The Adaptive Roadmap in Uncertain Times

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Adaptive and agile firms grow revenue 37% faster and generate 30% higher profits than non-agile companies, revealed a survey by the Economist Intelligence Unit in the wake of the financial turbulence of 2008 (2008-09)1. Don Sull, professor of management practice at the London Business School and author of the Upside of Turbulence says “In turbulent markets, organizational agility, as the capacity to identify and capture opportunities more quickly than rivals do, is invaluable.”2 Adaptive can also be equated with antifragile – the term coined by Nassim Taleb, essayist, author, and former derivatives trader in his book Antifragile: Things That Gain from Disorder. Taleb emphasizes that while the resilient resist change and stays the same, the antifragile get better and better.

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The Adaptive Roadmap in Uncertain Times

  1. 1. INTELLIGENT ENTERPRISE The Adaptive Roadmap in Arvinder “Monty” Singh Uncertain Times Senior Vice President – Sales, Marketing, and Re-engineering at GenpactExecutive SummaryAdaptive and agile firms grow revenue 37% faster and generate 30% higher profits thannon-agile companies, revealed a survey by the Economist Intelligence Unit in the wake ofthe financial turbulence of 2008 (2008-09)1. Don Sull, professor of management practiceat the London Business School and author of the Upside of Turbulence says “In turbulentmarkets, organizational agility, as the capacity to identify and capture opportunities morequickly than rivals do, is invaluable.”2 Adaptive can also be equated with antifragile – theterm coined by Nassim Taleb, essayist, author, and former derivatives trader in his bookAntifragile: Things That Gain from Disorder. Taleb emphasizes that while the resilientresist change and stays the same, the antifragile get better and better.The antifragile organization can ride the wave of change and stay afloat and chart abrighter course. They are highly adaptive because of steps taken and processes followedwithout fail. They have aggressively engineered an “instinct to evolve.” Leaders in theseorganizations know surviving and thriving isn’t about recognizing what you did wrongin hindsight. It’s about having the insight and foresight to adapt and outcompete amidstshifting tides.Transforming the organization and its maximum effectiveness, are the ones that have the most power to adapt and be agile. These are enterprises where the leaders atprocesses the helm – the C-suite executives including CFOs, CPOs, COOs,The flow of information, decisions and resources that crisscross work in tandem like the best crews on racing boats in stormy weather.an organization must travel faster than ever before, along withfaster execution, given that volatility is a certainty, in our global This ability is directly related to how integrated an enterpriseand connected economy today. is – not just across different functions, but within processes andIn this fast flowing current, organizations that are able to at all levels – for instance underwriting to call-center cross salestake better and faster decisions and run their operations with in financial services, Know-Your-Customer (KYC) to Anti Money 1 Organisational agility: how businesses thrive and survive in turbulent times: A report from the Economist Intelligence Unit 2 “Competing through organizational agility” in The European Business Review
  2. 2. Laundering (AML) in banking, in sourcing analytics to inventory concept that industrializes support operations) and relatedoptimization in manufacturing, or budgeting to stock market practices and infrastructure, such as a truly intuitive Unifiedearning guidance in any industry. Collaboration (not just communication) environment. This in turn also allows for flexible business models and modular costToday, sales and operations planning require far more precision, structures, as organizations are able to identify core versus non-speed and detail – necessitating not just cooperation but actual core processes and eliminate redundancies and inefficiencies –collaboration between various parts of the enterprise. The day- consequently enabling the adaptive and antifragile organizationto-close financial reporting process is another example of how that is ready to outcompete.closely interlinked numerous enterprise functions can be, andhow it can impact senior management decisions and the time toplan and prepare for discussions with stakeholders, shareholders Leveraging data and insightand markets. Being adaptive starts with listening – and understanding the external environment. The most cited criteria according toThe web of business practices connecting the different functions organizations that have adapted, and adapted with success in ain an enterprise were designed in less volatile times. Operations changing global environment, is the ability to track or measurethat were built for scale, today pose challenges in that they are customer and market sentiment. All enterprises – whatever theinflexible – both in what they can do, and in their cost structure. product or customer base, collect data on performance, marketAlong with this, talent imbalances, technology, and process size, customer feedback, demands, but do they have the abilityadvances are defining what’s possible – making industrialized to decode this data?enterprise operations a viable alternative for a range of supportprocesses. To harness the true potential of data and analytics, systems across the business have to be integrated and synchronized to create aLeveraging a global network of skilled workforce for both cohesive business intelligence framework. When this frameworkintellect and solutions is key to organizational agility in turbulent is in place, organizations can quickly identify the drivers oftimes. The ability to harness these resources in a frictionless way, success in every division of an organization, anticipate the impactirrespective of where they are, will be a defining trait for business of change on key variables, measure progress toward enterpriseprocess operations of the future. It will hinge on the adoption objectives – and consistently deliver the value that stakeholdersof global business models (such as the Global Business Service demand. Organization eco-system Extenal Stakeholders Reporting Performance expectations (financial, non-financial) (financial, non-financial) Forecast, Report CEO, Board Short- and long-term expectations of: (financial, non-financial) Margin, Earnings Growth, Capital Intensity Finance Revenue, Working Working Capital (AP) Capital (AR) COGS Budget, (short and KPIs, long term) allocation and and Sales & monitoring of respective Procurement Marketing OP/CAPEX, risk, inventory EHS risks COGS for pricing Demand and availability (short and medium term), of production inputs demand/inventory, Operations (commodities, energy, logistics, supply (mfg, facilities) components), chain footprint respective short and medium term price
