In professional service organisations and digital transformation projects people talk a lot about cost. How transaction costs such as customer acquisition, customer administration and service or product sales can be eliminated if they are delivered swiftly and ‘frictionlessly’ through the web.
The costs of doing business have, it seems, all but disappeared. Zero customer acquisition costs are the target. Customers fall from other customers contact lists like rain from the skies- pitter patter, pitter patter, dollars!
Influencers -at a relative cost of pennies- be persuaded to sell to- and sell- their friends and audiences. No one trusts adverts, but hey, this is my friend…I hope at $2,300 a tweet.
Chatbots can respond to customer queries and home based “AI” will train them in how to talk to bots. If they value their Netflix subscriptions, that is.
Robots, as long as they are actively maintained, never need a day off, or are involved in a live shooter incident after three years of mobbing which causes all sort of HR problems. Not funny, I know, but I have heard conversations…
But what do we mean when we talk about cost? What, exactly, is cost?
Well, in economics, it’s fairly simple. Cost is what you have to give up in order to obtain something else.
But do we know, exactly what it is we are giving up in order to obtain that “something else”?
Again, economically, we have the answer. Cost is something measured in monetary terms. It may be time, effort, material, resources, enablers such as power and light used, risks incurred, and opportunities forgone.
And the amount of money involved in cost is measured by the interaction of demand and supply. The larger the demand and the smaller the supply, the higher the cost.
When I was working in supply chain, long, long ago, one of the issues that irritated me was the fact that costs couldn’t be eliminated across the whole chain. It seemed that they could only be moved from one part of the chain to another. Of course, with accounting systems in use, this was fine. Those costs became what economists like to call “externalities”. They no longer exist. Like magic, they have disappeared.
But. going back to our frictionless service and product delivery systems, where have the costs been transferred to? Of course, you can’t see them. Nothing in my hand, nothing up my sleeve, eh?
Well, unfortunately, these costs have- generally- been transferred to you.
You might not see it yet, of course. All you see is that:
It’s you that will have to spend thirty minutes on the phone or in a chat session with a badly designed bot, trying to get your account details changed. Normally you would just have passed the problem on to your bank, who paid for someone to do it for you — and charged you for their wages- indirectly. So here you are a bank clerk.
It’s you that will have to click on decline when a poorly designed recommender system sends you yet another list of recommendations for products, services, entertainment that you hate. Now you are acting as a data scientist, ‘teaching’ the machine learning algorithm, what you like
It’s you that has to move repeatedly from one folder to another in an operating system that has been designed to be ‘predictive’. But which spends so much time monitoring you, it has no processing capacity left to recall your preferences. Here you are a devops person, trying to make the pattern work in an OS, that should have been scrapped years ago.
It’s you that has to answer- or ignore- the tidal wave of ever-so-friendly faked up ‘personalised’ emails that arrive in your inbox because you have ‘subscribed’ to a mailing list. Now you are a sales person, selling to yourself. Well done if you succeed! You won’t get any commission, but you will get the warm glow of success.
There are lots and lots more examples.
And, of course, frictionless doesn’t mean there will be a reduction in the price you pay. If businesses can achieve a 6% reduction in across the board costs that goes to the shareholder, not the customer. Or is applied to fighting off the competition who has implemented the new system just a little bit better or a little bit faster than they have.
So think about costs, if you can. And who has to bear them. And what that costs you. And what the work you do in aggregate for companies that are supposed to serve you is worth. And the frustration. And the cognitive load. And the affective effort. And…
Anyway, I remember once in Dallas sitting next to a guy listening to a presentation about ‘partnership’ and ‘relationships’. As the presentation came to an end, he turned to me, and in a voice dripping with disgust said “Relationships? In every relationship, there is a f*cker and a f*ckee, and I know which one I’d rather be” Now he might be wrong. He might be right, but frictionless capitalism creates new roles.
And as a first step, we think it’s time for a new definition of costs and a new way of tracking them. Complex systems need effective management and correspondingly effective measurement systems. Money just doesn’t cut it anymore.