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

© 2012 Copyright Genpact. All Rights Reserved.

Why Do We Need To Reinvent Business Process Management?

Our customers face multiple challenges in getting to best-in-class process performance

Process is a business lever that hasn’t been fully exercised, leveraged, or explored

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

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Key Challenges Faced by Businesses Today in Getting toBest-in-class Process Performance

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Organizational silos restrict the enterprise-wide view, leading to significant value leakage

Inability to qualify or quantify process performance

Focus on process efficiency as compared to overall effectiveness

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


Each organization has 7-10 horizontal processes and then vertical processes

Order-to-Cash Source-to-Pay Record-to-Report

Customer Service Hire-to-Retire Collections

IT Helpdesk

The Mystery of Business Process Management

CFO SUITE ENTERPRISE SUITE IT SUITE

No One Is Taught The Process…No Science…. No Standards…

No Benchmarks Exist…!

But 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

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Huge variation in Business Performance driven by Process Execution

• Eliminating input errors in billing can improve DSO by 2-3 days realizing $35 mn of cash

• Collections strategy that uses intelligence on the payment behavior of customers can help reduce DSO by ~20% realizing ~$100 mnof cash

Order to CashDays sales outstanding (Chemicals)Number of days

Cash release of US$ 270 mn*

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BEST IN CLASS

44%

AVERAGE

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• Integrating Account Payables with procurement can reduce working capital by 5-10% and spend by 1-2 pp

• Non-price levers can deliver up to 2-3X as much reduction in Total Cost of Ownership (TCO) as price levers

• For a typical $5 billion company, it could mean • A reduction in purchase spend by $ 50-150

million over three years• An increase in margins by 100-300 bps

1.5

4.5

2x+

Best in class Average

Impact of US$ 50-150 mn* over three years

Source to PayReduction in indirect purchasing spend y-o-yPercent of indirect spend


Large Variations In Performance Across Companies

Source to PayIndirect Materials

Source to PayIndirect Materials

AverageBest in class

~1.7X

15%

9%

Deflation as % of total Spend –

- First year impact on costs.

Application to issueLife insurance

Application to issueLife insurance


~1.3X

82%

65%

Placement rate as % of Applications

Collections Card issuers

Collections Card issuers

6.3%

4.8%


~1.3X

Net Loss as % of Assets

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Real World Insights of the Power of Processes …Delivering Client Outcomes

Enabling Business Process Effectiveness to Deliver 2-5X Efficiency Through Measurable Business 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

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• Working Capital• Reduce total cost

of ownership

• Days Sales Outstanding

• Plug revenue dilution

• Reduce order to invoice cycle time

• Cash flow & capital management

• Statutory & Regulatory Compliance

The Science Identifies the Key Business Outcomes for the Company …

Source to Pay Order to Cash1 2

Technology expertise, and Analytics

Process Excellence & Transformation

Key Enablers

Business Insights

Others - Treasury, Tax, Audit

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Key business outcomes:

1) Optimize Working Capital 2) Timely Reporting & Accuracy in Accounting 3) Profit Maximization

Compliance, Controllership, Audit

End to End Finance Offering

• Time to report cycle time

• Reliability & Statutory Compliance

Record to Report3

Everything Is Related and Inter-Dependent requiring an End to End View: S2P Example

Business ImpactSymptom

Inadequate spendvisibility

Spend Management

Spend Management

Category Strategy

Category Strategy

Negotiation & Contracting

Negotiation & Contracting Procurement Procurement PaymentPayment

Hindered actionablecategory strategy

Incomplete marketassessment

Wrong negotiationstrategy

Failure to linkprocurementto contracts

Savings leakages Manual accruals

Delayed or inaccuratereceipt transactions

Delayed payments

Inadequate negotiationleverage

Non PO invoices

Contract non-complianceInadequate

spend visibility

Value leakages and how they can impact Total Cost of Ownership (TCO) 8

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Requiring A Holistic Solution That Incorporates Process, Analytics And Technology

$$ IMPACT

$$ IMPACTSpend

AnalyticsCategoryStrategy

Negotiation ProcurementAccountsPayable

FOCUSED IT SOLUTIONSe.g., e-RFX engine to support supplier selection

BUSINESS INSIGHTSe.g., close integration between AP and sourcing can help negotiate for better discounts

ANALYTICSe.g., spend analytics to improve spend visibility and identify TCO reduction opportunities etc.

