Managing Principal, Supply Chain and Telecommunications
OMNI Consulting Group LLP
Abstract
Mobility in the past decade has brought about sweeping changes to the productivity of the global workforce as information becomes an increasingly vital link to job performance. Through the endowment of this research study, made possible by Cisco Systems, we explore the fundamental shifts in macroeconomic and microeconomic forces that face enterprise decisions regarding the adoption of wireless connectivity. And more relevant than ever before, the focus is on improving productivity for workers who capitalize on wireless advantage to actually do more in less time. This translates into not only a boost of efficiency, but also a source of competitive wealth for companies that place strategic value on information to succeed.
Of the roughly 180,000 jobs being created monthly in the United States, approximately 8.3 percent of these are a direct result of mobile workforce transformation. At the macroeconomic view of labor, this means that positive job growth is inherently linked to workers capable of performing their role in distinctly different way. From the insurance claims representative to law enforcement personnel, mobility appears to be changing the equation of getting more done in less time and at higher volumes than ever before. This trend line of productivity demonstrates an overall 13.37 percent improvement in total factor productivity (TFP), supporting the notion that employers can actually gain five additional hours per week of output from their workers by simply adding mobility to the mix.
An Economic Agenda for Mobility
Neoclassical economics tells us that adding technology to our mix of capital, labor, and assets should produce a positive return on the investment, or at least provide a distinguishable improvement in our ability to produce a market basket of goods and services. Through the Industrial Era of the 1900s, we saw technology concentrated squarely on changing production efficiencies (i.e., eliminating labor through automation and increasing output levels). However, as the global economy begins to morph into a knowledge-driven business fabric, the context of manufacturing steps aside in favor of information sharing. Now, competitive advantage hinges on rapidly executing bits of data rather than mastering the capacity angle of widget production. Lest we forget that widgets really still matter, the proper notion of an information economy still entwines exchanging data that makes commerce connect.
And that is exactly where mobility has made a quantum difference in enabling workers across the globe to enrich their productivity by having information at their fingertips and the freedom to execute wherever and whenever. The core of our research in looking at mobility's role today is nested inside an understanding of the behavioral and operational economics that face corporations and individuals choosing mobile solutions. Armed with real-world data and the concert of domestic and international reporting sources, we set out to define some of the critical patterns that make mobility a surging portion of economic growth in the past five years. By virtue of economic modeling and statistical sampling, this research highlights the ways in which mobile services infrastructure is improving the gross domestic product (GDP) outlook for countries and changing the game plan for organizations worldwide. Our premise that mobility does, in fact, equal productivity presents a number of insights at the macro- and microeconomic levels.
Figure 1: Mobility Equals Economic Productivity
Macroeconomic Lessons in a Global Economy
Take the top-down approach to thinking about mobility as a larger input of change. It is of little wonder that technology and the effects of globalization have changed our business output schedules in recent years. As we said, a key concept that most executives accept involves productivity being derived from implementing technology; that is to say, technology adds benefits to the balance sheet across many modes, from higher per-customer profit to lower per-unit production costs. The point of contention, to some, is just how investments in mobile technology perform against other choices of spending. On average, we observe that the annualized productivity growth rates in the United States alone have steadied at a 4.5 percent year-over-year improvement. And of this climbing growth, data shows that mobile data services are beginning to account for a hefty 23.6 percent compound annual growth rate (CAGR) as the information services economy evolves. Whereas before the economy weighed heavily on durable goods manufacturing, the next leap ahead is clearly about service creation as a wealth-building cornerstone.
This indicates that the global economy is witnessing an era of measuring itself on knowledge resources and how information is playing a greater role in changing our productivity quotient. A number of observations in the data point toward why this phenomenon is happening. Among the most significant conclusions, we recognized the following:
- Network convergence is bringing users of information technology applications closer to enterprise data through wireless connectivity
- Declining costs for wireless access are driving up usage to data warehouses
- Reliability of mobile performance is improving to meet enterprise service expectations
- Decentralization of workforce operations is forcing the need for mobile communications infrastructure
- Adoption of mobility services are better accounted for and budgeted within corporate and individual spending
- Willingness to spend for mobility enhancement is sharply rising as priorities of discretionary income lean toward service access
- Regulatory barriers are softening to invite new service providers and thus drive competition among mobile data options
At the pinnacle of change, mobility is forging new ground because of the positive realization that companies can adjust their capability to produce goods and services without adding costlier inputs such as people, capital assets, and long-term liabilities. And as the early adopters of mobile services in the late 1990s became mainstream users in 2004, we noted a substantial increase in value recognition at both corporate and individual levels. Mobility is no longer a fashionable sidekick to the corporate world, but more so the propagation of technology is reaching down the employee chain to those on the front lines with an information need. To an obvious degree, this is being driven by corporate instincts to perform the following:
- Reorganize labor to create higher forms of efficiency
- Improve quality of service (QoS) to yield higher profits
- Lower the costs of business operations
- Increase marginal output of goods and services
- Maximize revenue opportunities
One of the conspicuous phases of mobile transformation has been the slant of technology influence on previously untouched technology domains. For instance, some of the power users of mobility are quickly appearing from the blue-collar sector, where simple, rote processes are being replaced with handheld automation. From the delivery driver to the parking garage attendant, wireless devices are realigning the use of data to better connect the enterprise, whether it be packages in transit or parking spaces for rent.
