CUSTOMIZING THE SERVICE MODEL TO ALIGN WITH ORGANIZATION OBJECTIVES CNI’s Journey, Mistakes, and Lessons Learned Kenny Ong CNI Holdings Berhad

Contents: Before we start… Identify Business Objectives Align Service Model Internal Customer Indicators Notes, Problems, Issues Starting Up

Before we start…

Identify Business Objectives

Align Service Model

Internal Customer Indicators

Notes, Problems, Issues

Starting Up

Intro: CNI 18 years old Core Business: MLM Others: Contract Manufacturing, Export/Trading, eCommerce Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan Staff force: ± 500 Distributors: 250,000 Products: Consumer Goods and Services

18 years old

Core Business: MLM

Others: Contract Manufacturing, Export/Trading, eCommerce

Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan

Staff force: ± 500

Distributors: 250,000

Products: Consumer Goods and Services

Intro: CNI CNI’s Shared Services background CNI Malaysia CNI Global Key Elite

CNI’s Shared Services background

CNI Malaysia

CNI Global

Key Elite

A. Before we start…

“… in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent" CEO, Anonymous

“… in the past 18 months, we have heard that profit is more important than revenue, quality is more important that profit, people are more important than profit, customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our performance is inconsistent"

Before we start… In the old days of HR… Average training hours per staff % of staff attending training # of training programs % of training programs conducted Training needs analysis conducted Competency models developed Training budget as % of payroll What’s wrong with this picture?

In the old days of HR…

Average training hours per staff

% of staff attending training

# of training programs

% of training programs conducted

Training needs analysis conducted

Competency models developed

Training budget as % of payroll

Before we start… Moral of the story… Innovation: Business models Products Services Market Leadership Competitive differentiation Get the picture?

Moral of the story…

Innovation:

Business models

Products

Services

Market Leadership

Competitive differentiation

“ What is the moral of the story?”

“ What is the moral of the story?”

B. Understanding the Business Objectives Strategy and Intent

Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

Product Leadership New, state of the art products or services Risk takers Meet volatile customer needs Fast concept-to- counter Never satisfied - obsolete own and competitors' products Learning organization Strategy: Value Disciplines Operational Excellence Competitive price Error free, reliable Fast (on demand) Simple Responsive Consistent information for all Transactional 'Once and Done' Customer Intimacy Management by Fact Easy to do business with Have it your way (customization) Market segments of one Proactive, flexible Relationship and consultative selling Cross selling

Product Leadership

New, state of the art products or services

Risk takers

Meet volatile customer needs

Fast concept-to- counter

Never satisfied - obsolete own and competitors' products

Learning organization

Operational Excellence

Competitive price

Error free, reliable

Fast (on demand)

Simple

Responsive

Consistent information for all

Transactional

'Once and Done'

Customer Intimacy

Management by Fact

Easy to do business with

Have it your way (customization)

Market segments of one

Proactive, flexible

Relationship and consultative selling

Cross selling

Sample KPIs for Each Discipline Operational Excellence Price Selection Convenience Zero Defects Growth Customer Intimacy Customer Knowledge Solutions Offered Penetration Customer Data Customer-success focus Product Leadership Marketing Functionality # of Successes # of Failures Learn from key users Interdisciplinary teams Pipeline

Operational Excellence

Price

Selection

Convenience

Zero Defects

Growth

Customer Intimacy

Customer Knowledge

Solutions Offered

Penetration

Customer Data

Customer-success focus

Product Leadership

Marketing

Functionality

# of Successes

# of Failures

Learn from key users

Interdisciplinary teams

Pipeline

Operational Excellence Move know-how from top performing units to others Benchmark against best in class Ensure operations training for all employees Use disciplines like TQM for continuous learning to reduce costs and improve quality Strategy: Value Disciplines

Operational Excellence

Move know-how from top performing units to others

Benchmark against best in class

Ensure operations training for all employees

Use disciplines like TQM for continuous learning to reduce costs and improve quality

Strategy: Value Disciplines Customer Intimacy Capture knowledge about customers Understand customer needs Empower front line employees Ensure that everyone knows the customer Make company knowledge available to customers

Customer Intimacy

Capture knowledge about customers

Understand customer needs

Empower front line employees

Ensure that everyone knows the customer

Make company knowledge available to customers

Product Leadership Reduce time to market Commercialize new products fast Ensure that ideas flow Reuse what other parts of the company have already learned Ensure there are multiple sources of funding Strategy: Value Disciplines

