POINT OF VIEW

Introduction

In this report, Richard Whyte, CEO, gathers his thoughts on how business efficiency will look in 2023.

Operational cost is likely to be a high priority for many businesses

In the run up to 2023 companies have experienced significant increases in the cost of raw materials, energy, and salaries. In some industries, these costs can be passed directly to customers, but for many the competitive situation makes passing costs a significant problem.

Managing the risk of losing skills and staffing capacity is on the list

Working from home and the great resignation, followed by the great redundancy may have led to a less steadfast workforce with weaker social cohesion between team members.

Cyber security and IT resilience is going to be high on the agenda.

The war in Ukraine and international competition has increased the intensity of cyber-attacks and the likelihood that smaller businesses will be impacted, perhaps because larger businesses have made themselves harder to breach.

Unpredictable business environment and changing buying behaviour

Changes in taxation, consumer inflation, and international competition for resources mean that consumers are likely to become more reticent to purchase luxury items and that the business environment continues to be highly unpredictable.

Increased cyber risk, reduced workforce cohesion, and growing staff risk are individually important but also accompanied by a plethora of less obvious challenges.

There are a plethora of other trends and themes that are important to specific industries or that broadly impact all businesses. I will save them for another day and focus on the four mentioned here.

1. Operational cost
2. Staffing Risk
3. Cyber security and IT resilience
4. Business environment and buying behaviour

Operational cost

Operating costs are incurred during normal business activity, maintenance, and administration of a business. They include the cost of goods sold, cost of sale, rent, salaries, recruitment and overheads, and general maintenance.

Supply-Side Cost

Increased supply-side costs that effect raw materials have a direct impact on manufacturers but also flow down into all members of the supply chain. Some costs, for example energy, will add significant expense at every level of the chain.

This is an obvious source of new cost that is difficult to manage, however there are some approaches worth consideration.

1. Reduce waste using improved infomation about production volumes
2. Future demand

Improving the ability of a business to predict demand can be used to buy larger quantities at appropriate discounts, and to right-size deliveries to reduce loss through spoilage. Accuracy of the approach will depend on accurate models and the ability to spot trends in the data.

Accurate Data Capture is a critical capability in this case. The quality of capture is generally measured by the accuracy, completeness, and timeliness of the data. The ability to attach IoT devices to the same collection as enterprise information can significantly improve these measures.

Spotting important “situations” in vast amounts of data will depend on analytics and a good understanding of what is important, as well as the application of statistical methods to spot trends and anomalies.

Responsiv will help you to formulate ways to reduce waste and select an approach. We have access to skills in all aspects of this problem and with developing and operating solutions developed to a budget and outcome.

Operating costs can also be reduced by improving the staff efficiency to allow existing staff can focus on the exceptions and let the software take the strain. Automation is an opportunity to simplify and extend processes to mitigate risk.

Responsiv Cloud Custom Platform is a cost-effective way to host and operate a solution specific to your problem.

Changes to company culture and working practice may lead to resistance. This is a common problem that can be managed by involving and learning from those affected and responding to concerns in a positive and constructive way.

Staffing Risk

Managing the risk of losing skills and staffing capacity is another fear, priority, and cost for organisations.

Working from home and the great resignation, followed by the great redundancy may have led to a less steadfast workforce with weaker social cohesion between team members.

Increased salaries and bonuses directly affect businesses because staff are lost to more lucrative positions; because the salary bills are higher to keep skills in their current or promoted positions. Recruitment, training, and allowing time for new staff to gain experience are obvious sources of cost, however the reduced capacity and lost understanding of how your business operates are often overlooked.

Figure 1; Staff Risk, Symptoms, Strategic and Immediate Outcomes

Loss of knowledge, Operational Skills, and Capacity

Your staff have skills, relationships, experience of the role, and experience of the company. When they leave all of this is lost. Even experienced recruits need to learn the company as well as peculiarities of the role. It is likely that for many roles the performance of experienced, long-term employees will outperform recruits for several months.

Teams that are under pressure tend to become unpredictable. Individuals revert to their comfortable ways of working and the overall consistency of response is reduced. The impact on customer satisfaction can be considerable.

Operational skills are those skills needed to “do the job”, for example accountancy or programming. Loss of these skills can be problematic and is often the focus for concern, however loss of knowledge can take longer to replace.

Changes to company culture and working practice may lead to resistance. This is a common problem that can be managed by involving and learning from those affected and responding to concerns in a positive and constructive way.

Responsiv can help understand the problem and embed “how things are done” into automated processes that help people to know when things need to be done, and how to do them and record the outcome.

The Responsiv Cloud Automation Platform can be used as a foundation for capturing company knowledge and operational skills as well as overseeing the work of staff to reduce mistakes and mitigate customer satisfaction risk.

Most staff risks will end up with customer satisfaction issues, loss of revenue and brand damage. The costs associated with loss of key staff members can be crippling.

