Organizational separation necessitates special considerations
Enterprise shared services, or Global Business Services (GBS), involving centralized process execution in finance and accounting, HR, procurement, IT, logistics, and other functions, are now standard among large, geographically dispersed manufacturers across the Asia Pacific (APAC) region and globally.
While setting up shared services at one location, manufacturing leaders have to deal with geographical and organizational variations due to the diversity of the markets across APAC and Europe. The manufacturing industry is in the era of technology-enabled business transformation. The manufacturers are taking full advantage of the streamlined processes, new business models, and better customer service that digital transformation enables.
GBS organizations have initiated digital transformation programs of varying scope and duration over the past decade, driven by the need to standardize the efficiency process that facilitates scalability and technology enablement and the need for a central repository of best practices knowledge. They often partnered with consulting and technology service providers and outsourced Business Process Service providers in carrying out these changes.
Given their organizational, geographical, and sometimes cultural separation from their ‘customer’ business units, successful digital transformation of GBS organizations requires enterprises to adopt some distinct considerations.
Scope and approach: Holistic, end-to-end, and spanning boundaries and stakeholders
With accumulated experience in business and digital transformations shared by experts and the corporate’s executive teams, shared services transformation programs are now commonly designed keeping the end-to-end process, integrated organization capabilities, and customer-facing metrics in mind.
However, the logical and physical separation of shared services units from their core business units necessitates consideration during transformation planning to a set of approaches:
a) Deploying an integrated management team comprising business unit (BU) leads and GBS management for the transformation, even if the focus of process improvement is in the GBS organization. Since many processes begin and end with the BU’s customer-facing (or employee-facing, HR services) teams, more than GBS management is needed to drive these process transformations. It is more valid for geographically dispersed BUs operating in markets (e.g., China, Korea, and Australia for the APAC geography) different from the location of the shared service facility (e.g., Philippines, India, or Malaysia).
b) Subsuming all ongoing projects within the transformation program to ensure holistic decisions regarding both in-flight and new projects, avoiding overlapping investments.
It may necessitate difficult decisions related to some ongoing or new projects that individual managers or teams are invested in. Yet, taking these decisions with an agreed prioritization framework early during the program can avert the potential waste of scarce resources and management attention later.
c) Insisting on genuine “transformation” enabled by new digital technologies beyond aiming for automation for efficiency. Often, when the program is restricted to shared services units that are measured primarily on operations metrics like activity costs and transaction accuracy, a strategic or transformative intent that generates wholly different process solutions can be challenging to instill in the core team and among the advisors supporting the section on the ground. Hence, this approach also necessitates inclusive groups that represent the entire process activities capable of joint out-of-the-box approaches.
Continuous change management: Established GBS organizations, separated often from external volatility, may sometimes be particularly resistant to attempts at transformative change. Hence, initiating change management early in the transformation cycle, even before the to-be vision or process design phase, is essential. Continuous change management communication from all levels - executive sponsors to departmental heads - is necessary to ensure active adoption of the changes implemented. Also, business unit users of the new systems must remain active participants in the process transformation.
Team composition: Integrate expertise from across the enterprise and beyond
GBS organizations are typically designed for cost efficiency, their ability to scale to support growth and process excellence through functional focus. Capacity for innovation, dealing with technology disruption, or rapid environmental change are not necessarily inherent to them. Yet, these organizations’ digital transformations necessitate these skills be present within the broader team responsible for the program.
Hence, the GBS digital transformation office should supplement the core team from the user community and the GBS organization that is in scope with other internal experts or external consultants who can:
Technology choices: Follow enterprise architecture principles, and evaluate trade-offs in detail
The transformation management team will face choices while dealing with technology decisions related to digitalizing existing processes. Some of these include:
Should we automate/digitize divergent local processes or standardize globally first? The former has the allure of early savings by automating existing processes. At the same time, the latter ensures that resultant quality and scalability lead to the highest overall effectiveness while taking longer to execute. RPA-led interventions in Accounts Payable (AP), for example, may sometimes take the former route, customizing to-be processes to divergent practices across countries to achieve early returns without addressing the difficult challenge of standardization.
Should existing ERPs and packaged applications with workflow capabilities be extended to the GBS team for automation of manual GBS processes, or should a separate IT platform for service delivery be set up within the GBS organization?
Due to organizational separation and license cost considerations, GBS teams may not have access to ERP and BU applications used by the core BU, limiting their ability to automate GBS workflows, access data, and perform online reviews. Extending this access will enable the extension of established processes to the GBS user base and hence improve the cost and reliability of the GBS Transformation program since the program would not need to replicate some of the logic or data already available in the core transaction systems. However, it may mean higher license fees to software vendors for an extended GBS user base.
A GBS-specific IT platform deployed across the GBS organization that offers service delivery and service management capabilities for most processes in scope may instead be used for GBS process activities to be digitalized. While likely higher in implementation cost due to custom development, replication of workflows, and need for integration with BU applications, this approach offers the potential for lower license fees, apart from the benefits of a common platform enabling faster innovation and integration between processes within the GBS scope of activities.
However, such service delivery platform capabilities need to be evaluated carefully to ensure that features for functions in scope are available within the platform. For example, a service management tool with IT and HR service management capability would be relevant if HR and IT Services management processes were transformed but less relevant for Procurement or Accounting transformation.
Integrations can be a significant consideration in evaluating GBS-specific technology platforms: For GBS organizations that implement their processes on a selected service delivery platform, there may emerge several application integration requirements as data and process handovers will be needed between the core ERP or other BU systems and the GBS shared services platform. The cost and timelines of these integrations need to be carefully anticipated a priori as part of the business cases approved.
In sum, during the selection of technologies and architectures, it is essential that:
The number of integrations and reusability of integration artifacts that impact cost and timelines should be carefully considered early.
Sustaining continuous innovation: Embed continuous value creation in KRAs
Sustaining an innovation culture: Most GBS organizations continuously attempt to meet cost and reliability operating targets, sometimes with limited headroom for innovation. And yet, continued changes in the regulatory and compliance environment indicate a need for innovation capabilities.
It will take a special focus from GBS management and identified team members charged with the responsibility to ensure that value-creating innovation ideas emerge and go through the evaluation, implementation, and value realization cycle. Just as in customer-facing units that need to innovate quickly, KRAs of supervisory staff in shared services organizations also need to be linked to the number and quality of continuous innovation initiatives and value created in each period.
In summary, manufacturing leaders in APAC and elsewhere need to consider the specific needs of their Shared Services organizations while designing digital transformation programs for them. Some of the considerations elaborated include:
Scope of GBS digital transformation
To ensure a positive impact on customers, the scope of the GBS should be holistic, spanning organizational boundaries.
Approach and strategy
To align support and commitment from all stakeholders, the team should comprise an integrated Stakeholder group of BU and GBS, with joint ownership of success.
The skills needed for the program will require GBS process owner expertise supplemented with IT, architecture, and transformation governance expertise from elsewhere in the organization and beyond.
Technology choice considerations
Process standardization before digitalization.
To develop resilience to regulatory and technological changes, embed continuous innovation efforts and outcomes into program KRAs, and transition to an innovation-oriented culture.