I know it’s pathetic, but one of my wishes during Thanksgiving dinner … other than to avoid major indigestion, plus of course good health to all those I care about … was to learn what great things the HR Tech market’s largest players were doing in the predictive HCM arena. This would clearly make my recently launched research effort pretty darn interesting.
As this is clearly one of the more nascent HR Tech areas, I really don’t expect to hear about an abundance of mature, robust predictive capabilities just yet. I do expect, however, that many of the large HCM / HRMS solution providers we invited to participate in the research will have a reasonably clear and compelling product strategy and execution plans around their product’s predictive capabilities. Also, in my effort to take a read on this emerging capability area (the research’s main objective), I’m hoping to hear about HR Tech customer experiences related to leveraging these powerful capabilities.
When I dabbled on the HR Tech practitioner side (around 20 years of dabbling), my corporate HR colleagues and I sometimes sat around brainstorming about how to possibly predict such things as:
Which on-boarding aspects, if changed, could contribute to accelerating time-to-productivity
What are reliable indicators of “very high upside” in a candidate or employee’s profile
Will a job candidate, employee (considered for a new team or department) or a corporate acquisition target be a good fit from a culture perspective
Will changing an employee’s job, manager or team have a positive or negative impact on performance, retention, engagement, etc.
Will changing comp and/or benefits plans to reduce costs adversely impact the company in other ways
These “skull sessions” often ended with the same seemingly rhetorical question (at the time): “Can we ever expect HR Tech capabilities to help us out here?”
Bottom Line Regarding the Research Just Launched
Whether I’m getting ahead of myself by hoping the above questions will ultimately be supported by HCM systems remains to be seen. But I remain hopeful that I will be hearing from some HR Tech vendors that such predictive opportunities are not only on their radar, but they’re close to rolling these and other impressive capabilities out over the next 12-18 months.
A former colleague had a penchant for using phrases that stuck with me… One of them was – “I have questions for all your answers.” It took me years of working with Charles Edward “Skip” Odell to learn that his middle name was Edward, thereby explaining why the letters “CEO” on his cuffed shirts were not just aspirational.
During those same years, the HR technology domain was very much growing up, and the topic of predictive capabilities wasn’t generating many questions or answers in most customer or solution vendor circles.
While HR technology solutions have clearly matured in many ways (e.g., engaging user experiences leading to broader usage outside HR Departments, mobile computing’s dominance and increasing cognitive capabilities), the use of science within HCM platforms is arguably still at the adolescent stage. Lots of promise, seemingly random growth spurts, daunting challenges and some really pleasant surprises along the way.
Pulling Back the Curtain on Predictive HCM Analytics Capabilities
What are some of the pleasant surprises? Well for starters, literally — as these were in-fact the first predictive capabilities introduced in the HR tech arena — more customers are now using tools that highlight employee retention risks, or future star performers among job candidates. Both of these predictive capabilities, and most others, are of course generally based on validated algorithms adapted to the customer’s business context and data relationships; and either the customer’s data scientists or the system itself (via machine learning) does the adapting and periodic re-calibrating.
But as Skip astutely pointed out, interesting answers often beget more good questions. So relative to predicting retention risk or future star employees — or any other situation or outcome that is attracting predictive HR tech capabilities, here is a small sampling of questions that arise:
What are some of the most impactful and innovative examples of predictive analytics available to HR technology customers today, and which are being widely leveraged?
How long does it typically take for a particular HCM system’s predictive capabilities to start becoming evident, valuable and/or reliable?
Do the predictive capabilities within enterprise HCM software apply to most organizations using them, or is the predictive value sometimes more robust in certain industries or types of organizations?
What are some of the operational factors that might enhance or impede the business value to be derived when deploying predictive HR technology?
When should the guidance and insights delivered by predictive HCM tools be acted upon – including on the basis of prescriptive analytics; i.e., when the system prescribes specific and generally reliable actions to take?
What are the key trade-offs (e.g., benefits and risks) inherent in predictive engines that adapt themselves through machine learning … vs. engines (=algorithms) that rely more on customers to adapt them?
Finally, how will these capabilities evolve over the next few years, and will most customer organizations be ready and equipped to take advantage of these advances?
Announcing Groundbreaking Research
HfS Research will be pulling back the curtain on the above questions and many other interesting nuances related to leveraging these emerging HR technology capabilities. We’re very excited to announce our first-of-its-kind research and Blueprint Report entitled “Predictive Analytics in HCM Systems.” Publication is set for March 2017, and we expect many of the major HCM vendors – both HRMS and Talent Management Suite vendors – to participate.
A Point of View (POV) “Time-to-Predictive Value in HCM Solutions” is also being published this week and is available (complimentary) with a registration if you are not already a member of the HfS research and knowledge-sharing community.
Bottom Line
There are some amazing capabilities being brought to market that clearly demonstrate the arrival of science in HCM systems. For customer organizations wanting to take advantage of the increasing scope of these predictive capabilities, and for solution providers wanting to continue differentiating through related product innovations, the research we’ve just initiated should be quite valuable.
