Productivity and Process Management

Over the years I had multiple discussions with process management experts who claimed that the increase in productivity that can be seen in economy statistics is related to the use of process management software. I do not see that as evidence that BPM is a successful endevaour. The use of BPM is just an indicator of a common executive mindset. I see the relentless drive for higher productivity as a fallacy. It does not improve anything. 

I have written about the ‚jobless recovery‘ years ago when I wanted to point out that it is wrong to replace people in customers service jobs with IT automation and self-service functionality. BPM is a short-sighted, stop-gap solution to a lack of management skill and a focus on costs rather than value. Today, my conclusion is that it is not really relevant what BPM does or does not, or what BPM experts claim or not. Technology progress will simply push the businesses with shortsighted executives out of the way. See Kodak, Nokia, Blackberry. 

First we can have a discussion if productivity measured by output per hour and unit labour cost is relevant. While both output and per unit costs rise they are a totally unsuitable method for a non-manufacturing business. I would say that productivity should be measured as to how much customer perceived value a business produces. All businesses do today is to produce more, cheaper output at lower value. I define value as services or products that improve a persons life in the sense that it enables them to do more than they can do without the product. Alternatively it improves their health or knowledge. Just to do something cheaper is not higher value. Pushing down costs through consumer self—service does not increase value either. Everything bad that businesses do comes from driving down costs; from disloyalty to employees, inhumane insurance schemes, ecological damage, to the way animals are bred and slaughtered. Let me not even start about what they dare to call food.

Further, I propose that the true causes for the drop in costs in statistics are not worker productivity but primarily technology miniaturization, automated or robotic manufacturing and outsourcing to Asia. Miniaturization reduces not only the amount of work needed to assemble something but it dramatically increases yield (what percentage of production units is within spec). In service businesses everywhere the cost of like-quality services is going up, which is why you get less and less of it. In some businesses you don’t stand a chance to speak to a real person after you have bought a product. If at all it is someone in a call center somewhere in Asia. The consequences are visible. Looking at labour statistics you will find that in each recession since 1993, the percentage of employed people per population in the US has dropped. In previous recessions the numbers have recovered but not in the last one. It remains at the recession induced level since 2008. Hence a jobless recovery as profits are already higher again than before the market crash. The percentage is now actually at the same level as it was 30 years ago. 30 years of social improvement evaporated between 2008 and 2009.

US 30y employment-population ratio
Let’s not forget that the backlash from the reduction in workforce are ever more harebrained schemes by unions and politicians to protect the employed. It is Naive Intervention because its unintended consequence is to further drive employers into reductions of staff and where possible the use of temps. I know large (and very profitable) companies where it requires two executive signatures to hire.

If my information is right (I could not find a solid reference while I was writing this) then there are now 300.000 people in China assembling Apple products. But it sounds plausible given the volume that Apple produces across the board. Even at minimum wage these products couldn’t be built in the US or Europe as most people would not want to work these jobs. We could not get enough immigrants and the social expenditure would make them still unaffordable. The different working conditions in Asia are not a secret. You don’t like it? Then you shouldn’t buy ANY high-tech products as the only way you can afford them is to build them in Asia! Should the working conditions be better and Apple’s profits lower? Good question. But people want to work there and other people want to buy the products here. It is called a free market. Most people would prefer Apple to lower prices than to improve working conditions.

I am not condemning it because working for Apple in China is an improvement considering where these workers come from. Employement is better than money wasted at foreign aid programs. But in fact, while we are exporting jobs to China, we are importing poverty. The only way to look at it positively is that it will equalize the life style differences and the immigration run on Europe and North America will end. But clearly, it won’t be getting any better for us. 


The self-fuelling technology cycle.

