Time to reimagine operationsPwC’s 2015 Global Operations Survey: Australian insights

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Time to reimagine operations

It’s an exciting time for operations leaders, who can influence a company’s destiny like never before. But Australia’s COOs are lagging behind their international peers when it comes to imagining the role of operations in driving growth and with disruption and competition at every turn, time is not on their side.

More than anything else, Australia’s COOs need to better align operations with business strategy and the needs of the customer, and drive innovation to truly fulfil their organisation’s potential.

globally expect to be disrupted by competition

58%

globally say cross-collaboration has greatest potential to impact strategy

61%

1,262senior operations executivessurveyed across 19 countries

2015 Global Operations Survey: Australian Insights

2015 Global Operations Survey: Australian Insights 3

The core themes of our 2015 Global Operations Survey are echoed amongst Australian operations leaders. However, there are some important – and concerning – differences:

• Our operations leaders expect less disruption and less competition compared to those in the rest of the world.

• Only half of Australian respondents are confident that their company’s operations can provide value for customers, the lowest result among operations leaders globally.

• We are among the least likely to reward collaboration or support the idea that cross-functional collaboration is a key enabler of strategy.

Australia’s operations leaders do not appear to be as concerned about the impact of disruption or competition as their global peers. Of the top two most likely disruptive trends over the next five years, Australian COOs rank changes in industry regulation as the most disruptive, followed by changes in demand patterns, volatility and demographics. But only half expect disruption from increasing competition, compared to almost two-thirds in the US.

And only 52% of Australia’s COOs expect disruption from changes in core technologies of production or service provision, compared to 60% globally and 71% in the US.

How disruptive will the following be for your industry over the next 5 years?

Australia UK US Global

“Somewhat or very disruptive”

Changes in core technologies

60%

71%

57%

52%

Changes in demand patterns

69%

68%

75%

64%

Changes in customer behaviour

61%

62%

59%

56%

Increase in the number of significant competitors

58%

63%

60%

50% In a world of accelerating competition and disruption, this is a worrying finding for Australian businesses and operations leaders.

Andrew FriarsConsulting Operations Lead Partner, PwC Australia

A call to action for Australian operations leaders

2015 Global Operations Survey: Australian Insights 4

In order to meet these challenges and take advantage of the opportunities in front of them, Australian companies need to reimagine the role of operations in driving company performance.

The good news is that many of the elements required for an effective response are anticipated by Australian operations leaders:

When we look at companies that are most strategic,* we see that there are a few things that set them far apart from their peers. First, they’re far more likely than everyone else to focus on building a few differentiating capabilities to drive a competitive advantage (51% vs 29%). They’re also more confident they’ll succeed on every scorecard measure: revenue and cost targets, driving strategy, providing a distinctive customer experience and adapting to change.

Over the next three years, operations participation in strategic decisions is expected to jump from

* The signs we looked for were high rates in the following: involving operations leaders in strategic product and service decisions, funding operations improvement projects based on strategic goals for the company, and measuring and rewarding operations executives on strategic goals for the company.

49%

70%Develop a strategy that worksWhat is the right way to build a winning company? Based on new research from PwC’s Strategy&, the book Strategy That Works reveals five practices for closing the strategy-to-execution gap used by today’s winning companies.1. Commit to an identity: differentiate and grow by being clear-minded

about what you can do best.2. Translate the strategic into the everyday: build and connect the

cross-functional capabilities that deliver your strategic intent.3. Put your culture to work: celebrate and leverage your

cultural strengths.4. Cut costs to grow stronger: prune what doesn’t matter to invest more

in what does.5. Shape your future: reimagine your capabilities, create demand and

realign your industry on your own terms.

Reimagine operations to drive performance

Clearly define priority capabilitiesBe clear about what your organisation’s distinctive capabilities are and focus precious investment in these areas

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Taking a strategic seat at the table

2015 Global Operations Survey: Australian Insights 5

** You can get a step-by-step guide on how to design a capabilities-driven strategy here: Leinwand, Paul, and Cesare R. Mainardi. The Essential Advantage: How to Win with a Capabilities-Driven Strategy. Boston: Harvard Business Review Press, 2010.

Start by considering these questions:

1. What makes your company different? Which capabilities will define your company in the eyes of your customers?

3. Are you doing the right things? And sometimes hardest of all: what will you stop doing to support investment in what really matters?

2. Are you offering the right things?Are your existing products and services coherent with your strategic plan?Are you getting distracted by legacy offerings that no longer fit?

Given that every company’s combination of capabilities is unique, how do you know which ones matter most for you?

