Identifying opportunities for automation
Hint: There's a wrong way to do it, like Tesla did.
A different kind of newsletter today:
Hello and good afternoon. Today, we are going to premiere a different type of newsletter. This one is focused on identifying automation opportunities within your business (whether you’re an entrepreneur or an employee).
It may be an instinct to want to “automate everything,” but usually, that approach is unrealistic and short-sighted. Most of your value gained by automation (whether it’s top-line or bottom-line growth) will come from identifying critical Jobs to be Done and analyzing and improving the current processes.
Where Tesla and Elon fell short, you can prevail.
Back around 2017, Tesla wanted to automate their entire manufacturing process. They accomplished about 75% of their manufacturing process being automated but burned billions trying to automate that last 25%.
Instead of over-anchoring on how much of your processes to automate, anchor instead on the expected capital expenditure and payback period of doing so. If Tesla had done an automation analysis up front, they would have concluded that they should aim at that 75% range through a comprehensive analysis of current, stale automotive manufacturing processes and possible solutions.
Understanding opportunities to automate is similar to customer discovery for a new product. You want to test and identify the problem not the solution. Over the next few years, we will see billions of dollars in venture-backed AI start-ups disappear because we are labeling Generative AI as the “solution” to all our problems.
How to identify automation opportunities, the correct way
Hypothesize
To start off, it’s important for a 3rd party to observe current business processes and create a list of potential areas for improvement. If a 3rd party is unavailable, try to remove as much confirmation bias as possible!
Interview / Validate
Next, it’s time to interview. Validate your hypothesis. Collect data, and collect interviews from your stakeholders (fellow employees, or anyone who has a hand in that process). Identify common concerns, complaints or bottlenecks. Once you’ve narrowed down to a process where there could be improvement, analyze that process. What makes it a pain point? What is the job that the individual is trying to accomplish?
Ideate and Present
Here’s the fun part: Ideate. Come up with various solutions, and pick your favorites / the ones that have the most impact. From there, it’s time to present a deep ROI analysis. Most times, automation is a labor-saving tool. Create a simple comparison to identify what it would cost to implement the tool, and how many labor hours it would save. This is the barebones cost comparison, but you can get a lot more creative.
Try asking yourself some questions like:
What would happen if that individual has more time to work on other things?
Does the tool provide better/improve accuracy of the job?
Is the tool safer than the current manual process?
Does this change your model at all?
Present your findings in a pitch and get the green light to implement. But remember the most important part: there’s still an incredibly human aspect of automation, as we are nowhere near AGI.
Good luck! And remember, your team wouldn’t hire someone you don’t work well with. Apply that same mindset to automation in the workplace.
