Six Value-Adds to Service Chain Success | Customer Relationship Management | Strategic Management

SERVICES VALUE CHAIN FOOD FOR THOUGHT

MAY 2001

L I N K B Y L I N K : S I X VA L U E - A D D S T O S E RV I C E C H A I N S U C C E S S

The U.S. economy continues to move toward a services orientation. The U.S. Department of Commerce estimates that more than 70 percent of all revenues in 2003 will be associated directly or indirectly with services. Companies that traditionally produced goods only are seeking ways to package their knowledge and core competencies to capitalize on the service trend. They are re-inventing themselves as supply chain management integrators, logistics planners, complex engineering providers, Internet services providers, and a variety of other innovative offerings. In a parallel trend, business process outsourcing is on the upward swing, marked by companies providing their core competencies as packaged services wrapped with service-level agreements.

KPMG Consulting places great emphasis on capturing organizational effectiveness. To facilitate this for services organizations, we are defining the critical interrelated activities that comprise the services value chain.

increasingly establishing themselves as service bureaus in order to remain viable and to provide value to their internal customers. In all cases, service companies and organizations need to reach a balance between operational efficiency and organizational effectiveness. A heavy concentration on lowering operating costs can hamper creativity and innovation. Alternatively, constant innovation can create instability and adversely affect business operations. The dotcoms provide us with a

recent example of what can happen when innovation becomes the rule and sound business plans, operations, and performance management become secondary priorities.

PRIORITIZING VALUE-PRODUCING The question is, do these companies recognize the valueproducing activities, and harness the required solutions necessary for a successful foray into service delivery? The reach and convenience provided by the Internet, customer retention and care strategies, and the lure of higher profit margins and annuity business models associated with services are some of the primary factors fueling this renaissance. Companies that have been providing services as their core business suddenly find themselves with new market competition. These entrants often come with brand recognition and compelling value propositions intact. New competitors are delivering their products embedded within a broad range of service offerings. In addition, service organizations (such as IT, Recruiting, Human Resources, and Financial Management) embedded within large companies are KPMG Consulting places great emphasis on capturing organizational effectiveness. To facilitate this for services organizations, we are defining the critical interrelated activities that comprise the services value chain. These activities have traditionally been individually addressed from an operational efficiency standpoint, primarily utilizing point solutions and business process improvement strategies. We stress the need to evaluate these activities in context with their inter-relations to achieve organizational effectiveness and significant gains on the top line without compromising the bottom line. ACTIVITIES TO PROPEL EFFECTIVENESS What must a services company or organization do extremely well in order to grow the business on the top line while still producing solid bottom line earnings?

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PA G E 1

Six of the key value-producing activities are: Customer Management—Understanding the enterprise’s business vision, strategies, plans, and challenges, and mobilizing the organization to provide services and solutions that directly support the end customer and add significant value, while providing unmatched customer care. Doing these things well can positively impact customer retention, and can promote a deeper, collaborative relationship. Resource Management—Utilizing people effectively by matching their skills, capabilities, knowledge, and career interests to projects and initiatives. These steps are vital to retaining employees, and can be a leading factor in retaining customers. Skills Acquisition—Aligning permanent hire and contingent workforce procurement with the competency models required to deliver highly valued services to the customer, while maintaining a culture of continuous learning, improvement, and collaboration. Workforce Optimization—Combining requirements from booked and forecasted business to effectively forecast skill, capability, and knowledge needs. The output is staff transition, skill development, and skill acquisition plans that provide enough lead time to staff projects and initiatives with capable and motivated people. Human Capital Development—Proactively building training and distance learning programs in advance of needs, driven by forecasted customer requirements and market trends. In addition, utilizing performance appraisal systems and management tools to ensure people are developing both intellectual and social capital to meet ever increasing demands and challenges.

Partnership Development and Collaboration— Ensuring that partnerships are providing value and that the cost of managing them is proportional to the value they are providing. Also, looking for ways to utilize partnerships to deliver more innovative services to a customer base constantly looking for value propositions that support their changing business landscape.

INTERLINKING SOLUTIONS KPMG Consulting offers technology and business operation solutions to address each of the six value-producing activities within the Services Value Chain. When implemented in a prioritized and comprehensive manner, we can help drive our families of solutions to guide your value-producing activities and garner both operational efficiencies and organizational effectiveness. For example, an enterprise focused Customer Relationship Management solution, like our end-to-end offering Connectto-Customer, can establish true 360 degree customer views. Leveraging Internet technologies to deliver a seamless