  3. 3. Global business services (GBS) NOW FUTURE LoB 1 LoB 1 LoB 2 Unified Collaboration Country A GBS GBS Region 1 Region 2 Country B LoB 2 WFH Contractor Knowledge worker Transaction workerIn many respects, building this framework – for effective ability to access the right information at the right time (34%) and“analytical enterprise behavior” is a process. Consider the accountability (34%).following chart Leveraging data and insight in business processes(Page 4), which provides a view on the role of information as the As organizations grow, these four factors suffer frompulsating lifeblood of a business operation. Better data doesn’t diseconomies of scale: for example, driving a common culturemean more effective insight. To become really effective, data becomes harder across large teams, as does finding the rightneeds to be turned into insight and provide visibility to the right information. Building a scientific data-to-insight framework andpeople, constitute the foundation for setting the right operational embedding this in operations helps palliate such issues.metrics, and guide the actions of employees throughout theorganization and its partner ecosystem. Running processes with efficiency andThe arc of data-to-insight, and the embedding of insight in effectivenessthe countless big and small decisions, is a process and should But organizational agility can’t be based on the power of databe treated as such. The reward for creating such an effective and global work force alone. Processes and systems have to beprocess is significant – because this is what drives agility in an robust and stable, and hence flexible to accommodate change.organization. Automating, standardizing, and integrating fundamental processes and systems significantly increases an organization’sAccording to the Economist Intelligence Unit Survey on ability to problem-solve, improve decision-making and convertOrganisational Agility3- rapid decision making and execution information into insight, directly impacting its ability to change.is the most important trait of an adaptive enterprise (61% of And this is an approach that is typically at odds with traditionalrespondents) followed by a high-performance culture (44%), the structures – where individual sub-functions were optimized3 Organisational agility: how businesses thrive and survive in turbulent times: A report from the Economist Intelligence Unit
  4. 4. Leveraging data and insight in business processes Information consolidation, reconciliation Set and cascade KPIs, budgets Set Correct Report Account Targets Strategy PROVIDE MANAGE Periodic dashboards for Redefine revenue, cost, VISIBILITY EFFECTIVENESS capital profile, derive key stakeholders strategic actions Gather Feedback* Analyze and Benchmark Internal and external ecosys- EXECUTE tem help continuously refine questions, define boundary PROCESSES Advanced descriptive and conditions* Implement Measure predictive analysis Initiatives** Performance Data extract, cleanse, Implement enterprise data and standardize, enhance BI enablers, operations rules Operate New Processes Enable decision making at the * Recommended starting point ** Common starting point "moment of truth"within their organizational silo. Such legacy processes are strongest ability to adapt. If an organization’s core processes andresponsible for much of the organizational rigidity and slowness operations lack standardization and efficiency, it is most likely toin responding to shocks. be fragile. Building process excellence and best in class operations is integral to the adaptive roadmap.Which is why for large global organizations, having processexpertise is critical. For instance, enterprises with an end-to-endunderstanding and knowledge of their global order-to-cash Adopting smart technologyprocesses, can respond faster to volatility of demand in case of Technology is crucial to run large scale operations but thea credit crunch, not only by changing credit risk limits but rather need for agility throws additional complexity at technologycoordinating all aspects of the cycle including segmentation of investments and related change management. To ensure thatreceivables and flexible staffing of collection campaigns. organizations respond to internal and external changes in real-time without compromising on operational efficiencies,Similarly, scaling up and down in mortgage processing or the technology has be deployable with shorter implementation times,ability to access robust institutional banking KYC remediation easily configurable, mobile and seamlessly accessible through the“factories” to comply with new regulations in a cost effective internet.manner is something adaptive organizations can do with ease.The same applies in manufacturing environments, for example by In fact, recent research has shown that large ERP programsguaranteeing the same, mature, strategic sourcing practices even are becoming the exception as organizations turn to smaller,if the volumes fluctuate wildly. agile programs that don’t block capital and human resources. Understandably, many organizations struggle with theThe ability to quickly access managed services for order-to-cash, prioritization of technology initiatives and their scope.source-to-pay, and record-to-report for developing markets suchas China and India has an impact on cost, quality and time. An effective approach is to go in with much sharper focus and examine technology that enables the key drivers of operationsWhy this is critical to the adaptive drive, is because it is process effectiveness – as opposed to everything the technologyorganizations with stable and strong processes that have the can do. There are instances where cloud-based solutions work
