The top 2000 global enterprises are estimated to spend $2-4 Trillion in support function costs (aka General & Administrative spend). Many digitalization research studies estimate 30-50% of potential productivity via digital technologies (e.g., cloud, collaboration, process robotics, advanced analytics/ AI) – implying approx. $60 Billion to $2 Trillion in value at stake.
Quite likely a large portion of this current investment value is due to ineffective legacy systems – described these days as ‘technical debt’. However I would submit there is a significant degree of ‘process debt’ as well, including:
– Ineffective policies – e.g., multiple levels of manual reviews
– Fragmented processes with numerous exceptions and manual touches, missing or redundant information requiring non-value added research/ duplicate data entry
– Duplication of activities – redundant reporting, reconciliations and audit
Digitalization alone will only help an organization get around some of these issues – for e.g., automating 10 process variations is still 10 bots vs 1 harmonized process and 1 bot. Hence for real, sustainable impact – a clean sheet design and indeed mindset approach is required:
– Policy simplification/ demand elimination – Netflix and Dropbox are among organizations that have eliminated employee vacation policies. Focus is on employee outcomes and output vs when and how deliverables are generated.
– Virtualization of services – Digital first organizations are moving away from traditional physical consolidation of support services for economies of scale. Increasing end user self-service and ‘flow to work’ agile service models for managing rapid issue resolution and enhancements.
– Variable-zation of traditional fixed costs – use of Hollywood style gig/ specialist model for projects based work. Thin internal capacity build around agile models (as above). More share of project based work vs. recurring work (e.g., compliance for external authorities).
We are still very early in this journey – and new digital-first organizations start with a huge opportunity to re-imagine the traditional support functions delivery model – and create significant cost and agility advantages. There are also major implications for service consolidators (e.g., BPO and ITO firms) – who would be required to move from long term recurring contracts to perhaps micro-services and more project based delivery – a significant impact on current value creation models.
Watch this space as I continue to scan the horizon for emerging case studies and ideas!
Shared Services Imagineers 