Are you using robotic process automation (RPA) as a way to drive better outcomes for your healthcare organization?
In our research, we are hearing that companies using RPA find the greatest value from it in the quality, predictability, and speed that results from the use of the software to automate rules-driven business processes (there’s your definition of RPA, by the way). And we’d like to hear more examples –stories to share –of how it is being integrated into healthcare operations to impact health, medical and financial outcomes.
Notice in Exhibit 1, that 65% of the respondents in our cross-industry survey say the most value they get from RPA is in driving more predictability and quality in the processes, and half add that speed is of value, while rounding out the top three is freeing up staff to move to other projects. Healthcare respondents mirrored this top three, adding that number four is “creating more reliable datasets for analytics.”
Exhibit 1:
I’d venture to guess that the value of more reliable data sets will increase exponentially as value-based care and reimbursements take center stage in the industry. Predictable, accurate data will be increasingly important in, for example, segmenting patient populations, identifying appropriate and timely care interventions, and capturing and reporting appropriate feedback and insight for reimbursement. Reporting results for reimbursement are absolutely dependent on accurate and timely data.
Where to use RPA in healthcare operations
We heard from one enterprising organization that “every activity, every process is an opportunity for RPA.” Most of the examples we see are in claims processing and coding changes, followed by provider data management where there are many steps that require checking and/or moving data from multiple systems. EXL will share examples of the applicability in care management, for example, on an upcoming webinar, Robotics: A Call To Action In Health Care Management.
But while a number of tasks, activities, and even processes are automated, it is still too often in isolation from a broader process, which can really make an impact. What we have yet to see is dramatic change and impact on the healthcare consumer experience through the use and integration of RPA into a business operation. We’d like to see a significant change to the experience of a healthcare consumer in their patient visit to payment processed, for example, involving RPA, analytics, and customer service.
Think big, and start small—and find your champions. Start where there is the greatest interest in the benefit from the use of it, and the willingness to experiment. It can be anywhere in the operation, really. The key is to identify people who have a passion for using RPA; and in them, you will also find the people who will help drive interest, momentum, business rationale, and results. Results should be about business outcomes, such as reduced fraud or waste, increased medical adherence, reduced readmissions, or better member or patient satisfaction.
In order to get people excited about the prospect of these potential results, it’s important to develop a story around RPA for your internal stakeholders. At a recent HfS Summit discussion with operations leaders, Lee Coulter, Senior Vice President at Ascension and Chief Executive of the Shared Services Subsidiary said that what worked for them was to build a 10 second message, a 30 second speech, and a three-minute story that should include a demo or video clip to “show” how it works. Focus on the impact and results that RPA can drive—the accuracy, speed, and predictability, for example.
Partnering for results
Service provider partners can play a strategic role in identifying opportunities to better leverage RPA. While they are at different stages of maturity, they have been developing capabilities and tools over the past few years on the processes they manage. The use of automation is becoming increasingly sophisticated, especially when you as a service buyer partner with an operations service provider to use RPA in a shared strategy. You’ll find a snapshot of how service providers and service buyers are incorporating automation into their operating models and infrastructures in my recently published POV, Getting the Ball Rolling with RPA in Healthcare Operations.
What’s your greatest challenge, success story, or tip to share?
Just with any change, it takes learning and collaboration to create something meaningful. We look forward to your questions, comments, examples, and stories over the coming months as we figure out how as an industry, healthcare can better leverage RPA to drive better health, medical, and administrative outcomes over time.
Everyone loves to hate grading reports (including the analysts who write them!) If the evaluation criteria are too numerical, some people think the report lacks any strategic analysis. If the criteria favor analyst judgment over hard facts, some people think the report is biased based on the analyst’s emotions or other factors.
And unfortunately far too many people care only about the one evaluation graphic — missing much of the depth and nuance about the market in the report itself needed to really put the graphic in perspective. In fact, the graphic isn’t about who’s good or bad at something, but about finding the best fit for a buyer’s needs and preferences.
My job is to give you my insights about a space but also to give enough context so you can make informed choices with that analysis. And that could include coming to the conclusion that you disagree with a result or a starting assumption.
With that in mind, I want to be more transparent about some of the disagreements with the recent blockchain primer I wrote. I gave the service providers evaluated in the report the opportunity to tell me their thoughts.
Below are the comments from the ones who replied. (I choose to believe the non-responses from other providers as agreement that the report was perfect…)
The Providers React
Many providers appreciate HfS Research’s effort to take on this emerging area, noting that the market wants more information. They also mention many improvement ideas. Here are the questions I asked, the answers I received, and any final comments I have on the question.
What do you think the report missed/didn’t cover sufficiently?
Generally, the providers don’t have too many issues with what was covered but offer some ideas of places the report could have drilled deeper, including:
The report could have included more specific offerings and capabilities, like the availability of a provider’s internal and external training on blockchain as well as the availability of a consultative framework to support clients in identifying and qualifying use cases to co-creating the client’s product. Other examples of specific offerings include sandboxes and design thinking sessions.
