diego navia digital operations

By Diego A. Navia

A Digital Transformation journey is as unique as each organization. In fact, it is all about transforming the business into a more agile, profitable enterprise. Something that has been accelerated with software and boosted several times over with digital channels and technology.

Companies and organizations are in a continuous transformation process, one that has accelerated over the last decade with the influx of new technologies and the increased competitive dynamics associated with digital connectivity. Traditional business transformation has been predicated on cost competitiveness and market clout achieved through scale.

Cost and Scale have been the historical drivers of Efficiency & Productivity and thus the cornerstone of  Enterprise Operations.

The bigger your company is, the cheaper your products become as fixed costs are distributed amongst a larger set of products and services. Over time, organizations have pursued a scale-driven transformation approach to gain competitive advantage through cost leadership, as well as attain improved operational consistency, quality outcomes and improved access to resources.

Shared Services

This transformation journey has driven organizations to standardize their operations and migrate from ad-hoc processes and roles with infinite variations to a set of repeatable, standardized processes, tools; as well as organizational roles, positions and skills required to execute these standard activities. As this standardization took hold, scale has been pursued across geographies and legal entities acquired through M&A activity over time.  

This operational consolidation took the name of Shared Services as organizations consolidated specific processes and activities under one roof, serving numerous internal organizations (i.e. Finance or Tax “serves”different business units or product lines). As this concept took hold and in order to become even more competitive, the idea of selecting the most cost-effective location, contractual arrangement (i.e outsourcing) and service specialization strategy took hold, giving birth to several well known acronyms.


BPO, Outsourcing, Offshoring, CoE's & GBS

WHO

does the work

Business Process Outsourcing (BPO) focuses on who does the work, and relies on the assumption a third party can do the work at least as well as you can, at a lower cost, given they focus on that type of work. So, an organization selects an external party that would execute a series of operational  processes on behalf of an organization, and governs its outsourcing relationship primarily through contracts and service level agreements (SLA’s). These contracts initially were at least 5 years long in order to make it worth it, but things have changed dramatically over the past couple years.

One of the biggest driver -if not the biggest drivers- of operational cost is labor. Thus, seeking wage arbitrage, the ability to source the same type of skill at a lower cost from lower cost economies,  has become a key priority over several decades. Offshoring, outsourcing work in far away locations such as India and the Philippines is probably the best known term.

As companies involved in this sector realized similar savings could be achieved in nearby locations, with similar cultures and timezone, the term Nearshoring was born to accommodate outsourcing locations like Mexico, Costa Rica or Colombia serving clients in the United states. Similarly the term has been used for Poland, Morocco or Romania serving clients in UK, France, Germany, etc.

As companies faced hurdles in realizing economic savings and had to overcome cultural issues, timezones and capability challenges, some companies decided to come back to their home country, locating their centers in a single location in the same country. This trend has gotten stronger over the past 2-3 years as technology has rendered wage arbitrage less important and delivering operational technology innovation becomes more difficult in far flung locations with different cultures, expertise and aligned incentives. 

WHERE

the work is done

WHAT

work gets done

As Shared Service Centers grew bigger and capabilities popped-up in different locations, the need to focus specific centers -outsourcing, hybrid or captive- into deep capabilities was born. This gave rise to Centers Of Expertise, a group of experts that provide not just transactional expertise in a process but rather expertise in end-to -end processes, industries or products, giving rise to unparallelled knowledge and depth in a specific area. A construct ideally suited for innovation and process improvement. 

As companies and organizations decide the best answers to their particular circumstances and come to grips with an ever growing set of operational needs and operational footprint, the concept of Global Business Services (GBS) was introduced over the last decade acknowledging capability complexity and the desire to manage it appropriately as the corporate business transformation process continues. In doing so, organizations are effectively making strategic choices that define a modern operations strategy

GBS is about optimizing the whole network of capabilities rather than individual contracts

The concept is simple, it is no longer about individual backoffice functional processes (i.e. HR, Finance) delivered by outsourcers (i.e. Genpact, TCS, Accenture, Wipro,cognizant) and captive centers from remote locations (i.e. India, Philippines, US, Romania), it’s about managing these capabilities as a whole. 

