Strategy Archives - Page 5 Of 6

Location Strategies and the Inevitability of Change | Sherpas in Blue Shirts

May 21, 2014

Everest Group’s Eric Simonson, Managing Partner, Research, recently led a panel titled “Location Strategies: Optimising Your Operations in Growth Markets” at the 12 – 15 May SSON Shared Services & Outsourcing Week in Dublin, Ireland. Sarah Burnett, VP, Everest Group, was in the audience and shares the insights she gleaned from the discussion.

Last week I attended Shared Services Outsourcing Week (SSOW) in Dublin, where Eric Simonson, Everest Group Managing Partner – Research, ran a panel session to discuss location strategies. Taking part in the panel were:

Jamie Davies, Finance SSC Manager, Computacenter
Petter Frisell, Finance Operations Manager, Dixons Retail
Gerry Meegan, Head of Operational Excellence, GBS, Europe and Asia, The Coca Cola Company

Emerging from the debate was that change is inevitable — so location strategies cannot stay the same for long periods of time. Accordingly, Shared Services Center (SSC) organizations must be highly skilled in managing location as well as transformational change while delivering services, keeping staff motivated, and achieving ever increasing year-on-year efficiency and improvement targets.

Factors that contribute to change include:

Internal dynamics such as shifting corporate priorities and business strategy leading to changes in location requirements
External reasons such as problems with retaining skilled staff in off-shore locations.

For example, one company had moved some of its IT services offshore to India but had problems with talent retention. The quick turn over of staff made the services unsustainable and led to the company bringing its capabilities back onshore. This is the type of problem that could be exacerbated by the lack of brand awareness among the local workers who might prefer to work for an IT company rather than the IT unit of a different type of business.

Taking services back onshore can bring its own issues, such as lack of onshore skills particularly in IT where skills are expensive. Of course, changing locations does not necessarily mean bringing services onshore but likely to other locations and nearshore, particularly where the company might already have offices. Panel members had experienced moving SSCs to existing nearshore offices. Having had staff already in place in these new locations had made the moves much easier. The benefits of having an existing presence in a location had to be balanced against availability of the desired skills in that locality, for example required language skills or availability of specific technology platform expertise, such as, Oracle.

Having change management experience is essential for SSCs, not only to move locations but to modernize and transform services too. Some of the transformation challenges that panel members had dealt with included cultural resistance to change within their organizations. Their advice was to ensure good communication to engage well with stakeholders and all staff who will be affected by the change. One panel member gave the example of having to win hearts and minds to support even the simplest form of change; from paper to electronic payslips.

SSC managers also have to excel at marketing and sales in order to sell their services to the rest of the business. This activity requires performance data, monitoring and reporting, to demonstrate the value of the SSC in order to win new clients. This ties in to benchmarking and monitoring to measure year-on-year improvements.

Continuously improving performance can be very challenging, with expectations seemingly on an ever upward trajectory. This goes for year-on-year process and performance improvements as well as cost cutting targets. Consequently, panel members emphasized the need for SSC management to take a broad view of their services and how these can be improved. Some organizations have set up service optimization functions that work in parallel with the operational function of the SSC, but which are focused on achieving year-on-year improvements.

On the subject of continuous improvements, panel members believed that times of change, e.g. moving locations or bringing services back in house after outsourcing an SSC, provide good opportunities to review and improve processes, to fix them if they are broken, or to simplify them if they have become over-complicated.

Another important skill for SSC managers is good people management. The issue of staff retention has already been mentioned. Add to that the problem of staff in onshore or nearshore centers knowing that the service is very likely to be offshored at some point in the future. The SSC manager has to deal with the resulting job insecurity issues that this raises and the potential impact on staff engagement, motivation and retention. Some companies have specific HR policies to address this issue, for example, they will not take on raw graduates in the main part of the business but have career paths for their SSC staff to transfer to the main part of the business instead.

Finally, if the service is outsourced, the panel recommended that some capabilities should be kept in house, such as the operational oversight and the optimization functions mentioned earlier. This would keep some important skills inhouse should the outsourcing not work out.

Photo credit: SSON

Let’s Talk About Me | Sherpas in Blue Shirts

May 14, 2014

American country music artist Toby Keith’s hit song “I Want to talk about me” reminds me of a phenomenon in today’s services world — too many providers’ conversations with customers are unproductive.

Service providers are very eager to grow their revenue in their existing accounts. As the market matures, this is clearly the fastest, less costly way to grow. Customers often ask their providers to demonstrate that they can bring innovation. The problem is the provider comes back with products. That approach doesn’t align with the customer’s expectations. Clients think: “Let’s talk about me and my issues, not you and your products. Help me with my issues.”

As anyone in a marriage knows, you have to listen to the spouse’s whole day to understand what the issues are. Clients typically are not able or willing to succinctly articulate their needs. They will talk to providers about what they’re struggling with and what’s going on in their business. Out of that knowledge come issues they’re working on or potential issues they want to work on.