Technology (Mobile/Cloud) provides the large platforms for communities of interest, such as the Apple AppStore or Amazon. Some productivity may also be found there as the middlemen are cut out between producer and consumer. Steve Jobs’ touch devices have put usable technology in the hands of even younger consumers providing another on-ramp for products and services. Moore’s Law has not yet run out of steam, which means that every 18 months computer power doubles per dollar of cost. In 6 years time we will have SIXTEEN times more computing power in our hands. What will we do with it? Certainly not executing pre-designed processes as these will hold back innovation and not make businesses faster or more productive. It is a ridiculous notion. As technology gets cheaper and more software is written, it provides more opportunity to shorten design and production times. Technology provides people empowerment and more real-time interaction for anything. The demand for control by executives and governments is the only hindrance in this process. See my previous post.

So far the bloating software stack has eroded many technology performance gains regardless whether it was enterprise mainframes, desktop PCs or Mobile devices. But we certainly can manage more data, transfer larger files and perform more complex processing in the same time and at lower cost. Robots will be able to SLAM ‚Simultaneous Location and Mapping‘ their environment. My Vorwerk robot vacuum cleaner laser-scans the room and plans its route quite cleverly much more intelligent than the iRobot Roomba variants. Google’s self-driving car will become quite normal. Many high-end cars can already park a lot more accurately by themselves than its human drivers. They read roadsigns and warn us if we get too close to a lane marker. BMW demoed a car that drives around a race and slalom course drifting like a race pro.

Robots that will perform simple human tasks will be quite normal in ten years time. At that point in time the outsourcing trend to Asia will end. I do hope that by that time they will be their own large enough market allowing them to absorb the change without political upheaval in the region. They will certainly have absorbed enough of Western intellectual property by that time.

The main issue that I see will be that while the cost of such devices will drop, the cost of living, healthcare, government and social expenditure will rise dramatically, in consequence eroding those remaining gains in technology affordability. You can buy a phone but not find a reasonable service contract. In the US and Canada phone and data plans are 3 to 5 times more expensive than in most of Europe. We have more competition and less monopolies. The main problem will be that even more people than today will be out of a job. Old people could continue to drive cars as they can enhance their weakening skills, but they won’t be able to afford the fuel nor the medical bills. There might be robots to take care of the old, but their children who have thus more free time won’t have a job anyway. The lucky ones who will be both young and employed won’t be able to pay for the huge bureaucracies and their social expenditure of supporting the unemployed and retirees.

Now think about it: Does it really sound as if increased productivity is of benefit and that a cost cutting mindset improves our lives? You have to be quite ignorant to believe that. The larger the business structure and the more rigidly it will be process managed the less it will be able to deal the with speed of change that we are heading into. The larger the government bureaucracies the less they will be functional AND frugal with our tax money. But unfortunately the large monopolists are here to stay even in the fast moving technology domain. Big is still considered desirable. As for example no one wants to pay for software, software development will become a pure investment adventure because the only way to actually make money with software is to grow it big enough as a Cloud/Mobile business to be able to sell out to one of the monopolists. To buy technology is the only way of innovating for most large businesses, because innovation can’t certainly be process managed.

Improving the quality of products or services and with it the quality of staff and with it education, employment and income is a management action that is good for the business AND our societies in the Western world. The profit and cost motives produce in difference a race to the bottom for everyone, except a few who are the perpetrators in business and politics.

But I am not whining rather just observing. While my thinking and writing has certainly influenced the process management domain one way or the other, I am now much more relaxed about it. It is obvious — because human — that experts in IT, business and politics are stuck in their holes. Admitting they are wrong is not possible. They denounce disagreement and discussion and with it their own learning, despite the utter lack of proof and a lot of evidence to the opposite.

But there is no need for judgment either way. Evolution will take care of it.

I am the founder and Chief Technology Officer of Papyrus Software, a medium size software company offering solutions in communications and process management around the globe. I am also the owner and CEO of MJP Racing, a motorsports company focused on Rallycross or RX, a form of circuit racing on mixed surfaces that has been around for 40 years. I hold 8 national and international championship titles in RX. My team participates in the World Championship along Petter Solberg, Sebastian Loeb and Ken Block.

Posted in Economy, People Management

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Max J. Pucher

Max J. Pucher - Chief Architect ISIS Papyrus Software

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by Max J. Pucher. All rights reserved.
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