  5. 5. Case study: mortgage processing Traditional view: efficiency of a sub-process Functional optimization resulting in 10-20% efficiency gains, e.g. Collection calls made Customer Deductions per agent Input Credit Risk Output Set Up Management Orders processed per agent Enterprise-wide view of the process: effectiveness of end-to-end process End-to-end process optimization resulting in 2-5 times higher impact on Customer Deductions outcomes, e.g. Input Credit Risk Output Set Up Management Revenue dilution Improved days sales outstanding (DSO) and cash flowjust as well instead of ERPs - for example in case management for Organizations that have the ability to transform are ones thatcompliance-related processes impacted by new regulations, or have embraced change management, through good governancecollection management to handle cash flows in the presence of and communications strategies. Building a culture of changeclient volatility. accounts for the small things as well as the large – for instance an individual’s ability to adapt through cross-skilling andManaging change and risk facilitation of re-deployment, become central in achieving success at scale and within cost.Technology isn’t the o nly impediment for organizations tobe adaptive. An organization’s measure of success on beingadaptive will depend significantly on how top leadership enable Conclusionand facilitate organization agility. It is important for leaders to Enterprises and operations need to keep pace with thebuild employee resilience to deal with change and uncertainty changed economic and political landscape. Building an adaptiveand ensure that employees can work with ambiguity. Even the organization goes much deeper than just being ‘change ready’communication strategy to manage change can be a powerful – adapting also tests organizational elasticity (or anti-fragility astool in the adaptive drive. defined by Nassim Taleb) across processes and functions.Encouraging risk-taking, the acceptance of failure and Which is why adapting in uncertain times necessitates re-thinkingrecognizing and rewarding innovative breakthroughs, are critical traditional practices. The critical factors that come into focus infor ensuring a culture of continuous innovation that enables these circumstances relate to an organization’s ability to:adaptation. Management should accept and adopt the 80/20 • harness a distributed and global workforcerule and recognize that there is also a strong element of risk that • decode data which in turn enables speedy executioncomes with speed. So organizations must factor in a ‘beta’ test • maintaining a lean cost and asset basephase and improvements and upgrades. Adapting is a continuous • deploy technologyprocess. • work with innovative yet robust operational practicesAn organization’s risk management ability also needs to evolve Eventually mature, flexible and lean global process operationsas they balance internal change and “non-negotiable” demands are critical to making adaptive a reality, and not just a strategy.from the business. For instance, the impact of new regulations The old ways of running operations may have already beensuch as Dodd-Frank on banking operations drive the need for stretched to the limit, but fragmentation of the front lines,industrial-grade processes that keep cost structures in check and regulatory demands and volatility in the market continue. Andstill enable compliance. These are however not just Financial because success is more likely to come to those that embraceServices issues – large manufacturing organizations have been more scientific, industrial-strength business process design andfined heavily because of inappropriate transactions with clients management.and suppliers, and the fact that they didn’t have exhaustive andgranular transaction controls.
  6. 6. About Genpact About the AuthorGenpact Limited (NYSE: G), a global leader in business process management and Arvinder “Monty” Singh is the global leader for sales and marketing at Genpact,technology services, leverages the power of smarter processes, smarter analytics and also leads the company’s growing re-engineering business. He joined Genpactand smarter technology to help its clients drive intelligence across the enterprise. in June 2005 as the senior vice president for Six Sigma solutions, transitions andGenpact’s Smart Enterprise Processes (SEPSM) framework, its unique science of re-engineering, and helped transform processes for Fortune 500 clients, byprocess combined with deep domain expertise in multiple industry verticals, leads effectively utilizing Lean, Six Sigma, transition and solution resources.to superior business outcomes. Genpact’s Smart Decision Services deliver valuable Prior to joining Genpact, Monty was senior vice president, Six Sigma and Chiefbusiness insights to its clients through targeted analytics, reengineering expertise, Quality Officer for GE Vendor Financial Services and also held various leadershipand advanced risk management. Making technology more intelligent by embedding roles with GE Capital India businesses.it with process and data insights, Genpact also offers a wide variety of technologysolutions for better business outcomes. Monty has more than 20 years of experience in the area of driving process improvement. He holds a bachelor’s degree of commerce from the University ofFor more information, visit www.genpact.com. Follow Genpact on Twitter, Delhi and an MBA in finance and marketing from Xavier Labor Relations InstituteFacebook and LinkedIn. (XLRI), Jamshedpur, India.© 2013 Copyright Genpact. All Rights Reserved. You can contact Monty at arvinder.singh@genpact.com

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