Deep Dive: Putting innovation to work
Are business leaders asking the right questions about how artificial intelligence and digital transformation is changing B2B’s mission and how its work is done?
A couple of weeks ago, I was asked to suggest questions to help a B2B leader kick off an innovation retreat. Rather than look at my own work, I sought new inspiration and found ideas and many questions in this report: The Work of the Future: Building Better Jobs in an Age of Intelligent Machines, by David Autor, David Mindell, and Elisabeth Reynolds. The study focuses on the impact of technology on workforces, with suggested policy prescriptions for governmental action on labor. It is not intended for B2B innovators, but it has many vital facts, data, observations, and conclusions. In this edition, I dig into the report, provide some context about its contents, but mostly look for “leaps” of learning.
Innovating for the workforce
In the spring of 2018, MIT President L. Rafael Reif commissioned the Task Force on the Work of the Future in response to the then-perceived dizzying pace that robots, artificial intelligence (AI), and self-driving vehicles would outcompete humans for jobs, restructuring workforces, organizations, and markets. After two-and-a-half years of study, the task force reported that technology has advanced “remarkably” but not at the dizzying pace predicted by many experts at the time. The more worrying finding was that labor policies are not prepared for the digital age. The authors observe that, “Amidst a technological ecosystem delivering rising productivity, and an economy generating plenty of jobs (at least until the COVID-19 crisis), we found a labor market in which the fruits are so unequally distributed, so skewed toward the top, that the majority of workers have tasted only a tiny morsel of a vast harvest.” The report provides an in-depth economic analysis of growth and labor trends and makes several significant public policy recommendations. If this is your focus, it is an invaluable tool.
As an advocate of B2B innovation, labor policy is not immediately relevant to my work. However, I do firmly believe that B2B companies can be a force for both economic and social good, and this finding caught my attention:
History and economics show no inherent conflict among technological change, full employment, and rising earnings. The dynamic interplay among task automation, innovation, and new work creation, while always disruptive, is a primary wellspring of rising productivity. Innovation improves the quantity, quality, and variety of work that a worker can accomplish in a given time. This rising productivity, in turn, enables improving living standards and the flourishing of human endeavors. Indeed, in what should be a virtuous cycle, rising productivity provides society with the resources to invest in those whose livelihoods are disrupted by the changing structure of work.
For me, this finding is a clarion call for B2B innovators to consider the impact of their innovations on workers and the workforce, and where possible—which is most of the time—to innovate toward the betterment of both. This is not inconsistent with leveraging technology’s potential for exponential gains to achieve a competitive advantage for a B2B business. Instead, my research has found that the most significant digital-age opportunity for any B2B company lies not in defending its business model or putting moats in place through unmatchable efficiencies, but in helping business customers find their way in the digital age. Since the B2B community serves all businesses and, through them, all consumers, this means that B2B innovation is about helping us all live our lives and do our work. Thus, the future of work—or as MIT’s report puts it, the work of the future—is a central concern for all B2B innovators.
With this in mind, I have scoured the report, looking for insights that may be out-of-the-box ideas for B2B innovations. I share those insights in each header below, add context from the report, and offer my observations. Each topic is framed as a question, with follow-up questions across all at the end. Before digging into that, to set the overall context, here are the six key findings from the report’s introduction:
Technological change is simultaneously replacing existing work and creating new work. It is not eliminating work altogether.
Momentous impacts of technological change are unfolding gradually.
Rising labor productivity has not translated into broad increases in incomes because labor market institutions and policies have fallen into disrepair.
Improving the quality of jobs requires innovation in labor market institutions.
Fostering opportunity and economic mobility necessitates cultivating and refreshing worker skills.
Investing in innovation will drive new job creation, speed growth, and meet rising competitive challenges.
Is B2B e-commerce changing complex customer buying behaviors?
Many manufacturers and distributors are investing heavily in webstores and other e-commerce initiatives. Indeed, Amazon Business has made significant inroads, disrupting from the outside and taking sales from established businesses. But a fundamental question remains largely unexamined: Is e-commerce changing business customer buying behaviors or intercepting established customer buying habits, albeit through new, online, and virtual media?
Consumer buying behaviors have changed dramatically in the digital age. Consumers have embraced virtual sources for products and online social media influencers for brand decisions. And the consumer preference for home delivery is forcing logistical changes, as explained by Autor, Mindell, and Reynolds:
E-commerce has driven two fundamental changes in logistics. First, the industry has historically been set up for the delivery of goods in bulk sizes to local retailers for sale. E-commerce has changed the endpoint for the bulk of those deliveries from warehouses and distribution centers to individual residences. Second, e-commerce has radically reduced the size of orders that logistics centers must now handle, right down to individual items.
These changes in consumer buying behavior are real and fundamental. Are similar changes happening in B2B, especially for complex buying situations? Do distributor online sales represent new customer buying behaviors, or more simply, a transfer of catalog sales to online means? Are manufacturers selling more products direct to business customers? Are business customers buying in smaller quantities? Are shipments made to different locations? And are these questions even the most relevant or robust for B2B? In most B2B markets, convenience buys are far from the majority. More complex buys around replenishment, solutions, emergencies, and custom needs are more critical in volume and profits. Have digital platforms or tools made inroads into these value-added purchase occasions? Will they? What are the actual changes in business customer buying behaviors that are happening now and will happen in the near future?