DOMAIN EXPERTISEe.g., compliance through ‘No PO no payment’ or reducing requisition-to-PO cycle time

POLICY INSIGHTSe.g. Sourcing policy for which commodities are sourced by what mechanism at certain spend thresholds

Source: Genpact experience 9


Improving Callable Accounts per FTE

CollectionsRoll Rate Reduction

Cost and Cycle Time for PO Processing

Source-to-Pay Checking Sourcing Compliance

Effectiveness Levers Affecting BOs

Efficiency Metrics

Effectiveness Metrics

Reduced Cost of Operations$ 2MM savings

Reduced gross loss by 10 %$ 14MM savings

Effectiveness Drives a Much Bigger Impact Than Efficiency

Dynamic Segmentation and Treatment Optimization of

Delinquent Accounts

Increased Spend Under Management and Better

Spend Visibility Streamlining processes by reducing NVAs$ 1.5 -3 MM savings

Cost Savings through Spend visibility & mgmt$ 33 MM savings

Procurement

Financial Services

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Real Expertise Requires An Ecosystem Driving Operating Excellence

Operating Excellence Ecosystem


SEP Provides A Very Granular Framework For Managing Business Processes

Identifies the key business outcomes for the company

Maps every core business process at a granular level

Links business outcomes and benchmarks to key performance measures and key performance drivers

Identifies drivers of performance variability and roadmap for improvement by leveraging ‘insights’ and ‘best practices’

Offers solutions including process, analytics reengineering and focused IT

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Solution implementation to deliver business outcomes through process efficiency, transformation projects, Point IT / analytics solutions


SEPSM Establishes Linkages Between Business Outcomes, Performance Measures and Drivers

LaggardMedianLeader

Level 1SEP

Indirect Source-to-Pay Business Outcome

Level 2

Key Performance Measures

% spend visible accurately % preferred vendor spend

Spend analysis

Planning & PO issue

45% 100%93% 0% 100%67%

Extract, cleanse and categorize

data

Divide order among suppliers and release PO

% spend extracted accurately

40% 100%75%

% spend categorized accurately

45% 100%89%

% spend through catalogues

5% 92%21%

% Discount Capture

20% 98%78%

Key Insights/ Practices

Level 3

Key Performance Drivers

1% 8%5%

Reduction in TCO

Sourcing Procurement

~3-4% deflation can be achieved with 30-40% increase in spend visibility.

30-40% of contracted savings lost due to non compliance. 100% cataloguing and no-PO-no pay policy can reduce maverick spend by 20-40%

© 2012 Copyright Genpact. All Rights Reserved. 14

Benefits of an End to End View of Enterprise Level Processes

• 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

Appendix


Summary and Q&A

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Benefits Of The SEP Methodology For Customers

1. TRADITIONAL VIEW OF THE PROCESS – EFFICIENCY OF A SUB-PROCESS

2. ENTERPRISE-WIDE VIEW OF THE PROCESS – EFFECTIVENESS OF THE TRUE E2E PROCESS

Functional optimization resulting in 10-20% efficiency gains

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.


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• 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.

