GENERATING DIGITAL IMPACT Digital business models need ...€¦ · Behind the biggest success...

GENERATING DIGITAL IMPACT

Digital business models need advanced operating models

DESIGN • TRANSFORM • RUN LEAN DIGITALSM

Report

Research findings indicate that harnessing the full power of digital technologies requires a reimagination of operations through a holistic architecture that marries technology, process re-design, and advanced organizational structures catering to process specific differences.

TABLE OF CONTENT

1. Introduction ........................................................................................................................................................................................4

2. When the focus is today: Managing risk, ensuring compliance, and cutting costs............................................................. 5 Risk and compliance ......................................................................................................................................................................... 5 Cost ...................................................................................................................................................................................................... 5

3. Preparing for tomorrow: Customer satisfaction, growth, agility, and innovation ................................................................8 Customer satisfaction and growth .................................................................................................................................................8 Agility and innovation .......................................................................................................................................................................8

4. Conclusion: Towards a digital future powered by advanced operating models ..................................................................13

5. Methodology .................................................................................................................................................................................... 14

INDEX OF FIGURES

Figure 1: % of respondents across functions stating that the risk and compliance challenges are among the “top 3” for their company ................................................................................................................................................................ 5

Figure 2: Impact of operating model initiatives on functional areas considered most important for the risk and compliance challenges .......................................................................................................................................................6

Figure 3: % of respondents across functions stating that the cost challenge is among the “top 3” for their company ...................................................................................................................................................................... 7

Figure 4: Impact of operating model initiatives on functional areas considered most important for the cost challenge ...............................................................................................................................................................8

Figure 5: % of respondents across functions stating that the growth and customer satisfaction challenges are among the “top 3” for their company .............................................................................................................................9

Figure 6: Impact of operating model initiatives on functional areas considered most important for the growth and customer satisfaction challenges .................................................................................................................................. 10

Figure 7: Ability of functional areas to impact growth and customer satisfaction .............................................................. 11

Figure 8: % of respondents across functions stating that the agility and innovation challenges are among the “top 3” for their company .............................................................................................................................................................. 12

Figure 9: Ability of functional areas to impact innovation and agility .....................................................................................13

GENPACT | Report | 4DESIGN • TRANSFORM • RUN LEAN DIGITALSM

Introduction

Behind the biggest success stories of digitally enabled businesses – from Amazon to Uber to GE’s Industrial Internet – there is another story: business process operations agilely engineered to learn and scale in an unprecedented way. Yet the story most often told is oriented toward the front-end customer interface. Our analysis shows that middle and back offices are equally important in securing successful customer journeys and extracting value from markets at scale. What is more, insufficient emphasis on operating models – on Intelligent Operations – likely holds back some of the revolutionary power of digital technologies, especially in companies where legacy systems and processes constrain the creation of new, compelling business models. In a separate research [ www.genpact.com/leandigital ] we estimate that almost $400 billion, out of the roughly $600 billion representing digital budgets, will be spent on efforts that ultimately return insufficient impact. One key issue is the widespread inability to design and execute transformation programs that consistently align interventions with business outcomes. The consequence is significant extra effort, overly complex and vast scope of work, frequent delays, and insufficient ROI. Only by knowing where to focus digital efforts can enterprises maximize client value while minimizing waste.

This requires practical solutions that use lean management principles along with the power of advanced digital technologies, and a discovery process that involves design thinking. The combination helps prevent the digitization of broken processes by restricting interventions to the most significant sources of impact, and thereby avoids the bias towards small, tactical improvements that offer only incremental benefits.

This analysis of data provides an unprecedented view of “what” (functional areas and related processes) to focus on “how” (technology, process, organization)

to implement it. The research it is derived from, which was conducted by an independent research firm commissioned by Genpact, examined the potential of advanced operating models—including radically improved uses of technology—to address strategic enterprise challenges across a defined set of industries: manufacturing, high tech, healthcare, life sciences, consumer goods, and banking and financial services. As part of this research, interviews were conducted with almost 1,000 senior executives in North America and Europe. While individual responses may not reflect the strategic direction of the C-suite as a whole, it is obviously important to understand the perspectives of these executives, many of whom effectively “run” their companies, and to listen to the ways in which they articulate strategy in terms of operational execution.