Figure 2: The Impact of Mobility on Economic Growth Rates
And as the costs of business operations dip slightly with better information about performance, organizations are left to choose how to allocate the savings offset and make plans. Over the next few years of seeing mobility change whole industries, our data reveals significant benefits for consumers as goods and services flow with greater velocity and competition rises to bear lower prices. A crucial part of the information era is the way in which pricing approaches have changed to reflect the knowledge of consumers in a given market. Wireless data networks are fundamentally accelerating the relationship of commerce and specific components of pricing goods and services.
Figure 3: The Future: Mobility Contributes Heavily to New Job Creation
In total, organizations and individuals are beginning to set themselves apart by using mobility as a strategic lever in adapting routine business processes to accomplish more through the execution of information resources. And mobility is finally delivering on its promise to enhance workers' quality of life-the subsequent productivity gains reflected in larger payrolls and spending speak volumes at the macroeconomic root of change.
A Microeconomic Perspective: Drilling Deeper into Vertical Industries
Not every industry views mobility in quite the same manner. Nor do those who use mobility gain the same benefits across a set of standardized measurements. In our research of several vertical industries that applied a cross section of mobile data devices, portable computing applications, and combination voice/data infrastructure investments, the net effect of mobility could be boiled down to the following four primary factors:
- Human capital improvement by the automation of constrained information: Workers gain access to otherwise difficult information required to perform their job.
- Point-of-sale transactions that occur beyond a traditional brick-and-mortar location: Commerce happens in multiple locations apart from branch offices and physical locations.
- Volume throughput as a function of job performance: The measurable standard is how much mobility increases production goals and output of work products.
- Self-reliance on information to accomplish job task objectives and increasing isolation from workgroups: Workers require a certain amount of information access to accomplish tasks remotely.
Specifically, we examined six industries-insurance services, hospitality, public safety, manufacturing and logistics, health care and pharmaceuticals, and financial services-to gain a perspective on why mobility changed the productivity quotient. The key statistics from each of these vertical segments relate to how companies can choose to improve their operations by the four primary factors in microeconomic circumstances.
Insurance Services
Insurance services at the consumer level delegate claims management to field representatives who must gather information and adjust loss payouts according to a policy basis. Key performance indicators include the following:
- Operational efficiency and field staffing of claims management
- Loss-to-policy limit ratios
- Resolution and expiration of claim cases
- Optimization of information resources and handling accuracy
Key Statistic: Field claims representatives can improve case management workloads by handling 7.4 additional claims per week and improve payout ratios by an annual savings of 6.35 percent per adjuster. This means that the workload of an adjuster can increase moderately by avoiding the manual input, search, and gathering of data processing as part of the claim. The accuracy of information regarding loss values coupled to real-time settlement has been shown to improve operational payouts by 6.35 percent of a given adjuster's payout performance.
Hospitality
Hospitality services run the full gamut of hotels, restaurants, and retail locations that provide managed access to patrons. More recently, travelers have begun to show a distinct bias toward selecting properties that offer broadband connectivity options-both wired and wireless. Key performance indicators include the following:
- Guest revenue yield per visit or stay
- Vacancy or loading factor per day
- Site improvement and introduction of service costs
- Elasticity of patron and guest spending
Key Statistic: Across the range of options for broadband access, guests or service patrons are more likely to select a location with Internet access-7.2 times out of 10-when given a comparable hospitality solution. Travelers to hotel properties will equivocally spend 6.85 percent more per room for suitably equipped broadband facilities. On an average $100 per night room, a guest will spend roughly $7 more on equipped property versus one without mobile high-speed connectivity.
Public Safety
Immediate access to information is critical for the performance of law enforcement duties in the public safety industry. Peoples' lives depend on timely data to help accomplish the capture and prosecution of criminals at large, while vastly improving the chances of survival against attack. Key performance indicators include the following:
- Reduced loss of life and property
- Increased retention of criminal persons at large
- Reduced officer and public servant injury
- Accuracy and expediency of information from central database resources
Manufacturing and Logistics
The movement of goods and services within the economy requires a well-performing supply chain. Mobile data services in the warehouse environment help enhance the quality of logistics in getting products from one point to another. Key performance indicators include the following:
- Technical, operational, and economic efficiency improvements to move products at a lower cost
- Quality of shipments reaching end destinations in the least amount of time and on a least-cost basis
- Accuracy of data concerning the movement of high-value or volatile products
- Management of inventory thresholds to demand requirements
Key Statistic: Use of radio frequency information data (RFID) wireless technology eliminates 5.93 percent of logistics errors within any given warehouse operation. Based on the initial design of RFID networks, a warehouse shipper operation can effectively reduce the errors of miscalculated shipments, improperly picked loads, and the inventory handling process to achieve better spend performance on logistics services.
