Course Guide
Today, I want to explore three core topics.
The first topic: from a micro perspective, how companies can continue to gain wealth in a service-oriented economy.
The second topic: How do macro trends in the global economy affect companies' profits?
The third topic: the great revolution that is happening today: artificial intelligence (AI), robotics, and technologies that are revolutionizing the way service companies operate, market, and serve customers.
Professor Profile
Professor Wu Yaoheng
Associate Dean of Nuance University Business School, National University of Singapore
Department of Marketing
Prof Jochen Wirtz is Associate Dean and Professor of Marketing at nuancer University of Singapore Business School. He is also an International Fellow at the Center for Service Research at Karlstad University in Sweden, a scholar at the Cornell Institute for the Future of Health (CIHF) at Cornell University, and an international professor at the Center for Service Leadership (CSL).
Prof. Yaoheng Wu graduated from London Business School with a PhD. His research focuses on service marketing and management, and he has published more than 200 academic articles, book chapters, and industry reports (including six columns in the Harvard Business Review). Among them, "Winning in the Service Market" (World Science, 2017) and "Winning in the Service Market Series" (World Science, 2018) have been translated into various languages and sold more than 800,000 copies in more than 26 countries and regions around the world, becoming the world's leading service marketing textbook.
First of all, I would like to ask a question, please think: Would you please name three global service brands?
I often ask this question in various seminars around the world, but the answer is the same everywhere. For example: Accenture, McDonald's, McKinsey, and Express are the brands that people talk about most often. Please observe and think about it: What do these brands have in common? - Of course, they all have a clear value orientation and a clear brand image.
What these brands have in common is that they are relevant to our daily lives, which most people don't think about. If you look at the birthplaces of these brands, you'll see that they all come from the United States, which is a very special thing. Imagine if I asked you to name a few well-known merchandise companies, the ladies would talk about Louis Vuitton, Gucci, Chanel, men would talk about Porsche, Mercedes-Benz and so on. As you can see, merchandise companies come from all over the world, including fast-moving consumer goods companies like Unilever and Nestlé (FMGG). We can conclude that commodity companies come from all over the world, but when it comes to service-oriented enterprises, the vast majority of them come from the United States.
So why are the successful global service companies american? We can certainly find out many reasons: the U.S. has a huge market, is customer-oriented, and competitive, but such a review also applies to commodity companies. I've shown this table in Paris, and you can see that the Americans have taken away products that other countries are proud of and industrialized and scaled them up. So why the United States and not other countries? I think there are deep reasons for this. In addition to being competitive and having a huge market, the most important thing is cultural reasons.
The Starbucks case
In my opinion, service has always been a combination of art and science. You may know howard Howard Schultz, one of starbucks founders, where did he get the inspiration to start Starbucks? In fact, while on vacation in Milan, Schultz observed what was happening in a café and was inspired to start Starbucks. He observed what Italians were doing in the café. They go to the café to relax and spend a few minutes rejuvenating, resting and recharging. So, how should we define it? We want Starbucks to be the "third place," a safe place between the screaming kids in our homes and the company's roaring bosses. Whether we're going from home or home from work, we can relax and rejuvenate at Starbucks, which is our "gas station."
Therefore, the art of service is to truly feel and recognize the needs of customers. This is followed by the science of service: how can we turn inspiration into a program, into training, into a buying process design, into a product, into a package, into a price list? How can you package these experiences and then scale them up? That's what American companies are good at. They can create a brand like Starbucks and then push it around the world with the same quality standards, underpinned by a strong brand.
Today, the service sector faces a major challenge. If you look closely at Starbucks, do you think there's anything about it that can't be copied? Is it taste, packaging, design, music, service, scale? I'd say you can't replicate Starbucks exactly, but you can copy its idea, do some fine-tuning, and then you're in business. But if you think about it, you'll see that there's only one thing you can't replicate in Starbucks: the brand. So, in this case, what ultimately prevented you from competing with Starbucks was its brand.