While digital technology will profoundly change how businesses operate in the future, our research indicates that key enterprise priorities at every step in that evolution will continue to be very much

Insufficient emphasis on operating models – on Intelligent Operations – likely holds back some of the evolutionary power of digital technologies, especially in companies where legacy systems and processes constrain the creation of new, compelling business models.

http://www.genpact.com/leandigital/


focused on today—e.g., managing risk, ensuring compliance, and optimizing cost structure—at the same time that enterprises prepare for future uncertainty by ensuring revenue growth, customer satisfaction, innovation, and agility.

The analysis provides insights into the functional areas best placed to address those priorities, and into the material impact of different operating models (radically improved use of technology, process re-design or advanced organizational structures like business process outsourcing and shared services) on those functional areas.

The research makes clear that the indiscriminate application of new technology is not the answer to most important enterprise challenges today. Rather, it is enterprises’ ability to reimagine how processes are run, at scale.

A holistic architecture that harnesses technology, process re-design, and advanced organizational structures, such as outsourcing and shared services and caters to process-specific differences, will ultimately determine whether or not new technology enables them to achieve strategic enterprise goals.

When the focus is today: Managing risk, ensuring compliance, and cutting costs

Globally, executives consider risk and compliance as a top enterprise challenge (see figure 1), but differences exist between industries. Executives in banking, insurance, and capital markets, for instance, consider risk and compliance as particularly critical, whereas their counterparts in consumer goods, high tech, and manufacturing seem less concerned.

*% of executives from the function that state that the functional area impacts the challenge

COMPLIANCERISK

FunctionsFinance

IMP

AC

T O

F F

UN

CT

ION

AL

AR

EA

ON

CO

MP

LIA

NC

E C

HA

LLE

NG

E

IMPACT OF FUNCTIONAL AREA ON RISK CHALLENGE

Procurement

Marketing

Operations

Risk and compliance impact index*

Radicallyimproved use of the technology

Business process re-engineering

Anti-moneylaundering

Riskmanagement

Know your customer (KYC)

Supplierrisk

Supplierrisk

ProcurementMDM

ProcurementMDM

MarketingMDM

Medical and regulatory affairs

42

51 46 34

45 41 38

72

72

82 40 33

Solving the risk and compliance challenge

S U R V E Y I N S I G H T S

by reimagining how companies' processes run at scale and cost effectively

Large % of respondents across functions state that the risk and compliance challenges are among the 'top 3' for their company

But impact on risk and compliance varies by functional area

Genpact (NYSE: G) stands for “generating business impact.” We design, transform, and run intelligent business operations including those that are complex and specific to a set of chosen industries. Founded as a division of GE, we serve hundreds of long-term clients including more than one-fourth of the Fortune Global 500 and employ over 70,000 employees in 25 countries, with key management and a corporate office in New York City.

For more information, visit http://www.genpact.com/home/about-us/research-institute/advanced-operating-models-studyFollow Genpact on Twitter, Facebook, LinkedIn and YouTube

0 10 20 30 40 50 60 70 80 90

FINANCE

PROCUREMENT

MARKETING

OPERATIONS

RISK

Critical for banking,insurance and capital markets

Compliance a key concern in life sciences and healthcare

Consumer goods, manufacturing and high tech less impacted

% of respondents stating the operating model initiative can have a material impact on the functional area

The solution lies in reimagining how functions are run, through a holistic architecture that harnesses technology, process re-design and advanced organizational structures1

* Risk and compliance impact index combining stated importance of risk and compliance challenges and stated ability of the functional area to address them

(1) Business process outsourcing, shared services or hybrid

Findings drawn from a survey of 912 executives, commissioned by Genpact with an independent research �rm

Top 3 functional areas by industry

Anti-money laundering (AML) and supplier risk management have the most impact across both challenges

