Modern trends in the management of service organizations in the context of digital transformation

Artiukhov Anton Vital'evich ORCID: 0000-0002-7949-698X Postgraduate Student, Department of Innovation Economics, Moscow State University 127015, Russia, g. Moscow, ul. Novodmitrovskaya, 2k5 autor.article01@mail.ru

Trofimov Ivan Sergeevich ORCID: 0000-0002-7338-4207 Postgraduate Student, Department of Innovation Economics, Moscow State University 119330, Russia, g. Moscow, ul. Mosfil'movskaya, 25, kv. 41 vomifortis@gmail.com

Introduction.An important problem of modern management is the adaptation of companies to global digital transformation, including the management of the life cycle of digital transformation of organizations.

Digitalization affects companies from different sectors and activities at different rates and to an unequal extent. According to current American cases, in addition to IT companies, digital innovations have already become an important component of the strategic plan of service organizations (companies providing a variety of services, both for business and for individuals) (IT Directions. Digital Strategy for a Service Organization. URL: https://itdirections.com/digital-strategy-service-organization/). All over the world, service companies are trying to take their digital presence to a new level in order not only to maintain, but also to develop their business, including in terms of management quality. Since Russia is embedded in the global system of division of labor and in the global financial system, modern trends of digital transformation are fully important for the management of domestic service organizations, including those operating in the field of the sharing economy (hereinafter – ESP). This is no longer just a matter of management theory, but also a practical necessity, since the strategic importance of services and services in the digital environment is constantly increasing (Bendor-Samuel P. (2019) Managing Services: A More Effective Approach. Forbes. URL: https://www.forbes.com/sites/peterbendorsamuel/2019/07/18/managing-services-a-more-effective-approach/?sh=27cf425150f2).

In this article, we will look at the opportunities that service companies can get through the digital transformation of business processes, the problems they may face and ways to start implementing such projects.

Digital transformation: the importance of the implementation context.A service is a business based primarily on the sale of services, not physical goods (which may be part of the service), and involves direct interaction with customers (14 K Business Solutions.

Effective Management Strategies for Service Business. URL: https://14kbsol.com/effective-management-strategies/). The diversity of customers and the peculiarities of the structure of the business itself determine that each service organization is unique in some way, which means that management (including the introduction of digital innovations) must take into account the context, the specifics of a particular company. Management decisions should proceed from the context of the organization, which, in addition to well-known financial indicators, includes the complexity and maturity of the business (Bendor-Samuel P. (2019) Managing Services: A More Effective Approach. Forbes. URL: https://www.forbes.com/sites/peterbendorsamuel/2019/07/18/managing-services-a-more-effective-approach/?sh=27cf425150f2) , management features (including personal qualities and management relationships), etc.

It should be emphasized that when analyzing market information and developing a strategy for successful management of service organizations in the context of digital transformation, it is necessary to fully take into account the full context, including non-financial factors and limitations. Currently, financial performance systems, various metrics, etc., etc. are very well developed and largely automated, which can create the illusion of "modernity" and manageability of the business. However, the digital economy creates new opportunities that require new solutions to take advantage of them, require a broad, informal view of the situation. Automation and digitalization of individual processes do not mean the possibility of full automation, "stabilization" and "conservation" of the entire business. On the contrary, modern technologies require a flexible, creative approach in making and implementing management decisions.

Here is an example of the active development of ESPs, the so-called "sharing companies" (for example, the Russian Yandex, which successfully use modern digital technologies for continuous business development, taking into account current contexts.

Taking into account the context allows service companies from the field of ESP to extract maximum benefits from the digital transformation of business and the introduction of managerial and other innovations. Note that, in general, it is believed that digital transformation increases the potential for creating new value, and also usually reduces the cost of customer service – an important indicator for service companies (Bendor-Samuel P. (2019) Managing Services: A More Effective Approach. Forbes. URL: https://www.forbes.com/sites/peterbendorsamuel/2019/07/18/managing-services-a-more-effective-approach/?sh=27cf425150f2).

The importance of the sharing economyCurrently, the economic model of joint consumption (or ESP for short) is actively developing, which implies the collective use of goods or services without compulsory ownership.

