Once upon a time, technology improved our lot as humans.
Sure, machine-made shoes weren’t quite as good as shoes hand-made by a master craftsman, but at least now just about everyone could afford shoes.
Technology has improved the quality of our drinking water, saving millions from terrible, life-threatening diseases. Technology made cars safer and aeroplanes more likely to stay up in the sky.
And technology kept the UK safe from invasion in the 1940s – the codebreakers at Bletchley Park and the radar stations along our coastline kept us free when most of Europe succumbed to darkness.
Once upon a time, “technology” was mechanical because there was no other way to do anything. But then digital technology came along.
Early in my career, during society’s first faltering steps in digital technology, I saw transformations in my own world equivalent to those probably experienced by master shoe-makers in Victorian times.
Computers and software took over the world of accounting and made everything cheaper, faster, and better. Month-end took minutes instead of weeks. And the ledgers always balanced.
They weren’t always right in terms of the individual postings, but the total of the debits was always equal to the total of the credits because, within this confined, cosseted, hermetically-sealed digital world, there was no way for it not to be.
Then it gets harder
Whether you’re dealing with mechanical technology or digital technology, it gets progressively harder.
In the early days of computerised accounting, almost anything was an improvement on manual bookkeeping in terms of speed, reliability, and reporting capabilities.
But then a problem common in all technological developments set in…
The Law of Diminishing Returns.
This is just a fancy way of saying that, after a certain point, you get less and less back in return for each incremental investment. And, ultimately, you get back less than it cost you to invest in the first place.
At that point, the only sensible economic decision is to stop investing. When each incremental £1 spent brings in less than £1 in incremental returns, there’s no point persisting.
At least, that’s what happens in theory.
I’ve seen plenty of situations where a business kept investing regardless, yet couldn’t figure out why, despite continuing to invest £millions, they lose more and more money as each month goes by.
There are two main reasons for that:
1 – They’ve been sold on a concept to the exclusion of anything else, including rational thought
Every time I see an organisation talking about being a “digital first” organisation, I know the people running it have jumped the shark. They are so obsessed about making everything in their business digitally-based they have completely forgotten that the job of every business is to put money on the bottom line, not to become slavish, uncritical adherents to the technology equivalent of some TV evangelist.
Government departments are particularly good at doing completely daft things in the name of “digital first”, or some such silly rallying-cry. But that’s because they’re run by politicians who are incapable of rational thought except when it comes to attracting donor funds into their bank accounts.
But plenty of companies, large and small, fall for the charms of some tech evangelist with the sales skills of someone hawking face cream on QVC at 2.30am.
If a tech evangelist can convince you that the answer to everything is “more tech”, you become their meal ticket for life.
No wonder they put so much effort into finding their next mark – the payback to them is enormous.
The payback to you? Often nothing. And, increasingly, it makes everything worse.
You might as well just hand across a suitcase full of fivers and leave everything exactly as it is for all the good your business will experience as a consequence.
That’s often because of this…
2 – Non-existent business cases
There is nothing wrong with the concept of a business case. That’s what every business should be looking for to justify a proposed investment, right?
Except business cases often resemble reality about as closely as slurry down at the sewage farm resembles drinking water.
With machinery it’s a lot simpler: give me £10,000 for this special bit of kit and I’ll increase your hourly throughput by 1,000 units in less than 90 days.
It’s easy to model the impact of those extra 1,000 units, factor in the time-delay until the new system gets up and running, and so on.
You end up with a clear view of whether this proposed project adds any value, and if it does, how much.
And if, like the sensible businessperson I’m sure you are, you’ve done some trial runs as part of the commissioning process to make sure the machine performs as promised before you have to pay for it, you’re pretty safe.
That’s because of a clearly visible reality.
There’s either an extra 1,000 units at the end of the production line an hour later, or there isn’t.
If there is, that justifies the investment. Everybody, including yourself, is happy.
If there isn’t, you’ll tell the supplier to take the machine out and give you a refund.
When we’re dealing with digital technology, that’s not nearly so obvious.
While there’s nearly always a business case, that business case is nearly always garbage.