15 30 45 60 75 90

Procurement MDM

Supplier risk and performance management

Medical andregulatory affairs

Risk management

Stress testingClinical development

Sourcing/category management

Retirement services

O2C

Auto �nance

Life insurance agency support

Life insurance customer service

P&C commercial underwriting

Actuarial andclaimsanalysis

90

75

60

45

30

15

0

AML

Dodd-Frankcompliance

Basel implementation

Procurement MDM

Loan underwriting and

originationMulti-channel customer management

Multi-channel customer engagement

Marketing automation and campaign management

P2P

KYC and AML

O2C Equipment �nance

P&C agency support P&C personal claims

Marketing analytics

Personal policy admin/underwriting

FP&A

Life insurance originations

Multi-channel marketing and customer engagement

GENERATING RISK AND COMPLIANCE IMPACT

Advanced organizational structures


87

82

69

28

28

57

46

40

43

48

46

75

60

54

28

57

45

46

40

41 60

60

48

46

Risk

Large % of respondents across functions state that the risk and compliance challenges are among the “top 3” for their company

Figure 1

http://www.genpact.com/resource.aspx?FileID=52







Identifying and focusing on functional areas that disproportionately impact these challenges can improve the odds of success in addressing these challenges. The research reveals that only a few functional areas—such as know-your-customer (KYC), anti-money laundering (AML), and risk management in financial services, and procurement MDM, supplier risk, and performance management in other industries—are considered suitable to address challenges related to compliance and risk.

Impact of operating model initiatives on functional areas considered most important for the risk and compliance challenges

Another research insight is caution about technology-centered excesses. Many respondents did not rate technology, but instead cited advanced organizational structures as the key material lever for improving critical functional areas, such as supplier risk management and life sciences’ medical and regulatory affairs—even though key financial services’ areas had wide technology applicability (see figure 2).


COMPLIANCERISK

FunctionsFinance

IMP

AC

T O

F F

UN

CT

ION

AL

AR

EA

ON

CO

MP

LIA

NC

E C

HA

LLE

NG

E

IMPACT OF FUNCTIONAL AREA ON RISK CHALLENGE

Procurement

Marketing

Operations

Risk and compliance impact index*



Anti-moneylaundering

Riskmanagement

Know your customer (KYC)

Supplierrisk

Supplierrisk

ProcurementMDM

ProcurementMDM

MarketingMDM


42

51 46 34

45 41 38

72

72

82 40 33

Solving the risk and compliance challenge

S U R V E Y I N S I G H T S

by reimagining how companies' processes run at scale and cost effectively

Large % of respondents across functions state that the risk and compliance challenges are among the 'top 3' for their company

But impact on risk and compliance varies by functional area



0 10 20 30 40 50 60 70 80 90

FINANCE

PROCUREMENT

MARKETING

OPERATIONS

RISK

Critical for banking,insurance and capital markets

Compliance a key concern in life sciences and healthcare

Consumer goods, manufacturing and high tech less impacted

% of respondents stating the operating model initiative can have a material impact on the functional area

The solution lies in reimagining how functions are run, through a holistic architecture that harnesses technology, process re-design and advanced organizational structures1





Anti-money laundering (AML) and supplier risk management have the most impact across both challenges

15 30 45 60 75 90

Procurement MDM


Medical andregulatory affairs

Risk management

Stress testingClinical development

Sourcing/category management

Retirement services

O2C

Auto �nance

Life insurance agency support

Life insurance customer service

P&C commercial underwriting

Actuarial andclaimsanalysis

90

75

60

45

30

15

0

AML

Dodd-Frankcompliance

Basel implementation

Procurement MDM

Loan underwriting and

originationMulti-channel customer management



P2P

KYC and AML

O2C Equipment �nance

P&C agency support P&C personal claims

Marketing analytics

Personal policy admin/underwriting

FP&A

Life insurance originations


GENERATING RISK AND COMPLIANCE IMPACT



87

82

69

28

28

57

46

40

43

48

46

75

60

54

28

57

45

46

40

41 60

60

48

46

Risk


Figure 2


Cost came up again and again as an important and immediate challenge for enterprises, according to executives across functions (see figure 3).

Procurement executives, notably, reported cost as a greater challenge than other functions.