While the report focused on BFSI, it could have included a broader perspective on where blockchain technology is heading, and which industries and segments are building the first implementations.
CFR’s Take:We’ll be doing a full blueprint in 2017, where we’ll dig into specific offerings and get more detailed about capabilities. We’re also doing more research on many areas of blockchain, so the feedback on giving a broader perspective of the space makes a lot of sense, too.
What did the report get wrong?
Several providers feel that the report didn’t clearly define execution (the X axis) and innovation (the Y axis.) Some feel that they would have provided different information if the criteria were clearer during the research process and mention the following:
The lack of clarity meant they couldn’t fine-tune their answers to what we were seeking. One provider pointed out that we didn’t specify if our focus on client projects was focused on something like numbers of billable blockchain consultants on projects or if it was people who had been trained on blockchain internally, or capacity available to start new projects.
Related to explaining innovation and execution axes, it would have been helpful to explain each provider’s positioning specifically. For example, what made one player more innovative than another? The mini-profiles didn’t specifically call out the grid positioning.
Is the Blueprint Guide the right way to measure blockchain, given it’s so new? Maybe a different report format to explore a market before doing an evaluation is a better approach.
CFR’s Take: Since this was an early first-pass at assessment and not a full blueprint, we used a starting point set of criteria. Also, we recognize that this report switched from one analyst to another, so each analyst always brings a different perspective. But the broader point is taken to be clearer in how we define criteria.
What would be the next logical place for HfS to explore blockchain further?
There are some common requests here, including:
Cover more industries. Several providers mention healthcare, retail, media, and government as other industries they feel should be covered and where they had good client examples that the BFSI report by definition didn’t demonstrate. They also want us to keep studying blockchain in financial services and not stop with just this one report.
By domain area, IoT and supply chain demonstrate great use cases for blockchain and need further exploration.
CFR’s Take:We’re researching supply chain and IoT in blockchain and agree that they’re great places to explore further. We’re looking at other industries too, but that may take longer depending market developments and other factors.
What Did The Report Miss Or Get Wrong About Your Firm?
Most providers didn’t take us up on the offer to publicly voice their issues with our assessments of their firms, but two did. I edited for space and clarity but otherwise used the exact wording from the providers.
EPAM
At EPAM, we’re working on different use cases with different clients and we realize that we can group use cases by technical requirements towards blockchain. We created two prototypes (platforms) that cover over a dozen use cases from multiple industries. After review, we realized that this was not very clear in our initial presentation.
More generally, EPAM believes that when it comes to implementing software solutions there are multiple components/layers in the game: Front End, Integration layer, Backend (business logic + storage). Blockchain is a variation of a storage and limited business logic with some features to improve collaboration between parties. There are a number of different Blockchain frameworks available on the market. Most of the core crypto functionality will be addressed by framework developers so there is no urgent need for service providers to have an army of cryptographers (this is good if they have several).
Service providers need to have Architects, Business Analysts, Testers, and Infrastructure Engineers to be able to integrate/use Blockchain into projects. Their readiness should be measured by the core knowledge they have, ability to scale this knowledge, availability of consultative framework, projects completed (PoC, Production), infrastructure readiness, and client feedback.
IBM
IBM thinks HfS may have underestimated IBM’s innovation in blockchain and offered the following further details. (CFR NOTE: IBM also referenced several documents on blockchain that are available on the company’s website for anyone who wants to get into the details behind the statements below.)
IBM thought leadership. IBM, with the support of the Economist, recently surveyed 200 financial institutions in 16 countries on their experience and expectations with blockchains. This study includes findings like:
Fifteen percent of banks and 14% of financial market institutions surveyed (the early adopters) intend to implement full-scale, commercial blockchain solutions in 2017, and roughly 65% expect to have blockchain solutions in production in the next three years.
Banks identified three business areas with the highest benefits (reference data, retail payments and consumer lending) and three areas where blockchain-based business models will have the most impact (trade finance, corporate lending and reference data).
Financial markets institutions are investing most in five areas: identity and KYC, clearing and settlements, collateral management, reference data and corporate actions.
IBM client innovation leadership with the most centers around the world to help clients get started on their first blockchain project, with IBM Bluemix Garage for Blockchain centers in New York, London, Singapore, and Tokyo. IBM can also dynamically open a “popup” center when and where needed.
IBM industry innovation leadership, as a founder and leading contributor to the Hyperledger Project.
IBM offering innovation leadership with IBM Blockchain, based on the Hyperledger Fabric, and available on IBM Bluemix, which enables developers to easily and quickly develop applications while testing security, availability, and performance of a permissioned blockchain network. IBM Bluemix also allows the IBM Blockchain service to be integrated with other Bluemix services such as IoT, Mobile, Analytics and Watson.
Read through this and then don’t forget to add your own thoughts in the comments. Let’s get a dialogue going about blockchain services.
Procurement BPO has seen a more rapid move to “As-a-Service” — agile and on-demand — than other horizontal offerings. At the center of this movement is the maturity of procurement platforms and networks such as Ariba, Coupa, and GEP, the high degree of automation due to the transactional nature of large parts of the outsourced work, and increasingly strategic use of talent with subject matter expertise. These elements have led to more productive and “intelligent” operations. And at the same time…procurement outsourcing has become cheaper.