The GBS transformation journey is unique and needs to reconcile existing capabilities with operational needs pipeline while taking a proactive approach towards capability clustering, risk management, compliance, technology-driven innovation across functions rather than perpetuating wage-arbitrage driven silos. Key elements that define an operations strategy and thus the business and digital transformation path toward a new and modern operating model

Defining WHAT, WHERE and WHO does the work defines your Operating Model, as well as the unique transformation journey to get you there

Process Improvement techniques, data-driven tools and Technology

Improving the operating model requires a level of analytical detail and organizational expertise that transcends the location, scale expertise or contractual arrangement decisions described above. It’s detailed work to understand how work is actually performed and how it could be done better, both at the detailed execution level as well as in the way hand-offs take place and both work and data flows.  

Industrial Technique

optimization

Operational improvement has always relied on data. Whether manual cycle time measurements, KPI’s delivered by machine sensors or numeric benchmarks to compare operations across companies, this is a numbers rich area.

Over time, formal techniques have been developed to measure, standardize and reduce waste. Business Process Reengineering (BPR), Six Sigma, Lean, Benchmarking are just a few of the techniques developed to improve operations and one extensively applied even today. 

As new technology has pervaded organizations and our daily life, so has data associated with what we do, enabling a shift in the Digital Transformation journey from CX/UX to Operations. In its most basic form, big enterprise systems create transaction and security data dumps. Over the last couple years a new generation of tools that analyzes raw data and provides busienss insights in user-friendly formats has arisen. 

So called process mining is an entirely new software category that brings process improvement to the 21st century. Pioneer Celonis and a large crop of entrants add science to PI by providing smart analysis of cycle times, bottle necks, handoffs, etc. This has been possible by taking advantage of the structured sata behind systems like ERP and mining standard codes (i.e. transactions) behind each operation.

Data -driven

optimization

Work

Automation

As processes get standardized, rules clarified, individual role responsibilities articulated in checklist forms and common software platforms used for operations, automation becomes the logical next step. 

Automation in the workplace has been a formal desire and a concrete reality for decades. On the business services side, it started taken shape with ERP’s which laid the data and standard process groundwork. ERP themselves automated handoffs, approvals and several function-specific activities. As the transformation journey continued, automation focused on images, digitizing documents and workflows and most recently automating data handoffs and screen emulation via Robotic Process Automation RPA (i.e. Automation Anywhere, UI Path) – in its pure form or the myriad variations encompassing AI, BPM, etc. 

Most recently a strong wave of Low Code/ No Code tools (i.e. Pega, Microsoft Power apps family) promises to make it easy for organizations and individuals to continue their automation adoption journey without knowing to code. Whether automating a specific process, connecting applications through API’s or handing over work in the form of documents or data, it is likely you’ll find a product promising to do it for you. 

Your choices, your Transformation Journey

A shift towards an agile Operating Model is the key shift in the Digital Transformation Journey

As remote work takes hold and organizations face challenges driving total customer experience for existing and newly created digital channels, a shift is occurring focusing on digital operations as a natural progression of their digital transformation process to a next generation enterprise with a drastically different and more agile operating model. 

A modern post-covid organization is agile with competitive cost structures delivered by a hybrid remote workforce integrating human talent and technology across multiple geo locations, contractual agreements and smart sourcing. While there is no single path or unique end-state , having an end in mind can help align individual efforts move in the same direction. Whether driven by HR, functional automation, new platforms, re-skilling , each organization needs to ask itself:

Moving Forward

As each organization comes to term with the need to evolve into an integrated agile operating model, key strategic choices will be made in terms of the level of process standardization, risk profiles, locations, capability clustering/redundancy and other elements that configure an operating model end state. 

 

These strategic choices will vary depending on the strategic assets of each organization, its readiness for change and the industry dynamics it faces.  

Strategic choices made will of course impact not just the end state but the interim steps and associated transformation journey to get there. Some organizations will want a global footprint with internal capability centers in each major continent, another may want redundant capabilities across centers to avoid disruption, someone else may like to outsource most operations and hold third parties accountable for specific SLA’s. 

Whatever the choices, they are likely to evolve over time, but unless there is a well articulated end state and a deliberate effort to come together under a common operating model, scaling, remain agile and delivering quantifiable enterprise value will likely remain elusive with other attaining the competitive advantage afforded by the era of data, technology and composable enterprise

As you embrace technology, drive operational alignment and converge around a common Transformation journey leading to a  Digital Operating Model, you can access more resources here to help with your journey. 

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