Rapid Response: Rebranding IT By Creating Transformation Business Value
Sam Pakrashi Director, Cognizant Rapid Response Rebranding IT by Creating Transformational Business Value
Agenda <ul><li>What is Rapid Response? </li></ul><ul><li>Why the Disconnect between IT and Business? </li></ul><ul><li>Responsiveness: Addressing the “Long Tail” Drives Customer Satisfaction </li></ul><ul><li>Business Innovation: Changing the Game One Customer at a Time </li></ul><ul><li>Tipping Point: Doing More with Less </li></ul><ul><li>What’s Different About Rapid Response </li></ul><ul><li>Anatomy of a Rapid Response Center </li></ul><ul><li>Key Elements of the Value Proposition </li></ul><ul><li>Evolution of Rapid Response </li></ul><ul><li>A Case in Point: How Rapid Response Changes Perceptions </li></ul><ul><li>Building Brand Equity </li></ul>
“ What got you here, won’t get you there.” - Marshall Goldsmith
What is Rapid Response? Strategic Framework <ul><li>Creates a responsive and reliable brand while optimizing costs in a down economy </li></ul>Lean Principles <ul><li>Leverages tried and true Lean principles to manage demand, lead times and throughput </li></ul>Customer Satisfaction <ul><li>Enhances customer satisfaction by addressing “moment-of-truth” transactions </li></ul>Business Innovation <ul><li>Creates value one customer at a time; thereby facilitating business model innovation </li></ul>Brand Equity <ul><li>Radically changes the IT brand and builds political capital for more strategic initiatives </li></ul>Rapid Response solutions can help transform IT into a cutting-edge 21 st century service organization that responds and adapts to the demands of external customers and business stakeholders, thereby reshaping the very brand of IT.
The Disconnect Between IT and Business The answer lies in not what IT does, but what is perceives to be trivial and chooses not to do. Does IT adequately support critical business objectives like lowering operating costs? <ul><li>42% of respondents said “Yes” </li></ul>Does IT play a meaningful role in increasing workforce productivity? <ul><li>Only 45% of respondents said “Yes” </li></ul>Does IT enable business innovation that drives competitive advantage? <ul><li>Only 40% of respondents said “Yes” </li></ul>Source: Forrester Study on the Effectiveness of IT, September 2008 Forrester Study reveals a major disconnect…
Responsiveness: Addressing the “Long Tail” Drives Customer Satisfaction The manner in which IT handles such “moment-of-truth” transactions, defines its brand as a service organization. Strategic “ Lights-On” Number of Requests Effort Business Driven IT Funded IT/Business Funded Complexity Business Value Technology Projects Strategic Business Transformation “ Lights-On” Support Business Requests That Drive Operational Excellence Low High High The Long Tail The Missing Link “ The Third Bucket”
Business Innovation: Changing the Game One Customer at a Time Listening to the Customer <ul><li>Paying attention to the voice of the customer </li></ul>Addressing Customer Pain Points <ul><li>Dealing with “moment-of-truth” transactions </li></ul>Understanding Customer Preferences <ul><li>Adapting to subtle shifts in customer expectations </li></ul>Tailoring Solutions for Each Customer (N=1) <ul><li>Leveraging “co-created value networks” to build customer value one customer at a time </li></ul>Creating New Business Models <ul><li>Leveraging technology to create new ways of engaging the customer </li></ul>Listening to the customer and adapting business models to address fundamental changes in customer preferences requires a seismic culture shift, a mind shift from “we know it all” to making an effort to really understand the changing needs of the customer.
