Butspeakingas professorsof business, we think some companies might be jumping the gun.
Ourrecent researchsuggests that service providers shouldnt automatically jump on the AI bandwagon.
Instead, they should make a choice informed by their strategy.
In short, when it comes toAIand service firms, more isnt necessarily better.
Why service providers face a different calculation
Are you a manufacturer?
But service businesses firms that do things for customers, rather than making physical products are different.
Unlike manufactured items, services are co-produced by the customer.
Customers can complicate somethingas simple as ordering pie.
Dealing with customers introduces what academics callcustomer interaction uncertainty.
As an example, consider a restaurant.
The customer might make bad decisions, but the restaurant is stuck with them.
None of that will happen if you confine them to choosing from a set menu via a tablet.
If you run a servicebusiness, youve already made any number of choicesbased on your customer interaction strategy.
Imagine, for example, you run a financial services firm.
Are your offices comfortable and convenient for your customers, designed for long meetings to go over their needs?
Or do your services vary widely depending on the customers needs and the choices they make?
Think, for example, of CPAs versus tax preparation apps.
This should be one of the main things guiding whether your service business adopts AI.
To understand why, lets take a detour into what academics callinformation processing theory.
According to this body of work, organisations cope with uncertainty by using knowledge to reduce risk.
The core challenge for service firms is deploying knowledge in service production.
On the plus side, customersstill valuehuman interaction.
The other form of knowledge is known as organisational capital: codified knowledge that the firm itself owns.
Organisational capital has inherent advantages: It belongs to the firm, and it scales.
AI, a form of organisational capital, clearly has these advantages.
Information processing theory gives usthree techniques for organising knowledgeto deal with uncertainty.
The first is having rules and programs a form of organisational capital.
The second is having hierarchical structures.
Here, front-line workers escalate intricate matters to more knowledgeable managers.
These last two rely on knowledgeable, experienced workers human capital.
Heres how that fits with service strategy.
Mostly, firms with fewer options for consumers and limited customer interaction use organisational capital.
Nowadays, that typically means tech solutions on top of rules and programs.
The firm owns it and can scale it.
