Modernization doesn’t have to be daunting. Ongoing technological change has been a constant for decades now, but the reality is that many companies are still catching up. In fact, new research from Accenture Strategy found that 54 percent of companies were either struggling or waywardly pessimistic about digital technologies making them unprepared for modernization.1 But again, this doesn't have to be daunting. Enablement can more easily start in the back-office where companies are often less risk averse. CFOs and CIOs are uniquely positioned to champion change across the enterprise versus siloed investments. The idea is to not only improve enterprise leverage and profitability but also increase customer centricity in functions which were historically transaction focused.
Beyond just cost, however, the added insights and effectiveness derived from a digitally enabled organization is where the real value lies. In order to be successful in their digital journey, companies must take a zero-based approach and focus on the five rights to ensure digital investments are tied to the company’s strategic objectives and holistic in nature.2 A clean-sheet approach not only improves profitability but also fuels growth and increases enterprise agility by prioritizing forward-looking investments.
Applied Intelligence in the back office
In a zero-based approach, by first emphasizing the right work which is specifically customer facing, revenue generating or differentiated, companies are then able to automate, consolidate or eliminate activities which are non-value-add. This could mean refocusing on product development or investing in capabilities which were previously neglected including adopting applied intelligence in strategic areas of the back office.3
Let’s start with Finance, where the order to cash process (OTC), for example, directly touches the customer. Applied Intelligence like self-service customer portals can improve the collections experience and cognitive agents can reduce dispute resolution cycle time. Take for instance a leading consumer goods company with a global footprint. Through connected OTC, the company reduced their operating costs by 20 percent over two years and decreased customer overdue debt by 10+ percent. Furthermore, the company went from poor customer service ratings to now being recognized for service.4
In Human Resources, employee experience is everything. In a world of hyper-connected employees, digital is a key enabler to that experience. Accenture Strategy research shows that many companies already use a range of technologies, including internal collaboration tools, predictive employee services and self-service apps that create consumer-like experiences.5 And when companies get employee experience right, they outperform their peers on several important dimensions including customer loyalty (+17 percent) and revenue (+11 percent).6
In procurement, artificial intelligence, like machine learning, can be a powerful tool to improve buy decisions or monitor supplier compliance ultimately yielding increased savings as a percent of spend. For example, an Accenture Strategy client decreased manual average handling time by 67 percent through digital which improved invoice processing time as well as data accuracy.7 Moreover, digital could free-up an estimated 40-60 percent of procurement’s time to focus on activities which drive efficiency and savings for the enterprise.8
Lastly, in IT, the shift to agile development and cloud enables IT to partner with the business to co-create new service-based products. A common cloud infrastructure reduces cycle times across the enterprise. Cloud is so important that Gartner deemed it as the foundation of most “next big thing” technologies including AI, blockchain and IoT.9
Getting the case for change right
To create a compelling case, companies must include a value targeting exercise as part of their digital journey. In fact, zero-based thinking recognizes that digital technologies fundamentally shift cost curves and empower organizations to far surpass even their best past performance and first quartile benchmarks to achieve a new “zero quartile” performance.10 Concepts like zero-quartile and should-be modeling based on workload drivers are a better alternative than retrospective comparisons for predicting what good should look like for an organization11. Take, for instance, a $20 billion median company. Today they are spending 5.5 percent of revenue, or $1.1 billion on running Finance, HR, procurement and IT functions.12 Zero quartile shows us that deploying the right digital strategy could free-up more than 30 percent of costs before account for revenue uplift. That number grows to nearly 50 percent when excluding IT!13
To infinity and beyond
In short, by leveraging a zero-based mindset as part of a digital journey, companies can more easily thrive in any environment. Investments should focus on distinct capabilities. In many instances that includes strategic investments to bring the back office into the future.
1 Accenture Strategy research, Revenue Growth: Perception or Reality?, 2017
2 Accenture Strategy, Zeroing Out the Past, 2018
4 Accenture, Connected Order to Cash for Agility and Growth
5 Accenture Strategy, HR/Employee Experience study, 2017
6 Accenture and Forrester, Expectation vs. Experience, 2016
7 Accenture Strategy, When Bots Do the Buying, 2017
8 Accenture AS Operations insights and Future of procurement Study, 2016
9 Gartner, What does cloud bring us next 2017
10 Accenture Strategy research, Beyond the ZBB Buzz, 2018
11 Accenture Strategy, Zeroing Out the Past, 2018
12 Accenture Enterprise Value Targeting Database