Accenture - Driving High Performance: The Emergence of Integrated Business Services to Deliver Enterprise Value Research Report - July 2013

Driving High Performance: The Emergence of Integrated Business Services to Deliver Enterprise Value

Research Report


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Ever since Accenture first began to design and implement shared services more than 20 years ago, our aim has been to illuminate the latest trends for our clients. In our research report Trends in Shared Services: Unlocking the Full Potential1 we found that pioneering shared services organizations were pushing past the boundaries of traditional shared services models.

Today, we see these evolving organizations, which we call “integrated business services” or “IBS” organizations, moving beyond the back-office, function-based service provision of earlier generations. IBS delivers higher-value services on an enterprise-wide basis in a consistent, high-quality and cost competitive manner, leveraging both captive and outsourced solutions. IBS organizations are becoming strategic partners to the enterprise by supplying services that can help to solve end-to-end business problems and deliver increased enterprise value. IBS is revolutionizing how companies organize not only their administrative and support functions, but also more of their middle- and front-office activities—becoming closer to the customer, the product or service, and the business operations.

IBS leverages and expands on the traditional shared services foundation of solid service management and keen focus on process and organizational standardization. The operational decisions made by the IBS organization are no longer focused solely

on cost management but are now balanced with the responsibility—shared jointly with the business—for achieving business goals. So although cost reduction will almost always be an expected part of the business case for any type of shared services model, the incremental value from IBS will be measured based on its involvement in achieving strategic business objectives—for example, helping the business enter and exit new markets quickly, expediting mergers and acquisitions, or providing a buffer against business volatility.

Through our regular interactions with our clients, we determined that there are a number of key evolutionary components that are not only critical in laying the initial foundation of the IBS organization, but also in setting the trajectory for the journey ahead. Our research confirmed our beliefs.

Leading organizations are redefining their service models and modifying their governance bodies to better align to the overall business strategy. They are implementing new and innovative services, in particular analytics services, to drive business performance. They are evolving the role of the IBS lead to manage the broader strategic needs of the expansive IBS organization. Above all, the model is seen as an enabler of enterprise business goals as it partners with corporate, business units, and regional entities to craft long-term plans and create a strategy to bring them to fruition.

It is important to note that most of the organizations that we interviewed are on a multiyear journey. Few considered themselves as having “arrived.” Interestingly, many were overly critical of themselves, sometimes losing sight of the great strides they have made as they grapple with the challenges along the way.

In the sections that follow, we more closely examine four key evolutionary components and explain the impact on the business through the eyes of the leaders we interviewed.

1 http://www.accenture.com/us-en/Pages/insight-trends-shared-services-unlocking-full-potential.aspx

Research methodology

Because IBS is a relatively nascent concept, we focused our research approach on approximately two dozen shared services organizations that we identified as being well down the road to IBS. We refer to both these organizations and the heads of these organizations as “leaders” throughout this document. We interviewed the respondents to gain first-hand insight into how their organizations are moving toward IBS. In addition, we asked the respondents to complete a self-assessment survey based on Accenture’s defining characteristics of the IBS model, indicating where they feel they are today and where they envision their organizations in the future.




Four key evolutionary components to lay the foundation and set the trajectory of the IBS organization:

1. Redefine the business services model to better align with the changing business environment

2. Innovate and expand scope of services to partner with the enterprise to achieve business outcomes

3. Deliver insights and take actions based on the power of data and analytics

4. Identify the right lead for the evolving organization



For some IBS organizations, this simply means evaluating their location strategy and determining the proper mix of local, regional and global support. For others, it means evaluating and understanding middle- and front-office activities, such as sales or logistics, bringing an end-to-end focus that minimizes handoffs and lessens cycle time. In all cases, the ability to flex the model to meet the changing needs of the business is critical.

For example, one company has taken a novel approach to balancing its need for standardization with the need for respon-siveness. They changed the ownership and execution of activities associated with the process of shipping materials via freight rail to the business services organization for greater upstream controls and compli-ance to the standard process. At the same time, the decision was made to co-locate the business services resources responsible for the execution of these activities with the business to ensure a rapid response for such an integral process that is subject to interruption from weather, mechanical failure and other factors. This approach resulted in greater safety, sustainability, and reliability of the service.

