Point of View

Embracing a new reality: The rise of Intelligent OperationsSM

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Organizations are witnessing an unprecedented redefinition of competitive dynamics driven by technology advances. The best among them harness these advances through new strategies and business practices that leverage now-pervasive internet, cloud, analytical, and mobile technologies. Incumbents are being disrupted by companies defined by software.

This article was authored by Tiger Tyagarajan, President and CEO, Genpact, and first published in QS Advisory's "A Future in the Cloud."

Much of the technology debate misses a very crucial point. Technology enables companies to do things that could not be done before, but technology-enabled operations get disruptors to offer a superior customer experience with unprecedented cost structures.

For example, our own business has changed over the years from “run my operations in a captive offshore location through Lean and Six Sigma practices on Systems of Record” to “design, build, and run operations globally, through partially cloud-based Systems of Engagement TMtechnology and analytics, in a hybrid environment in which in-house and outsourced operations co-exist.” It has moved from BPO to business process services, including transformation, business process as a service (BPaaS), and support of client-shared services.

The future is here, unevenly distributed — and we are looking for it in the wrong place

BPaaS, for example, was born at the intersection of cloud-based technology and outsourcing. The benefits stem from the advantages of cloud and outsourcing: scale, process optimization and skills, and global delivery unconstrained by local talent or technology capacity. It can bring lower and more variable costs, as well as frequent innovation of underlying technology and processes. Although the vision has not taken off as quickly and broadly as expected, BPaaS is not an experiment anymore, thanks to maturing cloud-based technology and outsourcing practices.

The reason is simple: technology has allowed us to do such things, our size and experience has made our delivery robust, and clients have identified these arrangements as a strategic lever to their competitiveness. It is not just about technology — it is about domain and technology that create truly superior operations.

Within five years, technologies will become easier, faster, and cheaper. We will automate more. We will find more insights. We will, I hope, find mature solutions to cyber threats. But what will redefine the business process fabrics that make companies run, will be the ability to reimagine those operations with technology and analytics in mind.

Let us look at these trends in detail to learn how to bring this powerful, disruptive genome into the work of incumbents. To do so, we first must “unlearn” what some technology hype has conditioned us to think.

Seeing through Silicon Valley

Equating innovation and progress with technology does us a disservice, and our experience points to a more nuanced reality. Gianni Giacomelli, who runs Genpact’s Research Institute, notes: “Much of today’s conversation regarding new social, mobile, analytics, and collaboration (SMAC) technologies is misleading. Technology is not the issue: the issue is the ability of businesses to reimagine processes through its use. Some recent enterprises have recognized this, and have used technology to upend entire industries. PayPal, Uber, Amazon — the list is long. These are archetypal examples of Intelligent Operations SM — organizations that are able to sense, act, and learn from the outcome of their actions at scale. Doing so has allowed them to out-compete incumbents whose operations are stuck in old, slower decision-making and improvement cycles.”

The technologies these successful disruptors now routinely employ finally matured at almost the same time in mid-2013, and their combined momentum is inescapable. Silicon Valley — and its funding — backed many of them. But when we look past the hype, it becomes apparent that the most successful businesses leverage Intelligent Operations SM, not just technology.

I meet hundreds of senior executives every year, and many of them are concerned that the competitive advantage that their companies used to enjoy has now been replaced by a clear handicap due to legacy systems, processes, and often, people. My view is that the new business dynamic that technology brings about does not naturally favour disruptors. Many incumbents are fighting back as they leverage their domain expertise, funding capacity, and connection with both end clients and partners — as long as they can summon the change management momentum they need, and they align the right ecosystem internally and externally. In other words, these organizations inject some of the DNA typical of disruptive competitors into their own operations. Examples abound: banks can now engage clients at scale through multi-channel strategies enabled by technology that converts rich data-driven insight into actionable interactions. Pharmaceutical companies have made significant progress in leveraging operations that can improve patient interactions during the initial phases of product launches.

Manufacturers can now boost the effectiveness of their assets and capture more value by offering much more cost-effective services based on insightful data translated into action by technology. Finance departments can manage credit risk globally in real time, and are increasingly tasked with stepping up from transactions to insight to orchestration — often with the help of analytics and Systems of Engagement TMthat complement Systems of Record.

