Next steps on the journey
Wherever an organization is on the SSCC versus ESP continuum, and whatever its next steps may be, there are certain best practices that will become ever more important as stakeholders seek process flexibility and value-based thinking. Foremost among them will be to avoid the following mistakes:
- Focusing on value solely as a function of cost. Return-on-investment calculations can fail to quantify how innovative approaches will positively impact stakeholders, especially because shared services metrics are typically focused on full-time equivalent (FTE) input or service-level agreements.
- Insufficient investment to fix problems, or needed organizational change. The true value from SSCCs comes from a comprehensive rethink of how work is conducted. Leaders are reorienting and reframing process work, focusing on the mechanisms that deliver higher-value offerings. During these times, this demands the fortitude of CEO- and board-level sponsorship.
- Standardizing rather than innovating processes. Some SSCCs may have moved into their second and third generation or iteration. Consequently, with the urgent demands of COVID-19, immediate priorities (e.g., everything that can go online must go online) necessitate a rethinking of process best practices and the use of the latest advanced technologies.
- Insufficient ability to anticipate change. Black swan events like COVID-19 come at you fast. Companies need leadership that can guide their SSCCs to run better and run differently on dynamically responsive business models to persevere, persist and prosper during the new normal of the coronavirus and beyond. If an organization can’t do that, then it’s simply shuffling deck chairs on the Titanic.
Options with high success potential
Our objective for captives is focused on helping organizations take the next steps toward realizing their tactical and strategic objectives. Our solutions range from consulting or digital transformation projects to a takeover and transformation of all or part of the captive scope, and could also include joint go-to-market and monetization of the assets and capabilities of the captive.
Here are examples of these options and some approaches that have worked:
- Outsource select functions like finance and accounting, customer experience or application development, possibly through end-to-end business-technology solutions such as those provided through an industry-focused business-platform-as-a-service (BPaaS).
- Engage a strategic transformation partner to unlock the value of business processes by digitizing and integrating them in a value-chain ecosystem — for example, enhancing the automotive customer experience through marketing, sales, dealer services, warranty and asset acquisition.
- Sell all or part of the captive to yield cash and savings quickly. The captive holds a large component of selling, general and administrative (SG&A) spend, and business process outsourcing and IT outsourcing providers are poised to acquire a scope of services and deliver early savings and potentially cash through acquisition deal structures.
- Effect joint go-to-market to monetize the captive intellectual property (IP) and assets. Captives with well-performing capabilities can find partners willing to acquire and go to market with these assets and IP. This approach can yield returns for the captive owner on top of savings.
Our approach is to tailor the captive transformation strategy to the strategic imperatives of our clients. This could include “escaping the captive” by selling it; restructuring the operations to value-chain ecosystems; or transforming the operations and transferring them back to the client to yield faster, better results that are more aligned to the business’s short- and long-term strategy. In some cases, we’ve recommended actually increasing the reach of the captive as a way to escape current problems.
SSCCs will undoubtedly play a role on this journey to the future, but with the proven track record of ESPs — now with additional capabilities developed during the pandemic — the argument to maintain an internal capability at great expense (of time, money, management overhead and opportunity cost) is weaker than it was a decade (or generation) ago.