Quality 2020 virtual roundtable

How Corporate
Changes Will
Impact the
Quality Function
by 2020
18 October 2018
Virtual Roundtable

© 2018 Gartner, Inc. and/or its affiliates. All rights reserved. QLC180804
RESHAPING CORPORATE FUNCTIONS BY 2020
8 Trends Impacting Corporate Functions
Pervasive Digital
Capabilities
War for
Talent
Corporate
Function Drag
Asset
Lite
Data
Scrutiny
Winners
Take All
Eroding Process
Ownership
Regulatory
Fragmentation

What It Is
Digital capabilities permeate all
aspects of business and operating
models, reshaping how companies
(and functions) generate value.
What It Means
Companies (and functions) use digital
capabilities for almost every activity
(every step, input and output of every
value chain), remaking what they
do and how they add value.
1. PERVASIVE DIGITAL CAPABILITIES
Percentage of Company Revenue Spent
on Digital Capabilities
Average
0%
9%
18%
0%
9%
18%
12%
17%
Historically 2016 2020(P)
5%-7%
∆ = 50%
∆ = 42%
n = 2,000 global companies.
Source: Paul Roehrig and Ben Pring, “The Work Ahead: Mastering the Digital
Economy,” Cognizant, 2016.

What It Is
Growth in functions’ (overlapping)
process requirements outpaces their
coordination and efficiency gains,
creating more bureaucracy that drags
on the business.
What It Means
Corporate functions will slow down the
business, threatening growth, which will
lead business leaders and employees
to consider alternatives.
2. CORPORATE FUNCTION DRAG
Percentage of Respondents Across Functions
Who Report That Execution of Each Task Takes
More Time Than Is Appropriate
Launching a New
Business
Expanding to New
Geographies
Launching a New
Product
Acquiring a New
Business
Responding to an
External Threat
0% 20% 40%
36%
31%
25%
24%
22%
n = average of 979 staff across the audit, compliance, HR, IT,
legal, marketing, procurement, R&D, risk and sales functions.
Source: CEB 2017 Functional Activity Speed Test Survey.

Source: Veritas, Global Databerg Report, 2016.
a
Dark Data: Data for which the value has yet to be identified
b
ROT Data: Redundant, obsolete, or trivial (ROT) data that no longer has any
business value, and trivial data with little or no business value
c
Clean Data: Business critical data that is vital to the ongoing operational
success of the organization
52%
Dark Dataa
30%
ROT Datab
18%
Clean Datac
What It Is
Customers, regulators, business leaders
and employees expect companies to
understand what data they (could) have,
what can be done with it, what risks it
poses and how to manage it well.
What It Means
Functions will have to remake
processes and procedures to minimize
unnecessary data collection and usage,
while at the same time ensuring teams
take advantage of data that can drive
more business value.
3. DATA SCRUTINY
Data Types
Percentage of Total Data Stored and Processed
in the United States

What It Is
Access to tools and data means the
business will do more for itself and
expect value beyond current functional
process stewardship.
What It Means
Corporate functions will control fewer
of the tasks they used to consider
core and be pushed to provide higher-
quality experiences and insight when
they do get involved.
4. ERODING PROCESS OWNERSHIP
Widespread Prevalence of Business-Led IT
0%
50%
100%
0%
50%
100%
70%
40%
Percentage of Business
Executives Willing
to Run Their Own IT
Projects
Amount of the
CIO’s Budget
Being Spent by the
Business on IT
Not Just an IT Thing: Functions from procurement
to HR to legal are seeing the business take on more
ownership of their core tasks.
n = 165.
Source: CEB analysis.

