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RENOR & Partners

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October 21, 2022

If you don’t keep up to date, you’re destined to shut down.

If you don’t keep up to date, you’re destined to shut down.

by Simone Renzi / October 21, 2022
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This post is also available in: Italiano (Italian)

Very often, I’ve found myself sitting down with entrepreneurs, presenting my services, and witnessing a variety of reactions and behaviors from my counterparts.

There are those who listen with interest, those who act as if they’re doing you a favor by letting you explain how it’s possible to reduce their company’s costs by offering solutions to help them produce more, in less time and at lower cost; and then there are those who don’t let you speak at all—because, from being a metalworker, they’ve suddenly transformed into an IT expert, transitioned through cloud architect, and landed as an app developer. A truly all-knowing know-it-all!

I believe that at the heart of everything there should be an awareness of one’s own limits—something that is not a weakness, but rather a form of strength and intelligence. It means listening carefully to what someone who has been doing that job for 30 years has to say, and recognizing the nuances and opportunities that may arise from that conversation.

I would never dream of replacing an accountant or a lawyer just because I once wrote a letter of complaint.

Everything is moving toward the digital sphere—and specifically, toward the internet—is something I take for granted.

More and more companies are turning to e-commerce to overcome territorial limitations. Increasingly, businesses are automating their internal processes because they understand that automation doesn’t make mistakes and is capable of processing vast amounts of data with a single mouse click.

There are those who are rooted in their convictions.

Alas, there are people who fail to grasp this social-technological reality, or reject it simply because they don’t understand it. I can certainly put myself in the shoes of an entrepreneur who built their success in the 1980s, following the dynamics of that era—it’s genuinely difficult to accept that the world has changed radically over the past 40 years.

And yet the effects are visible everywhere: in the automotive industry with self-driving cars, in photography, filmmaking, transportation, commerce, public administration.
On a more everyday level, just take a walk and look around: everyone is holding a smartphone… everywhere!

This rejection of technology at a business level, however, is very dangerous—especially in this phase of rapid transition from the analog world to the digital one—because other companies are moving forward, keeping up with the times, managing to produce more at lower costs, and as a result, the products they bring to market will have higher quality at a lower price.

Analog world vs. digital world

To better understand this transition, we can take the example of a call center where phone operators search for contacts in the Yellow Pages, and compare it to another call center that uses automated solutions.

In the first case, the operator has to search for numbers in the Yellow Pages, contact the client, and note the outcome of the call. If the client requests a quote, the operator must forward the request to the appropriate department, which will take 30 minutes to prepare the quote and send it back. The operator will then write an email and send the quote to the client. Finally, they’ll have to make a note to call the client back and remember to do so on the agreed date and time.

A cumbersome and inefficient procedure, with a high likelihood of errors—such as forgetting to make follow-up calls or, in the worst-case scenario, calling back companies that are already clients to try and sell them the same service again.

Now let’s look at the second case…
The operator works with an automated system. The client requests a quote, and the quote is generated on the spot over the phone by the software, simply by entering a few basic calculation parameters. The software then automatically generates the PDF of the quote and sends it to the client.

Two days later, without the operator needing to do anything, the system will automatically reassign the number for a follow-up.

And now, the usual questions…

Analog case

How long did it take to handle the user’s request? More than half an hour
How many resources were involved? At least two (the phone operator and someone preparing the quote)
What is the risk of forgetting to call some clients back for quote confirmation? Very high

Digital case

How long did it take to handle the user’s request? Less than one minute
How many resources were involved? Just the operator, who by filling out a few fields was able to generate a quote and send it automatically to the client while still on the call
What is the risk of forgetting to call some clients back for quote confirmation? None—the number is automatically re-assigned to the operator by the system and remains active until a final outcome (positive or negative) is recorded.

Considerations on the Use Case and ROI

It’s quite clear that in an 8-hour workday, if the duration of each call in the digital case is drastically reduced compared to the analog case, then within the same time frame, an operator will be able to make significantly more calls. Therefore, the first return on investment comes from the increased productivity of each individual operator.

If an operator using an automated system is able to make 300% more calls per day, it is reasonable to assume that adopting such a solution means each operator produces the equivalent output of three operators using the analog method.

Furthermore, there will no longer be a need to assign a dedicated resource to prepare quotes. The quote can be generated directly by the operator while speaking with the client over the phone.

Finally, there is no risk of human error—because computers are fast idiots. They lack the ability to make decisions, invent mechanisms, or have thoughts, but they are extremely fast and efficient at executing error-free operations they were programmed to perform.

Effects on the Market

The company that has streamlined its departments with automated solutions will be able to produce more at a lower cost. At this point, the market speaks loud and clear, and the entrepreneur has two paths they can choose to follow.

  1. Maintain unchanged product costs that are in line with market standards in order to generate more revenue.
  2. Lower the product’s selling price while maintaining the same previous profit margin, in order to attack the market with more competitive prices and expand the customer base.

In my view, the first option is feasible for those who have already been moving toward automating their business departments for some time. As time goes on, however, even smaller companies are beginning to head in the same direction—and they are forced to adopt the second business strategy: lowering prices to aggressively enter the market, as they need to build a customer base.

This dynamic means that as more competing companies emerge with lower prices, the market price for that particular product will decrease, leading to a reduction in profits for the company that initially chose the first strategy. That company will then be forced to lower its prices in order to remain competitive—thus shifting to the second path.

Who still works analogically?

Those who still work with pen and paper are automatically out. Solutions of this kind can’t be built in just two days, especially because—in my experience—beyond standardized procedures, every company has its own internal workflow.

Creating tailor-made IT solutions takes time, and the more complex the workflow to be automated, the longer it will take.

The risk, therefore, is that the entrepreneur realizes the mistake and tries to make up for it when the situation is already beyond recovery.

After all, they’ll never be able to sell a product that costs them 40 to make for 35, when their competitors are already selling it for 30 because it only costs them 10.

And if we look at it from the market’s perspective: if I, as a customer, have always bought a product from a company at 40, it won’t take me long to stop buying from them when I realize I can get the same product for 30 from another company.

This will lead to an uncontrolled loss of clients—and consequently of revenue streams—that will be difficult to recover unless the company has substantial cash reserves capable of sustaining costs during the transition from analog to digital.

Many businesses will shut down for this very reason: an unjustified rejection of new technologies by entrepreneurs rooted in outdated business dynamics.

Simone Renzi
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