Product Leadership

Reduce time to market

Commercialize new products fast

Ensure that ideas flow

Reuse what other parts of the company have already learned

Ensure there are multiple sources of funding

The McPlaybook* Make it easy to eat 50% drive-thru Meals held in one hand Make it easy to prepare High Turnover Tasks simple to learn & repeat Make it quick “ Fast Food” Tests new products for Cooking Times Make what customers want Prowls market for new products Monitored field tests *Adapted from: Businessweek , Februrary 5 th 2007

Make it easy to eat

50% drive-thru

Meals held in one hand

Make it easy to prepare

High Turnover

Tasks simple to learn & repeat

Make it quick

“ Fast Food”

Tests new products for Cooking Times

Make what customers want

Prowls market for new products

Monitored field tests

Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

Financial Shared Services Strategy and Intent of the Business? FSS role in the strategy? FSS Strategy and Intent? Objectives of FSS? FSS Service Model?

Strategy and Intent of the Business?

FSS role in the strategy?

FSS Strategy and Intent?

Objectives of FSS?

FSS Service Model?

C. Aligning the Service Model

Aligning Service Model Role of FSS Objectives of FSS 4-Wheels

Role of FSS

Objectives of FSS

4-Wheels

Alignment: 4-Wheels Service Model Principles Corporate Objective FSS Role & Objectives Structure Resources Leadership Person

FSS Role? Financial Shared Services SBUs, Divs, Depts Corporate Center Strategy Results Request Service Policies Service

FSS Objectives? Transactional Cost reduction, Efficiency, Agility, Fast Copy AP, General Ledger, B/S analysis, Accounting, Fixed Assets, AR, Facilities Value-added Budgeting, Reporting, Financial Analysis, Forecasting, Tax, Legal, Treasury Consistency, Analysis, Value creation, customization Systems, Standardize, Benchmarking, ERP, Streamlining, Automation, Governance Best Practices Process improvement, service innovation, secondary KPIs, internal customers Transformation Market Leadership, Competitive Differentiation, Business model, M&A, CSI Direct Business Impact, primary KPIs, external customers

Open & Hidden Objectives Eliminate redundancies Remove no value-adding activities Cost Savings Focus on Core Economies of Scale Compete with external vendors Specialized skill sets Move from staff to line Salary Band Career Path Manage external vendors B.U.s appreciate services Additional revenue w/o interfering core Divestment/IPO MSC tax break Make accountable to SBU vs. HQ Undertake large infra projects

Eliminate redundancies

Remove no value-adding activities

Cost Savings

Focus on Core

Economies of Scale

Compete with external vendors

Specialized skill sets

Move from staff to line

Salary Band

Career Path

Manage external vendors

B.U.s appreciate services

Additional revenue w/o interfering core

Divestment/IPO

MSC tax break

Make accountable to SBU vs. HQ

Undertake large infra projects

Alignment: Framework Price Transparency Business Management Market Responsiveness Best Practice Process Standardization Service Culture Principles

Price Transparency

Business Management

Market Responsiveness

Best Practice

Process Standardization

Service Culture

Alignment: Framework Org Structure Job Design Policies & procedures Governance Management Systems BSC and KPIs Benchmarking A.B.C. Structure

Org Structure

Job Design

Policies & procedures

Governance

Management Systems

BSC and KPIs

Benchmarking

A.B.C.

Alignment: Service Structure Corporate Center Financial Shared Services One Internal Customer Multiple Internal Customers External & Internal Customers In-sourcing Co-sourcing Joint-Venture BPO

Alignment: Internal Structure FSS Transition Management Fulfillment & Service Delivery Business Development

Alignment: Internal Structure Migrate processes to standard platforms, scaled migration, joint-process ownership FSS Transition Management

Alignment: Internal Structure SLAs, Audit Compliance, Business Controls, records Management, service request processing, digitization FSS Fulfillment & Service Delivery

Alignment: Internal Structure identify processes to migrate, customer relationships, value migration, CS interviews, performance evaluations FSS Business Development

Alignment: Framework Tools ICT Systems Digitization Self Service Workflow Physical facilities In-source? Co-source? JV? BPO? Resources

Tools

ICT Systems

Digitization

Self Service

Workflow

Physical facilities

In-source?

Co-source?

JV?

BPO?

