NASSCOM BPO Summit 2012: MasterClass II Process as a Science - Pramod Bhasin


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NASSCOM BPO Summit 2012: MasterClass II Process as a Science - Pramod Bhasin

  1. 1. Why Do We Need To Reinvent Business Process Management? Process is a business lever that hasn’t been fully exercised, leveraged, or explored Our customers face multiple challenges in getting to best-in-class process performance Traditional approaches have failed to meet these challenges as they focus on efficiency alone (not effectiveness) Labor Arbitrage will become less important over time with natural demand from customers for “Next wave” of business impact 1 © 2012 Copyright Genpact. All Rights Reserved.Genpact Confidential
  2. 2. Key Challenges Faced by Businesses Today in Getting toBest-in-class Process Performance 1 Organizational silos restrict the enterprise-wide view, leading to significant value leakage 2 Inability to qualify or quantify process performance 3 Focus on process efficiency as compared to overall effectiveness 4 Huge variation in process performance compounded with lack of benchmarks & metrics 5 Unclear inter-linkages between process drivers and business outcomes Need For A Scientific Approach That Focuses On Process Effectiveness And Business Outcomes©2012 Copyright Genpact. All Rights Reserved. 2
  3. 3. The Mystery of Business Process Management Each organization has 7-10 horizontal processes and then vertical processes  Order-to-Cash  Customer Service  IT Helpdesk  Source-to-Pay  Hire-to-Retire CFO SUITE  Record-to-Report ENTERPRISE SUITE  Collections IT SUITEBut still…in a Banking industry, why is there a difference between banks in TAT for…• Loan Sanction & Disbursement?• Account Opening• Day to day services eg. DD issuance• Remittances, etc No One Is Taught The Process… No Science…. No Standards… No Benchmarks Exist…! 3 © 2012 Copyright Genpact. All Rights Reserved.
  4. 4. Huge variation in Business Performance driven by ProcessExecution Source to Pay Reduction in indirect purchasing spend y-o-y • Integrating Account Payables with procurement can Percent of indirect spend reduce working capital by 5-10% and spend by 1-2 pp 4.5 • Non-price levers can deliver up to 2-3X as much reduction in Total Cost of Ownership (TCO) as price 2x+ levers 1.5 • For a typical $5 billion company, it could mean • A reduction in purchase spend by $ 50-150 million over three years Best in class Average • An increase in margins by 100-300 bps Impact of US$ 50-150 mn* over three years Order to Cash • Eliminating input errors in billing can improve DSO by 2- Days sales outstanding (Chemicals) 3 days realizing $35 mn of cash Number of days • Collections strategy that uses intelligence on the 44% payment behavior of customers can help reduce DSO 57 by ~20% realizing ~$100 mn of cash 32 AVERAGE BEST IN CLASS Cash release of US$ 270 mn* ©2012 Copyright Genpact. All Rights Reserved. 4Genpact Confidential
  5. 5. Large Variations In Performance Across Companies Source to Pay Indirect Materials Application to issue Life insurance Collections 15% Card issuers 82% ~1.7X ~1.3X 65% 6.3% 9% ~1.3X 4.8% Best in Average class Best in Average classDeflation as % of total Spend – Best in Average - First year impact on costs. class Placement rate as % of Applications Net Loss as % of Assets ©2012 Copyright Genpact. All Rights Reserved. 5 5