The SEP Approach


Smart Enterprise Processes (SEPSM) – A New Science

Key Observations About Managing Business Processes

• Highly scientific, holistic and granular framework that takes an enterprise wide view of processes

• Proprietary IP based on analysis of 200 million+ transactions across 3,000+ managed processes

• Maps client performance at every step of a process and measures against best-in-class standards

• Offers solutions including process, analytics reengineering and focused IT based on achieving business impact

• Core enterprise level processes cut across functional silos

• Typical focus is on process efficiency vs. effectiveness

• Driving effectiveness delivers 3x – 5x benefits over driving efficiency

• Companies lack benchmarks to know how good they could be

• Technology is often not the answer–50–70% of benefits from process and insights

Accelerating Business Impact – Smart Enterprise Processes SEPSM

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.20

SEPSM Backbone: Schema

Source to Pay Order to Cash Record to Report

Click the attachment to viewthe Schema



Source to Pay- Schema

Order to Cash Schema

Record to Report- Schema

Process Schema is a detailed end-to-end process map with definite start and end points detailing sub-processes, key measures, activities, and the corresponding drivers of effectiveness


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SEPSM Backbone: Metric Drill down Tree

Source to Pay Order to Cash Record to Report

Click the attachment to viewthe Metric Drill down Tree



Source to Pay - MDDT

Order to Cash MDDT

Record to Report MDDT

An SEP Metric Drill-Down Tree establishes linkages between the overall Business Outcomes and the sub-level Metric drivers.


Typical Partnership – Evolving from achieving Operations Stability to Impacting Business Outcomes

Efficiency

Transformational

Bu

sin

ess

Val

ue

Relationship Maturity

Utility-Focused

“Make It Cheaper”

Effectiveness-Focused

“Make It Better”

Competitive Advantage

“Make Us Better”

Outsourcing to achieve the benefits of labor arbitrage (40% savings target)

End-to-End thinking and benchmarking will allow us to realize our objectives

Evolving from Efficiency to Effectiveness

2005

EnhancementEffectiveness initiatives based on knowledge sharing through the Business Quality Council (BQC)

2010

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SEP – Cornerstones

Smart Enterprise Process

Efficiency&

Effectiveness

Breaking Organizational

Silos

Benchmarking:Best In Class

Levers To

Tweak


OutcomeBased

Approach

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Through its experience of working across multiple clients across processes, Genpact has distilled and compiled very granular and actionable levers for process improvement that serves as a guide to execution

Best Practices

There are two types of diagnostic tools:

Quantitative – derived from benchmark data across clients and processes

Qualitative – derived from questionnaires based on best and common minimum practices.

Qualitative & Quantitative Tools

An SEP Schema details an End-to-End business process detailing L2 sub processes, key measures, L3 activities, and the corresponding drivers.

Process Schema

A metric drill-down establishes linkages between the overall Business Outcomes and the L2/ L3 level metrics and drivers and identifies metrics and practices for improving process performance

.

Metric Drill Down

From its vast operations footprint, Genpact has access to a large database of granular metrics across industries, geographies and processes

BenchmarksDatabase

Process, analytics and technology levers from Genpact’s vast experience which can help unlock significant value in business

Insights

SEPSM approach brings together all components of process excellence to deliver business impact


Based on An Ecosystem Driving Operating Excellence

*Figures indicative of a $5 BN company

Up-StreamFocus ImpactDown-Stream

$10MM – $100MM

Smart Enterprise Processes (SEPSM)

Incr

easi

ng

Val

ue

to C

lien

t/G

enp

act

$2MM – $20MM

LEAN/Green Belt Projects

$50K – $2MM

Improve Enterprise Business Outcome

End-to-End Process

Improvements

Sub-Process Improvements

Operational Stability

Process Health Frameworks

$1MM – $2MM

Insights and Best Practices

BenchmarksMetric

Linkages

Process 1 Process 2

Cycle Time Cash Flow Customer Satisfaction

$2.79BN Business Impact Delivered, $647MM P&L Impact

Reengineering (On-shore) / Black Belt Projects (Off-Shore)


SEPSM brings together all components of process excellence to deliver business impact

Detailed granular view of End-to-End business process

Linkages between the overall Business Outcomes and the L2/L3 level metrics

Large database of granular metrics across industries, geographies and processes through vast operations experience

Granular and actionable levers for process improvement that serves as a guide to execution

Process SchemaMetric Drill

DownBenchmarks

DatabaseBest Practices

Leverage framework to generate process insights and execute diagnostics