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Stay of execution
by George Davies, CEO, MooD International
Thursday, December 10, 2015

Research published earlier this year showed that 52 per cent of IT directors’ spend with outsourcing suppliers is focused on reducing the cost of IT, rather than achieving business benefits.  This is despite the fact that only 21 per cent of IT directors and their teams cite cost reduction as the most important way in which an outsourcing partner can contribute to the business’ success.  The same research indicates that the most important initiatives of the client’s business are revenue generation and growth.

There are several likely reasons for this disconnect, but the lesson for outsourcers is clear: understanding the whole gamut of business challenges faced by their customers and prospects is what is going to allow them to win and retain business.  Being able to demonstrate with complete clarity how the outsourcing relationship contributes to the strategy via the operational achievement of specific business outcomes will make an outsourcer a critical strategic partner.

It’s no revelation to say that new trends are reshaping industries at an almost frightening pace.  With them comes the need for organisations to make adjustments to their business operations in short order to keep up – or preferably even to anticipate them, and remain ahead of the curve.  Lean and adaptive is more than ever the name of the game.  Such highly challenging circumstances bring senior managers under the spotlight more than ever before, and the pressure to drive growth and deliver strong results across an increasing range of both internal and external stakeholders has never been higher. Effective implementation is increasingly being seen as the new combat arena because, while exciting strategies, powerful products or state-of-the-art technology can put an organisation on the map, only coherent and consistent execution can assure success. Indeed, we know it matters because, depending on the research, 50–90 per cent of new organisational strategies fail, regardless of how sound the proposal is.

But flawless execution requires a comprehensive understanding of all the moving operational parts of a business’ entire ecosystem.  Outsourcers that are unable to provide a detailed view into their workings are therefore a potentially worrying partner for the C-suite.  The CEO’s “gut feeling” – once given an astonishing amount of respect – is increasingly being challenged by stakeholders who want to see evidence that they’re backing the right horse if they’re going to stay on board. 

Whether they choose to see this call for greater transparency in the assumptions behind strategies as a complication, or as an opportunity to create greater freedom to innovate, CEOs in increasing numbers and across all industries are asking themselves how they can demonstrate the soundness of both their strategies and their operational prowess.  Any part of the business that remains a black box, including the partners that make up the wider organisational federation, should be prepared for severe scrutiny: change is coming.

But the problem with execution is that it is difficult.  A recent survey of more than 400 global CEOs found that executional excellence was the number one challenge facing corporate leaders.  The challenge of supporting this for outsourcers has not been made any easier by the trend towards companies eschewing single, large outsourcing contracts and instead opting for a more agile approach focused on smaller, flexible contracts.  More suppliers means it’s harder to get a clear view of what’s happening across the business in a joined-up way – for both the client and the outsourcing partners.  Because of this, outsourcing suppliers need to understand inside and out what their clients need to deliver and exactly how the service they provide to those clients impacts upon that.  Moreover, all of this needs to be explained to and understood by a large number of stakeholders across all levels.  It requires a common language for agreeing and describing what they are doing and, more importantly, providing clear evidence that they are delivering what really matters – the business outcomes.  It might not be easy, but it represents an opportunity to change the very dynamic of the outsourcer-client relationship from a fundamentally two-dimensional management of pure service performance to a three-dimensional view that concentrates on the execution of business strategy.

This extra dimension, and its sharp focus on business outcomes, allows both parties in the partnership a much greater amount of flexibility to react to changing market circumstances.  After all, no plan can anticipate every eventuality, so it’s important to be agile when implementing strategies.  The entire execution team needs access to real-time information that will help them come up with smart, creative solutions that keep the strategy on track. It’s no use persevering with a strategy that will fail in a couple of years’ time, after all of the resources and time that have gone into executing it.  Having fulfilled service level agreements (SLAs) will be meaningless if those SLAs are no longer relevant – even, unfair as it might be, if those SLAs were never changed.

The worrying reality is that most strategies at the organisational level take years to come to fruition, and certainly months or longer before key performance indicators (KPIs) will suggest things are going in the right direction.  For the CEO and her stakeholders, monthly and quarterly earnings (and maybe things like data centre uptime percentages) are used as a proxy for knowledge of the strategy’s execution.  How much more powerful would it be to understand exactly what every operational action the business or its partners make supports (or detracts from) the strategy in real time?

A supplier that is able to understand the business landscape that enables people, processes, systems, services, and their interconnections to be aligned with business objectives, outcomes, benefits, KPIs and budgets, is going to be invaluable in providing the competitive edge for the purchaser when it comes to achieving critical business outcomes.  This is for the simple but unarguable reason that even the very best of strategies is at the mercy of its execution.  Outsourcers looking to move up the value chain therefore need to focus on automation and digitisation as the driving force behind their activities.  If client and suppliers can access the same information to give them the same view of the status of the business – in real terms, not garbled data reports and non-contextualised SLAs – they will improve processes, drive out cost and, vitally, accelerate innovation and line-of-sight to business value.

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