Pressured to become innovative, agile and digitally-adept, many businesses are looking to glean more value from their global in-house centers (GIC). Indeed, the upsurge in GIC adoption is attributable to more businesses setting up in-house service centers to support R&D/engineering and digital services, according to Everest Group.
However, as discussed in the first article in this series, businesses face three key challenges when it comes to shifting the role of an already established GIC from a cost containment center to an innovation hub. One of these is encouraging existing GICs to embrace digital marketplace dynamics and adopt digital technologies such as cloud, big data, advanced analytics, robotic process automation and artificial intelligence. Glacially slow adoption of all of these necessary digital capabilities hampers existing GICs from contributing to business growth strategies.
The gap in GIC digital adoption is often deeply rooted in the service center’s origins and what drove the business to set one up in the first place. Typically, GICs are focused on executing mundane and repetitive back-office processes as efficiently and cost-effectively as possible. Further, businesses tend to hold the GIC at arm’s length rather than as an integrated business unit, which often leaves them behind in digital adoption curve.
The element that’s often missing from the GIC mandate — but crucial to a digital approach — is a focus on the customer, and even the question of who the customer is or should be. Whether for a business or a GIC, the move toward a digital operating model involves putting the customer at the center, and reinventing processes and organizational structures to serve those customer-centric goals and strategies.
The focus needs to shift from simply executing the process to mining the customer data itself, and gaining intelligence through advanced analytics. Rather than processing accounts payable/receivable applications, for example, GICs need to discover better ways of managing customer invoices. Once the data is understood, the GIC can better anticipate how it can improve its management of the customer relationship to drive growth.
Here are several steps businesses can take to support GICs in their digital endeavors:
Issue a top-down mandate for the GIC to focus on gaining customer intelligence and not just process execution — in other words, focus not only on doing it cheaper but on doing it better. This would free the GIC to focus on the growth advantages of investing in initiatives like big data analytics and even machine learning, beyond keeping costs as low as possible. The business also needs to define new metrics to measure the results of these types of technology investments.
Take a holistic approach. Pushing GICs to embrace an end-to-end digital approach is not much different from what senior leadership would want for any other business unit: identify a target operating model; conduct a gap analysis; build a roadmap; design new approaches across the areas of people, processes, technology, data and governance; define a new architecture; implement the business and technology changes; and ensure ongoing maintenance and continuous improvement.
Approaching this holistically ensures that opportunities aren’t missed. For instance, if the business simply focused on using digital to automate ERP processes in the GIC, it could overlook areas that would benefit from blockchain, the Internet of Things or artificial intelligence.
Open the lines of communication between GIC and company leaders. The business also needs to reconsider the relationship between GIC leadership and the senior executives within the company. Often, GIC leaders are not at the same level as corporate leaders, and their P&L offers no incentive to become more data- or customer-centric. Often reporting into operations, their detachment from the IT reporting structure can also hamper knowledge transfer between the two entities.
Unify fragmented data. A lack of data synergy is another issue — instead of one enterprise-wide repository, data is often siloed in GIC systems. Aligning data between the GIC and the enterprise will yield the insights needed to grow revenues or cut costs. For example, if the business has contracts with multiple vendors, new findings such as the potential for volume-based negotiations could be realized by combining in-house data with the GIC data to discover how items, customers and suppliers all relate to one another.
Define who the GIC’s customer is — and could be. For many GICs, the shift to digital starts with asking the question — often for the first time — of who its customers are, and could be. Beyond serving the parent company’s internal business functions, GICs could also create their own revenue line by serving external customers with similar needs to the parent company’s. This is one way that the goal of creating a GIC as an innovation hub can be fully realized, by monetizing the services it provides by expanding those services to the external market.
To embrace a digital business and achieve full maturity, GICs need to be treated like a business unit with P&L responsibilities. Whether it gets there depends on if the parent company fully supports the GIC in its digital pivot. As businesses evaluate their GIC investment and determine next steps, embracing digital at the GIC level will be essential.
This is the second in a series of articles on how businesses can optimize their GIC strategy. The first article discussed the changing role of GICs and the need to move up the maturity curve. Future articles will focus on the need to acquire and retain employees with the necessary digital skills, domain expertise and leadership qualities; and GIC productivity and operational cost pressures.
We invite you to visit our GIC landing page and take our no-obligation GIC assessment. For more on this topic, you can also watch our webinar, “GIC Trends from the Outside-in.”