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Shared Services Need Shared Management

by Chris Curran on August 4, 2010 [email] [twitter]

Second in a two-part series with Paul Blase – Read Part 1, Diamond’s 2010 Business Design Survey

One of our travel clients has several thousand locations across the globe where they serve customers.  While there are different brands and cultures, many of the functions are more common than they are unique.  To make things more interesting, many of the local businesses are franchises, greatly increasing coordination complexity and buy-in challenges.  So, the rationale for shared services requires even more work.

Companies like this one need to expand their shared services models to deal with increasing organization and geographic complexity while dealing with pressures of getting more product/service varieties to market faster.  In addition, more and more businesses are heavily dependent on information and the software that processes it.  Figuring out how to share the next wave of information services could be the one of the biggest levers companies can pull to grow profits and expand margin with grow.

Consider your current shared services model – is it keeping up with the changes in your business and industry?  Do you consider shared management models along with the services you share?  Ask yourself these four questions to see where you are.

1.  Do You Share Information Architectures?

The complexity of today’s business operations require integrating to manage new product or service options, manage a system deployment or pilot a innovation concept.  Sharing business and technology architecture allows companies to create complex, specialized more advanced modules of products, services or software that allow companies to continue to expand productivity.

For example, a premium class car has upwards of 100 M lines of code embedded in its processors making today’s service techs as much software engineer as mechanic.  Steven Spears, MIT professor and author of Chasing the Rabbit says:

… the complexity puts even more demands on the concept of aggressive learning, that is, building something, paying attention to what’s wrong, and rapidly doing the experimentation to make it better and better.

As complexity increases, so should the focus on the architecture to specify the critical integration points and standards across modules or workflow. Without an ability to manage integration of more complex modules to improve performance, speed to market slows, product & service features lag competitors and it becomes more costly to run the operations.

From an outside perspective, sharing customer service functions can be critical to manage company integration points, that if exposed to the customer, can create satisfaction and retention issues. For a $35 Billion financial services company, this amounted to $1.2 B per year in leakage.

2.  Do You Leverage Subject Matter Experts as a Shared Service?

At a client with a $1 Billion IT budget, loss of throughput value was estimated to be $100 MM per year.

Companies can increase “throughput value” by improving how they bring together people from across their organization to complete large transformation programs, product launches or systems deployments. These programs require many types of subject matter expertise to succeed. Shared program management functions help companies increase situational awareness across their employees. Shared program management groups learn how to bring together the right resources in the right situations from across large companies to deliver value. They create tools and techniques that experts from across the organization become familiar using to improve how they make decisions and work together. Coupling shared program management with shared IT development services helps reduce the probability of large program failure that has publicly plagued companies such as Ford, Avis and The FBI.

3.  Do You Share Transaction Processing?

Many companies have automated transaction processing. They can go farther by creating shared operations and IT services to focus on driving automation, reducing exception processing and designing more complex rules and algorithms to process more complex transactions. Many companies have six sigma programs, but don’t have dedicated groups and organization models to support continuous discovery to improve workflow supported by operations and IT areas.

4.  Do You Share Innovation Services?

Driving innovation requires more than strong R&D, it requires developing capabilities to increase the innovation potential throughout the business. For example, innovation may spring from creating a new data platform that changes the business model potential.

Ayn Rand would have shared services because in the right situations, it helps grow your top line, compress your bottom, provide more enriching experiences for employees and expand profits. Not a bad objectivist case.

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