Automation Won't Replace People As Your Competitive Advantage

The advantages that automation provides to your organization are the same ones it supplies to everyone else. Technology offers benefits too numerous to mention, but competitive differentiation may not be one of them.

In a global economy where the lowest cost is so fungible that Chinese companies are now relocating manufacturing capacity to Texas, identifying, measuring and managing value requires attention to the messy details of employee engagement, managerial effectiveness and strategy execution as the following article explains.

They may not be found on the balance sheet and income statement - but are no less important to future success for all that.JL

Tom Davenport and Julia Kirby report in Harvard Business Review:

In our competitive economy, managers may be too easily seduced by the advantages of automation. In relentless pursuit of lower costs and greater throughput, they might miss the fact that advantages in storytelling, judgment, and other human strengths are much harder for competitors to replicate.
Geoff Colvin’s new book insists that humans are underrated. It’s a fun follow-up declaration to his earlier book, which taught us that talent is overrated.
The two are not as incompatible as it might seem. Colvin’s point in the earlier book was that talented people always succeed in the context of a system, and it’s hard to rate talent independent of its context. As a result, stars usually get more credit for their successes than they’re due. (Boris Groysberg’s research backs this up by showing how the high performance of stars in various fields turns out not to be portable when they are recruited away by other employers.) Indeed, it’s often a well-designed system that makes someone valuable; the best systems are able to get “A” results out of “B” players. If you can build that kind of system as an enterprise, there is no reason to break the bank recruiting superstars or otherwise allow the top percentiles of your talent to walk away with “winner takes all” rewards.
As a follow-up, however, the point Colvin is underscoring in the new book is that the effective organizational system isn’t just a mechanistic one of capital investment. It’s a human system that relies heavily on unique human capabilities. So collectively, human talent is not overrated; it is extremely valuable. That’s an important truth to assert in an era when smart machines are taking over so many tasks that were in the past human contributions, including not only manual but increasingly knowledge work.
Colvin’s primary argument is that there are some unique human capabilities, like empathy and storytelling, that will keep people employable even as automation chips away at the content of most jobs. He further contends that, even in areas where machines do match or exceed human capabilities, there will still be an insistence that certain tasks and decisions remain in the hands of humans. In courts of law, for example, we humans will not stand to be judged by non humans. When we arrive in a medical office to hear a diagnosis, or pay to be entertained by either comedy or drama, we’ll always want it to come from someone who shares the human condition. The claim sounds plausible, though Colvin offers it as more of a prediction than an assertion with any empirical backing.
The question is: who is Colvin trying to convince that humans are underrated? To a large extent, he’s speaking directly to us humans, who may well lack confidence that we can continue to provide a superior value proposition relative to advancing technology. Colvin assures us we can, if we stop trying to win the race with the machines and instead run our own race, drawing on the strengths we have that cannot or will not be programmed into computers. The last lines of an article he excerpted from the book express it very nicely:

Staking our futures to our profoundest human traits may feel strange and risky. Fear not. When you change perspectives and look inward rather than outward, you’ll find that what you need next has been there all along. It has been there forever.
In the deepest possible sense, you’ve already got what it takes. Make of it what you will.

But it isn’t enough to convince ourselves and our fellow worker bees – who are eager to be convinced in any case. The reason Colvin’s argument is important is because he is speaking through the megaphone of Fortune magazine to the real audience that has to be convinced: the management community. In our highly competitive economy, managers may be too easily seduced by the apparent advantages of automation. In relentless pursuit of lower costs and greater throughput, they might miss the fact that advantages in storytelling, judgment, and other human strengths are much harder for competitors to replicate.
Our hope is that many managers will be persuaded by the instructive examples Colvin offers. His favorite, Southwest Airlines, certainly doesn’t lack for press about its positive organizational culture and cheerful customer-facing employees, but the example makes a more nuanced point about the contribution of people in a capital-intensive business. Southwest operates in an industry that has long been obsessed with asset utilization as the key to competitiveness. And making the minute-by-minute decisions required to maximize asset utilization is unquestionably done better by smart machines.
But optimizing asset utilization isn’t enough to sustain a competitive advantage. As we’ve argued elsewhere, once smart machines are built to solve problems in asset efficiency (or indeed any area of operations) they very rapidly spread and become pervasive across an industry. Therefore, they cease to provide a competitive advantage. In airlines, for example, seat pricing and crew scheduling optimization systems are practically part of the woodwork. Like ATMs in banks, they gave their originators a fleeting advantage but quickly resolved into a new normal. What they did not and will not create is an enduring competitive advantage.
For that, you will always need good people. And you need a system that engages them and allows what is unique and valuable about individual people to be leveraged – not a system that compels people to perform standardized acts in the same way and therefore commoditizes them as undifferentiated human resources.
This is Southwest’s advantage, and the lesson other companies should take away from it. Invest in the machines, but don’t expect them to reduce your reliance on people. Business isn’t chess; smart machines alone can’t win the game for you. The best that they can do for you is to augment the strengths of your people — you know, those humans you’re at risk of underrating.