What It Is
Stiff competition for scarce talent
(e.g., data scientists) creates the need
for skills-based roles and talent sharing
across functions.
What It Means
The competition for talent will
extend to other functions inside of the
company, requiring functional leaders
to build new relationships and make the
case for the prioritization of their work.
5. WAR FOR TALENT
Demand for Data Scientists
Average Number of New Job Postings
per Quarter
0
2,500
5,000
0
2,500
5,000
1,719
3,411
4,308
2014 2015 2016

What It Is
New products and services can be
made, customized and launched
instantly using resources such as online
software, 3D printing and crowdfunding.
What It Means
In addition to facing new threats
from upstart competitors, firms can
alter and scale their product and service
portfolios with much greater speed,
adding complexity that puts pressure
on corporate functions to quickly
support new offerings.
6. ASSET LITE
Percentage of Business Leaders Agreeing IT
Speed Is Important to Achieve the Following
Goals
n = 3,263 business partners across 17
business functions and five seniority levels.
Source: CEB 2015 IT Clock Speed Survey.
Launch New Products and Services
(e.g., Products and Services That
Use Big Data, Wearables, Internet of
Things, Smart Metering, 3D Printing,
On Demand, Mobile Payment)
Respond to New Types
of Competitor
(e.g., Startups, X as a Service,
Freemium, Social, Sharing Economy)
Respond to Changes in Demand
(e.g., Millennials, Silver Surfers,
Makers, Cord Cutters, Freelancers)
Comply With New Laws and
Regulations
(e.g., Solvency II, Dodd-Frank,
ACA, Right to Be Forgotten)
0% 45% 90%
77%
79%
80%
84%

What It Is
The rise of platforms and network
effects means companies that can
create enough scale can secure most
of the profits in a given market.
What It Means
Companies must make bigger, riskier
growth bets to compete, which will
challenge corporate functions that
need to enable and manage risk taking.
7. WINNERS TAKE ALL
Return on Invested Capital, Excluding Good Will
U.S. Publicly Traded Nonfinancial Firms
1965 1975 1985 1995 2005 2015
0
60
120
Percent
75th Percentile
90th Percentile
25th Percentile
Median
Source: Jason Furman and Peter Orszag, “A Firm-Level Perspective on the Role of
Rents in the Rise in Inequality,” 16 October 2015, http://gabriel-zucman.eu/
files/teaching/FurmanOrszag15.pdf.

What It Is
Global legal and regulatory frameworks
will fragment as more countries assert
their place in the global regulatory and
economic environment and enforcement
activity is driven by populist and
political agendas.
What It Means
Fragmentation of the global regulatory
framework will make it harder for
the business to work quickly while
maintaining compliance and effective
risk management.
8. REGULATORY FRAGMENTATION
Percentage of General Counsels Who View
Populist Political Agendas as a Risk
to the Organization
n = 78.
Source: CEB 2011 Legal Department Transformation Survey.
9%
View Populist
Agendas as
Low Risk
91%
View Populist
Agendas as
High Risk

FUNCTIONAL CHARACTERISTICS EVALUATED
5 Aspects of Functional Value, Ownership and Role Defined
Value Drivers
■■ What outcomes does quality bring to the business?
■■ What does quality help the business do?
Quality’s Role
■■ What is quality’s role in the organization?
■■ What processes or tools does quality apply to enhance business performance?
Business’s Role
■■ What is the business’s relationship with quality?
■■ What is its accountabilities, roles and responsibilities?
Delivery Model ■■ What does the quality function look like organizationally?
Resources ■■ How is quality using its allocated budget?

QUALITY 2020: IMPACT OF TRENDS
5 Key Shifts
Corporate Trends Resulting Functional Shift Required
Because of these trends… …Quality must make the following shift.
Current State Future State
Value Drivers
■■ Data Scrutiny
■■ Pervasive Digital Capabilities
Optimizing the
Cost of Quality and
Reducing Customer
Complaints
Understanding
What Quality
Means to
Customers
Quality’s Role
■■ Eroding Process Ownership
■■ Corporate Function Drag
Prevent Risks and
Eliminate Errors
Help the
Organization Make
Better-Informed
Decisions
Business’s Role
■■ Eroding Process Ownership
■■ Asset Lite
Quality Process
Execution Partner
Quality Process
Design Partner
Delivery Model ■■ Corporate Function Drag
Product Quality
Center of
Excellence
Full Product
Cycle Center of
Excellence
Resources
■■ War for Talent
■■ Pervasive Digital Capabilities
■■ Asset Lite
Process
Enhancement-
Focused Staff
Business and
Analytics-Focused
Staff

