Global business services (GBS) have access to the technology and expertise that can help them leapfrog the traditional maturity curve, move beyond cost savings, and meet their businesses’ evolving needs for greater agility, risk management, and growth. But to achieve these outcomes, they must first address four seemingly contradictory dimensions: deliver standardization with flexibility, enable efficiency and innovation, manage centers of work alongside centers of excellence (CoE), and focus on service delivery and collaboration. They can do so by combining design thinking and digital technologies with Lean principles through a novel Lean Digital approach.
When it comes to assessing the progress of global business services, things aren’t as they at first appear. Yes, most GBS organizations met their initial business-case objectives in terms of compliance, cost savings, and—in the case of offshoring—labor arbitrage. However, they often failed to scale up or penetrate deeper into processes that add greater value, and are not seen as innovative capability enablers by many CXOs today. And yet most large global corporations acknowledge the importance of an effective GBS organization as a source of competitive advantage.
Figure 1 shows that organizations want global business services to enable agility and adaptability, help manage risk and compliance, and increase growth and scalability. They also want to reduce capital and asset intensity along with costs while enabling innovation.
The question is: How can GBS leaders address this reality and meet their businesses’ basic and evolving needs? To do so, enterprises must master four seemingly contradictory dimensions:
- Standardize and stay flexible
- Commit to efficiency and innovation
- Run centers of work and centers of excellence
- Focus on robust service and collaboration
GBS organizations have typically followed a linear progression through the maturity curve shown in figure 2. But thanks to the increased availability of practical and nimble digital technologies, and the adoption of design thinking methods that focus on the end user, enterprises have the opportunity to leapfrog across stages rather than move from one to the next. This is even more likely if they embrace Lean principles that enable process excellence while maintaining the ability to adapt to a volatile environment.
This new, more effective, Lean Digital approach encourages companies to re-architect their processes beyond the front end, and into the middle and back office. The GBS organization plays a pivotal role in this transformation.
Flexibility and standardization?
For many shared services leaders, the idea that variation must not only be tolerated but actively accommodated can be a challenge. After all, the main rationale for adopting global business services is to realize savings by making shared processes reliably repeatable at scale. But in the last decade, people have come to expect a flexible, on-demand response to their specific needs.
Enterprises cannot leapfrog the maturity curve without learning how to make flexibility standard. The good news is that with cloud-based technologies there is no longer the need to wait for one common ERP or single master data. With the level of analytics tools now available, enterprises can drive for standardization on the back end and still offer user flexibility at the front end.
Let’s take the Bloomberg app for investment professionals as an analogy. When managing portfolios, the data in this app flows from standard sources, e.g., stock markets, commodities and futures markets. Yet what users see is the highly- customized, analytics-driven output from their search for news based on the filters they choose. So a day trader can see the daily movement of stock prices rather than the broader perspective of a longer-term trader.
As a result, the user feels empowered to make more informed business decisions. Importantly, at the back end, everything remains standardized; Bloomberg is not customizing its technology for individual users. We can apply this logic to GBS operations, where enterprise performance management relies on a common back end. When managing financial performance and analysis, companies often have thousands of customized reports. A fundamental shift is to move away from report production and towards technology that filters data to quickly deliver self-service insights specific to the user’s situation.
Structuring for innovation and efficiency?
Just as organizations can resolve the standardization versus flexibility contradiction, it is also possible to invest in innovation and greater efficiency. But if organizations become consumed by the goal of squeezing 10%-15% more efficiency from existing processes, they can miss the chance to radically redesign operations and impact performance by 50%-80%.
Consider collections, a key yet often suboptimal part of a broader order to cash process. Typically, organizations concentrate on making their existing operations more efficient but that may not move the needle on working capital or receivables metrics. In contrast, applying the latest technology and analytics can provide greater visibility into what’s happening upstream to cause payment disputes and receivables issues, and how to fix them. Armed with these actionable insights, CFOs and sales leaders can segment customers and make structural changes to how they engage with them in the contracting cycle.
Having a combined focus on both innovation and efficiency can radically change the receivables profile, cash flow, and working capital of a business, while also reducing costs.
Centers of work and excellence?
The solution in this area starts with the recognition that competency and expertise are often sources of value—rather than efficiency—and that they flourish in concentrated ecosystems. Historically, shared services aimed to aggregate work from across the business, increase standardization, and take advantage of economies of scale. But they ran in functional silos, which prevented organizations from managing processes end to end and reduced their ability to generate significant business impact beyond cost reduction. Centers of work and centers of excellence can run alongside each other; it’s not a choice between the two.
Centers of excellence are focused on driving a business objective, not just running a process. For example, consider a center of excellence for internal controls at a globally distributed company. Its business objective is to manage the control architecture across the globe for control testing, monitoring, and evaluation. The latest technology can perform remote monitoring of transactions across the world and apply advanced analytics in real time to readjust risk profiles based on where the higher risks are. If necessary, follow-on research or discussions can be carried out locally, while maintaining consistency in the controls operating model, standards, and analytics through the center of excellence.
Another example is business reporting. As organizations shift from focusing on past performance analysis to more predictive modeling and scenario management, they need different skill sets, such as data scientists and modeling experts, to benefit from a CoE architecture. The outputs are used by analysts in the business who now have time to act as true business partners instead of massaging data with moderate competency when compared to the experts in the CoE.
Focus on service and collaboration?
Shared services operations have traditionally had an arm’s-length relationship with their internal customers in terms of accountability to committed outcomes, such as cost or cycle-time reduction. Meeting agreed targets alone, however, does not guarantee customer satisfaction or take the whole process to the next level. For that, an organization needs to be engaged and collaborating with the customer when thinking about solving business problems in addition to meeting service level agreements (SLAs).
Digital technologies can have a significant impact on collaboration efforts here. When stakeholders do not sit together, collaboration tools can overcome distances with virtual, face-to-face meetings. Visualization technology also enables more effective conversations than static PowerPoint dashboards or reports.
Negate the need for trade-offs with a different transformation approach
As businesses look to take their GBS organizations to the next level, they must embrace these four contradictions, even if they challenge ingrained thinking:
- Standardize while offering flexibility
- Focus on both innovation and efficiency
- Align centers of work with centers of excellence
- Meet SLAs while collaborating with customers on business issues
By adopting a Lean Digital approach that combines technology, design thinking and Lean principles, global business services can leapfrog the maturity curve to deliver impact that goes beyond the original business case. Organizations that are ready to make the leap and address the four contradictions will find a way to proactively address their company’s rapidly evolving needs.
Authored by Shantanu Ghosh, SVP, CFO Services and Consulting at Genpact.