Do you have innovation plans for “old tech” and “new tech”?
In my conversations with B2B leaders, I find that many are overwhelmed by the flood of digital technologies offering game-changing results, often leading to inaction. If no clear path is provided, none is taken. Competition requires a return on investment, and digital-age investments are significant. Caution rules. Progress is slow.
At first pass, the MIT report’s finding that “the momentous impacts of technological change are unfolding gradually” seems to reassure B2B leaders that it is okay to be ruled by caution and go slow when adopting new technologies. But it’s important to remember that the impacts the study explored are on the workforce and labor market. Moreover, the report finds that labor policies are not keeping pace with technology change, negatively impacting workers today.
For B2B innovators, the essential point is that technology is advancing because it enables business to be done differently. Change is happening now, and it will accelerate. This means that innovators must have plans for leveraging technology now and other strategies for leveraging technology in the future. By examining the overall impact of artificial intelligence and technology adoption on insurance, healthcare, transportation, and warehousing and distribution industries, the report identifies many nuances important for B2B innovators. But when thinking about the “now and future” of innovation, two observations stood out:
“Old” technology is driving productivity gains now. The report explains that major new technologies can take as long as four decades for full adoption. In distribution, warehouse management systems (WMS) are just now delivering full benefits for many distribution companies. Artificial intelligence is just now coming online and will have an impact for decades. From my point of view, this means that as B2B adopts new technologies, like AI, the best innovations might happen in collaboration with older, well-understood technologies. CRM has been coming on for many years, and by some accounts, it has stalled. AI’s best near-term implementation might be to breathe new life into CRM and related tools, rather than completely restricting a B2B company’s business model.
New technology must be positioned as unlocking opportunities. Early on, the report shared that, “Where innovation fails to drive opportunity … it generates a palpable fear of the future.” Suspicion leads to fears that technology-driven innovation is about profits over livelihoods, leading to distrust in leaders and innovation itself. Reinforcing this idea, I have heard from leaders that they don’t use the word “innovation” when talking about technology because of a visceral hatred or fear created among employees. For me, this is a barrier to be avoided. And more to the point, significant initiatives around new technologies should be planned as pursuing new opportunities, not shoring up the business or digging defensive moats.
Are you identifying “new work” to be enabled by digital technologies?
As I’ve argued elsewhere, B2B companies tend to apply artificial intelligence in a reductive manner, taking over the job functions of salespeople and other workers. MIT’s report argues that from a macro perspective, leveraging technology to automate tasks often has negative consequences, explained as two threats:
The threat could take two forms. First, automation could ultimately reduce the number of jobs in which humans are more productive than machines, spurring mass unemployment. Second, automation could reshape job skill demands such that a minority of workers with highly specialized skills earn outsized rewards while the majority of citizens lose ground.
One strategy for offsetting these threats is to retrain workers as tasks are eliminated, adding new tasks to old jobs and removing worries about job security. It seems to me that, for B2B innovators, another approach is to leverage technology from the start as an opportunity to create new work through tasks that can be bundled together to create new jobs. Current employees may apply for new jobs, but the jobs are not a safety net. Instead, they are the foundation for a new business model. I will be exploring this approach in the context of sales innovations at MDM’s upcoming Sales GPS Conference. For now, I suggest two preliminary concepts:
Create a platform champion in your customers’ organizations. As I discussed here, platform strategies are essential for digital leadership, but platforms are not always technology-enabled virtual markets. Instead, platforms are any business model that helps users create value for other users. A “champion” for your customers’ business is a role that understands how your business, as a platform, helps customers work with other customers and, thereby, leverages your capabilities. I know of champion roles at customers in markets for information services, but I believe such a role would be new and revolutionary in the traditional manufacturer/distributor value chain.
Reposition your customer-facing people as managing a user experience for suppliers. This concept is primarily applicable to distributors. In previous research, I argue that distributors should use “customer experience” to mean the value created for customers by their capabilities and “user experiences” as the value created by the products they sell for manufacturers as suppliers. Going all-in on user experiences might mean combining all customer-facing roles—marketing, sales, customer service, and so forth—into a new role (or perhaps, organization) that exists only to manage the customer’s experience as it uses a supplier’s products. Such a role would be revolutionary in that it would not be about advising as a product is sold. Giving advice and much more is all that the role does. Sales are accomplished by other roles or, perhaps, e-commerce and webstores.
Join the journey (by asking questions)
For B2B innovators, perhaps the most outstanding value of MIT’s report relates to labor, not business. From this frame of reference, the report examines the evolution and adoption of technology candidly but is not intended to answer questions for business innovators. I’ve started the ball rolling by asking three questions:
Is B2B e-commerce changing business customer buying behaviors?
Do you have innovation plans for “old tech” and “new tech”?
Are you identifying “new work” to identify innovations?
I have barely scratched the surface of the questions raised by this report. You can join our B2B innovation journey by reading this edition, digging into the report, and identifying new and essential questions that you must answer like a B2B innovator. In any event, don’t be a stranger. Share your thoughts in the comments section below. If you prefer, reach out directly at mark.dancer@n4bi.com.