Wage inflation is occurring across the western world. At the end of 2021, wage inflation in the UK topped out at 5 percent. The Bank of England’s Andrew Bailey suggested that employees should temper their demands for pay raises, and issued a follow-up to firms, requesting they “show restraint” when raising prices. Easier said than done.
Worries that inflation will continue to get worse into 2022 are far from eased by the Russian invasion of Ukraine, which, as this article goes to press, has already sent oil prices to an eight-year high.
In the professional and legal services industry, where many organizations I work with have expressed their concerns about spiraling inflation, there’s a secondary problem: the battle for talent. Highly skilled professions are seeing the cost of talent increase considerably. For example, city and regional law firms in the UK—who, before the pandemic, were already struggling to compete with US law firms offering higher starting salaries and bigger bonuses—are now having to compete with the likes of Skadden offering newly-qualified employees salaries of £157,000.
With all this going on, what should firms in regulated and competitive industries do? There’s no easy answer, but there are immutable principles of business survival. And, when economic pressures coincide with labor shortages, firms need to pay closer attention to those principles.
The “roaring 2020s” might sound absurd—it shouldn’t
In 2010, a study entitled “Roaring Out of Recession” appeared in Harvard Business Review. Two years after the great recession of 2007, business leaders had still faced myriad challenges, many of them “busy tackling short-term priorities,” as the study indicated. Business leaders had worried that the world after the recession would be “unlikely to resemble the one before it.” They weren’t entirely wrong.
The study’s writers analyzed the strategies of companies during the previous three recessions, to identify which traits led to post-recession winnings. They found that “companies that master the delicate balance between cutting costs to survive today and investing to grow tomorrow do well after recession.” This means that they tightened the purse strings while remembering to be forward-thinking.
Further, firms that combine defensive and offensive strategies had the highest probability (37%) of roaring out of a period of economic pressure. According to the study, the strategy that all successful companies had in common was one of reducing costs by “selectively focusing more on operational efficiency than their rivals do, even as they invest relatively comprehensively in the future by spending on marketing, R&D, and new assets.”
How intelligent automation can help
While today’s inflationary pressures mean firms must interpret an entirely different economic picture, firms must also realize just how much technology has changed. A recent survey by IBM found that almost one in three firms around the world are now using artificial intelligence (AI) in some capacity, and adoption is accelerating. Some 43% of these have accelerated their adoption of AI as a direct consequence of the COVID-19 pandemic, according to the same survey.
Through the adoption of new technologies, firms are realizing new ways to achieve operational efficiency and leverage those for R&D and new revenue streams. With the concurrent growth of cloud-based SaaS platforms and no-code automation, new technologies enable firms to also improve customer experience.
Increasingly, these technologies are being recognized as “intelligent automation,” the computerization of work previously done by people. Far from the abstract applications of AI, intelligent automation is demonstrating tangible value over and above even just robotic process automation (RPA) alone.
For many, this new challenge can only be met by significantly increasing the efficiency and resilience of operations and adopting new revenue streams through intelligent automation. And for most firms whose overheads are being stretched by the ever-growing demand for higher wages and whose quality of expertise and talent will make or break their business, intelligent automation is the only solution.
The power of intelligent automation can enable a much greater output per full-time employee. It can embed human intelligence in systems that are used by those employees to raise the quality of the work they do, while concurrently reducing the time to competence for recruits, as well as defending the business against tribal knowledge walking out of the door.
Through intelligent automation, one firm I know of has productized the expertise of its accountants and generated almost half a million dollars in revenue. I know of another to turn high-cost regulator-mandated operational burdens like KYC onboarding into automated processes that don’t just ensure compliance but also identify more opportunities and bring in more revenue than manual approaches. And some hospitals, for instance, are completely overhauling how they carry out COVID risk assessments, saving countless lives.
What should firms do?
When the leaders of organizations ask for my opinion on the state of their business and opportunities to leverage innovation, my answer is always the same: find a way to keep costs down and generate new revenue without losing sight of the bigger picture.
Those that hesitate to join the unstoppable train of intelligent automation, one of the surest ways of doing this, will ultimately be left behind.