A typical business case for tech investments
This is slightly unkind for one or two people I’ve come across over the years…but only slightly… 😉
Here’s a typical tech business case, in summary form:
- This report from Gartner (or BCG or KPMG or someone like that) says switching customer services to digital chatbots will save the typical business 20% of their customer service costs.
- In your case, that amounts to £5million a year.
- So give me £1million to make you a chatbot and fire 20% of your call centre operators.
- That way, you get a 5:1 RoI, just in year 1, with gazillions of cash to follow in subsequent years.
- Sign our terms and conditions here and we’ll get started.
That’s not a business case. At my kindest, I might describe it as some sort of existential wish list, compiled by people who should probably get out more.
However, if one of those tech televangelists has already persuaded you that digital technology is always…inevitably…inscrutably the way forward in every conceivable situation, then the likelihood is you are reaching for your chequebook long before the sales rep asked for the sale.
The truth is that, unlike 20 or 30 years ago when using some technology where none had existed previously would almost certainly deliver a positive RoI, nowadays it’s a lot more nuanced.
And the margin for error is a lot smaller than it used to be. Which means the risk of a negative return in reality (whatever the overoptimistic business case said at the outset) is pretty high pretty often.
Of course, if your tech televangelist wants to sell anything, they know they need to come up with some sort of business case. I don’t particularly blame them for wanting to make a sale. The blame lies with people who don’t pause for long enough to challenge the rationale.
That’s almost certain to lead to higher operating costs for your business, even though you run digital project after digital project in the course of executing your “Digital 2030” vision.
Because tech is the future…right? Gartner, or someone, said so.
A coffee shop example
Just in case you think I’m making this up, I visited a coffee shop in London recently which had clearly fallen hook, line and sinker for this digital transformation nonsense.
The coffee shop had pretentions of grandeur and was working hard to recreate the Central Perk vibe, from the coffee shop in Friends.
I’m sure this coffee shop sees itself as a cut above Costa and Starbucks. And I’m guessing this coffee shop is part of a small chain – I’ve never seen one where I live in the north of England but I’ve seen a handful in London.
However, instead of Gunther in Central Perk, customers are greeted by a massive touchscreen ordering system when they walk through the door. Not quite as tacky or as big as those in McDonalds, but along those lines.
I spent some time trying to figure out what menu options my preferred coffee was hidden under and then had a bewildering succession of questions about coupon codes, extra shots, dietary information, and payment details.
This was followed by a section where I had to type my details into this massive touchscreen device in order to get a receipt emailed to me. It was genuinely impossible to get a printout of a VAT receipt while I was on-site – in what could well be a breach of VAT regulations, but that’s not my specialist subject.
Now, I’m sure some tech bro or tech gal sold this giant touchscreen solution to the coffee shop owners as something that would increase efficiency, or some such nonsense.
Yet, in the several minutes it took me to figure out this clunky technology, the two staff members behind the counter were doing absolutely nothing.
Well, nothing beyond chatting to one another and having a giggle about what they got up to the previous evening at least.
I know that’s what the staff are doing at the average Starbucks too, while I’m waiting in the vain hope that someone will break off their conversation and take my order.
But at least in Starbucks they’re not standing there watching me type my order information into a giant touchscreen while they stand by chatting.
At Starbucks I’m just being ignored. At this coffee shop, I’m being humiliated into the bargain.
The numbers make no sense
It so happened that I was in this coffee shop for quite a while as I had two meetings back-to-back. And I saw pretty much the same situation repeat itself throughout the morning.
Two members of staff stood around chatting most of the time, occasionally making a cup of coffee.
Successive visitors struggled with the giant touchscreen, some of them giving up completely and leaving the coffee shop before finishing the ordering process.
Let’s look at the reality of what’s going on here.
The coffee shop has to pay two members of staff regardless – for Lone Worker Regulations reasons, if nothing else. Even though there is only one coffee-making station, so realistically only one member of staff can make coffee at any one time.
I could have spoken my order to one of those people in about 10 seconds and the other staff member could have made my coffee straight away. It’s not like they were doing anything else.