Generate Value by Understanding
What Quality Means to Customers
With the increasing availability of
customer data and new analytic
techniques now available, quality
augments the organization’s
understanding of what quality means
to customers by translating data into
metrics and processes.
SHIFT 1: VALUE DRIVERS
Understand Customer Needs by Driving Insight
From More and Complex Data Sources
Implications for the Function
■■ Quality must identify the different ways
in which data analytics can help translate
relevant customer information (particularly
unstructured data) into customer insight.
■■ Quality has to find ways to better collaborate
(e.g., share information) with other functions
(e.g., R&D, marketing) to better understand
customers.
■■ Quality needs to become comfortable with
less precise data.
7 8 9 102 3 4 51 6
Detractors Passives Promoters
Social Media Net Promoter Scores
Focus Groups Customer Personas
Customer Survey

Help the Organization Make Better-
Informed Decisions
Quality enables the organization to make
informed decisions faster by helping
them understand their role in quality.
This effort is tailored to each function’s
particular challenges.
SHIFT 2: QUALITY’S FUNCTIONAL ROLE
Functions Receiving Quality Training
Percentage of Respondents
■■ Quality must establish externally focused
processes and tools that help the organization
make quality-focused decisions in the
moment.
■■ Quality needs to develop and delivery quality-
focused training and support to more parts of
the organization.
■■ Quality must improve its proficiency at “soft”
skills to persuade the organization to drive
quality behavior, which in turn drives quality
metrics.
■■ Communication with middle management
(instead of just function and business leaders)
needs to be more frequent.
n = 205 quality professionals.
Production
R&D
Procurement
Customer Service
Marketing
HR
Communications
Finance
Legal
IT
Sales
0% 45% 90%
88%
60%
49%
51%
28%
26%
24%
24%
18%
23%
22%

Quality Process Design Partner
Quality works with other functions and
business groups to jointly establish and
strive toward shared objectives before,
during and after production.
SHIFT 3: THE ROLE OF THE BUSINESS
Building Stronger Partnerships With Business
Groups
■■ Quality must gain a better understanding
of environments outside of manufacturing.
■■ Quality will need to gain a better
understanding of what quality means to each
of its different business partners.
■■ Quality needs to create processes and tools
that enable business groups and functions
to establish quality objectives on their own,
or with limited support from quality.
■■ In partnership with business groups
and functional leaders, quality needs to
establish metrics that ensure all parts of the
organization have clear quality objectives.
Present 2020 and Beyond
Area of
Focus
Production (e.g.
manufacturing,
logistics)
Manufacturing +
R&D, marketing,
business groups, etc.
Quality
Tools and
Resources
One size fits all
Tailored to needs
of businesses and
functions

Full Product Cycle Center
of Excellence
Quality will not change its center of
excellence model, but it will increase
its collaboration with other functions
and businesses by being involved
in the entire product cycle.
SHIFT 4: DELIVERY MODEL
Quality’s Involvement Throughout the
Product Cycle
Current and Desired
■■ Quality will need to better understand the
stages of the product development process
and customer journey, where it must get
involved, and how.
■■ Assumptions about Quality stifling the
innovation process will need to be addressed.
■■ Quality will need to clarify what aspects
of the customer experience are part
of its purview and which aren’t.
■■ Quality needs to focus on establishing tools
and processes that help identify potential
quality issues before they arise in order to
predict disruptions and customer complaints.
QualityInvolvement
Time
Desired
Current
Step 1
Process
Design
Step 3
Production
Step 2
Engineering
Step 4
After
Sales and
Service

Business and Analytics-Focused
Staff
Investment in people will focus on three
things:
■■ Training quality staff to be business-
oriented
■■ Attracting data analytics experts
Grooming quality champions beyond
production
SHIFT 5: RESOURCES
Quality Leadership Views on the Desired Versus
Actual Proportion of Business-Minded Quality
■■ Dollar investments in personnel will likely
increase because the talent required is more
expensive. Head count may decline.
■■ Leadership skills will need to be developed
as younger generations move up the ranks
and baby boomers leave the workforce.
■■ Budget (from the efficiencies gained
from technology enhancements) should
be reallocated toward personnel.
n = 27 quality leaders.
Source: CEB 2015 Quality Talent Test for Heads of Quality.
Quality
Directors
Quality
Line
0% 45% 90%
88%
58%
63%
34%
Desired Actual