It’s rare that customers will have thought something through to the extent that they will say: “I want to do this” or “here’s how I want to do that.” A clear articulation of the customer’s needs and issues is particularly rare for the empowered, senior individuals.

Service providers need to engage their customers in broad discussions and at multiple levels (junior, mid-level management and senior management). And out of those discussions comes a picture of the issues and needs that they are working on or need to work on. Then the provider can talk to the client about those issues.

That talk-about-me conversation will be productive and may lead to work. And the client will feel satisfied that the provider did not “sell” something to them but, rather, helped them on their agenda.

Photo credit: Marc Wathieu

The Limits of Verticalization | Sherpas in Blue Shirts

May 5, 2014

Many service providers are busy organizing along vertical industries and going to market with vertical solutions. As the services industry matures, it’s very clear that customers want to do business with companies that understand their industry. However, many providers find that verticalization doesn’t give them the growth acceleration they anticipated. So there are limits to this strategy; just knowing about a customer’s industry is not enough. What’s missing?

Customers want providers to know more about their industry but also to know more about their business and how they operate. Providers that succeed in putting these two aspects together enjoy faster growth.

Cognizant is an example of how to be effective in this strategy. They have organized by industry and built industry expertise, but they also invest a great deal in understanding their clients and leaving the teams or key players in place for clients (particularly the in-country teams).

Customers express a lot of frustration to us. They don’t like providers’ churn. They have to train new people every six months, and the churn is debilitating. They want providers whose people get to know them, build relationships with them and understand who they are and how they work. Those kinds of relationships allow both parties to cut through the noise and get things done.

Despite what the customers are looking for, we see many providers responding in one dimension — the industry knowledge.

My advice to providers: don’t overlook how important relationships are. It doesn’t matter how clever you are or how much vertical knowledge you have. The relationship activates the opportunity.

Photo credit: Curtis Perry

How Can a Service Provider Take Advantage of the Increase in New Shared Services Starts? | Sherpas in Blue Shirts

April 10, 2014

In a recent blog I noted that there is a new wave of shared services activity. But don’t dismiss that news with an assumption that new starts in shared services just means taking a slice of business away from third-party service providers. Here are my tips for shifting this potential business loss to a new revenue stream.

Tip #1: Be patient

If a company has decided to go down the shared services path, your trying to convince them to use purely outsourcing is not likely to succeed. However, we know that over time companies that decide to embark on a shared services journey later decide to use third-party providers in their shared services mix, to a lesser or larger degree. So be patient. These activities take years to develop.

Tip #2: Be an ally

Don’t be an enemy of their decision to take the shared services path. Instead, be an ally and assist them on their journey. You can help them build out their shared services approach and use that relationship to identify where they could use a third party for part of of the services.

Tip #3: Cede control

At some point a shared services unit probably will adopt a hybrid approach to services. Even so, companies moving to shared services inherently favor maintaining control; so the types of services you offer them should be designed to allow them to exercise control.

Much of the outsourcing model is about giving the provider control so the provider can operate in an efficient manner and give the customer a low price. That approach won’t work in a hybrid shared services model. Instead, take an approach along the lines of “Let us help you craft control” so you can participate going forward.

Sizing Up PwC’s Acquisition of Booz | Sherpas in Blue Shirts

April 8, 2014

PwC announced last Friday that it completed its acquisition of Booz & Company — now named “Strategy&.” Why did Booz agree to be acquired and why did PwC want Booz? And what does this mean for the services industry? My opinion: It’s a bold move that has the signs of being a game-changer in the global services world.

Booz had a trouble spot. I’ve blogged before about this phenomenon — the growing power of large consultancy groups and service providers’ ability to utilize access to their existing customer base to increase their revenue. It enables the rich to get richer. The champions of this strategy are the Big Four (Deloitte, E&Y, KPMG and PwC in the consultancy arena) and Accenture, Cognizant and TCS, to mention a few in the provider landscape.

Even though Booz had one of the most venerable, respected brands in strategic consulting for the past 100 years, it became increasingly difficult to drive consistent customer access. Booz believes it will be easier to succeed in this strategy of radiating to advantage by meeting client needs within the PwC family rather than having to blaze its own trail.

Using existing customers to grow a services business is a proven model that Deloitte certainly demonstrates in today’s marketplace, and PwC enjoyed the advantages of this model before the SEC asked it to divest services years ago.

PwC perspective

Bringing Booz into the PwC network is a bold commitment signaling that PwC intends to join Accenture and Deloitte as a major transformational player. PwC has been studiously building back its consulting and advisory services since its divestiture, and the Booz acquisition adds the high-end strategy capability that will enable PwC to be a strong value player in advising and driving major transformation deals.

What it means for the services industry

The arrival of PwC Strategy& in the marketplace changes the provider landscape significantly. It adds another true power with a broad set of capabilities stretching from the boardroom and strategy to implementation. And it will contest the market for large-scale transformational work.