This phenomenon is also called the "sharing economy" (from the English share – to share), and its essence boils down to an attempt to smooth out the disadvantages of classical ownership of a particular property, without losing the advantages of owning it.

According to RBC, the ESP is waging a broad offensive against traditional business, moreover, the sharing economy should be considered as a vector around which a whole set of global trends are formed and which itself forms (Makarenko G. Pass to another: what is the sharing economy. RBC Trends. URL: https://trends.rbc.ru/trends/sharing/5e73fbc29a794707401b6532). According to PwC analysts, the sharing economy will grow from $15 billion. up to $335 billion. between 2015 and 2025 ^[1]. Already, sharing companies are in many ways the engine of digital development, and companies from traditional sectors are already successfully adopting their experience in the framework of ESP.

Sharing companies can be classified as service organizations, as they mainly provide various services to businesses and individuals. Examples of ESP companies are: Yandex, Uber and other carsharing platforms, Amazon Web Services, AirBnb, WeWork, Avito, YouDo and many others.

Adaptation of service organizations in the digital economy.Over the past decade, service companies have taken different paths to maintain and improve the efficiency of business processes:

· the first thing that is visible to the naked eye is the digitization of business interfaces in order to ensure smooth interaction with customers (for example, the creation of various functional mobile applications that simplify the ordering of goods or services to customers, financial transactions, etc.), in which the sharing companies are particularly successful;

· the second most important direction is digitalization and outsourcing of back–office functions.

It is interesting that some service companies have taken the path of outsourcing a number of business processes, and the other just specializes in providing these same outsourcing services, but at the same time, digitalization and automation of service provision are the most important task of successful management in any model. Moreover, the company's management processes themselves, which are the objects of consideration, are undergoing digitalization and automation. By introducing automation, virtualization, advanced analytics and other digital technologies into their activities, service organizations can optimize processes. These technologies can also allow them to make more informed decisions and improve the quality of interaction with internal and external customers. McKinsey's research shows that by digitalizing service companies can achieve significant time and money savings – for example, increase the efficiency of some back office functions by up to 50% (Chandok P., Chheda H., Edlich A. How shared-services organizations can prepare for a digital future. McKinsey Insights. URL: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/how-shared-services-organizations-can-prepare-for-a-digital-future).

However, before engaging in the digitalization of certain areas of business, it is necessary to conduct a so-called "digital readiness assessment". It means that the management of a service company should study, discuss and answer a number of basic questions concerning the current and desired state of the organization, the existing personnel reserve and other resources, as well as readiness to carry out and support transformations at the level of senior management. Examples of questions: what are the existing digital opportunities and threats, how will the transition to a digital model affect the value proposition of the organization, what resources are already available and what will be required, etc.? Answers to key questions should help service managers create an economic justification for digital transformation and become the basis for a long-term digitalization strategy.

Note also that a large study in 2016 (Chandok P., Chheda H., Edlich A. How shared-services organizations can prepare for a digital future. McKinsey Insights. URL: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/how-shared-services-organizations-can-prepare-for-a-digital-future ) showed that, despite significant strategic prospects, about 78% of US service organizations were not yet ready for a full-scale transition to digital methods of work. In fact, only 22% of companies have started to fully implement digital technologies necessary to improve internal processes, interact more effectively with customers and partners, and create innovative products and services. The fact is that innovative companies wishing to make a digital transformation of their business face limitations related to management, personnel, workflows and operational models. For example, there may be concerns about the integration of outdated systems with new digital technologies, or there may be a shortage of talents and skills needed to implement a large-scale transformation program, as well as conflicting strategic priorities within the management team.

Opportunities and challenges of digital transformation.Currently, most consumers rely on one or another digital channel to interact with companies (Chandok P., Chheda H., Edlich A.

How shared-services organizations can prepare for a digital future. McKinsey Insights. URL: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/how-shared-services-organizations-can-prepare-for-a-digital-future ) (for example, mobile applications of sharing companies). Many say they prefer to make purchases using mobile devices or laptops because of the ease of use, greater choice and control, as well as timely delivery of products and services, among other advantages. In turn, most companies are testing new applications, products and digital tools that allow them to collect and analyze data and use the findings from this data for advanced business model transformations in order to improve interaction with customers and partners.

