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
organizations, we are defining
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
KPMG Consulting places
great emphasis on capturing
organizational effectiveness.
To facilitate this for services
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.

management integrators, logistics planners, Alternatively, constant innovation can create

complex engineering providers, Internet services instability and adversely affect business

providers, and a variety of other innovative operations. The dotcoms provide us with a

offerings. In a parallel trend, business process outsourcing is recent example of what can happen when innovation becomes

on the upward swing, marked by companies providing their the rule and sound business plans, operations, and

core competencies as packaged services wrapped with performance management become secondary priorities.

service-level agreements.
The question is, do these companies recognize the value-
producing 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 compe-
tition. 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
PRIORITIZING VALUE-PRODUCING
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?
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.

S E R V I C E S VA L U E C H A I N PA G E 1
 Six of the key value-producing activities are: Partnership Development and Collaboration
Ensuring that partnerships are providing value and that
Customer ManagementUnderstanding the enterprises
the cost of managing them is proportional to the value
business vision, strategies, plans, and challenges, and
they are providing. Also, looking for ways to utilize
mobilizing the organization to provide services and
partnerships to deliver more innovative services to a
solutions that directly support the end customer and add
customer base constantly looking for value propositions
significant value, while providing unmatched customer
that support their changing business landscape.
care. Doing these things well can positively impact
customer retention, and can promote a deeper,
INTERLINKING SOLUTIONS
collaborative relationship.
KPMG Consulting offers technology and business operation

Resource ManagementUtilizing people effectively by solutions to address each of the six value-producing activities

matching their skills, capabilities, knowledge, and career within the Services Value Chain. When implemented in a

interests to projects and initiatives. These steps are vital prioritized and comprehensive manner, we can help drive our

to retaining employees, and can be a leading factor in families of solutions to guide your value-producing activities

retaining customers. and garner both operational efficiencies and organizational

effectiveness.
Skills AcquisitionAligning permanent hire and
contingent workforce procurement with the competency For example, an enterprise focused Customer Relationship

models required to deliver highly valued services to the Management solution, like our end-to-end offering Connect-

customer, while maintaining a culture of continuous to-Customer, can establish true 360 degree customer views.

learning, improvement, and collaboration. Leveraging Internet technologies to deliver a seamless

Workforce OptimizationCombining requirements

from booked and forecasted business to effectively
LINK BY LINK: SIX VALUE-ADDS
forecast skill, capability, and knowledge needs. The FIGURE 1
TO SERVICE CHAIN SUCCESS
output is staff transition, skill development, and skill
acquisition plans that provide enough lead time to
COLLABORATION AND PLANNING
staff projects and initiatives with capable and
motivated people. DEMAND MANAGEMENT SUPPLY

Human Capital DevelopmentProactively building WORKFORCE

training and distance learning programs in advance OPTIMIZATION

of needs, driven by forecasted customer requirements

and market trends. In addition, utilizing performance CUSTOMER RESOURCE SKILLS
appraisal systems and management tools to ensure people MANAGEMENT MANAGEMENT ACQUISITION

are developing both intellectual and social capital to meet

ever increasing demands and challenges. PARTNERSHIP HUMAN CAPITAL
DEVELOPMENT DEVELOPMENT

2 S E R V I C E S VA L U E C H A I N
experience in each transaction, Connect-to-Customer FIGURE 2 VALUE PROPOSITION
provides strategic planning, operational process, technological
infrastructure and application integration. Supporting CRM HIGH CUSTOMER
solutions that could be part of the Connect-to-Customer MANAGEMENT
STRATEGIC HR
solutions include 1-to-1 Marketing, Sales Force Automation,
WORK/PROJECT SKILLS
and CRM Assessment/Quickscan. Our solutions can help MANAGEMENT ACQUISITION

significantly improve both the quality and effectiveness of VENDOR WORKFORCE

IMPACT MANAGEMENT OPTIMIZATION
BUSINESS
every interaction with customers, strategic partners, vendors OBJECTIVES PARTNERSHIP &
COLLABORATION
and employees by enabling a context-aware handoff and T&E
MANAGEMENT
personalization across all communication channels. This
solution can help develop and foster the rich collaborative
environment necessary to move customer management to LOW
EFFICIENCY EFFECTIVENESS
become a value producing activity.

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 enterpriseand maxi-
mizing 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 clients 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
clients business vision, strategies, values, and goals. These
models are then applied consistently across all permanent
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.
VALUE-PRODUCING ACTIVITIES AND
COMPELLING SOLUTIONSCAN 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 isnt 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 Consultings scope and
bandwidth. Working with us, we can help ensure that your
value producing activities have connected and that compre-
hensive solutions which propel your enterprise to substantive
results and ROI are implemented.

S E R V I C E S VA L U E C H A I N 3
 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 Consultings 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 devel-
opment, 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.
Food For Thought regularly provides views and insights to help readers
navigate and succeed in the world of business technology.
4 S E R V I C E S VA L U E C H A I N
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2001 KPMG Consulting, Inc. All rights reserved. Printed in the U.S.A. 1351MARAD.
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