Understandably, sourcing, manufacturing, and supply chain areas were regarded as having the greatest impact on cost, while insurance property and

30 40 50 60 70 80

FINANCE

PROCUREMENT

MARKETING

OPERATIONS

RISK

Procurement executives, in particular see cost as a key challenge for banking, insurance and capital markets

Cost reduction considered important in life sciences and healthcare across functions

Consumer goods, manufacturing and high tech also worried by the cost challenge

Large % of respondents from various functions state that the cost challenge is among the “top 3” for their company

Procurement executives, notably, reported cost as a greater challenge than other functions.

casualty (P&C) claims were deemed by a majority of financial services respondents to have the highest impact on cost.

Figure 3


Many respondents considered technology as a material lever to improving key functional areas—but advanced organizational structures have wider applicability in most cases (see figure 4).

Clearly, an effective solution lies in reimagining how functions are run using a holistic architecture that harnesses technology, process re-design, and advanced organizational structures, but caters to process-specific differences.

Impact of operating model initiatives on functional areas considered most important for cost challenge

Large % of respondents from various functions state that the cost challenge is among the 'top 3‘ for their company

But ability of functional areas to impact cost variesSourcing, manufacturing and supply chain, and P&C claims have the most impact

The solution lies in reimagining how functions are run, through a holistic architecture that harnesses technology, process re-design and advanced organizational structures1 but caters to process speci�c differences



% of respondents stating the initiative can have a material impact on the functional area



* Cost impact index combining stated importance of cost challenge and stated ability of the functional area to address them1 Business process outsourcing, shared services or hybrid


by reimagining how companies' processes run at scale



30 40 50 60 70 80

FINANCE

PROCUREMENT

MARKETING

OPERATIONS

RISK

Procurement executives, in particular see cost as a key challenge for banking, insurance and capital markets

Cost reduction considered important in life sciences and healthcare across functions

Consumer goods, manufacturing and high tech also worried by the cost challenge


IMPACT OF FUNCTIONAL AREA* ON COST CHALLENGE

S U R V E Y I N S I G H T S GENERATING COST REDUCTION IMPACT

Solving the cost challenge

40

35

33

49 49 39

41

44

39

46

51

39

60

56 54 69

58 54 50

43 34 38 53

31 57 40 46

26 41 47 69

32

30

32 48 46P&C personal claims

Manufacturing and supply chain

Sourcing management

Procurement MDM

Transactional procurement

Business intelligence and analytics

Claims processing and adjudication

P&C commercial claims

Personal underwriting

Cost ImpactIndex*

Functions Finance ProcurementMarketing Operations Risk

0 10 20 30 5040 60 70 9080

Actu

aria

l and

cla

ims

anal

ysis

Acco

unt s

et-u

p an

d se

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P&C

pers

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A

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insu

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atio

ns

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insu

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sup

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AML

Reta

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age

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MDM

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* Cost impact index combining stated importance of cost challenge and stated ability of the functional area to address them

Preparing for tomorrow: Customer satisfaction, growth, agility, and innovation

Driving innovation and customer centricity while managing an uncertain environment with agility are top of the mind for CEOs. However, the leaders who actually manage day-to-day functions of enterprises revealed in their responses that they do not necessarily share the same view or agenda as the CEO.

Figure 4


While a large percentage of respondents considered growth and customer satisfaction as top enterprise challenges, industry-by-industry analysis and comparison reveals some interesting insights (see figure 5).

Significant differences between executives’ ratings of growth compared with customer satisfaction indicate that many executives in charge of day-to-day operations either do not see the interrelation between these two variables or do not have reliable measures of customer satisfaction. Most banking, capital markets, and insurance executives ranked customer

satisfaction as a top enterprise challenge, but not growth. On the other end, growth was considered a critical challenge by life sciences and healthcare executives; customer satisfaction, not so much. This likely reflects the limited evolution of patient centricity within these organizations. Consumer goods, high tech, and manufacturing, on the other hand, acknowledge the salience of both customer satisfaction and growth uniformly across functions, possibly due to their head start in adopting robust analytical processes that leverage customer insights to fuel growth.

GROWTHCUSTOMER SATISFACTION

FINANCE

PROCUREMENT

MARKETING

OPERATIONS

RISK

Customer satisfaction (though not growth) a key concern for banking, insurance and capital markets

Growth a critical challenge in life sciences and healthcare for finance and operations executives

Consumer goods, manufacturing and high tech most impacted

10 20 30 40 50 60 70

Sizeable % of respondents from most functions state that the challenges are among the “top 3” for their company

Figure 5



Only a few functions were cited as capable of addressing both growth and customer satisfaction challenges (see figure 6).

