Technological advances have been impacting the workforce since Guttenberg disrupted the
publishing industry of the 1400s with his printing press. But the monks who were previously
tasked with hand copying the bible didn’t go out of business. Instead, manuscripts became mass-produced at an affordable price allowing for more efficiency in the spreading of information, greater literacy, and more innovation. The printing press didn’t kill the publishing world, it actually fueled larger public demand for the product.
Many experts predict this is the same story we’ll see play out in the service sector. As it was with Guttenberg, textiles in the 1800s, cashiers in the 1980s, and bank tellers in the 1990s, change is inevitable; the kiosk is coming.
According to analysis by McKinsey Global Institute, 73 percent of the activities workers perform in the food service and accommodation industries have the potential for automation. What’s more, Dr. Michael Chui’s research at McKinsey estimates that 54 percent of the tasks workers perform in American restaurants and hotels could be automated using currently available technologies.
But just because something could be automated, should it be? Is there enough benefit to business owners to undergo the hassle and expense of automating parts of their services? Ton Lam, owner of Bay Area restaurant alaMAR, thinks so. Tony operates his business in an are where the cost of living is high and unemployment is low. This makes lower skilled labor difficult to find. “We have these problems that we can’t control,” Tony said., “We can’t control the high living costs, we can’t control skill sets, and with minimum wage increasing from $13.50 to $15 on January 1st, our margins are shrinking. We had to identify the problems we could find solutions for.”
The challenge became coming up with a solution to help the restaurant operate more efficiently. While labor costs have been rising, the cost of machines has fallen significantly. According to the Boston Consulting Group, costs of robotics hardware and software are 40 percent lower than in 2005. alaMAR began testing automated ordering.
For Tony, the benefits speak for themselves. “We’re saving time, reducing errors, and providing a better experience for the customer,” he said. The reduction in human error means “there are no more incorrect orders, and we don’t have to worry about theft since the app means 99% of our transactions are made by credit cards.”
In fact, alaMAR made the decision to go entirely cash-free a year ago. The reason? Time. “Time is money when you’re paying $15 an hour,” Tony explains, “We can rely less on a cashier, on training, and on people to up-sell our products. People don’t always want to up-sell or promote specials or higher-margin products. The app is programmed to up-sell and promote upgrades right on the customers’ screens.”
Their success is not isolated. The Atlantic reports that since Panera introduced kiosks and ordering from their mobile app, they’re processing more orders overall. Starbucks’ mobile app
now accounts for 10 percent of sales and the company reports customers who use the app return more frequently than those who don’t. Furthermore, online ordering has increased efficiency to the point that sales during peak hours have increased.
So how should you go about introducing automation to your business? As with all change, it’s best to proceed carefully.
Do your research
Many restaurants are adopting kiosks or iPads at tables, but for alaMAR, those solutions were cost prohibitive. Instead, they turned to TorchFi to automate ordering. TorchFi turns a WiFi hotspot into a mobile sales channel enabling customers to use their own phones to complete transactions. There are many solutions out there to begin introducing automation to your business. Conducting a thorough cost benefit analysis and understanding the ROI of investing in new technology and how it will impact your customers is a critical step before taking the leap.
Know your audience
Understanding whether your customers will embrace this change is another key consideration before introducing automation. Asking patrons to use their mobile phones to order isn’t going to be a popular request for everyone, but the clientele at alaMAR prefer it. “This isn’t ideal for high-end dining,” Tony says. “But in the Bay Area, I’m targeting millennials who want convenience and speed. They don’t have time to wait around. They want to get their food and get out to continue their day.”
Test and Learn
Once you know which solution you want to try and whether your customers will be receptive to it, test automation with a focus group or on just a portion of your menu. “Change doesn’t happen overnight, the customers had to get used to a new process,” said Tony. At alaMAR, they started by opening up online ordering for specific menu items and for bar ordering. Customers took some prompting. “You need to have the right strategy in place. This is a new habit for the customers and you’ll need to help them learn it,” Tony said. Managers would invite patrons to use the online ordering system to cut long lines and signage offered incentives like discounts to try out the new system. Soon after, customers saw the benefit. “Counter service here used to be a much longer process. The online ordering has been so successful, it’s really made alaMAR a better dining experience for everyone. We’re now expanding online ordering to our full menu.”
Does more automation mean fewer jobs?
James Bessen, an economist at Boston University School of Law, has studied the automation of industries dating back to the 19 th century when technology automated 98 percent of the labor involved in weaving cloth. Textile workers reacted violently to this change and staged protests destroying the machinery set to replace them, actually originating the term luddite.
However, Beeson found that “the number of weaving jobs actually increased. Automation drove the price of cloth down, increasing the highly elastic demand, and resulting in net job growth despite the deployment of labor saving technology.”
The same thing happened when ATMs quintupled from 1990 to 2010. The convenience of the ATMs actually drove demand for consumer banking. Banking services were used more frequently and previously unbanked people opened accounts to take advantage of the new technology. Though each branch staffed fewer tellers, banks added more branches that in turn grew the number of tellers overall (pdf).
The positive labor impacts appear to apply to the food industry, as well. Panera reported adding more workers to fulfill the increase in orders stemming from the kiosks and its ordering app. Starbucks employed 8 percent more people in the U.S. the year it launched its app. These trends suggest that increasing convenience and reducing friction actually fuel demand and generate more jobs.
Only time will tell the true impact of automation, but to Tony, the future is obvious. “It’s inevitable,” he said, “Restaurant owners have been stretched way too thin. Food costs, labor costs, and rent are all going up. The margins are shrinking. This type of automation will be necessary for anyone looking to grow a successful business.”