Health Care and Pharmaceutical
Most pharmaceutical sales organizations employ field sales representatives to directly affect the demand fulfillment and marketing of prescription drug products. The individual field representative relies on access to physician networks and information pertinent to recommending certain solutions. Key performance indicators include the following:
- Prescription fulfillment rates by physicians and medical practice groups
- Adoption and conversion of sales leads
- Order fulfillment and demand planning for manufacturer operations
Key Statistic: Field sales representatives may increase incremental physician briefings by an average of 8.3 visits per week because of mobile data and voice access. Depending on the size of a given sales territory, a single representative can maximize his or her time within a given market at greater efficiency because of sales relationship and supply chain management applications.
Figure 4: Industry Contrast: The Effect of Mobile Data Within Financial Services
Financial Services
Markets fluctuate in real time as stocks, bonds, and other currencies move within trade circles. To place trade orders, financial services professionals have come to rely on data at their fingertips as they manage investment portfolios. Key performance indicators include:
- Execution of trade options to manage client wealth portfolios
- Profitability of fund and portfolio yields
- Data synchronization with field agents, brokers, and consultants
Key Statistic: Financial services agents can execute approximately 11.4 percent more trade options with wireless data services and achieve an average nominal improvement of 3.1 percent portfolio performance. Comparing two series of data on brokers with mobility against those without, the average volume of increased trade activity was marked, and the performance of the overall portfolio increased notably.
In Summary: Mobility Does Equal Productivity
The business logic of investing in mobility rests upon changing the productivity quotient. Workers that apply mobile data solutions to effectively increase their output do so because of scaled returns on labor utility. Time is essentially harnessed to produce greater business value with the result being more output over a shorter period. And the elimination of bottleneck constraints to information translates to improved execution on the part of employees. Empowered employees can then achieve higher value returns on the information technology investments already made by their organization.
Total factor productivity (TFP) is shaping up to be one of the landmark accomplishments of the economics discipline when it comes to measuring the real effects of technology. In the circle of mobility, TFP rates are steadily rising because of the positive correlation between mobile data and voice access becoming ingrained in the job requirements set forth by demands of the information economy. Looking ahead at labor economics of a future global society, we expect to see TFP continue to rise from 3.2 to 4.1 percent annually as information resource requirements transform the landscape. And as part of GDP estimates, this implies a widening in the respective size that electronic information and mobility shares in growing world economies (see Figure 1).
On the supply side of the equation, mobile service operators are poised to see the greatest boost in true average revenue per user (ARPU) as wireless data takes the stage in advance of pure voice networks. The sustained convergence of IP networks and mobile data will be the ultimate catalyst in bringing along the value of devices that can shed the four walls to roam freely with purpose. Inhibitors to spending for premium service will eventually disappear, and operators may finally realize a market condition that supports inelastic pricing models. Higher degrees of inelasticity imply greater demand for the service and less focus on price determination at the consumer level.
As the data reflects today, we anticipate the persistence of a strong bias among consumers for mobile technologies and service offerings that complement not only their information-based lifestyles but also their conduit to business applications. A steady uptick in capital investment for wireless applications is proving that investor confidence remains high for where access demand is moving. And eventually this ties back to currency being well-spent on ensuring that mobile workers continue to reap the tangible benefits of unfettered productivity.
Figure 5: Total Factor Productivity Soars with Mobile Worker Technology
Methodology Endnote
Conclusions and various perspectives contained within this appraisal integrate the latest economic data related to users and organizations that apply mobility solutions around the globe-covering metropolitan statistical areas in the domestic United States, Europe, and Asia-Pacific. Our sample data populations were derived from sources such as the OMNI Network Economics Study, mobile operator networks, enterprise transactional databases, U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, the U.S. Federal Reserve Bank, World Bank, and various university consortia studying human factor relationships with mobile technology.
We launched our modeling exercise with the compilation of this data concerning mobile data usage inside the framework of how organizations and individuals interface to specific economic patterns. The initial phase involved applying multivariate analyses for logistic regression and chi-square detection (CHAID) relationships. We expanded the scope of the modeling exercises to concentrate an understanding of the relationship between factors influencing the aspects of labor productivity and the economic output of firms within given metropolitan statistical area (MSA) populations. The resulting statistics and measurements were computed using the best available data and commonly applied stochastic methods.
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