Then I ask my second question: Where are the opportunities for companies with long-term, effective differentiation?
Before we get into this, let's define it clearly: What is long-term, effective differentiation?
In the case of flying from Singapore to Beijing, I can fly to Beijing in Singapore Airlines' Suite First Class, which is better than First Class. I could also opt for a low-cost airline like Scoot. Which airline is better? It depends on the different customers. For me, if someone pays for my ticket, I'm certainly more inclined to Singapore Airlines, but if I pay for it myself, then I might choose Scoot. Therefore, "better" is a subjective judgment that depends on the perspective of the bystander and depends on your target customer. Effective differentiation means that you are better than your competitors in the eyes of your main target customers, who like you more.
What does long-term mean?
The connotation of long-term (differentiation) is that it cannot be copied, it takes a long time to be copied, or it is illegal to copy. Satisfying one of these is called having a long-term differentiating feature. So, a valuable question is: What is a continuous, long-term competitive advantage? It's that you have something that makes customers like you, and your competitors can't replicate it. If you have, and your costs are reasonable, you're going to make a lot of money, which we call higher than the industry's rate of return. You can sit back and relax because you have effective differentiation and your competitors can't replicate you, so you have pricing power. Not only can you set higher prices, but you can also gain a larger market share.
So, the invaluable question now becomes: How can you achieve such a competitive advantage? You can look at this chart, these businesses put the price and cost at the bottom, why? How long does it take to copy a price? If your return on sales is 20% and your competitors reduce their return on sales to 15%, how long do you need to react? If you cut your return on sales from 10% to 5%, meaning that your profit points and profitability are reduced by 5% otherwise unchanged, then this will halve your earnings and your earnings will be reduced by 50%.
From another point of view, if a customer doesn't like your product 100%, will he like it if you give a 95% discount? Unless your product is a real commodity type, people won't feel that your discount has any meaning, which will not change anything, and will evolve into vicious business competition. So, for years, prices certainly fluctuated for price leaders in an industry, but it wasn't a good strategic option for most companies.
Well, in order to gain a competitive advantage, a better strategy than competing for price and controlling costs is service. As you can see, at the top of this table is the service.
If so in the U.S., why do you think it's in the first place? Most likely, it's the brand. American companies are particularly good at branding, which is what they are most concerned about. If you go to Silicon Valley, why do you think it's in the first place? Silicon Valley is particularly focused on technology and innovation, so I'm not saying the rankings can't be changed. But I've seen so many businesses, so many organizations, and the top three are always service, branding, and innovation. So if you want to have a few competitive advantages, here are three areas you should focus on.
serve
Branding
innovation
So now, what does it mean that the service ranks high? This means that service is paramount and customers love service.
Why is it so difficult for services to be replicated? Let me first share two especially important reasons based on my experience:
first
It's people who provide services, so it's all about people, it's all about culture. It takes the right people, the right skills, good training, and a good culture, all of which are very difficult to replicate, we can't replicate people, we can't replicate culture.
second
What we're really trying to do is putting together thousands of steps, and at each step, trying to do a little bit better. This case shows us that good service is related to people, steps or procedures, the latter of which is less obvious but is especially important in most service industries.
It's a very simple story, but I can tell you that every manufacturer in the world is going down this path right now.
Manufacturers are beginning to focus on the development of the service industry. One of the cases I personally appreciate the most is Rolls-Royce, where they sell power by the hour. Their engines, from manufacturing and sales to leasing to customers, took 50 years. To this day, they still operate engines on their customers' planes, which remain in rolls-Royce ownership, and they also bear all the risks of running.
So you might ask, why do airlines around the world agree to Rolls-Royce doing this? This is a very simple truth. Suppose we are now flying from Singapore to Los Angeles and lightning strikes the engine. Generally, pilots would contact Los Angeles to tell them we had been struck by lightning, and then they would notify Rolls-Royce that when the plane landed, Rolls-Royce would wait on the tarmac and then make an overhaul. Most of the time, the engine doesn't have any major problems, and sometimes only a part needs to be replaced with a turbocharger or other tool. What are the implications of this? This may result in a 2-4 hour delay on the next flight. But sometimes there are unexpected situations, the engine may stop running, encounter major failures, of course, this situation is also rare.