The goal in moving towards IBS (as expressed by 80 percent of the respondents in our survey) is that the greater integration and ownership that IBS provides will ultimately reduce local service variations, complexity and costs overall. For example, as one global beverages company seeks to expand the scope of services provided, it also faces an ongoing challenge of balancing its desire for global process standardization with its ability to provide the proper geographic support. The leader of this organization explained, “We have a very locally driven business and people can be emotional and think it is a big risk to deliver locally-relevant services from outside the region.” The organization needed to be very strategic in deciding what services to move from local business units to the IBS organization and when to move the services to ensure that they could deliver the intended value while still meeting the expectations of the business units.

Redefine the business services model to better align with the changing business environment

A volatile global economy, complex world financial markets, changing political regimes, increasing regulations, emergence of new technologies, pressure to deliver more innovative products and services – all of these factors and more are driving companies today to want more control and better integration across their business. As a result, the leaders we interviewed—those that are on the journey to IBS—have begun to recognize the value of tailoring their business services model to more closely align with the businesses they serve. Their decision-making has become less about cost management and is more focused on the need to design a service model that recognizes, accommodates, and makes the most of corporate and geographic culture, industry nuance, market forces and more.


Integrated business services in action

Our interviewees were excited to discuss the innovative services they were offering that enabled the enterprise to be much more agile in its operations. One hot topic was mergers, acquisitions and divestitures.

“We have driven value for many years through mergers, acquisitions or divestitures, and we can rapidly execute because of the capability that we now have within Business Services,” said one leader from a technology company. “For example, in 2010 it was decided that the company was going to divest one of its business units. What we sold was not only the business, but also a service to the business: to help set-up that business in record time and make it operational. Our Business Services organization provided all of the support services

for that divested business, so the buyer could focus on getting the core business ready to serve their markets and customers. Moreover, we now have the divested company as a customer, to whom we sell business services.”

Another research participant from a biopharmaceuticals company echoed the value the IBS model can bring to mergers and acquisitions: “How we do acquisitions and how we integrate that company into our business—we make far fewer mistakes and realize the return on investment more quickly if we are more integrated and methodical in our approach. IBS delivers that.”





Innovate and expand scope of services to partner with the enterprise to achieve business outcomes

Our research helped show that the inclusion of innovative services that integrate the back-, middle- and front-office activities is critical to defining the trajectory for the future IBS organization. Almost 90 percent of those surveyed see the potential value in offering these types of services and have already made the decision to expand their scope far beyond what is being offered in their existing service organizations. Middle- and front-office activities that were previously “off-limits” for fear of business risk or disruption are now contenders for movement to IBS. One leader in the biopharmaceuticals industry explained, “The front end is where there is more variability, but we see an opportunity there to integrate more with the back end. We need to develop strong end-to-end processes and turn them into services. We need to make the end user experience matter, as that is how we will

“wow” the business units and earn their trust to provide more innovative services.” IBS organizations are also discovering that by owning more of the middle- and front-office activities across all business units, they can identify and provide new services never envisioned by the business units before, such as merger and acquisition integration services or predictive analytics.

As they identify and incubate new and innovative services, 55 percent of the respondents in our survey are also taking the opportunity to align their service management structure to optimize their ability to enable business goals for the enterprise. For some organizations, this was a decision from the start. “I believe 80 percent of all the infrastructure of any company can be done out of shared services,” explained one leader from a professional services company. Another leader from a global beverages company said, “We succeed as a company because we have clear targets and focused and fewer initiatives. There was the perception that sales, supply and finance were not spending enough time with customers, consumers and the production lines. Business services is all about how we can free up business unit resources to focus on the core business capabilities.”

For others, enabling the business goals for the enterprise was an unexpected evolution that they now recognize as a critical component of the business services model. As one interviewee from the freight and logistics industry stated, “Today, we all have a process called order to cash. For many companies, portions of that end-to-end process are performed by the individual functions. That’s how it was at our company too. We never considered the impact to the customer, either internal or external, when we handed it off between functions. Nor did we consider the multiple owners and timing of the hand-offs when we initially developed the service level agreements for this process. We soon discovered that the real disconnects happened because of the hand-offs. It was then and there that we made the decision to change our operating model to provide true services with a customer focus instead of being a process-driven shared services organization with a primary focus on cost reduction.”


