In the early 19th century, Britain was expanding its railway network. Parliament passed the bill for building a railway line from London to Southampton in 1834. This caused both excitement and nervousness, the borough of Kingston was averse to having the railway line cut across their town and refused to have a mainline station. At the same time, the borough of Richmond embraced railways and went on to prosper as a result.
Disruptive technologies, such as the railways, present us with new opportunities, but often our immediate reaction is myopic, we tend to say ‘no’. We don’t realise that in saying no, we are potentially denying benefits and prosperity to ourselves and to future generations.
There is a now a new wave of disruptive technologies presenting opportunities - Robotics Process Automation (RPA).
RPA is the use of software robots to automate repetitive tasks, common in middle and back office jobs. A few examples are:
invoice matching with two different systems
reviewing a sales order in one system and creating a production work order in another system
follow-ups with debtors, ‘purchase to pay’ payments
Similar to the railways, RPA software has a phenomenal business case. Compared to humans, it is significantly faster, can handle up to 15 times the volume, and is far more accurate; railways were expensive and slow to implement, but RPA can be implemented in weeks.
Similar to the Kingston borough’s reaction to the railways in the 19th century, some people are responding defensively to software robots. The impact of this software on the lower skilled workforce is unclear, and can appear daunting, however, we shouldn’t immediately disregard the myriad potential benefits this technology offers to augment the way we do business.
The global economy, and the UK in particular, requires robots to improve its output and productivity. Moody’s, the international credit rating agency, recently downgraded the UK’s credit rating a further notch from Aa1 to Aa2. If this trend continues, the cost of borrowing will increase, slowing down our ability to invest in large infrastructure projects. With inflation rising, people’s disposable income is eroding, diminishing their prosperity. Now is the time for us to take some urgent steps to improve economic output.
UK productivity is at a historic low. Bank of England’s chief economist, Andrew G. Halden, in his speech, ‘productivity puzzle’ at the London School of Economics highlighted that during the pre-industrial era time, our productivity gains were low but positive 0.014%. Since the financial crisis of 2008, it has been negative 0.367%. Taking a ‘do nothing’ approach will only serve to put us in a negative spiral.
The UK’s economy has a 79% share of service-based industries, 15% of industrial production, 5% of construction and 0.7% of agriculture according to ONS data. For the economy, main productivity improvements won’t come from the mechanical robots, but with the software robots automating the middle office and back office tasks associated with that large service industry.
But why is productivity so important? Productivity brings prosperity. The roots of the UK’s spectacular prosperity of the 20th century lies in the productivity gains of industrialisation during the 19th century. In the present time, with negative productivity gains, denying or delaying automation could be harmful. Long-term wage growth can only be achieved if you can also achieve long-term productivity growth.
In the last ten years, the service sector’s productivity has dipped, taking a hard hit from regulation and competition from new entrants; hotels have seen AirBnB, taxis have seen Uber and banking has seen challenger banks. Established players in the mature service industries had archaic systems, which are difficult to change and integrate. This has forced them to solve every issue manually, which is expensive, error prone, and unscalable, and this has caused a dip in productivity. There are lessons that could be learned from other sectors though, such as manufacturing and retail, who are taking the lead.
There’s no doubt that RPA technology is here. Now it’s up to us to choose to deny its potential, or embrace the myriad business improvement opportunities it presents, just like Richmond and the railway.