Aug 29, 2013

Making the future affordable

August 29, 2013 - While you may not find a single mention of Six Sigma in it, The Rational Optimist is still an interesting read for anyone who wants to understand why advancing business processes and related operations can make a big societal impact. It also contains inspiration for those of us who work hard at industrializing business processes. While Matt Ridley's thesis does not take explicitly into account the theme of sustainability, and indeed at times he seems little interested in understanding the "total cost" of human activity, he does indeed highlight how innovation in business pushes the boundaries of sustainable societies.  

A lot of it is the stuff that we tinker with.   

A simple example - quite enlightening, no pun intended. For thousands of years, one had to work for multiple hours to earn enough to light a candle for an hour. Think about the impact. It all turned around two hundred years back. Now the same amount of light can be had by working a fraction of a second - at least if you are connected to a modern power grid.

Reducing the cost per unit of output, and making it scalable: That was the solution across industries. Making financial services, healthcare, and industrial assets cost less and be more scalable will continue to hinge on the same premises.  

The job has been done with inventions (e.g., industrially vulcanized rubber instead of its natural equivalent, or obtaining candle wax in a simpler way than killing whales for it) that ultimately enabled dramatically more scalable output (steam and electricity that radically altered production processes).  

That epochal shift required specialized capital to build "factories" (or organize large groups of individuals who didn't need to be highly skilled "artists" anymore) into productive groups. Modern organizations are much larger than in the past also thanks to the ability to organize and control people remotely through technology and management science.  

All this is akin to the industrialization of the business processes we work on. Lean Six Sigma has continued to provide lenses for creating radically improved business processes that now increasingly harness the power of new communication technologies, analytics, and cloud delivery models. The emergence of Global Business Services (GBS) within those organization is just another example of the industrialization of processes. 

Where can this take us? Shared service delivery, whether onshore or offshore, is increasingly used for much more than the cutting costs of G&A. It helps improve management accounting  and get data in the hands of decision makers at all levels—from CFOs who assess the profitability of business units to the sales persons who need to price the next contract.  

Data captured at the field level and processed through workflows (e.g., reconciliation and allocation to appropriate categories or ledgers) such as profitability of assets or customers, can be evaluated through different scenarios (often related to the amount of resources it takes to do that job and the amount of related risk).

People across the globe can collaborate on changing guidelines based on what they have discovered: for example, changing a customer’s credit limit or the cost of a policy or a service contract. They can then cascade these policies by embedding them in a granular way in business processes to ensure that the policies are activated at the right time.  

These are the "bowels" of some of the big cost drivers of our society: capital allocation through financial services, cost of care in the overall chain of healthcare, and deployment of industrialized assets and services. The same logic can be applied to education (think about hybrid local/distance education) and even housing (from pre-fab housing to analytics to drive zoning where people need affordable housing), although admittedly legacy processes and distortions there still slow some of it down.  

The more we understand that arc of data to insight to action, the more we can design organizations that enable the arc and adapt when needed, the more we will make a big impact on our organizations, and, ultimately, the more we will create a more affordable future for all.

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.