The increasingly common use of technology platforms, as well as maturity and confidence in service delivery, has driven down the contract value of procurement BPO deals. In the early days of procurement outsourcing labor-based deals often exceeded $100 million, this number dropped steadily to $50-60 million (five years ago) and currently sits between $25-30 million over five years. Growth dropped in five years to single digits from 12-15%.
Service providers have needed to develop and invest in a strong vision for procurement to drive change on themselves, or risk getting stuck in labor arbitrage. Bringing together an understanding of clients and technology plays a role of paramount importance in continuing to deliver on rising expectations.
A recent HfS Study on Intelligent Operations found the most important driver outsourcing is to drive up productivity. One in six respondents at the SVP level or higher, sees replacing their current (legacy) provider with one that is driven by As-a-Service (they’re more flexible, employ better use of technology and talent) as the way to get to this Intelligent Operations end-state. In this service engagement users in the enterprise get a better user experience—potentially resulting in more compliance, better stakeholder relationships, and stronger business alignment. We are currently exploring these stories and examples in our current research to be published later this month in the HfS Research Blueprint on Procurement Operations.
Moving to As-a-Service will lead to new opportunities and profitability for buyers and providers
Service providers are focusing on how to increase the value of their offerings to service buyers, and sustain their position in the market by investing in strategic sourcing and category management, areas that require higher skilled talent and are less suitable for Robotic Process Automation…and with potential for cognitive solutions. One service buyer we spoke with during our Procurement As-a-Service Blueprint research mentioned the big value she experiences from her service provider is a constant dialogue bringing new ideas about the future of procurement and challenging the current mindset and procurement operations model, focusing on more alignment with business stakeholders. In this particular engagement value add in service delivery has shifted from an execution focus to a strategy driven partnership approach.
Thus, procurement is a valuable area for many service providers and buyers. Buyers report more flexibility and scalability in their operations and experience more innovative input from their As-a-Service provider. And, some providers report achieving double-digit growth in the practice at the moment due to more technology in delivery—nonlinear growth. It’s a change we anticipate seeing more of in the outsourcing services market.
What to Watch
With the impact of the As-a-Service journey firmly visible in the industry, we stay focused on some key questions for the procurement services:
Has the downward spiral in procurement BPO contract value reached the bottom? How are service provider – service buyer expectations and relationships changing? Will we see service providers create new growth with Procurement As-a-Service delivery and commercial models? And will buyers get the support they need from As-a-Service providers in building Intelligent Operations? Stay tuned for more.
Breaking down the barriers between the end-customer and the business support functions is so pivotal for success in today’s world of the OneOfficeTM. And one place to start is by identifying the potential intersections where there is a shared outcome. We’ve seen how this approach can work for sales and procurement, leading to increased sales and compliance.
In my colleague Derk Erbe’s post, Why We Should Love Procurement, he encourages the much-maligned procurement organization to “be a business facilitator” and the business to be a partner with procurement to contract, buy, and use services from third parties in the most beneficial way for the business.
Just recently, I heard three good reasons to “love procurement.”
This story of collaboration between procurement and sales led to (1) increase in closed deals for sales, (2) increase in compliance, and (3) increase in mutual respect. It also, by the way, caught my attention as an example of using Design Thinking for an internal function, taking a stakeholder-centered (empathetic) approach to defining and solving a problem.
Thinking “outside the box” on how the skills of a sourcing professional are relevant to the business more broadly
In this example, the global sourcing office that provides support for contract management at Equifax, among other sourcing activities, had little interaction with the sales team, whose activities had some “loose ends.” At times, contracts were signed, for example, with non-compliant terms and conditions, some of which the company was not set up to deliver effectively in a timely fashion… if, in fact, the execution team could access the signed contract, which may just be sitting on the sales team member’s hard drive. The right people were not getting involved at the right time with the sales team to help shape, close, and deliver the business. Some of these “right people,” the Equifax leadership team realized, are in the sourcing organization, and are not just compliance experts, but also have a negotiating capability that could be better applied to its business more broadly.
Here’s where Tim Brown, SVP, Equifax Global Sourcing Office, and his team took a Design Thinking approach to defining and solving the problem. Giving some thought to what matters to the sales team – closing deals and booking sales, he tapped into relevant expertise on the sourcing team—people who buy products and services. The sourcing team for the company is a set of professional buyers, and the sales team is a group of sellers. What if, under a mandate of change, instead of providing a checklist of terms and conditions and hounding sales teams which sourcing groups are often (justly or unjustly) better known for, he offered the sales professionals something that addresses directly what they care about: closing deals.
Role playing may be awkward at first, but it can turn into coaching and valuable interactions that drive business results
The sourcing team offered to role play – “let us be the buyer as we have sourcing buy experience and can help you practice and also test/understand the buyer point of view.” As the dialogue played out, there were times when the sales team realized that the procurement professionals were sometimes a step or three ahead of them in the negotiations… and the sessions turned into real strategy and coaching interactions.