When creating your own company profile, you need to start with a clear-eyed assessment of the business opportunities, starting from the customer and working backward. And you’ll need the same review of your true operational strengths.** It all leads to one question: how do we intend to play and win in our chosen market(s)? Then, it’s time to think about choices that will define how your company operates.

Assessing the right business opportunities

2015 Global Operations Survey: Australian Insights 6

Is this part of operations?

66%

68%

80%

58%

Consumer or customer insights

68%

66%

66%

80%

Procurement/sourcing

“Yes”

Product or service design/development

68%

66%

65%

58%

Reimagine operations to drive performance

Orient towards customer valueArticulate how operations delivers customer value and reinforce this through to the front line

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There’s a disconnect between operations and the customer

Australia

UK

US

Global

Understanding what customers want is a top challenge for all business executives. In fact, 9 out of 10 of Australia’s CEOs say the impact of changing customer behaviour, brought about by digital innovation, will be the top disruptive threat for their industry over the next five years.

And only half of the Australian leaders we spoke to are confident that their company can provide a distinctive experience and value for customers, compared to close to two-thirds in the US.

58% of Australia’s operations leaders consider consumer or customer insights to be part of operations.

This was lower than the global average of

66%

and much lower than the UK at

80%

2015 Global Operations Survey: Australian Insights 7

Case study

Operations knowledge key to improving customer experience

Everyone in the financial services sector today knows that winning market share means delivering a better customer experience. And while companies commonly develop customer strategies, they often fail to execute them well.

One of the main causes is a lack of understanding about how to translate these strategies into meaningful actions across the organisation. This is because most businesses are large and complex and operate in silos, which makes it difficult to provide a consistent, end-to-end customer experience.

A major Australian financial services organisation recognised the importance of aligning operations with customer service by appointing a Chief Customer Officer with an operations, as opposed to marketing, background. With a deep understanding about how organisations actually work, the CCO is ideally placed to break down barriers and encourage genuine collaboration.

It’s something we’re seeing a lot of in the US. Scott Tanguay, Global Head of Consumer Banking Operations for Citigroup, for example, has a strong focus on designing operations from the customer in.

“Citi touches clients about ten billion times a year. And if we’re going to acquire new clients, those clients will be acquired through our operational team. My instinct is that there’s going to be a big pivot where we’re operationally thinking about running our business more by client journey.

“You can imagine that we may even align technology that way. So instead of having a technology infrastructure lined up against cards or the retail bank or against the operational teams, we could have a business organisation that’s aligned by how clients see the world.”

My instinct is that there’s going to be a big pivot where operationally, we think about running our business by client journey and begin to organise ourselves against them.

Scott TanguayHead of Operations for the Global Consumer Bank at Citi

Leading companies around the world are showing that it’s easier when you design operations around your customers. That way your operations teams can make appropriate trade-offs and more timely decisions when inevitable changes come. You end up creating an environment where keeping up with the customer doesn’t become an overwhelming challenge.

Without this type of leadership, we often see operations stretched too thin. When one team tries to innovate, they come in direct conflict with an operational assignment to cut costs – or they create some new complexity that’s harder to manage.

The disconnect between operations and the customer

2015 Global Operations Survey: Australian Insights 8

The perennial focus on functional excellence for operations is shifting. Increasingly, operations leaders say that cross-functional collaboration has the greatest potential for helping the company reach its strategic goal.

But when it comes to key aspects of collaboration, Australia’s operations chiefs are falling behind their global counterparts.

Only 42% say they reward collaboration, compared with

63% in the UK

Australians are also the least likely to say that either cross-functional collaboration or increased collaboration with third parties has the potential to support the company’s strategy.

What has the greatest potential to support the company’s strategy?

Australia UK US Global

61%

73%

58%

54%

Increase cross-functionalcollaboration

47%

51%

45%

40%

Increase collaborationwith third parties

45%

44%

51%

48%

Improve functionalexcellence including the

use of technology

More and more we’re not thinking about our organisation in discrete independent functional silos, but as a very, very connected ecosystem that... pieces together information in ways that are more powerful for our customers and our employees.

William D. Muir JrChief Operating Officer, Jabil Circuit Inc

Reimagine operations to drive performance

Drive innovation through cross-functional collaboration and technology adoptionAccelerate operations innovation through technology development and adoption, and cross-functional collaboration

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We’re not prioritising cross-functional collaboration

2015 Global Operations Survey: Australian Insights 9

Operations in focus

Innovating well: Technology adoption and walking the collaboration walk

As well as the immediate and sizable cost reduction, the automated nature of the processing ensures a high level of compliance. RPA has the potential to dramatically improve the customer experience by, among other things, reducing errors (and therefore complaints), extending service hours, speeding up processing, and freeing up staff to focus on customers with trickier issues that genuinely require human intervention.

