June 21, 2023
Low productivity and rising labour costs are on course for a head-on collision as expensive employees stall through manual processes in New Zealand, strengthening the case for automation technologies.
This is a nation already working longer than other countries in the Organisation for Economic Co-operation and Development (OECD) network – 34.2 hours per week compared to an average of 31.9 hours – yet producing less economic return with an output of $68 per hour, significantly below an average of $85.
Those with glasses half full can naturally build a case that such poor return for productivity in isolation can perhaps be mitigated. But the addition of severe spikes in salaries – not forgetting economic challenges and inflationary pressures – place growth-hungry Kiwi organisations at a crossroads.
Take the technology sector as an example, with 96% of tech employers delivering staff salary increases during the past 12 months in New Zealand, most within the 2-6% range. Within that context, concerned executives are starting to do the maths: productivity decrease + salary increase = no growth.
“Low productivity is colliding with rising labour costs,” stated Justin Lanigan, Managing Director of LavaBox. “In New Zealand, we’re not great at productivity. We work 7% longer each week than the OECD average but produce 20% less for every hour we work.
“When you combine low productivity with the highest wage inflation we’ve seen in 15 years, organisations are saying, ‘we can’t keep pursuing growth by hiring more expensive people’.”
According to Lanigan, the current economic climate is forcing businesses to assess the underlying causes of low productivity with new levels of intensity – “inefficient processes and disconnected technology are two of the big ones”.
Business appetite for automation exists in New Zealand, especially in forward-thinking organisations pursuing efficient growth.
“These organisations are committed to doing more with less,” Lanigan explained. “Not to pursue growth at all costs but to pursue growth and save costs.”
The usual approach for Kiwi businesses seeking to address an immediate capacity or capability problem is to simply make another hire – throw another body at the problem. Now, focus has shifted to the underlying processes and technology issues that are limiting productivity.
“Automation plays a central role,” Lanigan said. “Look for under performing processes that are repetitive, rule-based and impact a high volume of employees or customers.”
Then ask, how is the current state of business process impacting employee experience, customer experience and financial performance? Once shortlisted, Lanigan advised to go deeper by building out a return on investment (ROI) model that establishes baseline metrics and quantifies the expected improvement in performance.
“The use cases for automation are endless,” he added.
Yet organisations often fall into the trap of looking at the business case for automation through a singular financial lens. Notably, how much additional revenue will this generate? Or how much time will this save?
“But challenges related to employee disengagement due to low-value and repetitive work, plus customer experience due to inconsistent service quality and onerous processes also exist,” Lanigan advised. “This is alongside a slower pace of innovation due to siloed data and systems – all of which can be addressed through an automation project.
“Organisations are looking at the case for automation through those four lenses: financial, customer, employee and innovation.”
To ensure successful implementation, companies must first select the correct processes to automate, based on “sound ROI analysis”.
“Second, use the right tools for the job,” advised Lanigan, referencing the abundance of solutions available, including automation within customer relationship management (CRM) platforms, robotic process automation (RPA) and integration.
“Finally, start small and prove value,” he added. “This will help you gain the trust and momentum of your team.
“Acknowledge the importance of bringing employees along for the journey as they need a clear understanding of the benefits and what their role will look like when lower-value, repetitive tasks have been taken away.”
A homegrown alternative to automation
Positioned as a business and technology consultancy helping Kiwi organisations leverage the power of the Salesforce CRM platform, LavaBox launched in 2015. The company was co-founded by Lanigan in partnership with friend and colleague, John McLean.
In housing a team of specialist Salesforce consultants, digital marketers, architects and developers, the Auckland-based advisory firm aims to help aspirational growth companies, mid-sized businesses and non-profits enhance customer experience and productivity levels.
“Typically, these organisations struggle to consume enterprise technology and consulting services because they’re not set up like a large enterprise,” Lanigan explained. “We’ve designed our consultancy to fill the internal capability gaps that these organisations often have with a unique blend of business, technology and customer experience services.”
A central component of LavaBox’s go-to-market strategy is an alliance with MuleSoft – acquired by Salesforce for approximately $6.5 billion in 2018 – the provider’s preferred integration platform viewed as key to extending automation capabilities.
“Organisations are committed to doing more with less. Not to pursue growth at all costs but to pursue growth and save costs”Justin Lanigan (LavaBox)
“We’re investing in enabling more of our team on this platform over the upcoming year,” Lanigan added. “MuleSoft brings a powerful suite of integration and automation tools, including API management, RPA and Composer, which offers fast, pre-built integrations.”
The business has also pioneered new projects on Salesforce’s Financial Service Cloud during the past two years, with plans in place to deliver “ever-larger and more transformative projects” in the future.
“Clients in this space see us as a credible homegrown alternative to global enterprise consultancies,” Lanigan remarked.
Salesforce Data Cloud – which brings vast amounts of customer data from multiple systems into Salesforce to enable real-time personalisation at scale – is also seeing strong uptake in New Zealand, Lanigan shared.
“We’ve been engaged by one of New Zealand’s largest sports organisations to put this to use for a major tournament,” he said. “This is super exciting. We’re also doing some great work in the non-profit space, supporting customer-centric transformation programs to drive their missions forward.”
From a structural perspective, the LavaBox business is positioned like a tripod with three equally important legs – revenue, delivery and people.
“On the revenue side, it’s helping our clients make the business case for investment at the board level,” Lanigan noted.
“Our priority for delivery is optimising the value we deliver for our clients by further increasing our quality and velocity. For people, we’re extending our capability across the Salesforce platform on some key products.”
Specific to employees, LavaBox is rolling out aggressive certification and industry specialisation goals in strategic areas to continue enabling existing team capabilities.
“One of the silver linings to a more challenging economic climate, is that if you can win the work, you can bring on some fantastic people,” Lanigan said. “The job market looks very different to the COVID-19 years.”
Building a compelling consulting practice
Lanigan’s entrepreneurial journey started at the age of 21 with the launch of his first company – 123 Online – with McLean. The design agency – which Lanigan exited after 13 years in 2020 – still runs today and has delivered over 2,000 websites and digital marketing projects for small Kiwi businesses.
In drawing on more than 15 years of founder wisdom, Lanigan acknowledged that LavaBox went through significant change at the start of COVID-19, resetting the company’s 2025 vision as a result.
“We realised our vision needed to change,” he said. “We went through a process then we engaged our team, aligned our strategy and executed. We went from negative growth to 71% year-on-year growth the following year. It was the most rewarding experience of my professional career.”
For Lanigan, building a compelling consulting practice requires two foundational elements – genuine competitive advantage and complimentary business partners.
“This genuine competitive advantage has to be hard to replicate,” he noted. “This could be unparalleled expertise in an industry or technology where demand is outstripping supply.”
Or perhaps it could be a disruptive business model that will change the way services are delivered to a particular customer segment. But whatever the value proposition is, Lanigan stressed the importance of seeking market validation and possessing the resources required to “compete and win”.
“The second, is a group of business partners that compliment your skill set,” he added.
“To gain momentum, you need to have leaders who excel in sales and marketing, solution design, delivery and people and culture. Know your strengths and find driven, values-aligned people who fill in the gaps.”
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