Service (and especially - sharing) companies play an important role in the digital environment. They exist to optimize process management, assistance, consulting and much more that clients need. Increasingly, the work they do is crucial for collecting data that the customer can use to create even better and more convenient products.

Service companies in most industries are exploring the opportunities created by digital technologies, but widespread adoption has not yet occurred (Chandok P., Chheda H., Edlich A. How shared-services organizations can prepare for a digital future. McKinsey Insights. URL: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/how-shared-services-organizations-can-prepare-for-a-digital-future) , with the exception of individual examples of companies from the field of ESP. Only about 22% of service providers have begun to ramp up automation, freeing up employees to manage tasks that are critical to providing satisfactory digital customer service, while continuing to perform manual accounting tasks. Only 15% of organizations are increasing their skills in working with social networks and integrating data from several channels, almost 20% of companies have invested in optimizing internal operations using analytics (for example, using real-time management information systems). However, when it comes to using analytics for external analysis and business support (for example, creating predictive analytics to make more effective product sales decisions or improve customer flow management), only about 10% have systematically developed these capabilities. Similarly, it was revealed that less than 10% of service organizations contribute to the creation of new services or combine operations and technologies – an area that has special prospects. The introduction of digital technologies is delayed because companies face a number of problems that we have already mentioned earlier, the main one of which is personnel, i.e. the absence or lack of data analysts and other employees, as well as managers who understand how and what digital technologies need to be implemented and are able to do it. In Russia, the problems of "sluggishness" of large state-owned and partially state-owned companies, non-market regulation and sanctions pressure affecting the import of digital technologies and the experience of their implementation are added to this.

In addition, the typical growth model of service organizations – the consolidation of operational units – has become much more difficult, since IT departments must comprehensively solve the problems of combining outdated systems from different business units and updating all the processes of the organization as part of digital transformation. There is an increase in the complexity and speed of information and physical processes, which many companies are not ready for.

Against the background of the general picture described above, the success examples of domestic and foreign sharing companies look especially bright, and therefore ESP is an important guideline for the development path for the entire service business.

Changes in management goals and prioritiesTraditional approaches to managing service organizations need to change in order to adapt to digitalization.

For example, it is necessary to move towards increasing the share of automation of routine tasks and procedures, so that managers at all levels and staff pay less attention to performing "manual" tasks at a low level and spend more time developing and launching innovative and effective customer service options for the company. Therefore, instead of hiring low-cost entry-level employees, you will have to look for specialists in such areas as point robotics, data analysis and the development of modern software. In addition, operational and IT departments need to cooperate more closely in order to quickly create, test and provide new services, and the organization of effective interaction becomes a more important management function than managing processes within a separate department.

The management of a service company should understand that in the digital environment, the importance of IT departments and IT technologies will continue to increase and will be even higher than now, and this must be taken into account in strategic planning. IT services interact with all other departments to determine how best to automate or otherwise implement the digital transformation of processes through the introduction of new IT technologies. We are talking about the reorganization of the business of the service company itself, and about the performance of services for customers. In all cases, the organization of rapid and effective interaction of IT departments with the rest of the company's structures (and the implementation of IT solutions) is becoming an increasingly priority management task.

The main directions of digital transformationElements of digital transformation should be implemented in stages, taking into account the full context of the organization.

Various researchers ^[2] independently of each other usually suggest three possible directions that reflect the main modern trends of digital transformation of companies:

1) Changes in workflows. The first thing to start a company's digital transformation is to identify specific areas and workflows in which point–to-point or full automation of routine, "manual" operations can be carried out. A typical starting point may be a systematic scan of all back office operations and processes and their classification according to business goals, system interdependencies and the level of manual intervention required. Then IT services and specific departments will have an idea of which processes and actions can be fully automated, which should not be automated at all, and which will benefit from a hybrid approach. With this information, the company's management will be able to make an informed decision about investments in IT technologies, about the required system architecture and operational changes.

