Digital Technology
Feb 08, 2018

Has digital killed the GBS model?

Digital tools will not make GBS and its people obsolete

Some say that the end of an era in operations may be near because digital technologies’ agile methods and pervasive automation will upturn traditional operating models. Is this true? 

For over two decades, large companies have set up Global Business Services (GBSs) operations to consolidate corporate functions – IT, finance, procurement and human resources – to reduce costs and standardize processes globally. GBSs have helped companies take the focus off dealing with administrative tasks on the back end and allowed them to spend more quality time on their customers and products. Business process reengineering, ERP deployments, and offshore captives (both in-house and outsourced) were some of their main tools.

However, given the recent rise of digital technologies that can take over a lot of these back office functions, companies are starting to ask themselves, “Are GBSs still relevant? Or, have they become a ‘yesterday’ approach?”

These questions come as no surprise, as the opportunity to harness digital technology is massive. Processes today have the potential to be augmented through analytics and machine learning-driven insight and rejuvenated through automation. And, no longer is the value of a product only driven by its physical attributes. For instance, Olay has added value to its skincare products through the Olay Skin Advisor, an app that uses AI to better understand the consumer’s skin to find the best product to meet their needs. Many car manufacturers are layering telematics technologies on top of their traditional car amenities. From here on, what we consider “a product” will significantly change and so too will the processes connected to them. Is a GBS operation the right place to drive these initiatives? 

In truth, while they may recognize the shifting tides, many companies are still missing a large part of the opportunity in digital transformation. According to a study by Genpact and Harvard Business Review Analytic Services, only 34 percent of organizations say that they are seeing positive business outcomes from their digital transformation efforts.  

But the problem isn’t a lack of tech knowledge. It’s due to the following:

1. Inability to experiment at scale
Digital technology rarely works right from the start. When it does work, it’s sometimes thanks in part to an intelligent interoperation with an old system of record. With so many digital technologies available, companies need to be able to play around and make continuous tweaks to both tools and processes globally to see how they can get the best results both technologically and organizationally.

2. Inability to determine a tight strategy
Business cases and portfolio planning are hard, but they matter now more than ever. The problem with most business cases is that there is a tendency to only consider one specific budget. But business cases can span multiple functions or business units with multiple budgets and cost centers. Without a tight, comprehensive strategy in place, the result is incomplete, possibly misguided, digital projects.

3. Inability to execute strategy and transform at scale
Digital initiatives require constant redesign and organizational changes, not in respects to technology, but processes as a whole. Many companies tend to focus solely on what new, exciting systems to put in, making the total transformation partial and ineffective. For instance, implementing these digital tools doesn’t take humans out of the picture. Human staff are still needed, but in new responsibilities and roles. Ignoring the people leads to poor execution. 

Difficulties like those listed above are why target modeling models will not only still be relevant, but also grow in importance in the digital future. GBS, both retained and outsourced, is where technology expertise, as well as process redesign and build, could be concentrated to help reapply best practices at scale, rather than splintering efforts and learning across business units. For example, you can establish a center of excellence within an existing GBS – and many, like GBS pioneer P&G, do. Another example is represented by Genpact, having begun as General Electric’s GBS, and thereafter serving a variety of other GBSs. These experiences have shaped our Lean Digital approach, which combines technology, design thinking (focused on customer’s first and experimentation), and lean management (to ensure an end-to-end solution is provided for every problem).

So is the fear of demise unfounded? Not fully, in my view. Digital tools will not make GBS and its people obsolete. But complacency and inability to learn how to embrace the digital future and reimagine operations, very well could. 

About the author

Gianni Giacomelli

Gianni Giacomelli

Chief Innovation Leader

Gianni serves as Chief Innovation Leader where he drives and sponsors Genpact’s strategic initiatives aimed at sustaining clients’ transformation into digitally-enabled companies. He also co-leads the Massachusetts Institute of Technology (MIT) efforts to set up a Collective Intelligence Design Lab.