Point of View

Radical technology inflection triggers the rise of intelligent operations

  • Facebook
  • Twitter
  • Linkedin
  • Email

In an age of permanent uncertainty, organizations’ operating models are under stress, but technology can transform the way they run—if enterprises avoid the traditional narrow focus on tools and embrace a business-oriented approach. Today’s limiting factor is not technology: It is the ability to reimagine business processes knowing that technology is powerful and practical. Thankfully, unlike in the past, today’s technologies are easier to build and layer upon older ones. Systems of EngagementTM complement systems of records, and Data-to-Action AnalyticsSM can be weaved into operations more easily. The key to fulfilling these promises is to focus on the processes that power advanced operating models so that they closely align with measurable business goals. Leaders must identify the levers (technology-led or other) that generate material impact—and must focus on them. The result, cutting through the hype, can be a fast achievement of realistic objectives, thanks to powerful technologies.

Take a copy for yourself

Download PDF

Not déjà-vu

The Great Recession triggered a momentous change in many organizations’ operating models. Enterprises seek competitiveness in an environment where agility and variable cost are as important as robustness and where scrutiny from regulators and clients is pervasive—and organizations need their operations’ help to compete.

Unfortunately, past transformation through, for instance, large-scale ERP deployments has often delivered much lower-than-expected return on investment (ROI), as well as much slower realization of expected benefits (five to seven years later, on average). Our experience indicates that a clear root cause of these issues has been the forced fit of old processes onto new technologies, and vice versa. Many of these mistakes can be avoided today, thanks to better process design and transformation practices, and now-mature and more agile technologies—in short, with better operating models.

As described in previous reports,1 when these changes are executed well, the impact on cost and growth can be enormous. Being flexible in terms of cost structures—selling, general and administrative (SG&A), and cost of the product/service sold—while capturing fast-evolving, granular profit pools is achievable through advanced process operations. Operating model evolution also has a very significant effect on the controllability and auditability of how companies run.

A radical shift in the art of the possible: Technology is no longer the limiting factor

The largest shift is in the use of technology to capture value. Cloud-based and mobile applications, analytics, and collaboration tools multiply the effect of well-understood levers such as shared services, outsourcing, global delivery, and process reengineering.

These technologies matured almost at the same time2 in mid-2013, and their combined momentum is now formidable. Consider the following examples of the impact on client-facing activities:

  • Banks engage clients at scale through multi-channel models enabled by technology and related data-driven insight
  • Pharma companies can better harness interactions with patients during the initial, critical phases of product launches
  • Industrial manufacturers can optimize the effectiveness of their assets and capture more value from their clients by deploying more cost-effective services, once again based on more insightful data correlated with financial impact

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. Advanced organizational models such as global business services will multiply the positive impact thanks to their ability to scale and standardize. Interestingly, practices developing in specific industries cross-pollinate productively other sectors.

The ability to reimagine and deliver intelligent processes and operations, not technology availability, is the main challenge today

Clearly, these great opportunities may be nullified by the same issues that have prevented previous waves of transformation. The technological excesses of the past (such as in many ERP or data-warehouse deployments) have left many feeling jaded. Although the root causes have been identified, few understand the interconnection between IT, analytics, and process operations sufficiently. Some technologies are unproven, and older ones are rigid and expensive to evolve. Some new uses of analytics are unclear, and scaling deep analytics throughout the enterprise is frequently a struggle.

A practical way forward

There are agile and practical ways to evolve. They are based on our experience of advanced operating models, accumulated over 15 years of work with hundreds of large and complex enterprises, including more than one-fourth of the Global Fortune 500. This experience benefits from thousands of “controlled experiments” conducted at unprecedented scale by orchestrating the work of hundreds of thousands of operations professionals, including more than 60,000 within our own company. With this deep knowledge of operations, we can pinpoint practices and changes that are likely to work.

We believe that the key is to design, transform, and run the processes that power advanced operating models so that they closely align with measurable business goals. Digital technologies are essential enablers. The challenge, however, is to avoid the costly misguided efforts that prevent organizations from realizing expected business outcomes.

Our experience shows that combining design thinking, advanced digital technologies and Lean principles generates material impact. This Lean Digital 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
Deliberately disregard any intervention that does not yield material gain. This avoids unnecessary and often unmanageable complexity that too often jeopardizes technology-enabled transformation. Introduce design thinking methods to focus on the end customer and pinpoint sources of true value.

Take a more objective, practical, and holistic look at technology, analytics, and organizational practices
Extending fit-for-purpose digital technologies through the front, middle and back office can generate growth, cost efficiency and business agility when integrated effectively.

For instance, Systems of EngagementTM must complement systems of record technologies. Data-to-Action AnalyticsSM must be treated like a process, and aim to embed insight pervasively into the fabric of other enterprise processes; we believe that the typical approach of viewing analytics as a task and a set of technologies is misguided.

Leverage tried-and-true organizational models This is done by harnessing the process and organizational practices available from established disciplines, such as reengineering, 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.

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 operations. Intelligent operations must be a cornerstone in every CEO’s portfolio of strategic initiatives.

Visit our digital transformation page

Learn more
  1. For reference, among others, see Gartner gartner.com/technology/research/nexus-of-forces/
  2. "Business Process Operations: The Art of The Possible" and "Genpact Impact Report 2014"