In some cases, the sales team started bringing the procurement team proactively into deals and coordinating support through them. They became a team with a shared goal – grow the business, and in a compliant way. Because the procurement team is now a part of the sales process, there is more interaction, and therefore, more likelihood of adopting the common terms and conditions, faster escalation and resolution of issues, better contract management… In addition, the sales team is closing deals more expediently.
Bottom line: The sourcing team took an empathetic approach to understanding what would be relevant and valuable to the sales team, creating a valuable intersection, which also led to addressing challenges around contract management and compliance.
The teams, as a result, work more collaboratively and close business more effectively and efficiently. Procurement and sales, therefore, are partners in growing the business, from the back through the front office, most likely creating a better experience for their customers as well.
Predictive analytics in human capital management continues its slow but inexorable march out of the sizzle phase and into the steak — or for my vegan friends quinoa — phase. As this phenomenon is occurring, a few topics are getting considerable air time.
These include:
How are predictive engines adapted and applied to the unique business context of every organization – and by whom!
What types of predictive capabilities in HCM solutions (largely algorithms coupled with machine learning and human testing) have the most relevance and value to a particular HR/HCM agenda?
Will the predictive analytics guide in solving business problems? … and the all-important …
How much do data scientists earn and can HR afford them?
Forecasting the winners… more to come (winners and research)
An HCM or Talent Management offering that lacks a compelling predictive analytics strategy and capability set, and is competing outside of smaller companies, is akin to the proverbial “dog that won’t hunt.” (Yes I’ve fully acclimated to living in the South). Although from the buyer perspective, trying to unpack a vendor’s people analytics strategy, or just distinguish it from other capabilities out there that sound awfully similar, might keep some dogs hunting for a while. I’ve maintained for years that the HR tech market needs much more clarity around how solutions are different and why the difference really matters, in a language that typical HR professionals relate to. The absence of this makes the landscape more cluttered and more confusing for buyers.
I’ll be covering key operational and technology dependencies that affect the leveraging of people analytics in my upcoming HfS Blueprint Guide entitled “Predictive Analytics in HR Technology.” This will be published in early March 2017, but way before that, my related HfS POV is coming out in the next week or so. Among other things, it will offer-up a new industry metric called “Time to Predictive Value.” For now, here’s a preview.
Assessing a solution’s predictive analytics capabilities – checkmark or not
Here are three lenses to apply when evaluating whether an HR tech product’s predictive analytics will achieve desired outcomes; and by product, I mean HRMS platform, Talent Management Suite or HR Point Solution:
Time-to-Predictive Value (“TtPV”) is my stab (POV forthcoming!) at creating a meaningful guidepost to help judge one aspect of a product’s capabilities in this realm. It will hopefully bring some much needed clarity to a domain where, for example, “retention or flight risk” -– not a very meaningful metric in isolation, as most metrics aren’t –- often gets a vendor a quarter or half-way toward qualifying for a predictive analytics checkmark.
There are various operational dependencies for leveraging predictive analytics in HCM (or within any business discipline), such as having a large enough relevant data set, sufficient analytics and data science competencies and staff, pursuing closed-loop validations with well defined scenarios, applying appropriate calibrations for different data (e.g., job and organizational) contexts either performed by people or machines (via machine learning), etc. These dependencies and conditions typically take time to be addressed –- from weeks to months or longer. Buyers should have a sense of when they will actually see the predictive value manifesting itself, as that influences ROI and is also a major input to my lens #2.
Degree of Predictive Analytics Business Impact: There’s a wide range of potential business impact and value to be derived from these capabilities in HCM. Two factors that seem to correlate with impact beyond TtPV:
– Whether the best actions or decisions are being guided by the predictive information. In other words, is the analytic prescriptive as well as predictive? (A reason why retention risk in isolation probably has less value than what is often hyped.)
– Is the business problem being solved/avoided, or opportunity created, going to deliver noticeable competitive advantage? Examples include knowing the most important predictors of job success in a critical role, or what factors materially drive or impede employee productivity or customer retention, or is the organization truly ready to succeed on a strategic initiative?
Finally, Innovativeness (yes, it’s a word) of the predictive analytics capabilities: The more innovative a set of these capabilities are, particularly if they lead to practical and measurable business value delivered in relatively short order, the more it inspires other creative ways for solution providers to help solve HCM business problems. Data correlations and cause-and-effect relationships that are very intuitive to discern or simply the product of good common sense (e.g., freezing salary increases or cutting back on company-paid benefits will likely result in a spike in employee turnover) earn very low marks on the innovativeness scale.
In contrast, when Walmart years ago determined that putting diapers on sale will often lead to increased beer sales (somewhat logical, but only AFTER the non-intuitive relationship was discovered), now that’s a winner.
Bottom line
People analytics is hot, and predictive capabilities is a major reason why. But in order for customers to derive business value commensurate with what they are paying for the surrounding solution, they must look beyond the sizzle and assess the quality of the steak in meaningful and business-relevant ways.
