The roadmap for service sector digital transformation

Published on the 16/11/2023 | Written by Heather Wright

The roadmap for service sector digital transformation

Three technologies, two imperatives to stay competitive in 2024…

Technology has a key role to play in enabling local services businesses to remain competitive, with cybersecurity-as-a-service, blockchain and AI value propositions key, but underpinning the technologies is a need for ‘humanness’ and sustainability.

That’s according to a white paper from the University of Queensland’s Service Innovation Alliance Research Hub, which says to remain competitive, Australian service firms need to refine existing customer experiences and create service innovations – all while managing both their workforce through ‘the new normal’ and emerging technologies.

“Thinking that ‘signing cheques’ is the only thing you will need to worry about is, at best, misleading.”

Seventy percent of Australia’s gross domestic product stems from services, with four out of five Australians employed in the service sector. The services sector is also a dominant force in New Zealand’s eco=nomy, accounting for 66 percent of GDP in 2020, according to Statistics NZ.

But while IT has been critical for many services, there’s a dearth of insights on how new smart technologies can advance the sector, Professor Janet McColl-Kennedy and Associate Professor Christoph Breidbach, co-leads at the UQ Business School Service Innovation Alliance Research Hub, say.

“Existing academic resaerch investigating the intersection of IT and service has not provided insights on how new smart technologies can advance service and did not provide the kind of insights that could advance managerial practice and academic scholarship alike,” the pair write in Digital Service Transformation: Pathways to Human and Economic Wellbeing.

The Service Innovation Alliance Hub at the University of Queensland set about to develop ‘theoretically and managerially relevant knowledge’ about the digital transformation of service with use-inspired research, identifying the challenges and developing solutions jointly with those affected by the challenges.

“Importantly, ‘use-inspired’ research induces a shift from discovery oriented ‘basic’ research, which focuses on pure knowledge creation, to one where research is aligned with specific socioeconomic needs or managerial challenges – such as the digital transformation of services,” the white paper says.

It’s based on a roundtable with industry representatives and academics and aims to provide strategies to help service sector leaders refine customer experiences, create service innovations and stay competitive in the digital era.

The paper sets out the importance of preserving a human element in service sector organisations, with clear boundaries and human oversight for the responsible implementation of new digital technology.

Unsurprisingly, AI is dominant throughout the report, with McColl-Kennedy calling for ‘human boundaries’ to be established to ensure AI doesn’t overextend its reach.

“For consumers to benefit from AI, they must feel confident and motivated to adopt AI-based services or business models in their lives, which begs the question: ‘How does AI empower consumers?’”

To assist providers in better understanding how to empower consumers, we need to identify what the problem is, what the value proposition is and how including AI/ML in the service may benefit consumers.

“Providers need to recognise the power of AI/ML to customise all aspects of value creation, value delivery, value communication and value capturing for individual consumers. That is, how to nudge consumers to act in the organisation’s best interest rather than necessarily in their best interest. This leads to the question of how to empower consumers to push back to the industry.”

Technologies ability to both positively and negatively impact wellbeing of frontline service employees is also explored, with the report noting that if implemented ineffectively, technology can fail to achieve ROI targets, worsen existing skills/talent gaps and exacerbate negative perceptions among service employees.

Creating AI value propositions presents several challenges.

“Organisations need to identify where and how to deploy AI to create new value propositions. History tells us that this process is not straightforward. It took decades trial and error learning for steam-powered businesses to discovery how to effectively electrify their operations. They had to change everything from the architecture of factories and the way they trained their workforce through to the value propositions being delivered to customers.”

The paper also looks at the growing trend towards businesses leaning on ‘trusted partnerships’ with external providers such as managed service providers to bolster cyber-resilience and accelerate digital service transformation.

“Understanding what and where the ‘crown jewels’ are is an endeavour that service providers often leave to the clients’ discretion to act upon. In this sense, a more customised, hand-holding approach by service providers would go a long way in differentiating them from competitors in the eyes of their clients.

“Currently, the only differentiator clients often see in the plethora of providers they regularly interact with is pricing.”

Against this backdrop, the report says MSPs have the potential to support clients in another ‘epochal transition’ that is characterising cybersecurity – the move from a maturity-based approached towards a risk-based one in which integrating and understanding of cyberrisks into an enterprise risk management approach is paramount.

Businesses and MSPs alike need to establish clear frameworks to get the most out of their relationship, with the report urging companies to ‘dedicate effort to your relationship with MSPs in order to obtain tailored, customised service from them and significant performance improvements’.

“Thinking that ‘signing cheques’ is the only thing you will need to worry about is, at best, misleading.”

While it’s often associated with polarising offerings like cryptocurrency and non-fungible tokens (NFTs), the report says there’s also a place for blockchain technologies in service.

“The biggest opportunity of blockchain technologies in service may ultimately be its ability to help us solve societal problems rather than business problems. This is because blockchain technologies can provide anonymity for users, provenance of data, verification of property and transparency of transactions.”

That means blockchain could enable new applications for identification – know your customer – which could encourage customers to behave in a particular way, such as saving energy or recycling.

“At the same time, shifts in power allocation are also an important prerequisite when attempting to democratise many existing service systems that are currently not accessible for a wider range of non-expert users. In this sense, blockchain applications could enable individuals to start their own banks (ie through P2P lending).”

Rather than attempting to shoe horn blockchain into existing systems in which other technologies might be more efficient, the white paper calls for a companies to look instead to change the norms, rules and authority of existing systems, asking how blockchain might facilitate this change by considering what it can offer that other technologies don’t.

“It might be more advantageous not to attempt to apply blockchain in existing financial systems and institutions, but to consider ways blockchain technologies could enable the creation of entirely new systems or new financial institutions, such as decentralised financial institutions that could overcome the systemic challenges we can observe in the mainstream banking context.”

Alongside the imperative for ‘humanness’ the report says there is urgent need for a new approach to service transformation that considers the sustainability imperative.

“Technology has a major role to play in enhancing the human experience, such as through the provision of improved health in remote communities supported by both combined telehealth and MedTech solutions; or the application of digital twins to assist communities in managing their physical landscapes with precision.

“Increasingly, we are seeing digital technologies as an avenue to sustainable development. Yet, the rise of new technologies also creates disruptions and complexities in firms’ pursuit of sustainability.”

AI can be leveraged to improve short term sustainability performance through automation, greater precision and process optimisation, which can reduce waste in supply chains. Longer-term it has potential for transformative solutions.

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