While products are delivered to consumers, services are delivered with consumers: fast-food becomes slow if guests are indecisive and doctors’ prescriptions won’t bite unless patients take their treatments as directed.
Whether your customer is passive or co-producing illustrates a fundamental difference between a service and a product firm, something that is overlooked by many firms’ performance management systems still largely influenced by industrial theory. To be successful, service firms need capable users, not just well-managed employees.
The above has never been as true as in our ‘service economy 2.0’, a society increasingly characterised by self-service technology. The more responsibility you’re handing over to your customers (think: self-service kiosks and online banking) the more heavily your performance depends on their input.
The new meaning of the H in HR
A telling example of the effect of consumer input is the speed with which a customer enters her order on a self-service kiosk in a fast food restaurant. A study shows that a seven second reduction in service times increases a fast food chain’s market share with 1 to 3%. It follows that, just as fast food firms traditionally invested in training staff to be quick and efficient, so trained and efficient customers also become a competitive advantage for the automated firm.
At McDonald’s, self-order kiosks have bolstered sales by 0.7 percentage points and the restaurant chain plans to have kiosks installed at every branch by 2020.
The firm is famous for designing for predictability, calculability, efficiency, and control in every aspect of its operation — a management approach called ‘McDonaldisation’. While it’s intuitive to understand how they’ve trained their employees with precise proven protocols, it’s less obvious how to train guests who are free agents to be equally efficient. At McDonald’s, one approach to customer management has been to hire actors that pretend to be normal guests but who are there to establish effective customer behaviour norms.
What we’re getting at here is what happens with the H in HR when implementing self-service technology. The humans of human resources are not only employees, but consumers as well. The more automation there is, the more HR strategies will shift focus towards optimising the behaviour of the co-producing consumer rather than employee behaviour.
Empowering consumers: everybody wins
Medication management applications provide good case studies for how nudging consumers’ behaviour, using innovative tech, boosts organisational performance.
Patients are often far from perfect ‘co-producers’ of health care outcomes: an estimated 40% of medication isn’t taken as directed, costing the healthcare system billions in waste every year. Startups such as Echo—the application helping patients self-manage what medicines to take at what time, thereby delivering repeat-prescriptions free of charge so that patients never run out — demonstrate how managing patients’ behaviour outside of the clinic improves the clinic's performance. Launched in 2015, the UK startup is helping the NHS dramatically reduce readmissions by improving adherence.
Borrowing the words of HBS professor Frances Frei, self-service products such as Echo are optimal service improvements in the sense that they look ‘downright altruistic to the customer but actually benefit the company’.
Another win-win scenario in which consumers feel like they’re getting an improved service while the firm improves capital efficiency is Amazon Go, the technology that allows customers to ‘just walk out’ of stores without having to stand in line or unpack and pack groceries.
Comparing Amazon Go’s technology to the grocery store self-checkout processes of the previous decade provides a good lesson for any manager seeking to implement self-service technology. Previously, self-checkout meant a complicated procedure of weighing goods in which the customer performed a more difficult set of tasks than trained check-out staff. The new technology, on the other hand, has translated the original check-out procedure into something much easier; something that not only cuts labour costs but importantly makes the transaction more enjoyable for the consumer.
The firm with the best customers wins
To win with co-producing consumers and self-service technology, the modern service firm should not only invest in easy-to-use hardware and intelligent software, but also in tools to identify and train capable customers. In the service economy 2.0, the fast food restaurant with the fastest customers and the hospitals with the most adherent patients have an unfair advantage.
Clara Lindh Bergendorff is a VC at firstminute Capital.
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