Tipping Point: Doing More For Less Rebranding IT while optimizing costs without sacrificing strategic priorities More Effective and Efficient Infrastructure Spend Application Spend Strategic Business Transformation Savings Focus on Strategic Initiatives Optimization Transformation Why Rapid Response? Why now? The confluence of external and internal financial constraints, along with heightened customer expectations, has created an obvious “tipping point. Doing nothing is simply not an option. As economic conditions worsen, the inability of IT to take care of immediate customer concerns will erode the credibility of IT beyond repair. Rapid Response (Business Critical Requests) Business Funded, Outsourced A Responsive and Reliable IT Brand Customer Satisfaction
Rapid Response: How It Actually Works The Rapid Response model borrows a fundamental “Lean” concept known as Little’s Law. Little’s Law allows for effective prioritization and sequencing of incoming requests, thereby reducing lead times without impacting capacity or quality. Little’s Law Small requests Medium requests Large requests Incoming Service Requests WIP Tier 1 (24 Hrs) Tier 2 (48 Hrs) Tier 3 (72 Hrs) PMO (Prioritization) Business Analysts Little’s Law in Action Lead time = WIP Productivity
What’s Different About Rapid Response? Demand Management Lean Execution <ul><li>Increase utilization and reduce wait times by : </li></ul><ul><li>Managing demand by platform </li></ul><ul><li>Reducing estimation delays </li></ul><ul><li>Prioritizing based on business criticality </li></ul><ul><li>Sequencing requests by resource availability and technology platform </li></ul>Responsiveness, Reliability, and Cost Optimization Pricing Signals To a large extent, Rapid Response mimics the notion of global shared services, where delivery for services is centralized across business functions. However, there are fundamental differences in the demand management, execution and pricing models. Rapid Response is different from traditional Shared Services in three fundamental ways: <ul><li>Increase responsiveness and lower costs by : </li></ul><ul><li>Delivering fixed lead times (SLA’s) </li></ul><ul><li>Managing the work-in-process / throughput </li></ul><ul><li>Calibrating fixed and variable capacity </li></ul><ul><li>Enhance productivity through automation, standardization and specialization </li></ul><ul><li>Increase transparency and predictability by : </li></ul><ul><li>Managing demand using price signals </li></ul><ul><li>Creating a tiered service model (platinum, gold, silver) for differentiated levels of service </li></ul><ul><li>Creating a service catalog for standard requests to influence buying decisions </li></ul>
Program Mgmt Business Analysis Technical Analysis Quality Assurance Program Manager Business Analysts Technical Analysts Quality Analysts <ul><li>Prioritize Requirements </li></ul><ul><li>Sequence Jobs </li></ul><ul><li>Route requests </li></ul><ul><li>Monitor Performance </li></ul><ul><li>Define Requirements </li></ul><ul><li>Estimate Scope </li></ul><ul><li>Create Test Cases </li></ul><ul><li>Facilitate User Acceptance </li></ul><ul><li>Develop Applications </li></ul><ul><li>Conduct System Testing </li></ul><ul><li>Manage Deployment </li></ul><ul><li>Create Standards </li></ul><ul><li>Automate Scripts </li></ul><ul><li>Deliver High Quality </li></ul>Rapid Response Program Management <ul><ul><li>Demand management and project prioritization hold the key to successfully delivering projects within promised lead times. The program office also tracks project performance using a balanced scorecard. </li></ul></ul>Business Analysis Technical Development <ul><ul><li>Using the “agile” development methodology, co-located technical teams are organized vertically by application platforms. Each application tower has a minimum fixed capacity or “anchor resources” both onsite and offshore to build a sustainable knowledge base that drives productivity gains. </li></ul></ul><ul><ul><li>Accuracy in the requirements definition phase enhances speed and quality of delivery. Since these business analysts are not allocated by project but by process, they develop a deep understanding of the customer, which drives customer satisfaction and retention. </li></ul></ul>Quality Assurance <ul><ul><li>Ensuring the highest achievable quality at the lowest reasonable cost is the primary value proposition of the Rapid Response model. Quality assurance is important for enhancing the brand from a reliability standpoint, but so is the adherence to enterprise architecture and standards. </li></ul></ul>Anatomy of a Rapid Response Center Typically, delivery is conducted in an onsite-offshore model with a 30:70 staffing ratio, though ratios may vary by platform and request type. Outcome-based service level agreements enhance the effectiveness of the model.
The primary value proposition includes responsiveness, reliability, and cost optimization. Rapid Response Responsiveness Cost Optimization Managed Services Automation Demand Mgmt Specialization Reusability Standardization Reliability Responsiveness <ul><ul><li>Timely resolution to business-critical problems at a reasonable cost with high quality is a powerful value proposition for any stakeholder. Business executives are usually willing to pay a premium for faster service or a higher priority, if the occasion so demands. </li></ul></ul>Reliability Cost Optimization <ul><ul><li>The ability to deliver results consistently and predictably is critical to all organizations. Standardization and reusability help drive predictability. Rapid Response allows for standardization across the enterprise because it leverages a common set of tools, knowledge artifacts and templates. </li></ul></ul><ul><ul><li>A Rapid Response framework allows these requests to be handled cost effectively through better demand management, standardization and specialization, all of which drive productivity gains. Moreover, since the business usually bears the development costs, the IT budget remains largely unscathed. In short, Rapid Response allows IT to do “more with less.” </li></ul></ul>The Rapid Response Value Pyramid