Procurement BPO has changed substantially over the last decade. Growing maturity of procurement technology and commodification of significant parts of the procurement value change altered the value proposition of procurement BPO: From very large lift and shift outsourcing deals, heavily dependent on labor arbitrage, to smaller (about a fifth the size of ‘legacy’ deals) engagements leveraging procurement platforms, advanced analytics and intelligent automation. This exemplary of the shift in services we call the “As-a-Service Economy”. As we interview service buyers and service providers for the 2016 Procurement As-a-Service Blueprint, we home in on five facets representing Procurement As-a-Service:
Continued use of automation and robotics in services. Transactional procurement has changed tremendously. Not only by better platforms (see #5) leading to fewer and fewer exceptions in processes, and processes and exceptions that can’t be handled on a platform can be done with Robotic Process Automation. As an illustration: in spend analytics automation is used to automatically aggregate, cleanse, validate, classify and report spend data. Further areas with lots of intelligent automation potential are invoice processing, purchase order management, contract management, auto-routing of exceptions to stakeholders, invoice matching procedures, payment status and tracking.
Traditionally, the ‘higher value’ activities in contract management, category management and strategic sourcing have been consultancy driven. Skills are scarce and hard to repeat and scale.
It’s about knowledge and expertise and labor intensive processes. The market sees an accelerating talent issue, as category and sourcing experience is scarce and you can’t buy experience. Really good sourcing or category experience is built over a minimum of 10 years and many experts are retiring at a higher rate than new talent can be brought on. So there is a need for knowledge management and an opportunity with cognitive and AI becoming more mature to solve a part of this puzzle.
With cognitive platforms maturing, we will see a change in the more strategic parts of procurement.
Strategic sourcing and category management expertise and capabilities. Sourcing and category management drive a lot of value for clients, for instance in tail spend. There are many small categories, small sourcing events and potentially poorly sourced products in enterprises, which don’t warrant building in house category expertise. Procurement As-a-Service providers are expanding internal category management and sourcing capabilities by attracting and retaining more sourcing talent, arming sourcing and category talent with more and better analytics, insights and market intelligence and nurturing an ecosystem of partners, growing in the role of brokers of capability.
End-to-end capabilities. Service providers increasingly bring in traditional sourcing consulting skills into Procurement As-a-Service delivery, opening new doors to buyers looking for consulting skills at lower (BPO) costs, enhancing capabilities across the value chain. Procurement As-a-Service covers the entire Source to pay (S2P) Value Chain. The growing role of technology is enabling closed loop processes, with advanced analytics creating continuous feedback loops. New value creation in transactional procurement hinges on one to many solutions and services, deriving data and bundling insights across multiple client engagements. The game in procurement business services is scale, being able to deploy limited skilled resources across multiple clients, not on the project basis but on concurrent, day to day, shared basis.
Providers’ ability to bring sustainable change to the client organization is key to Procurement As-a-Service. Traditional challenges are compliance with procurement policy, contributing to transforming the procurement function and stakeholder management as part of continuous change management, beyond the transition period.
Commercial models. HfS’ research shows that while As-a-Service delivery is gaining ground in many horizontal and vertical offerings, the adoption of As-a-Service commercial models is lagging behind. Gain-share was popular in the early days of procurement outsourcing, but its popularity seems to have faded since in many cases the wrong behavior was incentivized. Determining actual savings and which part of the savings should be contributed to whom proved a nightmare. We are having a good look at how service providers supporting the As-a-Service vision introduce new commercial constructs and if they are bringing those into existing client engagements.
Platforms. Procurement technology is now much more integrated in platforms, where much of the technology of the past was separate, heavily customized and bespoke (point) solutions. SaaS enabled technology platforms such as Ariba, Coupa, SMART by GEP, Tradeshift, Accenture’s Radix and Capgemini’s IBX have taken a significant role at the core of procurement. In a nutshell, platforms consolidate a set of suppliers, automate most processes and put (commoditized) processes at the fingertips of buyers.
Platforms are eating into the traditional procurement outsourcing model. The mega deals of the past slimmed down due to the degree of technology being sourced, reducing human labor dependency in procurement. Key ingredients of Procurement As-a-Service are usage of platforms, services with embedded platforms, services around platforms and integration of platforms in service delivery.
What To Watch
Winners in Procurement As-a-Service are those providers going beyond merely providing a replacement or extension of existing procurement, by providing a vision and strategy for the future of procurement.
This vision includes:
Leveraging multi client insights, experience and buying power
Models for Customer management
Providing smart solutions for indirect (tail) spend
Expanding expertise in strategic sourcing and category mgmt
Putting Intelligent Automation at the core of (digital) procurement operating models
Leveraging procurement platforms (proprietary and 3rd party) in engagements and the ability to provide technology management across clients in a one to many model
Building closed loop processes
Data and information foundations
Using advanced analytics for (near) real time information and insights
Skills in consulting, technology and relationship management
End to end supply management
Creating communities for clients
The 2016 HfS Procurement As-a-Service Blueprint will investigate the progression service providers have made on the As-a-Service Journey, their vision for the future of procurement and their ability to bring this vision into the real world of procurement.
