The rise of intelligent operations Technology breakthroughs radically expand business processes’ art of the possible A collection of insights and perspectives Operating models are evolving fast. The effect of new thinking in shared services, outsourcing, and process engineering is further amplified by cloud-based and mobile applications, advanced analytics, and collaboration tools. GENERATING TECHNOLOGY IMPACT BANKING & FINANCIAL SERVICES The rise of intelligent operations A collection of insights and perspectives 1 Foreword The role of analytics and technology in the rise of intelligent operations 4 The impact of technology on business process operations 10 Data-to-insight-to-action: Taking a business process view for analytics to deliver real business impact 22 Built to adapt: A better business technology approach for volatile times 24 "Robotics" in process operations: Useful rapid automation, no transformation panacea 28 Loyalty 2.0: Industrialized analytics embedded in your processes 34 The changing face of business collaboration 48 Almost plug and play: How advanced process operations help M&As 52 A rigorous business case for advanced operating models Advanced finance and accounting operating models 62 Transforming finance and accounting through advanced operating models 68 Debunking the myth of leveraged AO-FAO solutions 72 Augmenting the FAO technology landscape – Exploring new engagement models 78 Master data management is the next big thing—Seriously 82 Separating impact from hype: How CFOs achieve technology ROI 86 Continuous transaction monitoring: Using analytics to detect fraud or simple payment errors in real time Advanced procurement and supply chain models 94 Transforming procurement operations through advanced operating models 98 "Industrialization" of sourcing and procurement operations 104 The supply chain: The CFO's crystal ball 106 Tail-end spend: Reaping significant savings with the right operating model Advanced operating models in banking and financial services 112 Commercial banks look for talent and technology as they strive to industrialize operating models 114 The retail banking industry sees changes in leadership as banks pursue growth and new operating models 116 Transforming banking operations through advanced operating models 124 Transforming risk management in the financial sector through advanced operating models 130 Predictive analytics model validation: Building a model validation group to better mitigate risk 134 Remediation as a Service: A cost-effective response to regulatory and strategic change 140 Multi-dimensional time series-based approach for banking regulatory stress testing purposes: Introduction to dual-time dynamics 148 How big data will transform the equipment finance industry 152 A 38% increase in production costs drives new operating models through business process outsourcing 154 Retail banks need nimble yet scalable operations to enhance customer centricity in the digital age 158 Creative solutions to building a business: Launching a leasing company from scratch 162 Analytics in banking 172 Marketing analytics in retail banking 176 Mortgage portfolio analytics 180 About Genpact The rise of intelligent operations A collection of insights and perspectives Foreword The Great Recession has triggered a momentous change in many organizations’ operating models. Enterprises seek competitiveness in an environment where agility and variable cost are as important as robustness, and where scrutiny from regulators and clients is pervasive— and organizations need all of their operations’ help to compete. This time is different. Unfortunately, past transformation through, for instance, large-scale Enterprise Resource Planning (ERP) deployments has often delivered much lower-than-expected ROI), and slower realization of expected benefits (five to seven years later, on average). Our experience indicates that a clear root cause of these issues has been the forced-fit of old processes onto new technologies, scale by orchestrating the operational work of hundreds of thousands of and vice versa. Many of these mistakes can be avoided today, thanks to professionals, including more than 60,000 within our own company. better process design and transformation practices, and now-mature and We now know that there are agile and practical ways to evolve. The more agile technologies—in short, with better operating models. key is to design, transform, and run the processes that power advanced As described in our previous reports1, when operating model changes operating models so that they closely align with measurable business are executed well, the impact on cost and growth can be enormous. goals, and avoid saddling the company with unnecessary and often Being flexible in terms of cost structures while capturing fast-evolving, unmanageable complexity. This approach: granular profit pools is achievable through advanced process operations, • Focuses more rigorously on the sources of impact and and yields better controllability and auditability of how companies run. deliberately disregards any practice that does not yield material A radical shift in the art of the possible: Technology is no longer outcomes. With our deep craft of operations, we now can pinpoint the limiting factor. Cloud-based and mobile applications, analytics, practices and changes that are likely to work. and collaboration tools now multiply the effect of well-understood • Takes a more objective and holistic look at technology, analytics levers such as shared services, outsourcing, global delivery, and process and organizational practices. It leverages new yet mature "systems reengineering. These technologies matured almost at the same time2 of engagement" that complement core business technology and in mid-2013, and their combined momentum is now formidable. "systems of record". It treats analytics (data-to-insight-to-action) as a Consider the impact on client-facing activities as a sample of what's process, and determines how to embed insight at scale into the fabric possible: of other enterprise processes; it does not take the typical approach of • Banks engage clients at scale through multi-channel models enabled viewing analytics as a task and a set of technologies. by technology and related data-driven insight. • Harnesses process and organizational levers available from • Pharma companies can harness interactions with patients during the established disciplines, such as reengineering, shared services, initial, critical phases of product launches. outsourcing, and global delivery. • Industrial manufacturers can optimize the effectiveness of their assets We call the resulting advanced operations "intelligent" because they can and capture more value from their clients by deploying more cost- sense, act, and learn from the outcome of their actions, at scale—thus effective services, once again based on more insightful data correlated making the entire enterprise more intelligent. with financial impact. Every great business relies on great operating models. They can be a In general, most large operations supporting front-to-back processes are cornerstone in every CEO's portfolio of strategic initiatives. benefiting from faster ways to automate, derive insight, and act in a way We sincerely hope you will find the reading useful, and we look forward that delights clients while reducing the effort (and cost) of doing so. to engaging with you in making these ideas a reality. Clearly, these great opportunities may be nullified by the same issues that have prevented previous waves of transformation. Technological NV "Tiger" Tyagarajan, excesses of the past (such as in many ERP or data-warehouse President and CEO deployments) have left many feeling jaded. Although the root causes have been identified, few understand the interconnection between IT, analytics, and process operations sufficiently. Some technologies are unproven, and older ones are rigid and expensive to evolve. Some new uses of analytics are unclear, and scaling deep analytics throughout the enterprise is frequently a struggle. A practical way forward. Our experience of advanced operating models, accumulated over 15 years of work with hundreds of clients, including more than one-fourth of the Global Fortune 500, drives the research described in this book. This experience benefits from thousands of "controlled experiments" conducted at unprecedented 1 "Business Process Operations: The Art of The Possible" and "Genpact impact report 2014". 2 For reference, among others, see Gartner www.gartner.com/technology/research/nexus-of-forces/. 1 2 The role of analytics and technology in the rise of intelligent operations The impact of technology on business process operations 4 We are entering a time in which new, yet robust technologies will catalyze the evolution of process operations, and multiply operations' impact in addressing the numerous challenges that large enterprises face. However, the applicability and impact of these technologies is not uniformly high, according to almost 1,000 business executives surveyed by an independent research firm in a project commissioned by Genpact. Here are the findings. Data-to-insight-to-action: Taking a business process view for analytics to deliver real business impact 10 Too many companies struggle in leveraging analytics. That's because despite the hype, a critical aspect is often neglected; "data- to-insight" and "insight-to-action" are business processes, and to generate material business impact, they require scale, as well as appropriate