Jan 5, 2016
A Future for Service Providers
by Brian Atkin in Business
Agile competitors are, by definition, quick to seize opportunities. What they lack in size, they can make up for in responsiveness to owner/client needs, adapting to sudden changes in the marketplace and exploiting disruptive technology such as artificial intelligence. Add to that the willingness of leading owners/clients to listen to those with something novel to offer then you have the makings of a market for new services and products. It has happened before and it will happen again. Established service providers could easily lose ground to up-and-coming agile competitors – upstarts if you will. Those that doubt it need to ask themselves what is special about facilities management that it could, uniquely, buck a trend that has been seen across industrial sectors for the past few decades. This time, technology enhanced by artificial intelligence, will help to accelerate the changes.
Look at Dyson and vacuum cleaners and what happened at Kodak – a company that co-invented digital photography. When you dominate a market and are so locked into a single business model – paper bags for vacuum cleaners and selling film, paper and developing fluids – it is easy to argue that there could be no other way. Besides, “we know what our customers need” was the retort of the behemoths. A customer who hears that is going to prove them wrong at the very first opportunity.
Labour-intensive services are one among easy targets for upstarts. If we look at the current situation, we have small armies of personnel busy cleaning, servicing and watching over facilities. It does not matter how the sourcing model works, it involves significant recurrent expenditure into the future for owners/clients based on labour-intensive operations that can be replaced by machines with intelligence. Owners/clients once focused on capital costs and cared little for operating costs; nowadays, whole-life costing is the norm with operational expenditure a big part of the equation and decision making. Where is the moral dilemma for owners/clients deciding to move from a labour-intensive to a machine-intensive workforce that never takes holidays or sick leave?
With both capital and operational expenditure under close scrutiny, owners/clients are going to think twice about any decision that volunteers them for unnecessary recurrent expenditure. Adding value through services enabled by artificial intelligence, without ramping up the head count, is an attractive proposition and one example of an opportunity to exploit. The living wage will put paid to competition based purely on lowest possible labour costs. Moreover, social responsibility will force owners/clients and service providers away from any practice that might cast them as exploitative. People can be exploited but not machines.
With so much pressure to cut operational costs, why should designers not be designing facilities that reduce to a minimum the need for services such as cleaning, leaving autonomous cleaning devices to mop up the rest? Well, they are. It is about technology, and artificial intelligence is a disruptive technology that is beginning to redefine the delivery and operation of facilities. Owners/clients and operators in Japan, China and the US are busy creating new markets for devices embedded with artificial intelligence that can perform an increasing range of tasks – watching, inspecting, cleaning, maintaining and delivering services – in a controlled environment that is itself embedded with artificial intelligence.
New designs for facilities with built-in self-servicing are an attractive proposition and will become commonplace because artificial intelligence enables decisions to be taken more quickly and objectively, and so will the autonomous devices used to inspect, clean, maintain and watch over them. This is a powerful combination that major vendors without any history of facilities management will capture because they can offer total control over facilities for owners and operators. Some will become operators, encroaching on existing markets and squeezing out incumbents, for the simple reason that they can.
So where might this leave service providers, especially those with large workforces dispersed across numerous sites? In a word, vulnerable. Margins are slim now and will become wafer thin. Does it really look likely that owners/clients will be prepared to pay more to help out established service providers? There needs to be an alternative business model – one that utilizes technology to provide services that add value for owners/clients and which simultaneously create more realistic profit margins for service providers. Of course, there will be those who huff and puff and say they have heard all of this before. Good, let them press on with their own demise whilst the rest build more robust business models and replace them one by one. Who will be the first to go?
When the internet was first touted, some people and businesses went out of their way to pour scorn over any suggestion that it could possibly impact their business or much else for that matter. We know what happened – it continues to kill off the sloths in all sectors – but it has created new industrial sectors as well as reshaping those existing. The energy that went into playing modern-day Luddites could have gone into stealing a march on the competition. But that is one of the nice features and benefits of Darwinism, depending of course on where you stand.
Technology is all pervasive and will continue to shape and reshape our world. Artificial intelligence adds considerable weight to the influence of technology. Simply, some tasks do not need a human operator or minder. We should therefore try to understand how artificial intelligence can help in positive ways to improve what we do and what can be provided to others. To say that robots (including actroids) could never replace a cleaner or maintenance engineer and then to use that as the cornerstone of a business strategy is laughable. Cleaners and engineers are unlikely to disappear, but they will not be required to the same extent as now. The pressure on incumbents will come from two directions and will force the pace.
So, here we are – on the cusp of major structural change. Will you be with it or against it? Now, where I can get a new battery for my Nokia?