Industrialisation represents a relentless drive to discover how an activity is optimally done, then doing it in exactly the same way every time, writes Andrew Poppleton (pictured) managing director of Accenture's UK and Ireland Technology Group.
It eliminates redundancies, automates and standardises wherever possible, and then drives the work to the most cost-effective and competent workforce available. The result? Organisations mitigate the biggest threat to their business: the unknown.
Outsourcing has succeeded because of its ability to reduce risk, drive standardisation, increase productivity, and improve reliability and predictability.
In other words, where outsourcing has been successful, it has been because of its ability to industrialise. Industrialisation is often thought of as being synonymous with standardisation. While standardisation is part of the picture, it’s not the only part. Using standardised production methods, a company could make the very best cement shoes in the world – better, faster and cheaper – but they wouldn’t have any practical value.
Along the same lines, a company can standardise IT infrastructure and applications but unless technologies are aligned with the correct business processes, it won’t produce sufficient business value. True industrialisation takes a company beyond “standard” work to efficient and effective work.
So how exactly does industrialisation work? The companies that have been most successful in driving business value through industrialised outsourcing of business processes have leveraged the following five principles.
1. Apply lean and Six Sigma principles
One distinctive, yet challenging, dimension of a business process outsourcing environment is that a single organisation no longer owns the entire business process. The client company, the outsourcing provider, and other vendors may all be involved at certain points. Therefore, being able to take an end-to-end view – and then optimise the workflow and hand-offs across all dimensions – is key to success.
Consider, for example, the number of hand-offs that occur for processing an invoice. The client organisation receives the invoice; the outsourcing provider scans and indexes it, checks to see if it’s a valid payment, sends it back to the client’s retained organisation; the company approves it, puts the funds in place to cover the payment. These exchanges present many opportunities for delay and error. But there are also opportunities for operational excellence and greater efficiency.
Most companies don’t spend the time or money to look in detail at the efficiency of their non-core business processes. An outsourcing provider, however, can give these processes an end-to-end review and apply “lean” principles and Six Sigma approaches to drive time and waste out of the hand-offs, and eliminate needless variations when they occur. The results can be impressive. When a company begins to work with an outsourcing provider, it’s not uncommon to discover that it has an on-time delivery rate of only 30-40%. In a few months, that number can rise above 95%.
2. To innovate, get the noise out of the system
As outsourcing relationships become more collaborative and strategic, companies are increasingly asking their providers to deliver innovation and business advantage, not just efficiency. However, in an outsourcing environment, innovation is rooted in industrialisation.
The inefficiencies in processes and functions – redundancies, delays, performance issues, multiple operating models and the like – constitute “noise” that has to be eliminated if the voice of innovation is to be heard. If a company can get the operating environment stabilised and running optimally, it can look beyond today’s urgencies toward the innovations of tomorrow. It will also have savings generated by those efficiencies that can be plowed back into making new ideas actionable.
3. Focus on what’s common, not just what’s different
Often, the biggest sticking point that companies face internally as they move to adopt advanced industrialisation principles is the belief that their operations are somehow different from the norm.
Within the IT function and business processes of any organisation are things that are unique and things that are common. Industrialisation lets a company use common approaches where those are workable, and particular ones where those are appropriate. But again, just because a solution (or part of a solution) is custom-built doesn’t mean it can’t be industrialised. The component-based design of a good outsourcing solution means that industrialised, common pieces can be put together into a custom, even unique, solution.
4. Look at the outputs, not the inputs
Where outsourcing arrangements have produced less-than-optimal results, it is frequently because of a failure to adjust to the need to measure success based on outputs (results, outcomes) and not inputs (the way the outsourcing provider achieves business results).
Executives often need to change their management mindsets when working with an outsourcing provider. If they try to manage the inputs – every detail of how the process is delivered – they may simply add more noise to the system and disrupt an otherwise smoothly flowing industrialised process.
The answer to the problem of managing inputs is simply stated, but sometimes difficult to achieve: trust. The establishment of trust is essential to driving greater value from industrialisation. An outsourcing provider that has delivered successfully and built up trust then can manage its own inputs, focusing on its own incentives to meet deadlines while keeping costs low.
5. Trust the process, not only the people
Companies that rely on an outsourcing provider need to become convinced of the reputation and qualifications of the provider’s industrialised model, not simply the personalities who designed or are implementing the model. It’s important to trust the process, in other words, not just the people.
Many companies become overly dependent on the people running their critical processes and someone who wrote an important application in the 1980s is the only one who can fix it when it breaks. Industrialisation doesn’t make them any less important; it just makes their expertise generally available and puts it into the process itself.
Industrialisation is forcing executives to look with more penetrating insight into their operations and processes. It’s making them see and think differently. Business value is being produced in slightly different ways. That which can be made repeatable and predictable needs to be made so, leaving the considerable space that remains as the foundation from which to innovate and grow.