Now, airlines need to delay flights by four hours, and the damage caused by this is already huge. If I delayed for four hours, I might miss a transfer on another flight, so I had to help a lot of passengers rebook tickets and deal with a lot of chores. In addition, the compensation voucher issued to the passenger is also a loss. If the plane was delayed all day, I had to reschedule other flights for three or four hundred passengers, and in addition to that, I had to call the driver and the hotel, which was really inconvenient because I had to rebook tickets for so many people, especially those who needed to transfer, and sometimes I had to send them to flights with competitors, so it was really troublesome and expensive, and that was the pattern of the past.
So what are the consequences of selling power by the hour? The first generation was an engine priced on an hourly basis, now let's look at the second generation of engines, of course the first generation of engines is the foundation, they all have interoperability tests (IOTs), after investigation, and remote monitoring of the monitoring engine. So if the engines on the customer planes are struck by lightning right now, the data is immediately transmitted to Derby, England, where there are thousands of screens monitoring the engines flying high in the air. At this time, the engineer will find that the screen turns red, realize that the engine has failed, and when they know that the engine has been struck by lightning, they will start remote diagnosis, and after diagnosis, 80%-90% of the problems can be solved, and then fly normally. In Los Angeles, if something goes wrong with the engine, people don't even pay too much attention.
But, we might ask, how do they know how to repair the engine? The data center will tell Rolls-Royce what parts it needs, how to repair it, and what engine maintenance skills it needs, and then Rolls-Royce will have everything ready, and the maintenance personnel with engine parts and professional skills will wait on the aircraft runway in advance, and if they are lucky, the aircraft will not be delayed, because Rolls-Royce is always one step ahead, so that the airline can save a lot of money.
There was also a situation where even though the remote diagnostic engine could no longer run, I had 8 hours to schedule another plane before the plane arrived. So now I just have to change planes, I don't need to re-arrange the route home for the passengers, I don't have to book a hotel for them, I just need to give them a meal ticket, let them wait at the airport for four to six hours, and then they can get on the arranged flight, so that's the value they bring to the airline.
This was the first generation of engines priced on an hourly basis, and now the second generation of engines is more technically skilled. We now have pilots, signal lights, and flashing signal lights that warn people of engine problems.
Can you imagine that? If the plane is full of passengers and the pilot doesn't take off, how much loss and inconvenience it will bring, and other messy problems, and they have to wait until they find out where the problem is before they can take off. Now it's different, the engine is priced in hours, the pilot can grasp the dynamics of the engine on the iPad, he sees the warning lights on, just a click can find the cause of the engine failure, he can sit in his seat to solve all the problems.
At the same time, in the new scheme, I knew I would need to replace the pump in the next few hours. So I can apply for services now, let's say it takes four hours for repairs, and it will take at least six or seven hours to park anywhere now, and at this point I can arrange for Rolls-Royce to fix them, so do you now understand how this affects the airline's value proposition? That's worth $225 million.
Rolls-Royce will also work harder, they shorten the time for repairs so that airlines can fly longer.
First, I guarantee revenue, and second, can my competitors imitate this service? Think about it, on an hourly basis, where do you need to repair equipment, find engineers, prepare spare parts? If you want to serve Air China, you have to go everywhere, because there are Air China flights everywhere. If you want to serve Singapore Airlines, you can fly at every airport, as do flights in the UNITED States and France. So which companies can do business all over the world, distributed in major airports? There are actually only three companies that can do it: Rolls-Royce, GE (General Electric Company of the United States) and Pratt & Whitney, which are all global manufacturers, and other companies are more geographically inclined, so if a Chinese merchant wants to enter this market, they may do it in stages.
