Review – Strategic Alignment

In this course, we explored global business services (GBS) operations in the context of the
business strategy and how the vision, goals and objectives for GBS are defined. The course
covered:

▪ GBS operations in the context of the business strategy

▪ The use of best practices in specific functions of GBS
▪ How the vision and mission for GBS are developed
▪ The scope of specific functions within GBS
▪ The use of offshoring and business process outsourcing (BPO)
We started with a definition of global business services and how it can align with your
enterprise business strategies.
We defined GBS as:

“A global, enterprisewide operating model to organise, deliver and continuously improve internal
business services, such as finance, HR, IT, procurement and supply chain operations. The goal is to
operate internal support services as a business unit focused on providing operational excellence,
creating value and enabling the enterprise to be strategically agile.”
It can include shared services, centres of excellence and BPO, and we saw that GBS can
provide both transactional and knowledge-centric services:

Transactional services

Business services, with well-defined, fixed relationships between input and outputs. They are
executed as a series of rules-based, repetitive tasks and activities, and are usually high in volume
and highly automated or automatable.

Knowledge-centric services

Business services that require human knowledge and/or cognitive technology capabilities for
execution. They are typically low in volume and of high value to the business.

We learned that the range of functions that can be serviced by GBS is very wide. It can span
from finance to legal, and from call centres to health and safety provisions. In this course, we
focused on the four, main general and administration functions, referred to as G&A. The four
functions are finance, HR, IT and procurement, but the general principles can be applied to any
function within a mature GBS organisation.

The prediction for inclusion in GBS by 2020 is:

▪ Finance – 86%
▪ HR – 82%
▪ Indirect procurement – 73%
▪ Order management – 62%
An enterprise today needs to compete in a complex, fast-changing global market and faces more
challenges than ever before. If the supporting services needed by the enterprise are moved into
a GBS organisation, the enterprise is free to concentrate on its core activities. By working closely
with the enterprise, the GBS organisation can become ever more proactive – enabling the
enterprise to grow, adapt and innovate as it faces challenges in the marketplace.

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Four key drivers for GBS are globalisation, maintaining a competitive cost structure,
operational agility and maximising the return on talent.

The evolution of shared services in large GBS organisations can be broken down into
three stages of maturity, defined along three dimensions: governance, service management
and organisational/geographical reach.
Stage 1: Functional transactional excellence (single-function shared services)

Stage 2: Business services excellence (multifunction)

Stage 3: Enterprise strategic enablement (multifunction)

The governance model at each stage of development is typically:
Stage 1: Shared services organisation for single-function or multiple-function shared services
organisations governed independently.
Stage 2: Multifunction shared services organisation, with partly consistent governance model.

Stage 3: Multifunction shared services organisation, with fully consistent governance model for
all functions and business units (BUs) served.
At Stage 3, the service management approach is fully consistent for multifunction, shared
services organisations for all functions and BUs served, and GBS provides services to all BUs
and geographies in which the company operates.

When GBS organisations move up through the value chain, more sources of value are unlocked .

GBS provides support for enterprise globalisation, which also typically evolves through
three stages – international presence, multinational operations and global operations.

Globalisation leaders are those enterprises that are reaching Stage 3 in both aspects of
enterprise and business services globalisation.

Three key competencies required for successful globalisation are:

▪ Visibility of management information

▪ Global manageability
▪ Automation

Key drivers include innovation, slower growth and greater competition, and accelerating
business cycles.

Digital economy

The digital economy refers to the emergence of digital business, which can be defined as “the
pervasive use of digital technology in products, services and value chains, fundamentally
transforming traditional business models and disrupting existing markets and industries.”
Disruptive innovation

Disruptive innovation describes the process where a new, initially simple product or service is
introduced at the bottom of a market and not seen as a threat to existing markets.

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The ultimate measure of the effectiveness of business services functions is their ability to
help the enterprise execute its growth strategies. As these strategies increasingly centre on
innovation, there is a need for IT, finance, procurement and HR organisations to develop very
different sets of capabilities.

Whilst each organisation has business demands and priorities, there are some recommendations
with cross-functional implications:

▪ Communicate and ensure strategic alignment

▪ Adopt advanced modelling techniques pervasively
▪ Foster a culture of innovation and manage knowledge-worker productivity
▪ Innovate across the entire value chain
▪ Mobilise technology skills across the entire enterprise

Role of business services in supporting strategy execution

Today, no business sector is safe from intensifying competition, disruption, threats of

cyberattack, weak or volatile demand conditions, and margin pressure. Whilst responding to
these threats requires innovation, agility and transformation, for most companies r esources are
constrained.

To balance these demands, companies are emphasising cost reductions and rationalising
existing operations as a means of funding innovation and strategic transformation.

What is also clear is the crucial role of business services in strategy execution (including
cost reduction, driving cultural change, working capital optimisation, using technology to deliver
process improvement and supply chain rationalisation).

Enterprise-level success is dependent on their expertise and ability to partner with the
core business.