Commercial strategy in life sciences; multi-channel marketing and customer engagement in consumer goods, high tech, and manufacturing; and P&C agency support in banking, insurance and capital markets were cited as impactful for both growth and customer satisfaction, and are therefore strong candidates for initiatives addressing these challenges. Interestingly, data-rich compliance and record to report functions weren’t widely considered useful for driving growth and customer satisfaction, indicating that most

organizations are not fully leveraging investments in these areas, possibly due to an inability to convert data to insight at scale.

Interestingly, data rich compliance and record to report functions aren’t considered useful for driving growth and customer satisfaction.

Commercial strategy, multi-channel marketing and customer engagement, and property and casualty (P&C) agency support have the most impact

Figure 6


Advanced organizational structures were also viewed as materially impacting data-rich marketing areas—even more so than technology—indicating the limitations of technology alone to perform Data-to-Insight-to-Action processes at scale.

While the applicability of advanced organizational structures was widely acknowledged, there were significant differences in the perceived ability of technology and process redesign to materially impact functional areas that address both these challenges (see figure 7).

Growth and customer satisfaction impact index*






P&C agencysupport

P&C commercialclaims

P&C commercialunderwritting

Commercialstrategy

CRM andsales support

Marketinganalytics

Marketingautomation

Multi-channelmarketing

Multi-channelmarketing

65

63

61

25 26 45

57

58

32

23

49

48

50

56 54 69

63 58 46

65 34 45 58

56 56 27 60

52 47 45 56

57

56

64 60 58

* Growth and customer satisfaction impact index combining stated importance of growth and customer satisfaction challenges and stated ability of the functional area to address them

Impact of operating model initiatives on functional areas considered most important for the growth and customer satisfaction challenges

Figure 7


Many executives in charge of daily running of enterprises, it seems, don’t emphasize agility and innovation as pressing enterprise challenges, albeit with some industry variation—executives from consumer goods, high tech, and manufacturing, for instance, consider innovation important; on the other hand, many executives in the financial sector

AGILITYINNOVATION

0 10 20 30 40 50 60

FINANCE

PROCUREMENT

MARKETING

OPERATIONS

RISK

Surprisingly small % of respondents in financial services state thatthe challenges are among the 'top 3'

Innovation slightly more important for life sciences and healthcare

Consumer goods, manufacturing and high tech impacted more

Executives from consumer goods, high tech, and manufacturing, consider innovation important.

apparently consider neither innovation nor agility to be important enterprise challenges (see figure 8).

Many executives in charge of daily running of the company don’t emphasize agility and innovation as pressing enterprise challenges, with some industry variation

Figure 8




As a result, only a handful of functional areas—largely from life sciences’ R&D function—are cited by executives as having material impact on both innovation and agility challenges (see figure 9).

Conclusion: Towards a digital future powered by advanced operating models

In our experience, reimagining enterprise processes and harnessing new advanced technologies and analytics with appropriate organizational structures can effectively operationalize a CEO’s agenda. However, it is imperative that, in the euphoria of digital momentum, enterprise don’t digitize the wrong processes, shape their processes into a recursive action-data-insight-action arc, and build-to-adapt

without constraining themselves unduly—and therefore waste billions of dollars of investment and opportunity cost. Executed well, digital transformation bring to life Intelligent OperationsSM that sense, act, and learn from their actions to deliver enterprise-wide impact. A practical implementation approach should consider agile technologies like Systems of EngagementTM, which extend legacy systems of record, along with process-aware data management and analytics applications, and productively harness these through advanced organizational structures.

By using these practices enterprises can generate material impact with the latest technology faster, while avoiding the mistakes of previous IT waves. Digital architecture such as this results in a more rapidly attainable, yet scalable and cost-effective, business platform, built to adapt.