We have seen the enemy, and it is us

We stand in the way of these changes. Our frames of reference must change. Practices developing in one industry can cross-pollinate with those in others, but many executives neither realize nor accept this fact. (Disruptors, however, embrace cross-pollination eagerly.) The sensing, acting, and learning triggered by every client interaction are now cutting across enterprises in unprecedented ways. The divide between front and back office is losing its significance, but many still silo their approach and their talent management. As our Research Institute notes: “In general, most large operations supporting front-to-back processes are benefiting from faster ways to automate, derive insight, and act in a way that delights clients while reducing the effort (and cost) of doing so. And while strategy, corporate finance, product design, and creative marketing remain vitally important, they must learn to synergize with technology-driven operations if they are to truly harness the power of new technology.” Disruptors have no mental legacy and shamelessly experiment, tweak, and scale.

Our view is that these great opportunities may be nullified by the same issues that have prevented previous waves of transformation. Technology bubbles of the past (such as in many ERP or data- warehouse deployments) have left a bad aftertaste, and some are still taxing CIOs’ maintenance budgets. We now know the root causes, but I am still surprised to see how few understand and holistically solve for the interconnection between IT, analytics, and process operations sufficiently. The tech landscape is also challenging. Some technologies are unproven, and older ones are rigid and expensive to evolve. The analytics hype has obfuscated the fact that some new uses of analytics are unclear, resulting in “solutions in search of a problem.” Similarly, scaling actionable analytics throughout the enterprise is frequently a struggle.

Getting SMAC to work

The business process services industry, including BPO and all IT services that help companies run and the consulting work that helps them transform, will radically change over the next five years. Clients will want business outcomes, as-a-service, able to integrate within their own business processes. This opportunity requires an ambidextrous ability at multiple levels: being able to not only harness technology practically to reimagine those processes and design, transform, and run processes, but also to learn from the results and continuously adapt, thereby shifting from a build-to-last approach to a build-to-adapt one.

The key to fulfilling the promise of technology is to focus on the processes that power advanced operating models so that they closely align with measurable business goals. Our experience of advanced operating models, accumulated over sixteen years of work with hundreds of clients, including more than one-fourth of the Global Fortune 500, drives the experience that we are fortunate to crystallize in Genpact. This experience benefits from thousands of “controlled experiments” conducted at an unprecedented scale by orchestrating the operational work of hundreds of thousands of professionals, including more than 70,000 within our own company.

We now know that there are agile and practical ways to evolve. The key is to design, transform, and run the processes that power advanced operating models so that they closely align with measurable business goals and avoid saddling the company with unnecessary and often unmanageable complexity. Our experience shows that combining design thinking, advanced digital technologies and Lean principles generates material impact. This Lean Digital SM approach maximizes the return on investment from technology, lowers risk, and addresses legacy and change management issues.

Reimagining business processes to achieve advanced operating models rests on the following tenets:

  • Focus more rigorously on the sources of impact and deliberately disregard any practice that does not yield material outcomes. Introduce design thinking methods to focus on the end customer and pinpoint sources of true value.
  • Take a more objective and holistic look at technology, analytics, and organizational practices. It leverages new yet mature Systems of Engagement TM that complement core business technology and Systems of Record. It treats analytics (Data-to-Insight-to-Action) as a process and determines how to embed insight at scale into other enterprise processes; it does not take the typical approach of viewing analytics as a task and a set of technologies. Extending fit-for-purpose digital technologies through the front, middle and back office can generate growth, cost efficiency and business agility when integrated effectively.
  • Harness process and organizational levers available from established disciplines, such as re-engineering, shared services, outsourcing, and global delivery. In addition, combining digital technologies with Lean principles enables end- to-end alignment, and creates initiatives that are built to adapt.

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We call the resulting advanced operations “intelligent” because they can sense, act, and learn from the outcome of their actions, at scale — thus making the entire enterprise more intelligent.

Every great business relies on great operating models. They can be a cornerstone in every CEO’s portfolio of strategic initiatives. Learn from the disruptors.