Evolution of Rapid Response Value Managed Services Automation Rapid Response solutions are best implemented in three phases that progressively build on the effectiveness and efficiency of the model as demand scales. Lean Responsiveness Standardization Productivity Enhancement Time Phase 1 Phase 2 Phase 3 Cost Phase 1: Responsiveness <ul><ul><li>Phase I focuses on reducing lead times by leveraging Little’s Law. Lead times are reduced by effectively managing demand flows, which minimize wait times first and then, through specialization, processing times. </li></ul></ul>Phase 2: Standardization Phase 3: Productivity <ul><ul><li>Phase II focuses on cost optimization through implementation of outcome-based SLAs and enhanced quality through standardization. </li></ul></ul><ul><ul><li>Phase III focuses on driving significant increases in productivity by automating value-added processes. </li></ul></ul>
A Case in Point… <ul><li>The Problem </li></ul><ul><li>Repeated delays were occurring in the shipping of sales samples for its health division, resulting in customer dissatisfaction and a frustrated sales organization. </li></ul><ul><li>A request to build an in-house solution that would reduce lead times and costs remained unaddressed for more than six months due to lack of bandwidth. </li></ul>Situation Challenge Approach Results A global industrial goods manufacturer is one year into its implementation of a Rapid Response Solution. The first phase has just been completed. The results, so far, have been quite remarkable. “ Rapid Response has been a true savior. It has allowed our department to cut lead times and costs by simplifying and automating non-value-added tasks. Our customers are thrilled with the lead times that we deliver to them now. Besides, we would have never achieved our budget goals without the rapid turnarounds on process and technology enhancements.” <ul><li>The Rapid Response Way </li></ul><ul><li>Create an in-house application with integrated ordering and shipping functionality </li></ul><ul><li>Create appropriate business workflow rules </li></ul><ul><li>Estimates completed the day of the request </li></ul><ul><li>Development completed within two months of start date </li></ul><ul><li>Project completed in 228 person hours (two part-time developers) </li></ul><ul><li>Remarkable Results… </li></ul><ul><li>Responsiveness: Lead times have been reduced by 50% to 1.5 days </li></ul><ul><li>Cost Optimization: Annual cost savings of $400,000 by eliminating third party vendor </li></ul><ul><li>Productivity: Reduction in rework has increased productivity significantly </li></ul><ul><li>Customer Satisfaction: Customers are delighted with the new lead times </li></ul><ul><li>Understanding the Root Cause </li></ul><ul><li>Sales representatives would enter the orders for product samples in an in-house Lotus Notes application. Since the order fulfillment process was outsourced to a third-party vendor, the same orders had to be re-entered manually in the vendor’s application. Processing delays were caused by duplicate entries that compounded downstream errors. </li></ul>
Impact of Rapid Response… 2006 2007 80% 60% 40% 20% 2007 2008 1600 1200 800 400 2006 2007 Productivity (Requests / FTE) 60 50 40 30 2000 Applications Requests Customer Satisfaction 2008 2008 2006 <ul><ul><li>Top-two box customer satisfaction has increased by about 40% in 2 years </li></ul></ul><ul><ul><li>Demand for Rapid Response has grown five-fold during this period </li></ul></ul><ul><ul><li>Productivity has nearly doubled due to specialization, standardization and proper demand management </li></ul></ul>Customer Satisfaction Overall Demand Productivity
Impact of Rapid Response…(continued) 2007 2008 4 3 2 1 2007 2008 Quality (DPMO) 5σ 4σ 3σ 2 σ Average Lead Times (Months) 6σ 2007 2008 70 60 50 40 Hourly Blended Rate ($) 2009 2009 2009 Responsiveness Reliability Cost Optimization <ul><ul><li>Lead times have dropped in some cases from six to 12 months to two to four weeks, depending on the scope, primarily due to better demand management. </li></ul></ul><ul><ul><li>Since services are delivered by resources dedicated to a specific application tower with the highest levels of proficiency, quality remains exceedingly high, in terms of number of production defects (4.5 sigma, measured in DPMO) </li></ul></ul><ul><ul><li>Cost avoidance due to the rate differential (adjusted for productivity) is already 33% of original spend. Migration to a managed services model will further accelerate savings. In addition, productivity has increased nearly 50% year on year. </li></ul></ul>
Building Brand Equity Something ventured, something gained. Customer Delight <ul><li>Delight customers by processing “moment-of-truth” transactions promptly </li></ul>Business Innovation <ul><li>Facilitate business model innovation by addressing the needs of individual customers </li></ul>Rebranding of IT <ul><li>Reposition the IT brand as a responsive and reliable service organization </li></ul>Political Capital <ul><li>C reates tremendous political capital for more complex strategic initiatives by delivering quick wins </li></ul>Competitive Advantage <ul><li>Companies that embrace innovative solutions like Rapid Response will emerge stronger </li></ul>
References Marshall Goldsmith, “What Got You Here Won’t Get You There”, Hyperion, New York, NY, 2007. Marc Beaujean, Jonathan Davidson, Stacey Madge, “The Moment of Truth in Customer Service,” McKinsey Quarterly, 2006. Survey conducted by Forrester Research, September 2008. Chris Anderson, “The Long Tail: Why the Future of Business Is Selling Less of More,” New York, NY, Hyperion, 2006. C.K. Prahalad, M.S. Krishnan, “The New Age of Innovation: Driving Co-Created Value through Global Networks,” New York, NY, McGraw Hill, 2008. Malcolm Gladwell, “The Tipping Point: How Little Things Can Make a Big Difference,” New York, NY, Back Bay Books, 2000. Michael George, “Lean Six Sigma for Service,” New York, NY, McGraw Hill, 2003.