Engineering the 21st Century Service Economy - The Human Side of Service Innovation and Transformation with AI/ML, Robotics, and Automation

Abstract: The megatrend in automation driven by exponential increase in computing power and data is transforming diverse service industries and the service systems within them. Here a service system can be viewed as dynamic configurations of people, technology, organizations, and information interconnected by value propositions. Service innovation can be viewed as advances integrating (i) technologies that amplify capabilities; (ii) business models that scale up benefits rapidly; and (iii) institutional arrangements that scale down potential harm to underserved populations, the planet, and future generations.During 2024 Penn State University (PSU) and the International Society of Service Innovation Professionals (ISSIP) collaborated to organize a series of panel discussions to explore the transformation underway across industry sectors as we engineer our 21st century service economy. Panels covered six service industries: healthcare, finance, education, retail & hospitality, and supply chain & logistics, energy & IT. Experts from industry, government, NGO, and academia served as panelists and discussed trends, tools, challenges, and ways to define and measure progress and excellence in the emerging service economy. The key challenges related to the human side of service innovation and transformation:Resistance to Change: Implementing new technologies and processes can be difficult due to resistance from both employees and customers. A significant cultural shift is often needed for successful adoption, and if the culture is not ready, even the best ideas can fail. It's important to bring people along, explaining why changes are needed, and demonstrating how new technologies can improve accuracy and workflow.The Need for New Skills: The digital transformation requires new skills, and companies are actively hiring for roles that didn't exist before. There's also a need for employees to upskill and reskill as technology changes, especially with the rapid advancement of AI. This includes not just technical skills but also soft skills like communication, teamwork, and listening, which are critical in team-based environments. Traditional education may not be adequately preparing individuals for these new roles.Over-reliance on Technology: There is concern that an over-reliance on technology, particularly among younger generations, may be hindering critical thinking and creativity. While AI can assist with many tasks, it cannot replace human skills like interpersonal communication or the ability to engage in nuanced thinking.Bias and Fairness: AI systems are trained on human data, which can perpetuate existing biases and unfairness. It is important to build fairness and unbiased approaches into these systems, ensuring that the benefits of technology are shared across diverse populations.Trust and Transparency: Trust is a major factor in the adoption of new technologies, especially in sectors like healthcare. People may be skeptical of AI and other new technologies if they are perceived as being removed from human interaction. It's critical to establish clear governance structures and controls, and prioritize transparency in how data is used and how decisions are made by AI systems.Data Ownership and Privacy: There are complex questions around who owns the data generated by AI systems. For example, in the context of healthcare, there can be questions about whether data belongs to the patient, the healthcare system, or the company that developed the tool. There are also concerns about the security and privacy of data, and the need for regulations.Balancing Automation and Augmentation: It is important to consider whether to use technology to automate processes or to augment human capabilities. The focus should be on creating human-technology synergies that empower people, rather than simply replacing them. In hospitality, for instance, the application of digital transformation is about augmenting the human experience by removing distractors, whereas automation is more central in the retail industry.Ethical Citation: This abstract was generated using Google’s NotebookLM on January 13th, 2025, based on information assembled by the co-authors. The material has been reviewed by the co-authors and accurately reflects key challenges highlighted by speakers in the series and those who took the survey.

Keywords: Service Industry, Service Systems, Human Side of Automation, Human Side of Transformation, Human Side of Change Management

DOI: 10.54941/ahfe1006411

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