Most Shared Services models have three stages of maturity –
- Fragmented shared services (shared services limited to one function or geography),
- Global Business Services (Globally organized and run as a business) and
- Optimized global business services (use of automation and demand regulation for even more value).
However, it is the emerging fourth stage which is the most strategic to your enterprise. It makes the leap from cost optimization engine to digital business model creator for the whole enterprise. It needs to be a core part of every company’s business strategy.
Shared Services – the cost optimized delivery of functional services within an enterprise – has been a key efficiency play for most companies in the past. Each stage of evolution has typically delivered a 15-30% cost advantage. The first step of evolution was the outsourcing or offshoring of certain back-office functions. The trend started in the late ’90’s. Since then most Global Business Service organizations have matured via more offshoring, outsourcing, ERP implementations, automation projects, service pricing and demand regulation. Best-in-class Global Business Service organizations are considered to be Third Generation GBS, and are reliable engines of productivity and transformation for their company.
However, more recently, this 3rd generation of Shared Services has shown signs of becoming a mature “S” curve. There is only so much cost that can be cut from existing IT architectures and corporate work processes. At the same time, the rise of digital disruptive business models from startup competitors is driving the need for even more cost efficiencies at the enterprise level.
The good news is that there is a way out of this dilemma. It is provided by the 4th Generation of Global Business Services.
Fourth Generation Shared Services – “Leveraged Business Services”
Essentially the 4th Generation Shared Services is a digital redo of internal and external business models using Exponential Technologies, Exponential Work Processes and Exponential Ecosystems. For instance, internal to the enterprise, Artificial Intelligence, Software Robots and Machine Learning can automate most of your call centers using Virtual Assistants, and do your Order Management or Financial Planning using automated algorithms. However, more important are the changes possible external to the enterprise. The same digitization technologies can create entirely new business models for the enterprise as demonstrated by GE’s focus on becoming a data company.
Exponential Technologies: The rise of Cloud, extremely cheap computing, Artificial Intelligence etc., can dramatically change work systems. The digital technologies of the first 3 generations of GBS were limited by the technologies of the time. Whatever could not be fully automated was handled by people – either in shared services structures or within the Business Units themselves.
This is quickly changing. Imagine Virtual Assistants operating self-service contact centers in the future. Many brokerages are starting to leverage virtual financial advisors. Natural Language Generators and Machine Learning are automatically writing financial or sports update articles in real time. Algorithms are beginning to hyper-personalize and recommend orders to customers. This exponential growth of technologies will only feed on itself as it automates increasingly complex tasks.
Exponential Work Processes: The rise of exponential technologies makes possible new work processes and business models that could never be imagined before. This takes design shop thinking. We have seen this in action already – just think of the evolution of the processes to check out DVD rentals at stores to the algorithm based recommendations and downloads of online movies on Netflix. What’s the equivalent of this to any selling and logistics function?
Exponential Ecosystems: The final multiplier is the ability to tap into an unlimited number of resources using ecosystems of people and technical assets. You can now hire almost any skilled resource – from lawyers to cyber security services via certified crowd services. There is also a growing list of assets also available on demand – from software as a service to extra truck capacity as a service.
Underpinning exponential technologies, exponential work processes and exponential ecosystems is the core enabler – exponential organization culture. Identifying discontinuous solutions is difficult. But change management in an established organization is 10 times harder. An exponential organization culture is critical for success.
“Leveraged Business Services” is your best bet to lead the change
The coming digital enterprise era promises radical change. A recent study claims that 75% of the S&P 500 companies will turn over by 2027 driven by the 4th Industrial Revolution. Thriving in this change will need a targeted redo of both internal and external business models. Keep in mind that these two are connected. Since your Global Business Services need to evolve to the 4th generation for the new internal business models, it is likely to be the best starting point to help enable the evolution of external business models as well.