  6. 6. Real World Insights of the Power of Processes …DeliveringClient Outcomes An insurance provider can release up to 50% of claim handler capacity and reduce overall settlement cycle time by 40% by enhancing claims segmentation and the adjudication process 30% reduction in call volumes can be achieved through analytics of customer calling behavior, effective usage of IVR & improving first time resolution By cutting down on spoilage, pricing errors, fines and fuel surcharges by 50% to 75%, a $5BN CPG company can increase its annual earnings from $15MM to $20MM A commercial lending organization can eliminate about 1/3rd of early stage delinquencies through focused early stage collections and eliminate administrative delinquencies by reducing booking, billing and cash errors For a $5BN pharmaceutical company, improving 1% revenue leakage can translate into $50 million top-line impact For a typical $40-50BN in asset credit card issuer, analytics around agent measurement systems and customized training plans can impact losses by ~$100MM Enabling Business Process Effectiveness to Deliver 2-5X Efficiency Through Measurable Business Outcomes © 2012 Copyright Genpact. All Rights Reserved. 6
  7. 7. The Science Identifies the Key Business Outcomes for theCompany … End to End Finance Offering Key business outcomes: 1) Optimize Working Capital 2) Timely Reporting & Accuracy in Accounting 3) Profit Maximization Others - 1 Source to Pay 2 Order to Cash 3 Record to Report 4 Treasury, Ta x, Audit • Working Capital • Days Sales • Time to report • Cash flow & capital • Reduce total cost Outstanding cycle time management of ownership • Plug revenue • Reliability & • Statutory & dilution Statutory Regulatory • Reduce order to Compliance Compliance invoice cycle time Key Enablers Process Excellence & Compliance, Technology expertise, Business Insights Transformation Controllership, Audit and Analytics©2012 Copyright Genpact. All Rights Reserved. 7
  8. 8. Everything Is Related and Inter-Dependent requiring anEnd to End View: S2P Example Failure to link Inadequate spend Incomplete market Delayed or inaccurate procurement visibility assessment receipt transactions to contracts Hindered actionable Wrong negotiation Savings leakages category strategy Manual accruals strategy Spend Category Negotiation & Procurement Payment Management Strategy Contracting Contract non- Inadequate negotiation Inadequate compliance leverage spend visibility Delayed payments Non PO invoices Business Impact Symptom Value leakages and how they can impact Total Cost of Ownership (TCO) 8
  9. 9. Requiring A Holistic Solution That IncorporatesProcess, Analytics And Technology POLICY INSIGHTS DOMAIN EXPERTISE BUSINESS INSIGHTS e.g. Sourcing policy for e.g., compliance through e.g., close integration which commodities are „No PO no payment‟ or between AP and sourcing sourced by what mechanism reducing requisition-to-PO can help negotiate for better at certain spend thresholds cycle time discounts Spend Category Accounts Negotiation Procurement $$ IMPACT Analytics Strategy Payable ANALYTICS FOCUSED IT SOLUTIONS e.g., spend analytics to e.g., e-RFX engine to improve spend visibility and support supplier identify TCO reduction selection opportunities etc.Source: Genpact experience 9 9
  10. 10. Effectiveness Drives a Much Bigger Impact Than Efficiency Efficiency Effectiveness Effectiveness Levers Metrics Metrics Affecting BOs Collections Improving Callable Roll Rate Reduction Accounts per FTE Dynamic Segmentation and Treatment Optimization of Reduced Cost of Reduced gross loss Delinquent Accounts Financial Operations by 10 % Services $ 2MM savings $ 14MM savings Source-to-Pay Cost and Cycle Time Checking Sourcing for PO Processing Compliance Increased Spend Under Cost Savings through Management and Better Streamlining processes by Spend visibility & Spend Visibility Procurement reducing NVAs mgmt $ 1.5 -3 MM savings $ 33 MM savings 10 © 2012 Copyright Genpact. All Rights Reserved.
