adapt to the realities of the 21st century. For these inefficient and poorly managed businesses a slight change in the fortunes of the economy was enough to push them under. But given the unexpectedly high rates of unemployment and the potential for much more, some are beginning to question whether we are witnessing a more fundamental re-structuring? Is technology beginning to bite hard? Gary Simon, FSN’s managing editor reports.
There is nothing new in the notion that technology is displacing jobs. The application of robotics in manufacturing industry and the transition from bricks and mortar to clicks have transformed swathes of traditional industries. Yet despite these massive changes employment has been surprisingly buoyant as western economies with expensive labour have transitioned to service based industries.
In many industries, companies have been sitting on a time-bomb, i.e. retaining high levels of staff on the payroll and inefficient business models. The newspaper and traditional print industries are a good example of business that have simultaneously maintained a costly print and web presence in the face of falling revenues and rapidly rising paper costs. Similarly, music publishers and re-sellers have retained large numbers of stores on high street even though there is a palpable shift towards downloading on the internet. Retailers, both large and small are realising the growing importance of e-commerce to overall contribution.
But have we reached the tipping point? Have we now passed the stage where a multichannel (traditional and e-commerce) approach is still appropriate and has modern technology more broadly become so affordable and pervasive that we have now gone beyond the point where high levels of employment can be sustained?
Take two local examples of how technology is transforming the SME sector, which it will be remembered is the powerhouse (greatest contribution to GDP and employment) of most western economies. A visit to a local supplier of sports equipment in the high street (actually a specialist in tennis rackets and re-stringing) revealed that the business had fundamentally changed. The proprietor used to employ a handful of local people, but not anymore because they are not needed. “No-one visits the store,” he says, “we are sending out 40 to 50 parcels of goods per week from orders over the internet.” The gentleman who is nearing retirement is planning to close his expensive store and ‘retreat’ to an entirely internet-based business from a modest warehouse on an industrial estate and employ one person to do the packaging.
Or take the vendor of fine bone china who used to occupy two stores in the high street knocked together and employed an army of people to dust the merchandise daily carefully lifting and replacing each item. He also employed specialist sales personnel whom, by appointment, would set out a complete dinner service for customers to view before purchasing. Not any more! It’s the same story. The shops are closing because customers can simply view the merchandise from any angle over the internet and make a purchase. Once again the vendor is selling all around the world but rather than employing lots of staff he now only needs a secretary and a packer.
Agile SMEs it appears are making the running well ahead of their larger competitors and jobs are disappearing at an alarming rate. The changes have been accelerated by SME business systems such as Microsoft Office Accounting, Sage, SAP Business One and others which provide business systems that combine powerful e-commerce engines and accounting systems in affordable and easy to use packages. Together with marked improvements in broadband communications e-commerce capability is within the grasp of even the smallest businesses. In fact the entry level Microsoft Office Accounting is free!
The levels of automation now available at knock-down prices (or free) are astonishing. Paypall integration with sales invoices, ebay integration so that goods and transactions can be automatically shared with an ebay shop, downloadable files from retail banks to aid swift bank reconciliations are just some of the innovations that are becoming standard.
But the prospect of severe unemployment cannot be pinned on retailing and e-commerce alone. Almost every industry sector from airlines through to insurance has a similar story to tell. New systems in almost every business function are promoting efficiency and productivity gains – at the expense of employment. Workflow and collaborative technologies are becoming the norm, allowing organisations to re-shape business processes, carve out wasteful activities and tighten compliance and control. One of the biggest successes has been the ‘purchase to pay’ cycle where document capture, imaging and management systems have revolutionised the ‘handling’ of suppliers invoices and significantly reduced paper flows – especially across multi-sited or distributed organisations.
However, it is not just regular processes such as ‘quote to cash’ or ‘record to report’ that are benefiting from automation. Irregular or idiosyncratic processes are also amenable to change because modern workflow technology allows any user defined process, to be codified and embedded as an application.
Whether at the SME level or more broadly, technology appears to have reached the point where it is affordable and accessible to a wide spectrum of users. What started as a ‘normal’ recession appears to have different characteristics and it is by no means certain that unemployment will be subsequently matched by re-employment. Structural change is part and parcel of this recession and like the other excesses which may have driven this downturn the bubble of bloated processes has also burst.
