The value of innovation in global business services

Facing economic uncertainty and fluctuating demand, companies across the world are restructuring their corporate functions. The goal: to take advantage of new technologies to improve the productivity, flexibility, and agility of their business operations.

This new way of doing business is changing how companies get things done, with the introduction of self-service portals, automated workflows, and AI-enabled tools. It’s also changing how companies organize themselves, with the development of leaner corporate centers and the increased use of shared-services organizations and global business services (GBS) units.

Centralizing business services promises a raft of benefits for organizations. It enables processes to be streamlined and standardized across large, complex organizations, and it gives business units fast, efficient access to a global talent pool.

Yet there are signs that the growth of the GBS model may be hampering companies’ ability to innovate at speed. In conversations, most business leaders tell us they are satisfied that their GBS units are delivering basic services at a reasonable cost. Set the bar higher, however, and support drops sharply. Far fewer leaders believe that their GBS organizations are helping them innovate, such as by offering expertise-led services or using technology and data to redesign processes and improve performance outcomes.

Our analysis finds that four root causes are preventing today’s GBS organizations from fulfilling their potential as enterprise innovators:

  • Accepting the status quo. Leaders and frontline managers in GBS organizations are not proactively generating ideas for the business. Often this is the result of an arms-length operating model in which GBS operates as a silo, with limited visibility or understanding of the strategies and priorities of the core business.
  • Limited investment in next-generation service-transformation capabilities. GBS organizations tend to focus more on tactical improvement ideas (such as robotic process automation) and less on transformational initiatives (including design thinking, user experience design, next-generation enterprise resource planning, or data management and science). This constrained view limits their ability to complete high-impact initiatives.
  • Fragmented processes. GBS organizations often reflect the siloed nature of the businesses they serve. With limited ownership and no end-to-end view of critical processes, they only have enough scope to make incremental improvements.
  • Lack of access to world-class talent. Because GBS organizations are not seen as a place where staff can apply the latest technology on the highest-impact work, they struggle to attract and retain the high-potential people needed to conceive, design, and execute such projects.

Building a truly innovative GBS organization

To turn their GBS organizations into innovation engines, companies can build robust operational practices with the right enablers. This involves five areas of focus.

  1. Strengthen GBS leadership and talent. GBS leaders with experience in traditional management approaches such as lean, Six Sigma, and automation are necessary but no longer sufficient to drive innovation. High-performing organizations often look for leaders with two key sets of skills: the ability to run efficient operations, and to transform processes at scale. Most innovative GBS leaders also bring an entrepreneurial mindset and a willingness to take managed risks.

    High-performing GBS organizations are also better positioned within the organizational hierarchy. A GBS leader who reports directly to the COO, for example, tends to have a high degree of autonomy and the influence required to drive meaningful change.

    Frontline and middle-management talent would also benefit from attention. Creating an aspirational employee value proposition (EVP) could help better attract and retain high-quality talent, as would targeted investments in skill renewal. For example, one global bank trained more than half its GBS employees in digital skills so that it could develop a digital-native culture. Designing meaningful career-building opportunities and strengthening formal and informal internal networks could also have a high impact on employee experience.
  2. Empower the GBS unit. GBS organizations typically operate in one of two ways. The first is a “business extension” model, which structures GBS teams as extensions of the business units or functions they serve. The second, an “empowered” model, organizes GBS teams along process journeys (such as procure-to-pay) that often cut across business units. Each archetype can work effectively depending on business needs. However, organizations with a stronger mandate to drive innovation are selectively moving toward the empowered model, which gives GBS units greater autonomy to drive change, take an end-to-end view and ownership of processes, and invest in continuous improvement and transformation capabilities.
  3. Strengthen innovation processes. GBS organizations need the ability to innovate continuously and at scale. That requires an in-depth understanding of stakeholder priorities, with innovation plans developed and maintained jointly with end users across the business. Internally, the GBS organization needs robust, visible business plans and demand forecasts so it can ensure it has the right capacity and capabilities available.

    GBS organizations can also establish a structured innovation approach: identifying and prioritizing use cases with a material business impact, then efficiently executing implementation projects. Over time, the results become a cookbook for replicating successful ideas across functions and business units.
  4. Build an innovation ecosystem. The most innovative GBS organizations lean heavily on the work of partners, vendors, and suppliers. Leading organizations are already building their own ecosystems of established vendors and start-ups to help develop cutting-edge capabilities in areas such as the Internet of Things, data and analytics, and generative AI. A global retailer, for example, has built a systematic program through its GBS unit to identify start-ups that help deliver specific use cases across core retail processes.
  5. Rethink innovation funding. Ensuring that the most promising ideas receive the investment they need calls for a consistent approach to prioritization and funding, with a robust, venture-capital-like methodology to measure ROI. A healthcare company has followed this approach by tapping its GBS executive sponsor to assemble an “innovation council” that now evaluates a pipeline of ideas through a “Shark Tank”–like process. GBS organizations can also create new commercial models to incentivize partners to drive innovation, whether based on gain-share agreements, an innovation fund, or provider-funded investments.

With unique access to people, processes, and data from across the business, GBS organizations could become a crucible of innovation for the modern enterprise—if GBS leaders rethink their teams’ value proposition, equip their organizations with stronger capabilities, design cutting-edge technology offerings, and instill a new entrepreneurial mindset.

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