  11. 11. Real Expertise Requires An Ecosystem Driving OperatingExcellence Operating Excellence Ecosystem©2012 Copyright Genpact. All Rights Reserved. 11
  12. 12. SEP Provides A Very Granular Framework For ManagingBusiness Processes 6 Solution implementation Offers solutions to deliver Identifies drivers including business of performance process, analyti Links business outcomes variability and cs reengineering outcomes and through process Maps every core roadmap for and focused IT benchmarks to efficiency, transfIdentifies the business improvement by ormation process at a key performancekey business measures and leveraging projects, Point IToutcomes for granular level „insights‟ and / analytics key performancethe company drivers „best practices‟ solutions©2012 Copyright Genpact. All Rights Reserved. 12
  13. 13. SEPSM Establishes Linkages Between Business LaggardOutcomes, Performance Measures and Drivers Median Leader Reduction in TCO Level 1 Indirect Source-to-Pay SEP Business Outcome 1% 5% 8% Sourcing Procurement Spend Planning analysis & PO Level 2 issue Key Performance % spend visible accurately % preferred vendor spend Measures 45% 93% 100% 0% 67% 100% Extract, cleanse Divide order among and categorize suppliers and Level 3 data release PO Key Performance % spend extracted % spend categorized % spend through % Discount Capture Drivers accurately accurately catalogues 40% 75% 100% 45% 89% 100% 5% 21% 92% 20% 78% 98% Key ~3-4% deflation can be achieved with 30-40% 30-40% of contracted savings lost due to non Insights/ increase in spend visibility. compliance. 100% cataloguing and no-PO-no pay Practices policy can reduce maverick spend by 20-40%©2012 Copyright Genpact. All Rights Reserved. 13
  14. 14. Benefits of an End to End View of Enterprise LevelProcesses • Provides an enterprise-wide view, cutting across functions and silos • Arms businesses with data for change management, e.g., visibility into performance vs. benchmarks • Affords discontinuous business improvement • Prioritizes the high-impact levers to deliver quick results • Focuses on enabling a capital light solution • Offers deployment flexibility and performance-based commercial models © 2012 Copyright Genpact. All Rights Reserved. 14
  15. 15. Appendix
  16. 16. Summary and Q&A 16Genpact Confidential
  17. 17. Benefits Of The SEP Methodology For Customers 1. TRADITIONAL VIEW OF THE PROCESS – EFFICIENCY OF A SUB-PROCESS Functional optimization resulting in 10-20% efficiency gains 2. ENTERPRISE-WIDE VIEW OF THE PROCESS – EFFECTIVENESS OF THE TRUE E2E PROCESS End-to-end process optimization resulting in 2-5X higher impact on outcomes • Provides an enterprise-wide view, cutting across functions and silos. • Improves process effectiveness to impact a customer‟s operations and provide them significantly higher value. • Arms businesses with data for change management. For example, visibility into performance versus benchmarks. • Offers deployment flexibility and performance-based commercial models. 17Genpact Confidential
  18. 18. The SEP Approach • SEP approach is a new, scientific approach for looking at end-to-end process optimization with focus on business outcomes and process effectiveness. • It focuses on making each customer best-in-class. • SEP is the next wave beyond pure outsourced services; it is thought leadership in business process management. 18Genpact Confidential
  19. 19. Accelerating Business Impact – Smart EnterpriseProcesses SEPSM Key Observations About Managing Smart Enterprise Processes (SEPSM) Business Processes – A New Science • Core enterprise level processes cut • Highly scientific, holistic and granular across functional silos framework that takes an enterprise wide view of processes • Typical focus is on process efficiency vs. effectiveness • Proprietary IP based on analysis of 200 million+ transactions across 3,000+ • Driving effectiveness delivers 3x – 5x managed processes benefits over driving efficiency • Maps client performance at every step of • Companies lack benchmarks to know a process and measures against best-in- how good they could be class standards • Technology is often not the answer– • Offers solutions including process, 50–70% of benefits from process and analytics reengineering and focused IT insights based on achieving business impact SEPSM is a unique proprietary methodology that can deliver 2 - 5x’s the impact on improved cash flow, margins, revenue growth or other metrics©2012 Copyright Genpact. All Rights Reserved. 19
  20. 20. SEPSM Backbone: SchemaProcess Schema is a detailed end-to-end process map with definite start and end pointsdetailing sub-processes, key measures, activities, and the corresponding drivers ofeffectiveness Source to Pay Order to Cash Record to Report Click the attachment to view Click the attachment to view Click the attachment to view the Schema the Schema the Schema 20 © 2012 Copyright Genpact. All Rights Reserved.