From An Interview with Charlotte Bui, Global Lead of Design Thinking at SAP
Recently a colleague in common introduced me to Charlotte Bui, Global Lead of Design Thinking at SAP, and I chatted with her about how design thinking is used with SAP clients. I’m sharing snippets of this interview to get you thinking about how to use design thinking in your work, and in your partnerships and outsourcing engagements to drive new levels of innovation and impact from them. Consider it a way to address the challenge Phil laid out in his October 2nd blog: “let’s make outsourcing great again”… because there is a lot of untapped potential …
Charlotte, how do you bring design thinking into your work?
We ask questions to uncover and discover the true needs of our customers as it relates to their business and their customers. What that means is that we often dig deeper to better understand the “why” behind their needs, their motivation. We ask questions about how the work they do impacts stakeholders and customers, such as: Why do they need this? Why do they care? What’s missing? These questions can be applied to any situation to get focused on how to solve problems with a human-centered, customer first approach, versus a business-centric, solution first approach. And by leading with listening, we work with them to help uncover what’s missing or even what could potentially change their entire business model.
Business process services and IT services is a process driven industry; what can you tell us about how to structure an approach to work that uses design thinking? We share customer stories and we talk through our method; there are many design thinking methods that all share a same common theme. At SAP, we use “look-think-do.” (link) It is about understanding WHO you are doing it for, cultivating ideas, finding the one (or more) that is real and can be implemented, and execute it. That last step is where the value is realized from the design thinking driven work. We use design thinking to understand what clients need, then work to define and apply the right solutions to bring those ideas to reality.
Will you share a story with us about how design thinking is part of a corporate culture?
Look at Discount Tire, which is a tire company mostly in Arizona, California, and New Mexico. They are well known for their friendly approach to something as common as tires because at the core of what they do is ensuring safety. Yes, they need to sell tires to be in business; but the tires need to support a safe drive. The team at Discount Tire continually thinks about how to create that safe situation for drivers, and that leads to services with loyal customers. In the video they made to capture their experience, Discount Tire employees talk about “slowing down and thinking more,” and “making decisions with empathy.” For them, it was not a “one and done” project. Discount Tire liked the design thinking approach and results so much, they created dedicated spaces for their employees to keep using the approach they learned while working with SAP.
A guiding principle of Design Thinking is prototyping. If you are talking about doing delivery services in a different way, how do you prototype?
We do low and medium fidelity prototyping: storyboards and vision videos, for example. We take ideas coming out of a workshop engagement and put it together into a story and then play the story back. For example, for a discrete manufacturer exploring the use of 3D printing, we would develop an end to end story, such as, if you used 3D printing on site, here’s how your supply chain might change… what it might look like… in a video or storyboard. The power behind low and medium fidelity prototyping is the ability to see the different ideas in action and imagine a future with those concepts applied. This allows for iterations without long-term investments, promotes learning, and embodies the concept of “fail forward” to ensure the changes can be easily adapted.
Have you seen other companies besides SAP that are using Design Thinking in their culture? Which ones come to mind as a good example of incorporating Design Thinking into the way they work? Has it helped them change their business?
There are several other companies that use design thinking although most of them are in the business-to-consumer market. Harvard Business Review recently profiled the CEO of Pepsi, Indra Nooyi, who introduced design thinking into the core of the company, driving change that has resulted in revenue and stock price increases for the past few years after stagnating. (link) Other familiar brands like P&G, Marriott, and Fidelity are well known in the design thinking sphere where they also customize the concept in order to ideate and co-create with their customers. These companies are going beyond just dabbling in it, and are working to make design thinking a part of their organization.
What if Design Thinking is not part of the culture or driven by the leadership in your organization? How can someone use it in her or his everyday work?
I rely on a broad ecosystem of people who leverage design thinking every day, including Mark Leung, Director at Rotman DesignWorks, who shared his approach around being a DT ninja at the onset. Even without a “guru” or network, you can practice with design thinking tools and techniques in your everyday work, like using empathy, thinking out loud (write up what you think on a board rather than your little black notebook), and doing small rounds of ideation and prototypes. You’ll find other tools on the Stanford d.school site, as well.
As part of our journey at SAP, we were very fortunate to partner with the creative technology firm Gorbet Design. During our time together, we built a business-focused design approach to working with customers, and learned how to leverage those tools and techniques to uncover and solve both internal and external business challenges. We found that a design thinking approach that includes perspectives from many people, rapid iteration, and a focus on the human in the system will generate far broader and more innovative ideas than a standard business approach.
I have learned that you don’t need to wait for permission to use design thinking, you need to just start doing it… delighted customers and powerful results speak for themselves. You’ll find examples in these customer stories.
Charlotte, thank you for sharing your experience and ideas that hopefully will inspire the designer in more of us!
In summary, design thinking can help you create “connections” with your customers and client base because it is about knowing, understanding, and creating new and creative ideas leading to solutions that enable those connections. Connections and experience create relationships and loyalty, which is good for business… and the financial bottom line.