Perhaps now is the time for our COOs to take the lead in Australia’s productivity revolution.

Organisations today are looking for ways to radically overhaul their business processes to meet high customer expectations while lowering costs and risks. In the US, organisations are turning to Robotic Process Automation (RPA) to achieve this. Could Australia be an early adopter, and a global leader?

As companies seek to digitise their operations, mature business processes and meet changing metrics, RPA is gaining interest globally as a preferred operations model over traditional avenues, such as business process remodelling and offshore/onshore manual processing, due to the relatively low cost and ease of implementation.

RPA involves the use of software ‘robots’ that are easy to configure, require little IT expertise and can be quickly ‘trained’ and deployed to automate manual tasks. They differ from traditional software by working at the user interface level, replicating the exact actions a human user would take and creating, in effect, a virtual business process outsource.

While a number of solution options exist, RPA offers a superior customer experience and dramatic error reduction, providing significant cost and efficiency benefits in short timeframes.

Being relatively simple to implement, RPA can deliver benefits quickly and

1 PwC Experience & ROI Case Study – Cerner, Automation Anywhere (>600% ROI)

300–800%[1]

are common.

ROIs of between

2015 Global Operations Survey: Australian Insights

In this rapidly changing world, it is those companies that can respond to disruption, become more customer-centric and look beyond traditional productivity levers that will have the strongest capacity for growth. And it is the companies that adopt an integrated way of embedding these functions into their operations that will truly unlock their potential and become the market leaders.

Today, a majority of operations executives are focused on transformative change and new ways of creating value. It’s an exciting time to be in operations. But to truly succeed, companies need a proper framework for setting operational priorities that align with the corporate strategy and encourage collaboration across the company to work towards the company’s core purpose.

So whether you’re a CEO or the operational executive in charge of a geographic P&L, you need your teams to focus on what matters most. This means framing your operational choices to continually strengthen and reinforce what makes your company unique. When you do this, it will be hard for anyone else to copy your customers’ experience. This is hard work: it requires real honesty about strengths and a willingness to come together, even if this means doing very different things, and doing them very differently.

The good news? More companies are gaining experience with a capabilities-driven strategy, and it’s possible to fast-track your operational decisions. For operations leaders, it’s a chance to drive their companies’ destiny like never before. And for companies, it’s the path to sustainable growth, especially in the face of change.

Take operations to the next level

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2015 Global Operations Survey: Australian Insights 11

Fit for GrowthIn an uneven business climate, companies need to transform how they operate, while creating the capacity to invest in growth. Our Fit for Growth methodology for strategic cost management starts by articulating a clear and compelling cost agenda from the front line to the back office, continues with the building of lean and resilient processes, systems, operations and organisation structures, and culminates in the institutionalisation of capabilities that keep resources flowing to “good” costs and away from “bad”. The outcome is an adaptable, high-performance culture positioned on an accelerated path to sustained growth.

For more information, visit: www.strategyand.pwc.com/fitforgrowth

PerformHow do you get more out of your people, get them more engaged and improve performance, in a way which will deliver sustainable long term benefits?Perform is our operational excellence approach that uses intensive coaching to strengthen capability, optimise what staff do and how they do it, and sustain and improve performance over time.

For more information, visit: www.strategyand.pwc.com/fitforgrowth

Further informationReimagining operations: PwC’s 2015 Global Operations Survey

• The journey begins with a clear understanding of your “way to play” and the capabilities critical to winning.

• Next, a comprehensive breakdown of how your structure should align against differentiating capabilities is developed.

• A top to bottom set of improvement levers are then evaluated to unlock sustained performance.

• Relevant quantitative and qualitative benchmarking is used to identify targets for improvement.

• Lessons learned from world class companies highlight the potential for improvement from an “outside-in” view.

• Finally, long-term success is engineered with a strong governance infrastructure to ensure that benefits “stick”.

• The result is a roadmap of growth, cost and capability improvements that enable superior performance.

While there is no one-size-fits-all solution, we have identified some important principles that leading companies use to align operations with strategy to win in their chosen markets:

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Andrew Friars Partner andrew.friars@pwc.com |

Ben GilbertsonPartner ben.gilbertson@strategyand.au.pwc.com |

Shane O’SullivanDirector shane.osullivan@pwc.com |