  21. 21. SEPSM Backbone: Metric Drill down TreeAn SEP Metric Drill-Down Tree establishes linkages between the overall Business Outcomesand the sub-level Metric drivers. Source to Pay Order to Cash Record to Report Click the attachment to view Click the attachment to view Click the attachment to view the Metric Drill down Tree the Metric Drill down Tree the Metric Drill down Tree 21 © 2012 Copyright Genpact. All Rights Reserved.
  22. 22. Typical Partnership – Evolving from achieving Operations Stabilityto Impacting Business Outcomes Competitive Advantage 2010 “Make Us Better” End-to-End thinking and benchmarking Transformational will allow us to realize our objectives Effectiveness-Focused “Make It Better” Business Value Effectiveness initiatives based on Enhancement knowledge sharing through the Business Quality Council (BQC) Utility-Focused “Make It Cheaper” Efficiency Outsourcing to achieve the benefits of labor arbitrage (40% savings target) 2005 Relationship Maturity Evolving from Efficiency to Effectiveness 22 © 2012 Copyright Genpact. All Rights Reserved.
  23. 23. SEP – Cornerstones Smart Enterprise Process Outcome Efficiency Breaking Levers Benchmarking: Based & Organizational To Best In Class Approach Effectiveness Silos Tweak 23 © 2012 Copyright Genpact. All Rights Reserved.Genpact Confidential
  24. 24. SEPSM approach brings together all components ofprocess excellence to deliver business impact Metric Drill Benchmarks Qualitative & Process Schema Best Practices Insights Down Database Quantitative ToolsAn SEP Schema A metric drill-down From its vast Through its experience Process, analytics and There are two types ofdetails an End-to-End establishes linkages operations of working across technology levers from diagnostic tools:business process between the overall footprint, Genpact has multiple clients across Genpact’s vast Quantitative – deriveddetailing L2 sub Business Outcomes access to a large processes, Genpact experience which can from benchmark dataprocesses, key and the L2/ L3 level database of granular has distilled and help unlock significant across clients andmeasures, L3 metrics and drivers metrics across compiled very granular value in business processesactivities, and the and identifies metrics industries, geographie and actionable leverscorresponding drivers. and practices for s and processes for process Qualitative – derived improving process improvement that from questionnaires performance serves as a guide to based on best and execution common minimum . practices.©2012 Copyright Genpact. All Rights Reserved. 24
  25. 25. Based on An Ecosystem Driving Operating Excellence Focus Up-Stream Process 1 Process 2 Down-Stream Impact Smart Enterprise Processes (SEPSM) Improve Increasing Value to Client/Genpact Enterprise $10MM – Business Insights and $100MM Metric Benchmarks Best Outcome Linkages Practices Reengineering (On-shore) / Black Belt Projects (Off-Shore) End-to-End $2MM – Process $20MM Improvements Cycle Time Cash Flow Customer Satisfaction LEAN/Green Belt Projects Sub-Process $50K – $2MM Improvements Process Health Frameworks Operational $1MM – $2MM Stability $2.79BN Business Impact Delivered, $647MM P&L Impact©2012 Copyright Genpact. All Rights Reserved. 25 *Figures indicative of a $5 BN company
  26. 26. SEPSM brings together all components of processexcellence to deliver business impact Metric Drill Benchmarks Process Schema Best Practices Down Database Detailed granular view of Linkages between the Large database of Granular and actionable End-to-End business overall Business granular metrics across levers for process process Outcomes and the L2/L3 industries, geographies improvement that serves level metrics and processes through as a guide to execution vast operations experience Leverage framework to generate process insights and execute diagnostics©2012 Copyright Genpact. All Rights Reserved. 26