A three-part series.
Machines Can Lower Costs…
Machines play a critical role in increasing corporate profitability. When you invest in technology to automate your processes, economists call it capital investment. You use these upfront commitments of capital to try to lower your ongoing cost of operations. Smart capital investments save you more money over time than what they cost up front. In a traditional, stockholder-centric view of business, that saved money drops to your bottom line so you can better reward your shareholders.
That stockholder-centric mindset is going to press you to make your capital investments in ways that lower your biggest source of ongoing expense – and if you’re like most businesses, that’s people.
This is the classic story of profitability taught in the micro-economics classes of most business schools today. Like all dogma, it has elements of truth, but it also paints an overly simplistic picture of the underlying reality.
When it comes to making capital investments to reduce costs, Japanese manufacturers like Toyota have taught the world a thing or two about this more complex reality. Decades ago, as part of their efforts to improve manufacturing quality, these firms pushed decision-making control to the people closest to where actual economic value was being created – which is to say, to the assembly line floors.
Toyota and other leaders in the quality control revolution showed us that the key to success is arranging the technology around the people, rather than the other way around. They invested in automation technology and they invested in the people best positioned to generate real customer value from that automation.
… But It’s People Who Create Value
Creating value is the heart of business, but sometimes it’s easy to overlook the critical role human ingenuity plays in creating economic value.
We may reach a day when our technology is capable of truly generative thinking. But until then, it’s really just a tool; a tool that’s ultimately programmed by human creativity. We may have to look hard to find the people behind the technology, but they’re always there, meshing their creative insights into what the technology can do with their understanding of what other human souls actually find valuable.
“Pay no attention to that man behind the curtain.”
– The Wizard of Oz
It’s this “generative capacity” – our ability to imagine that which does not yet exist – which most sets human beings apart from even our most advanced technologies. It also happens to be the source of almost all real value that’s created in your business.
In seeking to reduce costs, we sometimes buy into technologies without investing in the human factors that bring it to life and create real value. This is the classic trap of capital investments: money chasing technology in order to chase money. The antidote, of course, is to reinvest in your ability to generate value over time. This doesn’t mean turning away from technology, but it does require a shift in thinking. Rather than focusing your technology on maximizing short-term returns for shareholders, it means using technology to maximize people’s ability to generate value.
When making investments in the technology and people, the key is arranging the technology around the people, and not the other way around.
For the better part of a decade, I ran a technology consulting shop, and through that experience I observed hundreds of organizations adopting various kinds of technology. Eventually I got pretty good at knowing in advance which projects would succeed and which would not. Almost without exception, the difference came down to how thoughtful the organization’s leadership was about the connection between the technology, the mission and the people. This is people-centered technology and it’s key to building deeply social, deeply human business.
Up next in part 2: Unleash the Power of Your Stakeholder Networks