Many executives in charge of daily running of the company don't emphasize agility and innovation as pressing enterprise challenges, with some industry variation

Only few functions seem to impact both innovation and agility challengesLife sciences research, pre-clinical and clinical development have the most impact, possibly neglecting other promising areas

Wherever executives recognize the importance of agility and innovation, they indicate that both technology and advanced organizational structures1 can have material impact

Based on our experience, reimagining enterprise processes can elevate operations and enable them to impact CEO’s agenda

Agility and innovation impact index*






Pre-clinicaldevelopment

Clinicaldevelopment

MarketingMDM

Marketingautomation

Commercialstrategy

Marketinganalytics

* Agility and innovation impact index combining stated importance of agility and innovation challenges and stated ability of the functional area to address them



Solving the innovationand agility challengeby reimagining how companies run at scale and cost effectively



AGILITYINNOVATION

0 10 20 30 40 50 60

FINANCE

PROCUREMENT

MARKETING

OPERATIONS

RISK

Surprisingly small % of respondents in financial services state thatthe challenges are among the 'top 3'

Innovation slightly more important for life sciences and healthcare

Consumer goods, manufacturing and high tech impacted more


IMP

AC

T O

F F

UN

CT

ION

AL

AR

EA

* ON

INN

OV

AT

ION

CH

ALL

EN

GE

IMPACT OF FUNCTIONAL AREA* ON AGILITY CHALLENGE

25

100

90

70

50

40

10

20

30

60

80

30 35 40 5045 55 60 7065

Marketing MDM



Marketing analytics

Access and reimbursements

Multi-channel marketing

Contract management

Advertising and promotions management

Compliance

CRM and sales support

Commercial strategy

Manufacturing and supply chain


Clinical development

Research and pre-clinical development


Contract management

S U R V E Y I N S I G H T S GENERATING INNOVATION AND AGILITY IMPACT

FunctionsMarketing

Operations

43

43

37

48 45 63

75

45

47

26

43

25

37 56 27 60

34 57 40 46

29 45 41 60

Data not reported due to small number of responses related to innovation and agility compromising representativeness of the results

Life sciences research, pre-clinical and clinical development have the most impact, possibly neglecting other promising areas

Figure 9


Methodology

Genpact commissioned a research project conducted by an independent research firm. The goal was to assess the potential to address strategic enterprise challenges through advanced operating models across a defined spectrum of industry sectors (banking and financial services, manufacturing, high tech, healthcare, life sciences and consumer goods).

The findings presented are based on the response of executives selected, based on their ability to materially influence functional decisions, of which over 150 were from finance, about 130 from marketing, about 120 from procurement, about 140 from risk and over 350 from operations. Respondents were asked if operating model initiatives such as radically improved use of technology can materially impact an enterprise function.

We analyzed the data to identify patterns of applicability of operating model initiatives on key enterprise processes across industries. To do so, we

first determined which enterprise challenges were most pressing for the surveyed organizations, by industry and business functions.

We then analyzed which enterprise processes and functional areas helped the most in addressing those challenges.

An impact index for a selected set of challenges was computed for each functional area by taking into account the functional area’s ability to address those challenges as well as the importance of those challenges for the enterprise.

For the most impactful functional areas of operations, respondents rated the ability of operating model initiatives, such as radically improved use of technology, process re-design, and advanced organizational structures, such as business process outsourcing and shared services, to materially impact them.

About GenpactGenpact (NYSE: G) stands for “generating business impact.” We architect the Lean DigitalSM enterprise through a unique approach based on our patented Smart Enterprise Processes (SEPSM) framework that reimagines our clients’ middle and back offices to generate growth, cost efficiency, and business agility. Our hundreds of long-term clients include more than one-fourth of the Fortune Global 500. We have grown to over 70,000 people in 25 countries, with key management and a corporate office in New York City. We believe we are able to generate impact quickly and power Intelligent OperationsSM for our clients because of our business domain expertise and experience running complex operations, driving our unbiased focus on what works and making technology-enabled transformation sustainable. Behind our passion for technology, process, and operational excellence is the heritage of a former General Electric division that has served GE businesses since 1998.

For additional information, contact, [email protected] and visit, www.genpact.com/leandigital

Follow Genpact on Twitter, Facebook, LinkedIn, and YouTube.

© 2016 Copyright Genpact. All Rights Reserved.

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GENERATING DIGITAL IMPACT Digital business models need ...€¦ · Behind the biggest success...

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