Research and development has been a “strong hole” of the production sector of our economy. It is by the very nature of the capitalistic system that a business cannot “remain still” in a market that is destined to change. And many times it changes very rapidly. Market competitiveness is the driving force behind this ongoing change. If you want to be successful and remain at the top you got to change and innovate what you are offering. In the production sector it means that you got to have new products, or redesign, re-formulate, make of better quality, the ones that you already have placed in the market. But where does technology fit in this process? What is its role?
Technology has become a key driver of our economy and competitiveness over the past few decades. Much of the economic growths (and we must admit even the “bubbles”) that we have witnessed in recent years are the results of some innovative technologies or products developed by engineers in the laboratories and implemented by entrepreneurs on the market. In the technology-based economy today, the process of technology development and implementation from research laboratories to dynamic markets has become a key competitive edge of the engineering profession in industrial organizations. A well-developed technology in the laboratory without a successful commercial implementation will not lead to any economic returns. Hence, technology development and implementation must be seen as an integrated subject between technology and market. The complete process is a highly interconnected one, crossing over the conventional engineering college and business school curriculums. Traditionally, engineering students are trained to look at this process from a more technical (or development) viewpoint, whereas business students are asked to learn the management (or implementation) side of the same process. This divided “development-implementation” training approach and the separation of domain knowledge make it very difficult for students to gain a comprehensive view of this interdisciplinary subject in order to master this important process effectively in their professional careers. But here comes a contradiction. It is not the production of goods that actually represents a steadily growing segment of the economy, but the service area. In fact, manufacturing of goods has declined and the service area has boomed.
In this essay I want to demonstrate that not all of the service related businesses and firms are following the example of the major actors of the area. In the late years the development of business intelligence and knowledge management has led to a more close relationship between software technology innovation and service related firms. Business intelligence and, especially, knowledge management, are two new developments of the correlation between service industry and technological innovation. Let me explain in brief what these two mean.
In fact business intelligence and knowledge management have more than one definition each, but for study purposes I will take in consideration that given by the Bureau of Information Technology:
“BI (business intelligence) is an interactive process of analyzing and exploring structured, domain-specific information (often stored in a data warehouse) to discern trends or patterns, thereby deriving insights and drawing conclusions. The BI process includes communicating findings and effecting change. BI domains include customers, products, services or competitors” (“Business Intelligence”, par. 1).
According to the definition, business intelligence is basically the sum of all the data, information and knowledge that a company has. But they do not only store the data. Their focus is on the processing of data. By processing data business intelligence can then be used for supporting decisions, forecasting future events or discovering trends within a set of information. By this description it gets clear that it is not only for use by service related businesses but even by manufacturing companies. This information is nothing more than the raw numbers generated from the everyday activities that every business has. The main point is to analyze performance of the company, to watch the status of the supply and that of the demand and to try and find trends that can help predict future behaviors. This information is crucial especially to managers that take it and determine the strategies and tactics that their company should implement in order to be ahead of the competition. This is why technology is so needed in processing fast the information. In the words of a specialist like Mike Schroeck, managing partner of the iAnalytics practice at PricewaterhouseCoopers, on business intelligence and knowledge management:
“Analytics can help companies identify areas to pursue, which customers to target. And most important, it can show them the impact or payback from introducing a new service in a manner timely enough that they can refine and adjust their strategies.” (Kirkpatrick, 2002: p.2).
Let us take the example of a restaurant. It is a business related to the service area of the economy. For a manager of a restaurant, technology can offer different ways to improve sales and increase profit. This can be done through revenue management. For example, by subdividing a meal into its component sections, a manager can determine which systems to apply at a particular stage for the purpose of providing the greatest revenue benefit for their particular business. Of course he has to make a financial analysis in order to have a clearer view of the cost-benefit relation. There are many studies that support this idea but I want to cite only one in favor of this argument. In his article “The role of technology in restaurant revenue management”, Sheryl E. Kimes (2008), states that:
“In the United States alone, table service restaurants account for approximately $180 billion per year in revenue (National Restaurant Association 2006). If these table service restaurants can achieve the 2 to 5 percent revenue improvement typically associated with the adoption of revenue management (Hanks, Noland, and Cross 1992; Smith, Leimkuhler, and Darrow 1992; Kimes 2004a), overall revenue could increase by $3.6 billion to $9.0 billion per year. Correctly implemented, technology can more than offset its cost with increased revenue. Technologies that support restaurant revenue management range from relatively simple credit card processing systems to elaborate table management and kitchen production software.” (pg. 2)
This is why the service sector is not going to miss the opportunity given by technological innovation. In fact, the above mentioned author states that the service industry is beginning to use business intelligence technology or other related technologies. Especially restaurants, bars and hotels in tropical or holiday destination areas are using this technology to improve their revenue (Kimes, 2008, p. 4).
The service sector of the economy is being hit by the financial crisis as well as the production sector. If people are going to consume less goods because of their financial situation, they are not going to consume more services either. This is the reason, I believe, that the service sector will increasingly make use of the technological innovation for their management.
- Kirkpatrick, T. (2002) Analysis: Business Intelligence.
- (2007). Business Intelligence.
- Kimes, Sh. E. (2008). The role of technology in restaurant revenue management.
- Long, D. G. (2008). Motivation and Stakeholder Acceptance in Technology-driven Change Management: Implications for…