It's human nature to believe that what has worked well in the past will work well in the future. That's a problem 1. It's often why companies make irrational, short-term decisions. It's also why some struggling organizations cut costs without improving quality. It's why many businesses ultimately fail.
Banks, insurers, and healthcare companies are no exception. In fact, these industries require special consideration, given recent regulatory changes and ongoing performance challenges.
In this context, we recently studied 250 North American and European firms in those sectors. What we found is that managers have serious concerns about the health of their businesses, and how relevant their processes will be over the next 24 to 36 months.
In fact, the majority of those surveyed expect an average decline of 7% over the next two years if they do nothing. And most expect more than 70% of their core processes will need to be modernized to meet cost, agility, and new market pressures.
More specifically, financial firms anticipate big lags in front-office functions, new product development and accounting. Healthcare companies predict large shortcomings in claims processing, client sales, medical management and accounting. And property, casualty, and life insurers say accounting, new business and underwriting, client management and sales processes will be most susceptible to performance declines.
To overcome those impending gaps, executives expressed a need for two things: Better tools and a new ways to reimage work. "The demand for new products has increased greatly," admitted one senior executive of a $14 billion U.S. bank. "We need to get those products shipped faster and serviced better. We can only do that if we improve our processes."
Efficiency vs. Efficacy: Improved Quality Is Key
When the going gets tough, many companies focus on cost-cutting processes only in an effort to survive. This is an effective strategy—if the goal is to delay eventual insolvency. For those interested in thriving, however, achieving cost efficiencies goes hand-in-hand with process efficacy, improvement and innovation.
To do that, more than two thirds (68%) of the companies we studied conducted business with external (or shared) service partners. They do this not only for the cost advantages of third-party vendors, but to also enhance innovation. They externalize service for technology savings and quality.
Case in point: Deep skills in SMAC technologies (social, mobile, analytics, and cloud) are in short supply. As such, many big companies do not possess the skills to monitor social media discussions or analyze huge volumes of data from mobile phones, point-of-sale devices, and other data to target consumers. But they can quickly acquire the capability and often reduce cost by using skilled third-party providers.
The shift to external or shared work is particularly intense in Europe. We found that European companies conduct 74% of their processes in shared services centers, which is 10% higher than in North America.
Whatever the mix of internal and external work, balance is key. Since the 2008 recession, many companies have achieved substantial savings and elevated operational quality by using a combination (or hybrid model) of external services and third-party provided technology.
Eight Ways to Rework Quality and Savings
By now you hopefully realize the importance of modernized processes to the survival of your bank, underwriting, or healthcare—not just for cost savings, but innovative quality gains as well. What's more, you understand why the majority of companies leverage third-party talent to achieve hybrid quality.
That said, here's how banks, insurers, and healthcare can jump start the modernization process:
Focus on the entire "building."
Moving a stapler closer to your desk is one thing. But if you want to improve overall quality, you'll need to broaden your view and consider an entire functional process before effectively improving it.
Consider shared services.
The key question for many enterprises today is not whether they can invent ideas to optimize marketing, sales and service. It's whether the management orthodoxy of centralization will permit them to do so. In short, executive buy-in to the advantages of shared and external services will be crucial.
Don't deploy technology; supply it as demanded.
Technology is no longer being driven by IT departments and absorbed by everyone else in the organization. More and more decisions on how and where to deploy IT across the organization are being made by marketing, finance and human resources. That's a good thing that results in better uses of technology. Follow suit.
Avoid using stand-alone tools.
In other words, never view a technological tool—say a CRM or social platform—as the end. Unless those tools are integrated with other processes to share information, insights, and ultimately inform decisions, you're wasting your time and money, and living under a false sense of security.
Become a "Meaning Maker" of analytics.
"Let's do analytics," sounds good, but crunching numbers won't add value unless it connects data with work decisions. Making meaning out of process data and becoming a "learning organization" (i.e., Amazon recommendations) will be one of the key differentiators over the next generation.2 (See also: Separating Signal from Noise: How Meaning Makers Conquer Big Data)
Adopt hybrid external-internal services.
To do this, broker innovation from outside (and inside across departments within) the company to improve quality and cut costs. Then transform your value chain into a Value Web by disaggregating functions, virtualizing work, and separating people from tasks.
Don't let uncertain ROI stop you.
Not knowing how to mine a mountain doesn't mean there isn't precious metal inside. Similarly, although the return on investment of SMAC technologies are still unclear, most of the executives we surveyed view these technologies as key enablers for improving service, developing innovative products, and enhancing supplier management.
Don't just make a better mousetrap.
In the information age, the cost of not innovating is too high to ignore. Incremental improvements will still be needed, but missing innovation curves will leave you behind. Whether it's reimagining the claims process, transforming medical management, or building wealth processes for the millennial demographic, it's time to rethink your everyday processes.
Two decades ago, Michael Hammer and James Champy wrote "Reengineering the Corporation." Since then, armies of consultants have tirelessly worked to help businesses re-engineer their processes. Companies that improve efficiency at the expense of innovation, however, will fall short of customers' expectations. But efficiency and innovation are not mutually exclusive. New processes supported by SMAC Stack technologies can deliver both. Growth can be accelerated by improving quality in addition to leveraging technological savings.
To learn more read our white paper The New Process Genome Re-coding Business Process Work to Thrive in the Modern Digital Economy, available on our SMAC and Future of Work Web sites. Also visit Cognizant's business process services practice for more insights.
2 For decades, management scientists have struggled to describe how organizations — and the decision makers within — learn and adapt. Argyris, Schon, March & Olsen and many others have wrestled with this in great depth and rigor. Interested readers should look into this amazing body of work.