Strategy: Framework Customer focused Attentive to market standards Costs Service Best practices Accountable for SLAs, ISLIs Build relationships with BUs Bottom line management Tradeoff between Cost vs. Value Leadership

Customer focused

Attentive to market standards

Costs

Service

Best practices

Accountable for SLAs, ISLIs

Build relationships with BUs

Bottom line management

Tradeoff between Cost vs. Value

Alignment: Framework Specialist Career Ladders Staff -> Frontline Team-based Duplication Standard or Creative? SS vs. Staff mindset Sourcing C&B, Retention In-source? Co-source? JV? BPO? Person

Specialist Career Ladders

Staff -> Frontline

Team-based

Duplication

Standard or Creative?

SS vs. Staff mindset

Sourcing

C&B, Retention

In-source?

Co-source?

JV?

BPO?

Alignment: Framework Principles Corporate Objective FSS Role & Objectives Structure Resources Leadership Person

D. Internal Customer Indicators

Measurement & Satisfaction “ In business after business, 60% to 80% of lost customers reported on a survey just prior to defecting that they were satisfied or very satisfied .” HBR March/April 1996

“ In business after business, 60% to 80% of lost customers reported on a survey just prior to defecting that they were satisfied or very satisfied .”

Corporate-level BSC Financial “ To satisfy our stakeholders, what Financial objectives must we accomplish?” Internal Process “ To satisfy our customers, in which internal business processes must we excel?" Customer “ Who are our target customers? What is our value proposition?” Learning & Growth “ What capabilities and tools do our employees require to help them execute our strategy?

Corporate Objectives FSS-level BSC FSS Strategy Customer Who do we define as our customer? How do we create value for our customer? How do we enable ourselves to grow and change, meeting ongoing customer needs Employee Learning and Growth Internal Process To satisfy customers while meeting budgetary constraints, at what business processes must we excel? Financial How do we add value for customers while controlling costs?

ISLI ISLI = Internal Service Level Index. Services and Levels Expectations, Priorities, Improvement Plans Service Costs

ISLI = Internal Service Level Index.

Relationship = Expectations

Relationship = Expectations

ISLI Matrix Customer Intimacy Product Leadership Operational Excellence Transactional Value-added Best Practices Transformation Standard

ISLI Transactional Cost reduction, Efficiency, Agility, Fast Copy Value-added Best Practices Consistency, Analysis, Value Process improvement, service innovation, secondary KPIs, internal customers Transformation Direct Business Impact, primary KPIs, external customers Time Cost Quantity Quality

ISLI Transactional Cost reduction, Efficiency, Agility, Fast Copy Value-added Best Practices Consistency, Analysis, Value creation, customization Process improvement, service innovation, secondary KPIs, internal customers Transformation Direct Business Impact, primary KPIs, external customers Time Cost Quantity Quality Innovation Service

ISLI Transactional Cost reduction, Efficiency, Agility, Fast Copy Value-added Best Practices Consistency, Analysis, Value Process improvement, service innovation, secondary KPIs, internal customers Transformation Direct Business Impact, primary KPIs, external customers Time Cost Quantity Quality Innovation Service KPI

ISLI Transactional Cost reduction, Efficiency, Agility, Fast Copy Value-added Best Practices Consistency, Analysis, Value Process improvement, service innovation, secondary KPIs, internal customers Transformation Direct Business Impact, primary KPIs, external customers Time Cost Quantity Quality Innovation Service KPI Impact

E. Notes, Problems, Issues

Notes, Problems, Issues FSS viewed as simply Cost Cutting No change in C&B structure “ Shadow” services at BUs Incongruent with Company Strategy HO allocation Just consolidate, no Redesign Complicated, Legal-jargon SLAs FSS leadership turnover FSS staff < competent than BU staff Who should bear external party costs? Infra ownership SLA yes, but ISLI no Staff unwilling to go to FSS FSS taking orders from Big Boss vs. BUs

FSS viewed as simply Cost Cutting

No change in C&B structure

“ Shadow” services at BUs

Incongruent with Company Strategy

HO allocation

Just consolidate, no Redesign

Complicated, Legal-jargon SLAs

FSS leadership turnover

FSS staff < competent than BU staff

Who should bear external party costs?

Infra ownership

SLA yes, but ISLI no

Staff unwilling to go to FSS

FSS taking orders from Big Boss vs. BUs

F. Starting Up

Starting Up Strategy and Intent of the Business? FSS role in the strategy? Objectives of FSS? FSS Service Model?

Strategy and Intent of the Business?

FSS role in the strategy?

Objectives of FSS?

FSS Service Model?

Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com