SBA

Little Boys’ Toys

As I write I'm on the plane to London, to give a talk about the implications of Brexit for the UK's IT leaders, with a detour via the guitar shops of Denmark Street where I hope to try and buy another electric guitar. It's quite likely that I'll try it, love it, and then have to order one instead of walking out of the shop with the one I try. This, any older musician will recognise, is a Big No No. Musical instruments are individual, each has their own character, you can play two instruments of the same brand and model and they will feel and sound different.

That used to be very true, but today it is much less so. If I get my new guitar it will have been made through a substantially automated and computer-controlled process. The neck, fretboard and body will have been machined under computer control to incredible tolerances more commonly associated with the specialist aerospace components made on the island than a wooden musical instrument, meaning that the differences between two instruments of the same model will be too small and subtle for me or most other similarly mediocre players to detect.

I have messed around with guitars since I was 13, and first made my own electric when I was 15 - it was good enough to see me through the next ten years until I sold it as being too antisocial for my terraced house in Cambridge. All the love and care I put into making that instrument has been superseded by machines which, I am sure, do a superior job. Nevertheless it has been a longheld wistful dream that when I retire I might set up a workshop and produce, in low volumes, my own designs of guitar for those musicians seeking something a little different, something with a bit of character. Each year I get nearer to retirement and the dream slips further away - how can a small business compete with the expensive robotics and relentless consistency of a global manufacturer?  

Therein lies one of the major quandaries for Isle of Man businesses in the future - how do we continue to deliver our small scale services and products at a cost and quality that permits us to remain competitive?

I believe the answer lies in technology. If I ever set up my guitar workshop I will need to invest in a handful of small automated woodworking machines instead of the thousands of large machines possessed by a global brand, but those machines will enable me to deliver equivalent consistency and quality. I'll never have the volume of production to be cost competitive with Fender or Gibson, but I'll be able to compete based on differentiation as long as my quality and consistency are up to scratch. While the machines will be expensive they will enable me to achieve this.

When I was 15 I shaped my first own-made guitar with chisel, spokeshave, drill and sanding block - it was an artisan product but competitive with the commercial quality of the day. When I am 65 I will need CNC routers and shapers to compete, even though my pipe-dream is to be an artisan again.

The point of this daydream? We must almost all be technologists now. If we execute a repeatable process to provide a service or create a product we do it better and cheaper with the help of technology, and in many spheres without the assistance of technology we cannot compete at all. The smallest one-man business on the island may still require a mastery of technology to stay in the game. Technology is pervasive, without it we can only compete in an environment where nobody else has it either. Like the Arms Race, once you enter into the exploitation of technology you have to continue in order to stay ahead - it has been this way since the earliest pre-historic toolmakers. Technology evolves and broadens its scope, tasks which could not be performed by machines twenty years ago now cannot be performed to modern expectations of quality without machines. With the assistance of machines I can aspire to match big name manufacturers for consistency and quality, without them I don't stand a chance.

The same applies to many businesses on the island; in banking and financial services, fiduciary services, e-gaming, law, aerospace, retail, agriculture etc. - because the cost of technology has fallen over the years all have affordable opportunities for automation. The majority of businesses do not need a data centre or server room or CNC machines, they can utilise cloud computing services to rent systems by the hour.

It used to be the case that computing was all about productivity, automating tasks to reduce the man-hours involved in them. Computers were expensive to buy but you didn’t have to pay them much of a salary, a few kilowatts of electricity each month. Now you don’t even have to buy them, almost everyone has access to massive computing power at modest cost, so the productivity advantage has been eroded - computer-assisted productivity is the norm. There are still marginal productivity gains to be made from automation, and new techniques will emerge to prolong the life of automation as a productivity enhancer, but increasingly the productivity gains to be had from automation are in the domains of larger businesses which can leverage ever-decreasing marginal benefits through their economies of scale.

Whilst the productivity benefits of incremental automation are becoming ever more marginal, the quality benefits are still very much on the upswing. Modern IT is increasingly focused on ensuring reliability and repeatability of products and services. As usual, bigger enterprises are in the lead because they have the talent and cash to be the first to experiment with new techniques, but the quality advantage they gain over smaller businesses is much less durable. In a large company it is common that very few people understand the business process end to end, so there are very few people who can specify how it should be automated for reliability. Instead the large company will employ an army of business analysts to discover how it actually does what it does, and another army of systems analysts and developers to recreate its processes in IT systems. In a small company the directors and senior manager know how the company works, they don’t need the discovery phase, they can simply tell the IT folk how it should be. Simply, a small organisation can usually implement process automation much more quickly and cheaply than a big company in order to reap the same quality benefits.

Can - but usually doesn’t, and therein lies the problem. Two factors have a fundamental impact on quality; the first is Human Fallibility - we commonly make mistakes, omit steps in processes, forget that something needs to be done on a specific date etc., we may be 98% reliable, but an automated process is more likely to be 99.99999% reliable. The second factor is knowledge; if we grow our business then we generally take on extra staff and teach them our processes, but whilst they may be reliable in performing what we have taught them to do they don’t necessarily understand why it must be done the way it is, so any exceptions that we haven’t taught them to deal with may go wrong, and over time they may change and “improve” processes without understanding why we did it the way we did. These two factors make human-executed processes unreliable however conscientious and hard-working the humans may be. If a process can be automated it will be more reliable - it will be a better quality process which produces a more repeatable customer experience.

Incremental automation represents an opportunity passed over by many smaller businesses, often because it seems like too much effort and cost in return for the small productivity gains it will deliver, but thinking this way is going to miss the point. The benefit is in increased reliability, a better quality product or service for the customer. Customers will often tolerate higher prices from smaller suppliers in return for better service or more distinctive goods, they instinctively recognise the economics of production - but they do not easily tolerate lower quality. The low cost of technology has brought some degree of automation within the reach of most smaller businesses, and to compete on quality we must, as an island of smaller businesses, take advantage of it. Otherwise bigger businesses will take the food from our table by being both cheaper and better.

P.S. Yes, I did try the guitar I wanted, and I’m now waiting for it to be delivered. The quality is superb, much better than the very posh one-off handmade guitar I’ve been playing for the past nine years. My current guitar is unique, my new one is a model used by countless guitarists, but whatever it lack in exclusivity it makes up for in quality.