But this chain thought it was a good idea to double the amount of time between when I walked into their coffee shop and the time I got my coffee cup placed into my hand, so they made me spend several minutes messing around with their blasted giant touchscreen.
So, if two humans – two humans whose salaries were already being paid by the business – could have taken my order verbally, and made my coffee straight away, then the investment in those giant touchscreens…together with the barrage of EPOS and stock control modules which ran off the back of them, I’m sure…was a complete waste of time and money.
It didn’t – and couldn’t – make the staff more efficient, because two members of staff were always required, regardless of how much tech was deployed.
A fairly standard till operated by a staff member, instead of chatting and laughing with their colleague, would have given this business all the EPOS and stock control information they needed.
Which means their “putting digital first” investment took money off their bottom line despite some tech evangelist selling them on the idea due to the supposed “extra efficiencies” of going digital.
And that’s just the obvious stuff
As a purely financial, surface level business case, this investment didn’t seem to make any sense.
But here are three other ways this “efficiency investment” might be bad news for their customers. And ultimately themselves:
a) When I…and I suspect most coffee shop customers…have to take longer than necessary to get the result I want (ie a steaming cup of coffee), I’m unlikely to come back any time soon. As it happens, this location was particularly convenient for a business meeting. But there was a Pret a few doors down where I could get the same amount of caffeine in a fraction of the time, and without fiddling around with giant touchscreens for minutes on end.
b) If I was a stalker (which I’m not, to be clear) I could position myself behind anyone keying in their email address to get a receipt and see what they typed in. Now, a high proportion of the people wanting a receipt are likely to want it to claim against business expenses, so it’s fairly likely they’ll enter their work email address. If someone up to no good looks over their shoulder, they now know the person in front of them is Jane-dot-Smith, and she works at Megabank. That’s more than enough information to track this person down.
c) I never actually got my receipt. Why, I don’t know. But now I can’t go back to the coffee shop and ask them to print me another one because they’re incapable of printing out a till receipt. And I can’t get the giant touchscreen to produce one without ordering another coffee, which rather defeats the point. So now I’m down by £4 I can’t claim back – while I’m fortunate that being out of pocket by £4 isn’t the end of the world to me, it is still profoundly irritating. And for some people, I’m sure, would have been extremely bad news.
Time to reflect
So, in summary, this coffee shop has a tech solution which:
- increases costs instead of reducing them, by adding unnecessary tech on top of the staff salaries the business was already paying for
- make no difference to the hourly coffee sales, because only one person could make coffee at a time anyway
- irritates customers through clumsy UX – some of the grumpier ones of which won’t be back in a hurry
- lost customers who couldn’t figure out the giant touchscreen and chose to walk down the road to Pret instead
- can’t produce a receipt for me on-site
- didn’t send me a receipt by email, for reasons unknown, costing me £4
- increases the risks of stalkers and ne’er-do-wells by making customers share personal information in a public place
Put all that together and I’m genuinely struggling to see a positive RoI from a no-doubt substantial investment.
Yet this is true of so much tech nowadays.
If you keep your accounting records manually, there is almost certainly a positive RoI from getting them onto Xero or Sage.
But if you’re already using Xero or Sage, the business case for upgrading to some enterprise grade solution with all manner of reports you’ll probably never use built in almost certainly delivers a negative RoI.
Yet some tech televangelist will set out to convince businesses every day of the week that the increased reporting capabilities alone will pay back the investment they’re asking for.
And every day, around the world, thousands of businesspeople believe them.
If you believe more tech is always the answer and that business cases prepared by suppliers always include all the negatives as well as all the positives, there’s almost certainly disappointment ahead for you.
Although the coffee shop is a fairly trivial example, it’s nonetheless pretty much what every tech solution I’ve seen for a while looks like.
Maybe 10% or 20% of the time there is still a positive RoI for investing in tech. But the odds are increasingly against it.
Next time a tech bro or tech gal comes to tell you about their exciting AI-enhanced robot service capability, start running and don’t stop until you find a good accountant to talk to.