2) Changes in the management structure and personnel work. The digital transformation of business imposes new requirements on the knowledge and competencies of management and core personnel. In addition, the introduction of modern technologies and rapid response to changes in the external environment often requires moving away from the classic pyramid structure of the company towards a matrix, project or network organization of activities. A number of service companies prefer, for example, a matrix management structure, but rightly point out its shortcomings (Babko A. (2018) Building an Effective Management Structure in a Service Company. Aproit. URL: https://www.apriorit.com/dev-blog/515-building-an-effective-management-structure-in-a-service-company). The same can be said about other individual options. On the other hand, launching the process of digital transformation and innovation requires centralized decision-making and subsequent leadership at least at the level of top management and key performers ^[3]. Therefore, we recommend that you be prepared to mix (using rigid management models for some departments, and flexible ones for others) or to consistently change different structures. In any case, the organization of interaction between the IT department and all other departments, and between various departments, will require the creation of "interdepartmental" working groups with broad powers and reporting directly to high-level managers. At the same time, IT managers and managers of other involved departments will need to determine the required specialized skills and new competencies for their departments (for example, data analytics, programming, design and design of IT systems, etc.) and ensure the timely involvement of relevant specialists.

3) Changes in operating activities. In the long term, we should invest in creating opportunities that will allow us to constantly update the operating model, so that as new IT technologies become available, the company can implement them, adapt to them and ensure the consistency of operations of all business units. In particular, it is advisable to study the transition to integrated approaches to product development and technology platforms. This may mean introducing flexible software development capabilities (for example, assimilating the product development team with the IT department - an approach known as "DevOps", so that both groups can jointly and quickly release new software applications that will benefit the company or its customers). If earlier IT and operational groups were traditionally separate, then in the digital world everyone should cooperate more often and more effectively with the help of "DevOps", "agile" and other approaches to development, to the organization of operational business processes.

A number of other authors propose an approach to creating a profitable service business based on four essential elements: product design (goods, services), personnel management, customer management and a financing mechanism (Frances X. Frei. (2008) The Four Things a Service Business Must Get Right. Harvard Business Review. URL: https://hbr.org/2008/04/the-four-things-a-service-business-must-get-right). All these elements are also suitable for becoming objects of digital transformation.

Thus, the range of possible changes within the framework of digitalization is quite wide. It is advisable for the company's management to initiate changes in those areas that can bring immediate benefits and help give impetus to future digital initiatives. Successful management of digital transformation implies following modern trends (including the growth of the share of ESP) together with the ability of management to choose the most suitable directions for it, taking into account the context and strategic goals of the company. You can choose any of the above directions or all at once, you can combine their relationship and sequence in any way. The scope of innovation can also be different for different service organizations:

· one option is to start with a large–scale automation project, given that the benefits will accumulate in the long run;

· another approach is to launch a relatively small pilot project in order to work out models of interaction between management and departments in practice, to assess readiness for large–scale digital transformation.

In any case, the company's management should proceed from the context and strategic goals of the company. Then each individual project within the framework of digital business transformation will be able to serve as an impetus for further effective transformations.

Conclusion.The modern digital economy requires the management of service companies to be able to implement digital transformation projects, both for their own company and in the interests of customers (business partners).

To successfully manage digital transformation, it is necessary to take into account the full context and strategic goals of the company, in relation to which innovative measures are required.

Service companies (including sharing companies) have gone different ways to maintain and improve the efficiency of business processes, but in general they face similar problems, among which they stand out in particular:

· the need to change management approaches and introduce flexible organizational structures in order to establish rapid and effective interaction between departments (divisions, business units) of the company;

· shortage of personnel with the knowledge and competencies necessary for the implementation of digital transformation, the introduction and use of modern IT technologies.

On the other hand, digitalization and automation can be carried out in various ways and affect various aspects of the company's business model, so everyone can start with the project that is most accessible to management, and therefore obviously will give the best effect. The task of management is to develop a digital transformation strategy based on modern trends and capabilities of IT technologies, and start it with the first project that will create the necessary impetus for further innovation.

Successfully moving along the path of digitalization, the service organization will be able to offer the best, most modern solutions and services to its customers. Therefore, service companies should not just improve their business processes, they should be (along with IT companies) at the forefront of the achievements of the digital age, master the latest technologies and be the first to offer modern solutions to customers, including expanding consumer access to ESP.