First of all
It can provide hourly billing services for Domestic Flights in China, penetrate all airports in China, and expand its business to the whole of Asia and finally to the whole world. But I want you to understand that you have to have a lot of flights, because if Air China only has one flight to an airport, you can't just prepare engineers or repair parts for that one flight, so it's useless, you need to have enough turnover and liquidity. Rolls-Royce has taken protective measures to maintain service flights and customer base, and may not be affected by other competitors around the world for decades to come. This is one of the advantages of the competitors.
second
It is related to the culture and pattern of the enterprise. In the past, if something went wrong with an engine of a Rolls-Royce customer, but the engine was no longer covered by warranty and now had to be repaired, was that a good thing or a bad thing for Rolls-Royce?
If the engine is in a bad state for a long time, it can be left alone, but if in the short term, the customer must pay for parts, labor and maintenance, and this maintenance cost and part price are not a small income for Rolls-Royce, so in fact, this is a headache for customers, but it is profitable for Rolls-Royce. Of course, this is the previous processing mode, and now Rolls-Royce is charged on an hourly basis, and whenever there is a problem with the engine, it will be repaired.
Customers will only let you repair, but in reality, if the plane is grounded because of the engine, you have to compensate, so they take a lot of risk and the repair cost is expensive. Every time engineers want to redesign, improve, or develop a new engine, they must perform a parametric analysis.
If you want to really solve the problem. This is something that requires long-term effort, starting with a basic solution, and companies usually build their first master product and focus on the product lifecycle. Consulting, specification, installation, training, integration, optimization of machine processes are the most basic solutions.
If you're doing a good job of these, you can move into productivity services. If you can guarantee that the engine will be up and running 99.5% of the time, you can guarantee that the machine will work properly, and you can see that the focus of the past is changing now. I used to charge you for machines, which most likely included consulting fees and so on, but now I want you to understand that machines cost very differently at 99.5%, 99.99% and 95% uptime. You're now paying for this guarantee, and to me, it's the service offered as a vendor. So I need to be vigilant at all times, and the higher the level of guarantee, the more I need to provide interoperability testing, sensors, remote diagnosis, prevention, repair and maintenance.
If you're doing a good job of that, you can focus on the customer service process, which means you can now perform in front of your customers. Let's say you're an air conditioning company and you want to promise your customers that you want to help them optimize air quality, minimize air temperature, and minimize electricity bills. So you should think now, what can you do? Can you put an air purifier next to the window of a room with an air conditioner? How often do you need to think about cleaning and maintaining? If there is no one in the room, whether you need to turn off the sensors of the air conditioner and so on. If you do all of the above problems well, the value of the machine will increase and become trustworthy. At this time, you really understand what the customer service process is, and now you can boldly tell the customer and let me help you.
This is the positive revelation that Rolls-Royce brings us.
We've just seen from some small stories what companies should do to make money from the service sector, and how a company can use services to build a long-term competitive advantage.
Now let's look at a little story. What's changing in our economy, now you're seeing the U.S. economy change for 150 years. As you can see, 150 years ago, two-thirds of the people in the United States were farming, and today almost no one is engaged in agriculture.
From the chart we can see that manufacturing reached its peak in 1950, what is the reason for this? Because the end of World War II stopped the machine from running. Since then, the manufacturing sector has gradually declined, while the service sector has begun to grow continuously.
Let's guess: what are the three promising service industries?
The first is the largest service sector in most countries in the world, namely health care. In some rich countries, people want to live longer and stay young and beautiful, so they spend a lot of money on health care, and this is also true in poor countries, people always spend all their money on the medical expenses of their loved ones, children, parents, siblings, so the prospects for health care are bright everywhere.
The second area is exactly what we are doing now, which is education. The education industry is constantly evolving everywhere. Developed countries advocate lifelong learning, lifelong education, you know, these developed countries always have a lot of training and learning. In some poor countries, everyone understands that the only way out of poverty is education, so the education industry is everywhere.