Responsiv Cloud Automation Platform is a cost-effective way to host and operate a solution specific to your problem.

Cyber Security and IT Resilience

Companies are exposed daily to cyber-attacks that are mostly repelled by Internet firewalls.

Digital Transformation initiatives often require companies to expose sensitive information and controls to the Internet; many of which have previously been deep in the bowels of the business.

Application Programming Interfaces (APIs) allow machines to speak directly to other machines, or more importantly, for businesses to communicate directly and quickly with their partners and customers. The need to properly design and secure APIs will be an added consideration for many organisations that have previously avoided the issue.

Figure 2; Cyber risks

The risks stemming from a cyber-attack are focused on data and access to capabilities that are required to operate the company. Data can be lost because an attacker has copied it to use against the company or the data subjects, however it can also be lost because it is encrypted, changed to add inaccuracies, or deleted.

Why protect that?

A trivial example is a small company website. No financial information, no sensitive information, and no connections to internal systems.

A blackmail attack may simply change the website pages to include obscene or insulting wording that will impact the company’s reputation. Or change the passwords to deny access or many other changes that are not obvious but lead to significant financial loss.

Other examples are read-only APIs and their implementations, data leaked to browser pages that can be reverse engineered, and many more.

Loss of operational capability

Loss of operational capabilities covers a multitude of situations from denial of service (DOS) through to encryption of desktops and servers, to random changes of passwords. In all cases the distraction and data integrity, as well as the undermining of staff and customer confidence can be catastrophic.

Responsiv Consulting can help you understand the issues and review your existing approach to these risks. Responsiv Unity API Bundle contains all the software required to deploy a compartmentalised infrastructure that can protect your systems and data. Alternatively, the same capabilities are available on the Responsiv Cloud. (See Responsiv Open Banking Platform)

If you are using the IBM API Connect products we have significant experience with installation, upgrade and patching to maintain your cyber protection.

Business Environment and Buying Behaviour

People are more conscious of the cost of living. In personal lives, many are considering changing spending patterns and watching the pennies. This general awakening is likely to spill over into their working lives at the same time as companies are clamping down on expenses and unnecessary expenses. Implementing savings is not a hard sell.

The effect is to extend buying cycles and to involve more decision makers in the purchase, to be focused on capital costs, and to consider cheaper options that may be less sustainable.

Risks for businesses is highest when short-term savings undermine long-term viability, and when savings in one part of the business cause disproportionate costs in another.

This is particularly true when information or processes hand-off between departments.

Business Process Automation can help you understand cost saving trade-offs and mitigate their impact.

Intelligent automation is the method of automating key business processes to increase overall organisational efficiency. It Is also known as cognitive automation and combines three tools – robotic process automation (RPA), business process management (BPM) and Artificial Intelligence (AI).

Sustainable Efficiency

It is easy to think that a business can sustain a level of output and that the demand will continue at optimal levels. This is unlikely; a business geared to a particular demand will become inefficient when the demand changes.

Fortunately, software and business automation can respond to changes in demand. With the right license flexibility, this elasticity can be used to maintain efficiency.

From my point of view, to be sustainable a business must balance staff capacity and need with demand and be capable of flexing when demand changes.

Addressing Staff Risk

New staff need to learn the job, and large organisations must standardise in a way that often stifles innovation. Many teams break when put under pressure, and I have observed that staff under pressure will often revert to the way they were first taught the job. When teams are recruited over a long period the inconsistent approaches cause customer satisfaction and control problems.

Automation of part or all of each process can reduce divergence without undermining personal innovation and remove monotony without undermining quality or personal control.

Business Efficiency – Point of View

It is my point of view that business is different. Business Efficiency is about profitability for a given quantity of combination of investment, operational effort, and risk. Of course, Mr Taxman reduces profitability, so he must be considered in the mix.

Perfect Business Efficiency is a mercurial nirvana just beyond our reach. The perfect solution to customer demand is quickly undermined when customers change their behaviour. All solutions must be developed with three things in mind:

1. We are probably wrong; this solution must be adaptable to stay relevant
2. If the market changes the solution must be capable of significant and revolutionary change in a way that supports business transition
3. A good solution creates opportunities that don’t exist today

Customer demand changes, and suddenly the perfect solution is over or under specified, staff skills are not sufficient, or the hours of business don’t compete.

Recruiting staff can lead to reduced efficiency and inconsistent customer experience. The perfect team is shattered by a resignation. In engineering, efficiency is a measure of outcome for a given effort; or put another way, how much success can I achieve with the smallest effort?

Next Steps

The first step is to assess your current state and where there are opportunities for improvement. Speak to our Consultancy Team who will help you to understand key areas of improvement and how to approach them. 

Find out more about Responsiv Consulting here: Responsiv Consulting – Responsiv

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