In that contest, it will prove interesting to see which providers lose some market share to PwC Strategy&. Will this new power inhibit Deloitte’s growth? Will it affect Accenture and IBM? Will it affect the aspirations of Cognizant, TCS and Wipro as they look to join the transformational party?

One thing is for sure: The transformational dance floor is getting crowded.

Don’t SMAC Your Customer! | Sherpas in Blue Shirts

April 3, 2014

The service provider community is very fond of clever terms, and SMAC — standing for Social, Mobile, Analytics, Cloud — is a good example of that. However, if you’re a service provider looking to sell to new or existing clients, talking about SMAC may not be the most productive way to hold the conversation.

The most productive way to uncover a significant opportunity is to talk to your customers in their language about the business issues they have. Sure, they’re looking for technology answers to their issues, but very few of them use the term SMAC of their own volition.

So if you’re talking to a retailer about their out-of-stock condition, for instance, talk about the practical ways that your solution will help them identify where they’re out of stock and how you can help them prevent that from happening.

Software tools can be very powerful. But as I’ve blogged several times in recent months, decision rights and buying influence are flowing toward the business users rather than CIOs. Providers must change terminology and communication to successfully capture their attention and serve them well.

Use simple business terms to communicate what you can do for a customer. If you use clever technology terms, you’ll probably just marginalize your impact and consign yourself to the realm of being a geek.

My advice: Keep the acronym out of your sales toolkit. Don’t SMAC your customer!

The Services Industry Is Not Getting Its Return from Investing in Innovation | Sherpas in Blue Shirts

April 2, 2014

At the request of a BPO provider, we did a fairly exhaustive study of all vendor/provider-funded innovations and their impact on the business growth. The data were startling. Our study clearly revealed that the hundreds of millions of dollars that providers invested in innovation yielded very disappointing returns. Although they often succeeded in taking their innovations to market, they realized only scanty returns and not the kind of return that creates a differentiated accelerated growth. Why is that? Were their hopes too ambitious?

The biggest culprit in the poverty of their return on investments is that those investments didn’t have the necessities for success built into their DNA. What was missing? In many cases innovation initiatives don’t resonate with existing and prospective clients because they simply don’t meet the clients’ needs. In other cases the offerings require a different kind of sales discussion as the provider tries to sell something the client isn’t looking to buy. In both cases this creates a difficult sell and largely proves unsuccessful.

Strategy for innovation that leads to business growth

As I explained in a previous blog post about innovation agendas, these disappointing outcomes from provider-funded innovation initiatives often start with trying to design a solution for multiple clients rather than innovating on a single client’s defined needs. Providers fall into the seduction of believing it makes sense that just because one client wants a particular innovation other clients also will want it that way.

Further, building things in a vacuum away from a client is not helpful and tends to result in outcomes that are off target.

The path to innovation that accelerates growth lies with the provider working closely with clients to define their needs and then bringing the provider’s capabilities to meet those needs. It’s a powerful strategy that results in much deeper client satisfaction.

It also allows a provider to deal with the issue of changing influence structures that we’ve noted in previous blog posts, where the business stakeholder is now more influential in defining a client’s business needs and driving investment and work that goes to third parties.

Providers that interact with business stakeholders to address their needs find the effort pans out and they can move to more impactful innovations that the client will be ready to fund.

And that’s a recipe for explosive growth.

Photo credit: Matter Photography

Many Believe Cloud is a Strategic Differentiator | Market Insights™

March 28, 2014

According to results from our annual Everest Group – Cloud Connect Enterprise Cloud Adoption survey, 56% of organizations consider cloud to be a strategic differentiator

Download the report

Is Xerox Changing Direction or Is It More of the Same? | Sherpas in Blue Shirts

March 27, 2014

I’m watching with great interest the current change in leadership at Xerox. They just announced that Lynn Blodgett will retire at the end of 2014 and Robert Zapfel will join the firm on April 1 as president of Xerox Services and EVP of the corporation, reporting to the chairman and CEO. Bob has had a distinguished career for 35 years at IBM and helped transform Big Blue’s services business to profitability. Will Xerox now use the IBM playbook?

Here’s a short version of the IBM playbook:

Be relentless in adjusting the cost base and disciplined in exiting businesses that can’t meet the return total.
Be patient and consistent in acquiring new properties that enable positioning in attractive, high-growth market segments.
Be very effective at utilizing the company’s broad capabilities including products and R&D to craft a differentiated position in services.

In many respects Xerox and IBM enjoy a similar position. They both have strong balance sheets with which to finance acquisitions, they both have golden brands that engender trust, and they both have R&D that is the envy of the industry. Arguably Xerox has already been walking down the IBM path to some extent. It will be interesting to see how Bob shapes the future of this proud and venerable industry leader. What do you think?

Photo credit: Derek Bruff