Digitization begins with nontechnology ‘industrialization’ opportunities
The outsiders’ secret: They simplify and standardize work so that it can be performed by machines – either mechanical or digital. We can call this process “industrialization.” It’s nothing new. For the past century, manufacturers have used industrialization to mechanically automate factories filled with hourly workers. They launched an Industrial Revolution that delivered history’s greatest increase in productivity and economic wealth.
Maybe it is happening again. Today’s digital startups follow the same industrialization playbook. But they simplify and standardize the work of employees who were exempted from the last Industrial Revolution: knowledge workers. It’s not obvious, but the principles of industrialization can be applied to knowledge work.
This is precisely what the digitization startups are doing, even if they don’t recognize it. They search out products and services that are manually intensive for established companies to deliver. They look for inconsistency, inconvenience and frustrated customers. For example, within financial services, products such as consumer mortgages, small business loans and insurance all fit this description. Not surprisingly, these are prime targets of the new “fintechs.” This is the name given to the more than 4,000 venture-funded startups now targeting the financial services industry.
Once a fintech decides on an opportunity – mortgage loans for example – it begins industrialization. Its non-technology improvements resemble those of industrial engineers preparing a product for an assembly line. The startup reimagines every aspect of the product or service. It dissects every step. Wasted activity is designed away. Standardization further reduces complexity. The fintech is preparing to install a digital assembly line – one that often includes the customer as a voluntary self-service participant.
Manufacturers have industrialized like this for generations, from the first mass-produced sewing machines of the 19th century to the cars now partially assembled by robots. Some call this process “design for machinability.” Digital startups are simply redesigning knowledge work for “digital machinability.”
How knowledge workers justify ‘virtuous waste’
Can’t business executives and their IT teams do the same thing – design for machinability? Yes. Most already do it for hourly work but not for knowledge work. That’s because they view knowledge work and its “waste” as different from hourly work. For example, when new sales orders arrive with the usual missing and incorrect data, the knowledge work “factory” simply begins repair work – making corrections. No questions asked. Knowledge workers see these corrections as merely the unavoidable and negligible cost of doing business. But digital startups see a golden opportunity to industrialize and digitize away this costly, avoidable waste.
Unlike a manufacturing plant, a knowledge work factory has no industrial engineers who recognize errors as valuable redesign opportunities. Instead, each employee in the knowledge work factory is expected to manage a dizzying array of one-off corrections. If they think of these corrections at all, they and their managers view these as valuable activity. After all, they are preserving revenue, making the sales force more effective and keeping customers happy. This is virtuous activity – “virtuous waste.”
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