Even if you are not a designer, don’t have a budget for engaging a third party for a workshop, or have a leader promoting design thinking, you can incorporate the principles of Design Thinking—asking questions, observing your end users, experimenting—into your own approach to problem solving and start a new movement.
The funny thing about innovative projects is that everyone likes to talk about buying them as if innovation is a product you just pick up off the shelf at the store. But real innovation – exploring ideas, opportunities, risk, and implications of change – means you likely don’t even know what you’re buying. You’re not buying a packaged piece of software or a defined solution. You’re really buying someone who can be a co-creator with you, helping you wade through the mass of tangled and often conflicting options available to discover and build something that adds a unique value to your business.
When you’re experimenting with business opportunities it’s complicated enough, but when you add a technology or solution area that’s just emerging, it gets doubly complicated because often the service providers don’t have tons of experience themselves in the new area. Blockchain is a perfect example – most service providers are themselves exploring what blockchain can do for their clients and vertical industries. My latest research into emerging blockchain services shows this, with most providers still in the early days of the blockchain efforts (see Exhibit 1)
Clients and their service providers are learning blockchain together. This is bad if you want someone to hold your hand and tell you everything is going to be ok, that they have the answer for you (by the way, no judgment from me on this – if there’s a well understood solution and you can hand it over to someone to get it done, go for it.) BUT it’s fantastic if you really want to take control of your own business destiny, be strategic and really work collaboratively with a partner to find the right opportunities and create solutions together. It’s a rare chance to be an equal intellectual partner with your services firm and in fact potentially for the provider to learn from you as your team researches opportunities and bring in the provider to help test some of those opportunities.
Five considerations for selecting a services partner for blockchain experiments
If you can’t just send out a standard RFI with what you’re looking for, how can you pick a service provider to help you explore blockchain? Try some of the following criteria:
Look for design thinking capability. Because design thinking is about looking at the human aspects of a situation, finding the problem to be solved, and then working backwards from that solution, it’s a great way to discover opportunities with blockchain. It also allows you to be respected an expert in your own right, unlike more traditional discovery projects where the consultants feel like they already know 80% of the answers.
Find great storytellers. It’s really important to understand the technical aspects of blockchain, of course. You’ll have an easier time finding technical skills than you will finding people who can really dream with you and tell you stories of how blockchain can change the world. This isn’t just about looking for strategists, it’s about looking for providers who can clearly communicate a vision for what’s possible, so you in turn have an easier time digesting the different scenarios and selecting the right ones to move forward on to the proof-of-concept stage.
Conflict resolution, problem solving, and negotiation. Innovation engagements are by definition environments of strong disagreements, opposing views, and conflicting information. Most providers are great at marching when you tell them to march. Far fewer are capable of disagreeing without causing an escalation in the account. Look for consultants with negotiation backgrounds and a methodology that explicitly calls out conflict resolution processes as part of their work.
Put more emphasis on service providers’ partnerships than usual. The market for an emerging technology like blockchain is filled with consortia, startups, and small vendors. Service providers that are just exploring should be comfortable saying they’re looking at a lot of players and haven’t made formal partnerships yet (we saw this often in our latest research.) But they should be able to demonstrate a broad view of those players and the segments where they’re trying to map the vendors. Spend more time understanding what criteria the providers are using to evaluate the technology vendors than you would normally, since this deep dive is going to be more important for you than in other more mature areas.
Ability to work in agile development environments. Yes, I know, you’re likely not even close to building anything right now. But keep in mind that you’re looking to find someone to co-create with you and that requires the ability to be iterative and flexible while still not losing sight of the original goals. Providers who have more rigid engagement methodologies will put more pressure on you to define your requirements probably even before you really know what those requirements are. So look for a player that has strong agile skills since those skills will transfer well to your blockchain exploration.
Of course this doesn’t mean you forget your best practices for hiring service providers: client references, checks into their technical depth and execution, client management and governance, etc. But those best practices need to be supplemented with a few more non-traditional evaluation criteria like the ones above. Ultimately, these kinds of engagements are a lot more push/pull than engagements for more mature areas.
What did I miss? What other less-asked qualifiers do you use when evaluating new areas like blockchain services? I’d love to know your thoughts as I keep researching blockchain.
In the meantime, here’s a link to the full HfS Research Emerging Blockchain Services Blueprint Guide, with definitions and descriptions of the current activity (particularly in BFSI) and how service providers are approaching this inevitably integral part of the future fabric of any industry.
We ask questions to uncover and discover the true needs of our customers as it relates to their business and their customers. What that means is that we often dig deeper to better understand the “why” behind their needs, their motivation. We ask questions about how the work they do impacts stakeholders and customers, such as: Why do they need this? Why do they care? What’s missing? These questions can be applied to any situation to get focused on how to solve problems with a human-centered, customer first approach, versus a business-centric, solution first approach. And by leading with listening, we work with them to help uncover what’s missing or even what could potentially change their entire business model.