The third is leisure, hospitality and tourism. Once people have enough food, clothing, and shelter, they want to go out and enjoy the world. So let's talk about the experience economy. Yes, those gadgets and merchandise don't catch our eye anymore, we want to experience something new. These can be experienced in the service industry and leisure industry.
What you see here, the areas I'm talking about above, are all B2C (business-to-customer) business models. Interestingly, the B2C model hasn't been growing in the U.S., because every time a new job is created in education and health care, jobs in retail, insurance, banking, and telecommunications are cut. So if the service industry grows, but B2C doesn't, then B2B (business-to-business) must be growing, and that's the real state of the service industry.
I want to introduce a value chain, what happens if I have a company like BMW or a higher value chain and start doing outsourcing, contacting outsourcers, outsourcing customers? If an IT company starts outsourcing its supply chain, what happens when it outsources facility management?
If we outsource everything, what's left? A friend of mine works at BMW, and I jokingly said to him, look, all the things from BMW are not produced by BMW, such as ABS (anti-skid brake system), batteries, entertainment systems, seats, tires, rims, these things are bought together from other manufacturers. So what core capabilities does BMW have, is it the engine? I mean, in the past their engine was still an advantage, the engine was almost the same as the electronic engine, they could run 0-100 kilometers per hour, but soon it was no longer a secret, how did this work?
So if you really dig deeper, what exactly are the advantages of BMW? First of all, their first advantage is the brand, and now the BMW brand can still bring value. The second advantage is the design of the car, which is still great from the point of view of appearance, whether it is touched or looks textured. The third advantage is the design of the whole vehicle, where they choose to cooperate in creation, core design and innovation, and work with suppliers to produce high-performance cars that are fun to drive.
brand
Car
devise
The whole vehicle
devise
One example I often talk about is Tesla. How did Tesla succeed? About 3 or 4 years ago, Tesla's annual revenue was $13 billion, which is less than the research and development budgets of its main competitors General Motors, Toyota, Volkswagen and other competitors, who used to spend more on research and development than Tesla's annual revenue, but now Tesla has surpassed many large companies.
If you think about it, the secret is here, this value chain rupture. Tesla innovates at one of the links in this value chain. They reformed the engine, replaced the complex engine with a simple one, and removed the gearbox, added batteries, and so on. But Tesla still has to buy tires, wheels and brakes, where does it come from? They eventually chose to buy from the same suppliers as General Motors, Ford, and Toyota.
So the problem is, the supplier provides a different part of the value chain, and if that value chain breaks, any new merchant can get involved, innovate at one link in the value chain, reconfigure and buy other parts of the business, and that's the power of Silicon Valley. What do I need in Silicon Valley? I need ideas, I need money, everything else can be outsourced. Web design, application design, storing websites, setting up customer service centers, you don't need to do it yourself. What I really need is creativity, business models, brands, customer base.
So you can find that for traditional suppliers, the real problem that needs to be solved is how to get profits, how to avoid the value chain being disrupted? Now I'll show you a very simple value chain analysis. If our value chain breaks down, it can have a huge impact on our business.
Here's a simple example:
Let's say I'm Nike sneakers and I'm selling a $100 pair of sneakers in Manhattan, New York, how much do I need to spend on them? Assuming it costs $40 to buy, the retailer will probably make a gross profit of $60. How much of the remaining $40 belongs to Nike? Nike is branding, advertising, design and R&D, and they steer the supply chain, so of the remaining $40, it's likely that $30 will go to Nike. So, how much money can you make from inbound and outbound logistics made in Vietnam and sold in Manhattan?
Logistics is transported through containers, so profits can be very low in the single digits, or it can be 2% or 3%. Manufacturers can earn almost nothing, or about 7%-8%. So the question is, 90% of the profits go to retailers and Nike, why did it become like this?
If I were Nike, I would bring a brand new brand NBA product to the value chain, and after value chain analysis, the retailer took 60% of the profit, which is obviously my brand, my creativity, and the marketing activities I carry out. Are they trying to do something at the next World Cup or Olympics?
