Business Model Innovation for Intelligent Automation: Unpacking the Productivity Paradox

Lead Research Organisation: University of Cambridge
Department Name: Engineering

Abstract

Productivity growth has been slowing down in the last decade in major economies as well as in emerging markets despite the prevalence of digital technologies. This phenomenon is widely known as the productivity paradox. The productivity growth slowdown is particularly acute in the UK compared to other major economies. Moreover, industries that are the most intensive users of Information and Communication Technologies (ICT) appear to have contributed most to the slowdown in productivity. One of the main reasons for this productivity slowdown could be due to the limited redesign of business processes and business models following the adoption of new digital technologies by firms. Through the research programme Dr. Velu will provide a better understanding the relationship between business model innovation and productivity improvements following the adoption of intelligent automation technologies. Dr. Velu will build a digital tool for management information and decision support systems for assessment of productivity of business models in order to enable rapid and sustained improvements in productivity within firms following the adoption of digital technologies. In doing so, the Dr Velu aims to propose a new framework for productivity reporting for national income accounting.

Dr. Velu will conduct historical analysis of firms that have implemented intelligent automation technologies in order to learn and develop the criteria for productivity measurement of business models. This will include analysis from historical publically available data as well as within firm analysis of a number of selected sectors such as manufacturing, distribution and the sharing economy. In addition, the research will conduct longitudinal in depth analysis of firms in similar sectors as the historical analysis in order to build a digital tool that will identify business model innovation opportunities following the adoption of intelligent automation technologies. This will involve working with the senior management team of a selected number of firms in these sectors in order to define the data requirements, draw-up the technology specification, develop the software programme, populate and test the digital tool with data and propose ways to embed the digital productivity tool within existing management reporting systems. The research will benefit firms as it will provide the basis for a systematic evaluation of the need for business model innovation opportunities following the implementation of intelligent automation technologies. The research will also benefit policymakers by defining good quality and appropriate data in addressing the challenges of measuring productivity in the digital economy.

Planned Impact

The research will provide key benefits to the stakeholders across the managerial, policy and academic communities as follows:

(1) Supporting Business Model Transformation
The digital productivity tool will help managers in established and start-up firms to decide how to assess the impact of the intelligent automation technologies that they implement in order to fully leverage the productivity benefits through appropriate business model innovation. Moreover, technology transfer organisations (such as the Digital Catapult, the Advanced Manufacturing Catapults and Innovate UK) will benefit as they would be better able to provide advice to firms testing and implementing the latest intelligent automation systems using the Catapults facilities to gain the full productivity benefits. Moreover, the involvement and support of IBM as well as The Conference Board will ensure that the digital productivity tool is disseminated widely among firms implementing digital technologies.

(2) Influencing National Policy
Policymakers such as the Department for Business, Energy and Industrial Strategy (BEIS) and Office for National Statistics (ONS) will benefit significantly from defining good quality and appropriate data in addressing the challenges of measuring productivity in the digital economy. The research will feed into initiatives related to the recent Industrial Strategy Green Paper. This will result in more effective policymaking on industrial strategy. Policymakers will be involved from the start of the research programme in order to ensure sustained interactions. Policy Fellowships will be organised through our partnership with the Centre for Science and Policy (CSaP) at the University of Cambridge ensuring strong policymaker engagement and dissemination of findings.

(3) Consumers and the Economy
Consumers and the economy will benefit from new digital technologies such as intelligent automaton becoming available sooner as a result of appropriate business model innovation. Moreover, addressing a key element of the productivity paradox by enabling quicker and more effective business model innovations will stimulate faster economic growth.

(4) Further Academic Investigations and Research Capability
Research findings generated during the project will be disseminated at international conferences and through leading academic journals. Dr.Velu will plan a special issue with one of the leading journals on the topic. These will provide valuable routes to publish developments in intelligent automation and its impact on business model innovation and productivity in an accessible manner to academics and practitioners alike. The involvement of the visiting professor who are all experts in digital technologies will support this strand of activity. Moreover, the research programme will complement existing research on productivity such as the Economic Statistics Centre of Excellence (ESCoE) on measuring the modern economy and the Centre for Economic Performance's (CEP) productivity programme and to the forthcoming ESRC Network Plus on Productivity. Finally, the Research Associates will acquire unique skill sets in combining social science with engineering to address productivity issues. These skills will be disseminated widely through research training in order to help train other researchers.

Publications

10 25 50
 
Description Developed a framework called the Business Model Cohesiveness Scorecard (BMCS) to help firm measure and manage the coherence of the activities across within the business model as firms adopt digital technologies. The BMCS enables the identification of the enhancing and mitigating effects the inter-relationships across the activity chain within the firms as well as across the ecosystem in order to facilitate business model innovation. The BMCS framework will appear as a chapter in the Handbook of Digital Innovation by Edward Elgar Publishing (forthcoming in 2020).
Exploitation Route The BMCS framework could be used by managers to identify and innovate their business models as they adopt digital technologies.
Sectors Aerospace, Defence and Marine,Chemicals,Construction,Digital/Communication/Information Technologies (including Software),Energy,Financial Services, and Management Consultancy,Manufacturing, including Industrial Biotechology

URL https://www.ifm.eng.cam.ac.uk/uploads/Research/BMI/Velu_MI_for_BMI_Aug_2019_Final.pdf
 
Description Developed an Executive Education Course on Business Model Innovation and Digital Technologies. Delivered the course to executives globally.
Geographic Reach Multiple continents/international 
Policy Influence Type Influenced training of practitioners or researchers
Impact The course aims to provide a basis for organisations to think about how to innovate their business models as they adopt digital technologies. The skills acquired have been helpful in executives improve the digital transformation challenges in their respective organisations. Such thinking about business model innovation would help address the productivity slowdown in the UK and elsewhere.
 
