Optimising financial processes

Posted on:

Is Commoditization the biggest challenge to Global Business Services?

Cost is a key driver in any business.

In addition to the team, product/service innovation, customer relationships and supply chain, cost competitiveness is an essential element of the business model.

Some time ago, I asked Finance leaders and heads of Shared Services and GBS what they felt were the key expectations/demands of their executive stakeholders. 

The answer was no surprise. Cost came out top.

In fact, the rankings were;

  1. Direct Cost Reduction
  2. Improving Business Unit Experience
  3. Enhanced Risk Management, Control & Compliance
  4. Flawless Issue Resolution
  5. Preserving Process Knowledge

However, when I asked them about their aspirations for GBS as business leaders themselves, we had a much more nuanced discussion, and the common themes were more thought provoking;

  • To develop an enhanced reputation as value creator as well as cost reducer
  • To evolve as a center of excellence, with the expertise to optimize and automate, as well as operate
  • To be the facilitator of enterprise-wide end-to-end business process collaboration and alignment
  • To become the talent pipeline for the entire business

This all came to me as a flashback as I read a great article by Barbara Hodge of Shared Services & Outsourcing Network (SSON) this week. Barbara comments on the SSON GBS Certification program (GBS Certification programs also provided by The Hackett Group and an innovative new player with some faces you may recognize, ConAxia )

Barbara and Tony Saldanha, former VP GBS at P&G,  make some important points about the existential threat of “commoditization” to GBS organizations.

There will always be somewhere cheaper to source services. Consequently, a myopic focus on cost will result in a slow and painful demise.

Tony argues that running GBS should be like running a business, not a function. So, far from being seen as a low-cost transactional operation, GBS ought to be seen as an enabling component of the entire modern enterprise. 

Managing a GBS service is like being a consumer brand manager, driving decisions on customer experience, cost, price, innovation, market share et al.

Tony distinguishes between the business model and the operating model, which defines the processes that run GBS, rather than the processes that are delivered as services by GBS to their customer / consumer. 

These operating model services include service management, risk management, structure & governance, skills and talent, process design, process placement and sourcing, automation & enabling technology, performance management and so forth.

But if we are to be genuine value creators, rather than just cost reducers, we need more than well managed GBS processes and excellence in delivery..

We need continuous innovation.

In a GBS context, as with the best strategic suppliers, this requires deep, strategic collaboration with the customer.

The unique value of GBS may be it’s ability to collaborate up and down the value chains of the enterprise, and co-innovate with the customer the best end-to-end business processes. 

GBS will never run the full end to end activities on all of these processes, but it’s competitive advantage, against commoditization, will be this sustained, embedded, creative collaboration.

With, of course, one eye on the costs, as in any good business 😉

You can read this article by Barbara and Tony that got me thinking, here . . .

Thanks for reading . . .