Strategic implications

Business services organisations need to come to terms with the fact that a stable business
environment characterised by well-known competitors, predictable levels of demand and
consumer preferences no longer exists.

For many, this is a big shift in mindset that requires deep cultural change, with profound
implications for the design of service delivery models and transformation agendas. Agility, i.e.,
the ability to anticipate and respond to change, must be an explicit objective of service
delivery design. Whilst specific aspects of agility will differ for each business function,
information, analytical capability and talent are common themes and priorities for all.

Transformation into world-class GBS

In the section on transformation into world-class GBS, we looked at how a GBS organisation can
be transformed into a world-class operation.

The term “world class” is used to describe an elite group of best-performing GBS organisations
– those that are ranked in the top 25% of performance on both dimensions of efficiency and
effectiveness.

The three pillars of world-class performance in GBS organisations are:

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 ▪ Optimisation of a holistic service delivery model (SDM)
▪ Adoption of a service management framework (SMF)
▪ Competency in integrated transformation management

Strategic implications

GBS organisations are under immense pressure to improve their operational performance and
enhance their strategic value to the enterprise, all whilst expanding their service portfolio and
geographical footprint. These multiple objectives cannot be achieved using an ad hoc, disjointed
approach to transformation or continuous improvement.

Over the following nine units of this course, we will look at each aspect of the three pillars of
world-class GBS organisations and help you learn how to move your organisation toward world-
class performance.

For any function to move toward world-class performance, a transformation journey is

required. The journey involves efforts to improve processes through elimination of redundant
or low-value tasks, simplification, standardisation and automation, as well as consideration of
the optimum placement of services.

In the final section of this course, we explored G&A functions and best practices to understand
the major G&A functions and their scope, together with the use of best practices within the
functions of finance, HR, IT and procurement.

We also considered the critical development areas (the critical issues that companies have the
least ability to address) within each function.
Finally, we examined the proportion of processes that are typically serviced by GBS, BUs and
corporate.

Critical issues – finance

To deliver world-class value as a business partner and deliver on enterprise needs, research
suggests that the finance function must improve key capabilities.
The most critical issue facing the finance function is the integration of enterprise information,
underscoring finance’s pivotal role in analytics and decision support.
The second critical issue is achieving and maintaining a competitive cost structure directly tied
to an emphasis on enterprise cost reduction.

The third critical area of weakness is formulating strategy with the business.
These critical development areas, when taken together with the business challenges discussed
earlier (for example, significantly slowing revenue growth) and the current resource constraints
facing the finance function (significantly reducing finance operating budgets), suggest that the
top-three transformation focus areas of the finance services function are leadership, process re -
engineering and performance management.
Critical development areas – HR

Let’s consider the business issues that HR functions need to address most critically. To deliver
world-class value as a business partner and deliver on enterprise needs, research suggests that
HR functions must improve the following key capabilities:

▪ Dealing with talent/critical skills shortages

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 ▪ Improving leadership development
▪ Enabling business strategy execution
▪ Adapting to business needs

In response to these challenges and pressure on budgets, many HR functions are responding by
creating a technology platform that enables them to:

▪ Roll out more standardised processes and data across the enterprise or globally
▪ Gain access to better data
▪ Have more time to use that data to focus on key leadership and talent management
issues

Critical development areas – IT

To deliver world-class value as a business partner and deliver on enterprise needs, research
suggests that IT functions must improve the following key capabilities:

▪ Big data
▪ Analytics
▪ Time to market for technology solutions
▪ Cybersecurity
▪ Translating technology innovation into business

The large number of critical issues reflects the fact that IT is vital to the pursuit of growth,
innovation and agility.

Critical development areas – procurement

To deliver world-class value as a business partner and deliver on enterprise needs, research
suggests that procurement functions must improve the following key capabilities:

▪ Improve agility
▪ Tap into supplier innovation
▪ Elevate the role of procurement to trusted advisor
▪ Increase spend influence

Vision and mission statements

In the final section, we explained how the vision, mission and objectives for GBS are developed
and achieved. We also looked at the role played by offshoring and BPO.
We saw that the No. 1 priority for most GBS organisations is alignment with corporate and
BU strategic goals.

We explored the difference between vision and mission statements and related definitions of
strategy, strategic objectives and core values, and then considered how GBS goals and objectives
are aligned to the overall vision and mission. We also stressed the importance of ensuring that
the vision for GBS is aligned with the visions of the functions served.

Finally, we looked at general trends in in-house (captive) service provision vs. outsourcing
and concluded that few organisations use just one option for the delivery of all their business
services. Most commonly, a hybrid solution is adopted.

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The choice of sourcing strategy will be driven by a range of factors, such as how quickly the
benefits must be achieved; however, for most organisations, the key driver is the need to
transform business processes.
Although the potential benefits to be derived from the arbitrage gains available from locating
service provision in low-wage economies are an important consideration, increasing access to
high-value analytic skills is considered essential when determining the most appropriate
strategy.