They'll launch a new line of hot shoes that will get celebrities and famous social media outlets around the world to hype up online, and then people will rush to retail stores to buy them. A good brand always brings the profitS I want, like Under Armour, New Balance, etc.
Then the retailer has a point of sale. Another point, I want to find a pair of running, leather stiff running shoes, I might find a salesman in the store and ask them what they recommend? They will recommend me a pair of the most profitable brand shoes, retailers always recommend shoes for customers with the purpose of "high profits", so they have 2 advantages in sales, they have a point of sale, and maintain a relationship with customers, which is very important. I don't care if the point of sale is a brick-and-mortar store or a website or app like Trip Advisor, it doesn't matter where the customers are, as long as they are willing to buy, as long as you master this, you can make a lot of money.
So what does Nike have? Retailers need to pay $40 to buy the shoes from Nike, but they can also go to the same factory in Vietnam or a nearby factory. The same merchandise, the same styles, and almost the same design, it only costs $15 to buy these shoes, why don't retailers do that? Because you can only buy real Nike shoes from Nike. If you go to other markets and look for other manufacturers, there are also some other brands, such as you can buy Hike, Like, etc. You can find a lot of different brands of shoes on the market, but none of them are Nike.
So which way to sell is the easiest? If you want a $60 gross margin, you can choose to buy a $15 pair of Hike shoes and sell them for $75, or buy a $40 pair of Nike shoes for $100, and I can guarantee that no one in Manhattan will buy a pair of $75 Hike shoes at a top-notch sports store. That's the influence of the Nike brand.
You do better than other competitors, you can provide more value, you have pricing power. What happens if the prices are almost the same in the market of the commodity type? You may ask a friend about it, which is equivalent to you selling relationships, which is a more dependent way of selling. If that doesn't work, you'll have to do better and sell cheaper. If that doesn't work, you'll have to be my friend. Manufacturing is the same, if you and I are in a long-term relationship, I have been buying shoes from you for 20 years, so you have been doing our manufacturer. And now, let's say I'm a purchasing manager and get a new proposal, and the other merchants promise me a 20% discount because they're a fully automated, robot-made company.
What would I do? If we had a good relationship, would I ignore that proposal? Of course not, because the purchasing manager's KPI is to reduce costs, but if our relationship is really good, I will tell you that I received that proposal, but I still want to work with you, will you reduce the price? You probably don't have much money, and while I know you and trust your business, you still need to lower the price, which is probably only about 3% higher than what the new company offers. Of course you can also name your difficulties, so that's what happens when the value chain breaks.
In the era of stock competition, what should enterprises pay more attention to to enhance value?
So what you have to do to bring value, we've just discussed a few points: having a point of sale, maintaining a relationship with your customers, and that's all good. Plus, you need branding, which is a good bargaining chip. We've talked about it before, sometimes if volume and liquidity infrastructure is important, we need to do it, and you have to build the infrastructure in your own company.
Sometimes, we also involve intellectual property (IP), although not in most services. Most of the stuff in business is replicable, but if you're doing a good job of it, I'm not going to tell you to do this or that, I'm just going to tell you that our economy is only going to get more and more "volume", so you have to think very seriously about your business yourself, what exactly should I have to have in order to get value in the future.
We've just discussed what we should have to do to get value in the service sector, and then in the third point, I want to talk about what huge and rapid changes are taking place in the economy today, driven by intelligent automation, artificial intelligence (AI) service robotics. I have strongly sensed that by now, we have ushered in the era of the service revolution.
Fifty years, a hundred years from now, when we look back, we will say: This is when the revolution of service happened. All the technology has changed from now on, and our technology is getting faster and cheaper, and the performance is getting better and better, almost every month. Whether it's the drones we're talking about, autonomous driving, biostatistics, cloud technology, mobile technology, geomatics algorithms, or artificial intelligence, machine learning, natural language processing and other technologies are changing at the same time and are evolving better and better.