FIGURE 1

LINK BY LINK: SIX VALUE-ADDS TO SERVICE CHAIN SUCCESS

COLLABORATION AND PLANNING DEMAND MANAGEMENT WORKFORCE OPTIMIZATION SUPPLY

CUSTOMER MANAGEMENT

RESOURCE MANAGEMENT

SKILLS ACQUISITION

PARTNERSHIP DEVELOPMENT

HUMAN CAPITAL DEVELOPMENT

2

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experience in each transaction, Connect-to-Customer provides strategic planning, operational process, technological infrastructure and application integration. Supporting CRM solutions that could be part of the Connect-to-Customer solutions include 1-to-1 Marketing, Sales Force Automation, and CRM Assessment/Quickscan. Our solutions can help significantly improve both the quality and effectiveness of every interaction with customers, strategic partners, vendors and employees by enabling a context-aware handoff and personalization across all communication channels. This solution can help develop and foster the rich collaborative environment necessary to move customer management to become a value producing activity.

FIGURE 2

VALUE PROPOSITION

HIGH

• CUSTOMER MANAGEMENT • STRATEGIC HR • WORK/PROJECT MANAGEMENT • SKILLS ACQUISITION • WORKFORCE OPTIMIZATION • PARTNERSHIP & COLLABORATION • T&E MANAGEMENT

IMPACT BUSINESS OBJECTIVES

• VENDOR MANAGEMENT

LOW EFFICIENCY EFFECTIVENESS

To address workforce optimization, resource management and human capital development, we can help create value via our Workforce Solutions. Focused on connecting content, applications and resources within the enterprise—and maximizing the value chain of that workforce for significant ROI— these solutions might include integration of personalized role-based enterprise information portals, next-generation shared services, or professional services automation. Solutions like these can help transform a client’s approach to developing and managing human capital into a highly leverageable asset. In this approach, resource managers can be enabled to place employees on projects or in skills development opportunities that are timely and well-matched to skill and goal sets. Likewise, employee can obtain access to role-based tools and information to better manage their benefits, personal data and work flow. And in our approach to skills acquisition, we can help align competency models (intellectual and social capital) with the client’s business vision, strategies, values, and goals. These models are then applied consistently across all permanent VALUE-PRODUCING ACTIVITIES AND COMPELLING SOLUTIONS—CAN JUST ANYONE PUT TWO AND TWO TOGETHER? Where do value-producing activities and respondent solutions meet? Certainly, select value-adds can be made possible by examining point solutions which address specific areas. But isn’t a more durable, strategic focus what you had in mind? If so, then the best step is to pair up with an integrator and strategic counselor of KPMG Consulting’s scope and bandwidth. Working with us, we can help ensure that your value producing activities have connected and that comprehensive solutions which propel your enterprise to substantive results and ROI are implemented. hiring, contingent workforce procurement, and partner collaboration activities to fill project teams and open job positions with people who possess the right mix of skills, capabilities, experience, and knowledge, and who are motivated by the challenges, opportunities, and compensation offered.

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ABOUT THE AUTHOR Fred Hencke is a Senior Manager within KPMG Consulting focused on developing Service Value Chain solutions, partnerships, marketing strategies, and business opportunities. KPMG Consulting’s Services Value Chain solutions address human capital management, process optimization and technology integration. Fred has more than 20 years’ experience enabling business transformation through process optimization, organizational development, human capital development, and technology implementation. Fred served as the Global Director for Competency Development at Computer Task Group, an information technology services company. During his tenure he successfully architected and deployed an eLearning program designed to re-skill internal employees as Web developers within six weeks. He led an effort to create a comprehensive skills inventory integrated with human resource policies and procedures. He has also developed several Centers of Excellence focused on program management, Web development, business intelligence, security, network design, and systems management. He used a virtual team organizational model to connect several hundred consultants in a collaborative environment to support business development, solution delivery, mentoring, and services innovation. Prior to joining KPMG Consulting, he was the Chief Operating Officer for a Business Service Provider, responsible for developing partnerships, marketing strategies, and business opportunities, as well as managing operational and organizational performance.
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ABOUT KPMG CONSULTING, INC. KPMG Consulting, Inc. (NASDAQ: KCIN), based in McLean, Virginia, is one of the world’s largest consulting companies with more than $2 billion in annual revenues. Our more than 10,000 employees provide business and technology strategy, systems design and architecture, applications implementation, and network and systems integration, designed to enable clients to leverage technology for stronger return on investment and enhanced service to their own customers, vendors and employees. We serve more than 2,500 clients, including global companies, Fortune 1000 companies, small- and medium-sized businesses, government agencies and other organizations, through six industry-focused lines of business, including: financial services, consumer and industrial markets, high tech, communications and content, public services, and health care. For more information about KPMG Consulting, please contact us at 1-866-FOR-KCIN or visit our Web site at www.kpmgconsulting.com.

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©2001 KPMG Consulting, Inc. All rights reserved. Printed in the U.S.A. 1351MARAD. KPMG Consulting, Inc. is an independent consulting company.

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