Deliver insights and take actions based on the power of data and analytics

IBS organizations are in a very unique position when it comes to data. With the responsibility for end-to-end processes comes the realization that the IBS organization is sitting on top of a data gold mine. This gold mine can be harnessed to turn previously siloed functional information into aggregated data sets made up of proprietary and public data from a variety of sources. After applying statistical modeling and advanced analytical techniques, the data can be used to derive cross-functional, actionable insights that can help business units understand the full business landscape and be more confident and proactive in their decisions. Analytics can benefit IBS’ customers by providing, for example, analysis of a company’s customer base, data that directs how a company re-positions its products in the market,

ideas on how to drive more profitable sales or information to better manage its resources. In all of these cases, the IBS organization actually partners with the business to use data and analytics to make an impact on the product and the marketplace as well as on top line sales and bottom line savings.

Our interviewees were energized about the strategic possibilities that come from focusing on data and analytics. “We are finding that now that we are taking a global view of the business, the need for analytics increases significantly,” said one executive from a consumer goods company. Said another, “Analytics is the highest value service we have. By applying analytics to one of our primary regions, [the business] was able to recover close to $27 million—two-thirds realized and one-third avoided—in over-payments to suppliers. We [shared services] can now give insights that weren’t available before.” Yet another leader from a global beverages company described how rationalizing capital expenditures and improving cash flow management were CEO-level priorities after an acquisition.

The business services organization, which was sitting on top of all of the data components for working capital, was able to quickly put the pieces together and proactively provide the proper level of data and insight necessary to give investors confidence in the company’s plans for market growth and cost reduction.

Our interviewees who are currently pursuing analytics services cautioned that there is some preparation required to venture into this new service. As one executive from a beverages company said, “Today, nothing is in place to collect and scrub the data in the business units. Once the data is under one roof [as with IBS], we can be methodical in how we clean it up and we can keep it clean more efficiently.” Once the data is clean, the IBS organization can then focus on delivering analytics to generate incremental business value.


Using analytics to power and promote integrated business services

In addition to using analytics to bring overall business value, the IBS organization itself can benefit from looking at data with a more intense focus. Analytics is becoming an integral part of the journey toward IBS because of the role it can play in identifying—and then acting on—not only the cost savings, but also other strategic benefits that come from cross-functional insights. Analytics can be a key driver in the integration of functions and processes; it both identifies potential process refinements and provides the data to allow IBS leaders to actively market the value IBS is bringing to the enterprise.

In our research report Trends in Shared Services: Unlocking the Full Potential we introduced the concept of “value marketing,” that is, marketing the value the IBS organization brings to its key

stakeholders, as a foundation for establishing the trust that leads to new business opportunities for their organizations. Value marketing builds confidence and pushes the businesses to proactively turn to IBS for help rather than the IBS organization having to actively solicit additional work. When an IBS organization can easily and factually demonstrate the value it brings to the table, there is less resistance to expanding IBS’ scope and scale.

“Of course, we want to provide more information to the company. I get really excited when we talk about analytics and spending patterns—what we can tell them about our customers from the information we house in our organization,” said one leader from the freight and logistics industry.

Because analytics is a critical component to establishing a strong “value marketing” campaign, analytics should not be an afterthought or second phase but a key component of the IBS strategy to drive improved business outcomes. As one executive from a beverages company said, “Include analytics in the plan… or be caught unprepared.”



“When the business case is just cost (labor and scale) it is more difficult. When it helps to solve a business process issue, it is easier to sell.”





Identify the right lead for the evolving organization

Traditional models of shared services were often single-function in scope, limited in service locations and thrived under the leadership of an individual with deep functional expertise. But the next generation IBS organization is cross-functional with a dispersed and diversified workforce. Employees can be located locally, regionally or globally, and can have widely varied skill sets, from data entry clerks for transactional activities to professionals with Ph.D.s for predictive analytics.

In conjunction with the evolution of the IBS organization having the mandate to integrate and transform end-to-end services, the need for deep functional expertise in a lead has been replaced with the need for someone who can effectively operate a global business and deliver business outcomes. IBS requires a powerful lead with a strategic vision, as well as the determination, fortitude and skill to unite executives from across the business (who may have widely differing viewpoints and objectives) in order to win support for the IBS concept—which is essentially an enterprise-wide transformation.