For us, the most recent revolution was the Industrial Revolution of the late eighteenth century, which brought about manufactured goods. Before the Industrial Revolution, a woman might only buy one handbag in her lifetime, save up for 4 months, and even save longer to buy it home. After the Industrial Revolution, as long as you want, you can buy a bag every month, because the quality of the package after the Industrial Revolution is good, the price is low, and we only need to work for a few hours to buy a good quality package. So the Industrial Revolution allowed us to buy high-quality manufactured goods at a very low price, which greatly improved our standard of living.
Of course, we also have handmade handbags, such as Hermès and Louis Vuitton, and you still have to spend months to buy them, which is the luxury market. Now the mass market goods are cheap and good, and the service industry has new technologies and is developing in one direction. We will usher in large-scale manufacturing services to further improve our living standards. There are many services that are very expensive and unaffordable for many people, but for most people these are all they need, such as education and medical care. There are many other services that are very expensive at the moment, as they almost all need to be done by hand.
In the future, many industries will become industrialized services, goods that need to be done manually or manually will become very expensive, of course, this is only relatively expensive, and eventually these industries will gradually change or be subverted, one after another, including the education industry, I believe we will one day achieve it.
Now when we talk about service robots, intelligent automation does not refer to one technology, but to a fully automated, scalable, end-to-end customer service process, which is not just one technology, but contains multiple technologies. If you need to use computer images, I have to do facial recognition, read the file, just enter something into the computer, there is language in the computer, so I can read the file, but what the meaning of the file is, natural language will process it, let the computer read the meaning from it.
The next step is to execute. If you're all right, now I want to open an account and get a credit card, and the service process must include credit card issuance and activation, as well as mailing credit cards.
For example, this is robotic process automation, but it can also be a service bot. The final step is learning and analysis, and machine learning, improvement, and analytics are a whole set of technologies. For me, there are two things that are exciting, when we talk about service robots, people always imagine that there will be a real robot standing in the store and greeting you.
That's going to happen in the future, we've already offered some retailers and restaurants, and you can see in hotels that robots will take your luggage to the room and deliver room service items. To achieve this, yes, we need a real robot, and right now we're working on it, but it's going to be slower.
The real service revolution is not what we call intangible services, the service revolution refers to the lack of access to physical objects, such as transferring money, making phone calls, consulting investment proposals, you want to know when a store will open, information services like this, which is also the area of the fastest progress at present. The most cut jobs in the U.S. right now are retail store clerks, because people are shopping online or amazons, they don't need that many store clerks, and in fact, what is really changing rapidly now is call center automation.
Automated call centers in the U.S. are changing very quickly, with millions of call centers and agent workers in the country, and most of the positions are now disappearing because chatbots and virtual agents are more powerful than people. Now you don't have to call a center agent anymore, you just need to answer the phone. The technology in the call center will become democratized, which means it is available to everyone.
Of course, notification service systems are obviously important, but think about it, even in the service industry, businesses like hospitals, hotels, airports, etc., have help desks.
Singapore has always been proud that Changi Airport is one of the best airports in the world. They have a help desk on each floor of the terminal. In Singapore, both property and wages are high costs, so it is expensive to build. Although the service desk is expensive, it is not very convenient for passengers, because it is generally located in the center of the terminal, and you may be at the other end of the terminal, so there is little one to consult.
I assure you that in a few years' time, every 50 meters, a holographic projection device shooting from the ceiling will appear at Changi Airport, with images of well-dressed, smiling men or women. The airport only costs a projector, a microphone and a speaker, so the development cost per square meter is low, and of course it can be expanded. This will be the solution proposed by global suppliers to solve the problem of airports, and they will also provide customized services for airports.
The staff on these holographic projections speak all the languages of the world, so you can speak Mandarin, Indonesian, English or Spanish to them, and yes, they know the languages of the world. In addition, they will answer basic questions, such as where to go to check in for Air China? Where to get a tax refund? Where is the bathroom? Where is the immigration check? I hope you all see that day, and it will have a big impact.