ROADMAP TO THE FUTURE
Future State Activities End State
1. Inform the Business’s Customer Strategy Through New Analyses
■■ Help identify blind spots in the organization’s understanding of customer
needs.
■■ Use data analytics to anticipate and predict customer needs.
■■ Become familiar with new data analytics methods and tools and apply
them to the quality function.
■■ Make distilling data into insight a common habit for quality staff.
Function that generates
value for the organization
by generating customer
quality insights
from structured and
unstructured data; this is a
step to ensure that quality
is embedded in the entire
customer journey.
2. Drive for Efficient, Cross-Functional Ownership of Day-to-Day Quality
■■ Provide clear guidance on what factors to consider to properly balance
business objectives and quality requirements.
■■ Establish organizational leadership by initiating influential projects.
■■ Enable and empower people who are always thinking of quality.
■■ Provide the organization with ways to think about risks and the tools
to help them manage them.
■■ Set up processes and controls that enable speed and quality, not
necessarily eliminate all risks.
Function that works
alongside other functions
to build processes and
a culture that drive for
better quality
3. Understand Other Functional Environments
■■ Create forums to discuss how quality can support quality-focused efforts
across the organization.
■■ Help business leaders identify the metrics to measure quality and risks.
■■ Give business leaders tools and processes that help them think effectively
about what quality means in their world and empower them to use these
new tools.
■■ Work with HR and CXOs to establish and assign ownership of quality goals
to business partners across the organization, including nonproduction
environments. These should be tailored to every function or business.
Business partner
that helps functions
see quality goals as
important and delivers
against them

ROADMAP TO THE FUTURE (CONTINUED)
Future State Activities End State
4. Shift the Quality Center of Excellence Left
■■ Establish a business case for earlier involvement in the development
of new products.
■■ Revise the existing new-product development process by clarifying how
quality will be involved in the early stages.
■■ Establish a business case for including quality in all parts of the customer
journey.
■■ Establish a clear process describing when and how quality will be involved
with the different aspects of the customer journey.
A continued center of
excellence that provides
quality guidance on
all aspects of product
creation and the
customer journey
5. Build Business-Minded Capabilities in Talent and Technology
■■ Make competencies more business-minded (i.e., influencing and analyzing
skills), build training programs that encourage those competencies and
measure performance against them.
■■ Develop a talent strategy that takes into account future leaders may
be younger and have less experience.
■■ Work with IT to create an aggregate system for cross-functional access
to customer data.
■■ Explore areas where technology can provide real-time information
that enhances quality.
Function that leverages
a more diverse talent
pool and more complete
set of tools

WHAT TO DO NOW?
A To-Do List for Quality
1. Convene the corporate quality leadership team
and relevant stakeholders to examine the five
shifts. Ask them to think forward five years, identify
implications for your organization and develop
scenarios for how your organization may change.
2. Include discussions related to the five shifts as
a standing agenda item in meetings with other
functions. Begin brainstorming and drive consensus
on expectations.
3. Define what quality looks like in other functions,
particularly in nonproduction.
4. Work with IT to explore infrastructure capabilities
and needs to create a common corporate customer
database that will be useful across functions.
5. Discuss changing talent needs with HR.
1. Embed the implications of the five shifts
in quality’s strategic plan.
2. Add metrics to quality’s performance dashboard
to track trends related to the shifts.
3. Train business unit leaders to take ownership
of their own function-specific quality metrics.
4. Describe the five shifts and their implications for
the quality function’s structure and role — and
for individual career plans — in quality’s team
meetings, conference calls, emails and newsletters.
5. Explain how the quality function and its value
drivers are changing in meetings with business
partners and suppliers.
Immediate 2019-2020

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