Description Intelligent Automation and Productivity: The Imperative for Business Model Innovation
Amount £78,000 (GBP)
Funding ID Cambridge ESRC DTP Knowledge Exchange PhD Studentship 
Organisation Economic and Social Research Council 
Sector Public
Country United Kingdom
Start 10/2020 
End 03/2024
 
Title Business Model Coherence Scorecard (BMCS) 
Description Developed a framework called the Business Model Cohesiveness Scorecard (BMCS) to help firm measure and manage the coherence of the activities across within the business model as firms adopt digital technologies. The BMCS enables the identification of the enhancing and mitigating effects the inter-relationships across the activity chain within the firms as well as across the ecosystem in order to facilitate business model innovation. The BMCS framework will appear as a chapter in the Handbook of Digital Innovation by Edward Elgar Publishing (forthcoming in 2020). 
Type Of Material Improvements to research infrastructure 
Year Produced 2019 
Provided To Others? Yes  
Impact The framework will be developed further and is expected to improve the identification and management of business model innovation among firms as they adopt digital technologies. 
URL https://www.ifm.eng.cam.ac.uk/uploads/Research/BMI/Velu_MI_for_BMI_Aug_2019_Final.pdf
 
Description Intangible Capital and Productivity Improvement: A Study of Small and Medium Enterprises in the UK Aerospace Industry 
Organisation Sharing in Growth
Country United Kingdom 
Sector Charity/Non Profit 
PI Contribution My research team and I have been working with the Sharing in Growth (SiG) Initiative to better understand how intangible capital helps improve productivity among Small and Medium enterprises in the UK aerospace industry. SIG in a government funded initiative to help improve the productivity of the small and medium sized enterprises in the aerospace industry.
Collaborator Contribution The Sharing in Growth (SiG) initiative has been providing access to the beneficiary firms as well as data on the performance of these firms. The SiG team has been guiding the research team on the main issues with respect to the management of intangible assets and how it affects productivity. SiG will also facilitate interviews with the senior management team of the firms.
Impact The outcome so far is a first year report of one of the PhD students from the research group. This involves multidisciplinary research team with engagement from economics, engineering and innovation management.
Start Year 2019
 
Description Realizing the Full Potential of Digital Transformation. 
Organisation The Conference Board
Country United States 
Sector Private 
PI Contribution The research involved interviews with senior management of 14 major blue chip firms across various industry sectors. The work involved understanding how these firms were preparing and implementing digital technologies. I was involved the helping design the interview protocol, involved with the studies, doing the analysis as well as help write the White paper.
Collaborator Contribution The Conference Board involved their member firms in the interviews, organised the interviews with the senior management team, conducted the analysis of the interview data as well as helped draft the White Paper.
Impact The White paper with a provisional title 'Realizing the Full Potential of Digital Transformation: Three Areas of Focus' will be published shortly and circulated to wide set of firms worldwide. This is with a multi-disciplinary team of involving engineering, economics and technology management.
Start Year 2018
 
Description Targeting the Full Value of Digital Disruption 
Organisation IBM
Country United States 
Sector Private 
PI Contribution Published White Paper titled 'Targeting the Full Value of Digital Disruption: Innovating Business Models for Capturing Value from New Technologies'. The paper analyses the digital technology adoption (Mobile, analytics, IoT, Ai, Blockchain and Cloud) across six industries such as Retail, Auto, Hospitality, Healthcare, Electric Utility and Oil refining. The analysis show the industry spend in digital technologies still leaves a lot of potential value on the table as it does not fully account for the value creation and productivity improvements from business model innovation. I contributed to the design of the study, guiding the analysis as well as the writing of the White Paper.
Collaborator Contribution The partner firm, IBM provided resources/staff to collect the data and do the analysis.
Impact The outcome of this collaboration is a White paper as noted below: https://www.ifm.eng.cam.ac.uk/uploads/Research/BMI/BMI_IfM_2019_whitepaper_digital_disruption_FINAL.pdf The collaboration is multi-disciplinary as it involves the disciplines of engineering, economics and business management. Moreover, there is a new ESRC DTC PhD scholarship that has been allocated to me to support a PhD student from October 2020 on this collaboration.
Start Year 2018
 
Description Digital Transformation and Innovation: Where is the benefits? 
Form Of Engagement Activity A broadcast e.g. TV/radio/film/podcast (other than news/press)
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact The activity was a live webcast by the Conference Board from their offices in New York. I was interviewed in the webcast by a Senior Fellow of the Conference Board based on the topic of challenges and opportunities in digital transformation. This was streamed with over 80 participants. Subsequently the webcast was available to member of the Conference Board as well as through the website of the Institute for Manufacturing (IfM) at the University of Cambridge.
Year(s) Of Engagement Activity 2019
URL https://conferenceboard.adobeconnect.com/pq7rcewtjdvg/?proto=true