Some people will ask me what is the competitive advantage of this service? I would say that it will most likely be like a bank's ATM (automated teller machine). ATMs are the most efficient way to withdraw cash, but no bank has developed its own ATMs. These ATMs are all purchased from merchants, and then you redesign the surface, touch, color, logo and the services you provide.
The core technology of ATM comes from suppliers, so every competitor can buy exactly the same, so it is difficult to find a competitive advantage because everyone's ATM is the same. From retail solutions to information solutions, everyone is the same. So, the important point is that robots, artificial intelligence and service robots are truly innovative services.
It will be divided into two phases. Rapidly changing things are all related to information, and information changes do not affect the actual thing. Because physical robots have to do things, such as autonomous taxis, it will take several years. At that time, there will be robots serving you in the restaurant, and there will be smart mirrors in the barbershop, and you will sit in front of you and click on different types of hairstyles, and the "barber" can help you make the hairstyle you want.
The robot will start to change, which will still take some time, but not for long. So the key point is, is this a tangible service or an intangible service? Another key point is, what is the underlying service value proposition here? Is this really emotional socialization? What can you do for your clients? Are they cognitively and analytically competent? If there is, the service robot will have the ability to do all the complex work, such as robot investment advisors and architects.
Or do something very simple, like buy a ticket and so on. Of course, some people also ask me what if the machine really replaces everything and doesn't feel the touch with people, and I always ask them Do you really pay attention to human touch? Can you remember the last time you withdrew money from a manual counter?
Singapore only needs to use cash during the Chinese New Year, otherwise you are unlikely to walk through the bank doors. If singaporean banks are resourceful enough, they will put new banknotes in ATMs because banks don't want to see you withdraw money, cash withdrawals over the counter are too expensive, and they prefer to offer other higher-value businesses to branches. So if you want to withdraw cash, ATMs are still the most effective way to withdraw money because ATMs anywhere can withdraw money all day long, which is quite fast. Similarly, if you're in line, you don't want to want the staff at the help desk to speak, so if there's a more efficient platform, you can answer through a digital agent or a digital service provider.
Most of us have cognitive and analytical skills, what if we encounter a very emotional, social, complex situation? At this time, we need to process it manually, because robots can't replace it. Although they can feel emotions and express basic emotions, such as happiness or sadness, they will imitate your feelings, but in our view it is just a very superficial performance, they really can't feel the real emotions of human beings.
EMBA
summary
Now, let's look at a few important conclusions, which are some of the best of what I've taught in Chinese EMBA program, which sum up in three ways.
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First, the modern service industry is developing rapidly, how can we gain a competitive advantage? For many companies, they are focusing on developing services and providing solutions because customers like services that are unique and difficult to imitate, and we have given a few examples, such as the Rolls-Royce hourly billing example.
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Second, the contemporary economy will increasingly focus on the service sector, encompassing not only "B2 C" but also "B2 B" models. If the value chain breaks, it's easy for other merchants to get into the value chain and disrupt and disrupt value because they can buy everything from the value chain and innovate at one of them. In business, we also talked about Silicon Valley, we talked about what to do, such as how to control value, in the modern economy, how to get value from the value chain, we also suggested what conditions you should have, such as point of sale, customer relationships and brand effects, in addition to volume and liquidity infrastructure is also important for quality, you should also have. Although we said that there is not much IP in the service industry, if IP is important, you should still try to have it. In short, I don't want to tell you exactly what you need to have, you need to carefully consider your business strategy, how to do it to get value.
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Third, a large number of service industries are undergoing huge reforms that will follow the development of bioanalysis, artificial intelligence and service robots, and the services we provide will change dramatically in the future.
Finally, I hope you enjoyed today's "Teacher Speaks New Language" Master Lecture and I look forward to seeing you in the nuancers of Singapore Chinese EMBA in the future, thank you!
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