Operationally, today’s IBS leads must not only excel in delivery, but they must also bring a level of authority and organizational respect to drive ongoing relationship management (collaborating with business unit peers to achieve business outcomes); talent management (recruiting the right resources and fostering an environment for that talent to succeed and advance); and contract management (getting the best service from third-party service providers at the best price). These leads must possess vision and a high level of cultural and emotional intelligence as they explore new services to offer and consider new frontiers that were previously out of reach for traditional shared services organizations.

Not surprisingly, our interviewees repeatedly described their IBS leadership as having more expertise in large-scale operational management than in specific business functions or processes. For example, one interviewee from a freight and logistics company explained, “In our organization, we decided to place general manager types in this position. They have the operations expertise necessary to collectively run the global business services sites.” Another interviewee from a professional services company commented that “[the role of the IBS lead] needs to be senior enough to be peers with other corporate functions.”

It is clear that the skillset and focus of the IBS lead must be much broader than that of shared services leads of the past. As the journey to IBS continues, the business unit executives must be able to trust that the IBS lead can effectively manage the IBS operation to deliver valuable, business-focused services.



Conclusion

All of our research participants were passionate about the emergence of IBS and we at Accenture feel confident that the concept of IBS is here to stay. Companies are embracing the value IBS brings beyond traditional cost management, by aligning more closely with the business to not only support, but in many cases, drive greater business value.

We recognize that getting there is not easy. It requires vision and resilience. It demands strong, cross-functional leadership. There is no “one size fits all” approach. Indeed, as the alignment with the business becomes stronger, IBS organizations will look even more diverse, while still leveraging the shared services foundation and backbone to ensure excellent service delivery. The decisions made will determine if, how and how far the IBS organization is positioned to enable business value. The guiding principle has to be, “What best enables our business strategy today and in the future?”

Having seen how rapidly IBS’ success builds upon itself, nearly all of those interviewed commented on the need to think big from the start and to have a bold, far-reaching vision. As one executive from a beverages company said, “Be proactive and ahead of the curve. Be clear on the burning platform and do it when you don’t need to do it. Make the hard decisions early to reap the benefits or you will spend additional time and money to retrofit the solution. You pay now or you pay a lot more later.” Setting the full vision and strategy early and then following the roadmap in the face of hurdles is critical to the success of the IBS organization, regardless of whether the destination is one, three or five years away.

We are excited to see what the future holds for the leaders we interviewed, and others who aspire to an IBS model. We know the spirit of innovation and continuous improvement abounds and will drive these organizations to new heights of high performance in an effort to deliver even more value to the business.







About the authors

Christian Campagna is managing director-Accenture Management Consulting. He brings more than 22 years of experience in leading large transformational programs that help clients develop leading edge solutions for the finance function as well as other general and administrative functions. This work includes analysis of opportunities to establish or improve efficiency and effectiveness, develop integrated business services visions and competitive strategies, and refine business models and processes.

Paul Jeruchimowitz is managing director-Accenture Management Consulting. He has more than 16 years of experience leading large-scale, global, integrated business services transformation programs and predecessor shared services models. He is a well-respected author and thought leader on integrated business services models, and serves as a regular presenter at the Accenture Global Shared Services Conference as well as other finance executive forums.

David Axson is managing director-Accenture Management Consulting, Finance & Enterprise Performance. He has more than 28 years of experience in finance, industry and entrepreneurial pursuits working with clients in more than 40 countries, and leads the thought leadership efforts for Finance & Enterprise Performance globally.

Elizabeth Rosa is principal-Accenture Management Consulting. She has 20 years of experience in assessing, designing and implementing both traditional shared services and integrated business services models for clients in multiple industries, with a particular focus on organization design and change management.

Kristin McMinn is senior manager-Accenture Management Consulting. She has over 15 years of experience in helping clients improve their processes as well as design and implement shared services solutions, and currently leads the development of offerings related to this area. She is a key contributor to the integrated business services research and thought leadership program.

The authors wish to extend their thanks to Gary Duncan, Haralds Robeznieks and Lynn LaFiandra for their considerable help and support on this paper.

About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with approximately 259,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

About Accenture Management ConsultingAccenture is a leading provider of management consulting services worldwide. Drawing on the extensive experience of its 17,000 management consultants globally, Accenture Management Consulting works with companies and governments to identify and deliver value by combining broad and deep industry knowledge with functional capabilities to provide services in Strategy, Analytics, Finance & Enterprise Performance, Marketing, Operations, Risk Management, Sales & Customer Services, Sustainability, and Talent & Organization.

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