The Future is not a PDF

Over the past fifty years, technology within businesses around the world has improved at pace. No longer do we have manual general ledgers, telex machines, typewriters or faxes. Instead, businesses have digitised to varying degrees; at a minimum, capturing unstructured data in electronic format (for example, documents created, saved and shared within an organisation), and at full potential seeing digitisation of structured workflows and interactions. This may include the capture of data (at the point of activity), storage, analysis, insights, and decision-making support through cloud-hosted, specialised platforms which now touch every aspect of businesses operations.

These platforms are now commonplace, and in many cases the productivity gains are unarguable. End-of-period accounting which may have taken a highly trained, dedicated accounts team weeks can now be completed by a relatively un-skilled practitioner in close to real-time, while information dissemination from operational platforms enables real-time decision making and optimisation which improve business productivity immensely.

Within organisations, productivity improvement from digitisation and optimisation has been on a meteoric rise, however a number of these gains have now been captured. Further improvement is now increasingly reliant on heavy investment, customisation and radical changes to ways-of-working, systems, and processes. As such, the next ‘revolution’ of productivity improvement is unclear.

Between organisations (i.e. company-to-company), the process of digitisation has scarcely begun; it is this which has the potential to drive the next major wave of business productivity over the next 25 years. Whilst the idea of writing, printing and sending a letter to a colleague seems increasingly far-fetched (bordering on ridiculous), paper-based processes between organisations remain commonplace. For example, procurement, legal, and regulatory interactions between organisations remain at best an ad-hoc exchange of unstructured information (i.e. over the phone, or email), and at worst, are conducted via post in much the same way as the early 20th century.

Digitising (and organising these exchanges into structured data) will be difficult. Any structured exchange of this nature requires an agreed set of rules, a communications means, and a way of transforming the exchanged data to/from a format that can be used within a sender or receiver’s business. Despite these challenges, progress has been achieved within both a global and Australian context, for example:

  • Governmental reporting: Within Australia, “Single Touch Payroll” as implemented by the Australian Taxation Office (ATO), is a clear example of a real-time, structured data project which has already shown immense benefits. Implemented across every Australian organisation with paid employees between 2016-2019, this system requires businesses to report individual employees’ payroll to the government in real-time, and was the key mechanism for rapid and targeted wage relief during the COVID pandemic.
  • Supply-chain Electronic Data Interchange (“EDI”): While not a new concept (given it was originally pioneered by the Automotive industry in the late 20th century), EDI is increasingly penetrating smaller organisations as a means of conducting structured and efficient procurement processes with other organisations.

The next wave of improvement in systems of this nature is likely to come from both an increase in functionality and an increase in penetration:

  • Functionality: The ability to provide additional functionality beyond simple data-exchange has the potential to provide large productivity gains. For example, the integration of payments into a procurement process would avoid the work that comes from processing, verifying and reconciling payments with invoices, while reducing fraud, errors, and re-work.
  • Penetration: Historically, structured exchanges between organisations have worked well where a more powerful party (i.e. the government, or a key customer) sets rules, which other parties must play by. The full potential across the economy can only be achieved when peer-to-peer connectivity is also commonplace. This will require a third party (likely a government or powerful private-sector technology player) to ‘set the rules’, by which others will then operate. This appears possible to achieve with initiatives such as the PEPPOL invoicing standards in Australia (currently being implemented for Australian Government procurement), however realising productivity gains across the economy will require not only the setting of standards, but also a mandate to require adoption by all organisations within a set timeframe.

In summary, while organisations have typically done a good (and sometimes great) job of digitising themselves, the ‘quick wins’ from this transformation have now increasingly been captured. To continue to increase productivity in line with the last 30 years, we need to increasingly focus on how businesses interact with each other. This won’t be a simple process, however there are now sufficient proof points to demonstrate that this will be a worthwhile journey.

Andrew Joyce,
Potentia

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