Why it’s time to reinvent global business services

Global business services (GBS) units face a radically changing environment. To survive, they will have to reevaluate their value proposition, reinvent their processes, and restructure their operating model.

Over the past three decades, companies across industries have consolidated and optimized support functions such as HR, IT, and finance into global business services (GBS) organizations. Ideally, economies of scale and scope allow these operations capture a range of performance and efficiency improvements: in particular, higher productivity through more-intense process standardization and IT use, and lower cost by tapping specialized talent pools across a global network.

That ideal was often met—but success came at a price. GBS organizations are remarkably unpopular with their internal customers. In a recent in-depth survey, only 40 percent of respondents said they were fully satisfied with the performance of their GBS units (Exhibit). The frustrated majority cited a wide range of issues. GBS organizations aren’t effectively addressing customer needs, they say, or the support on offer is skewed towards the needs of HQ at the expense of other units. Costs, chargebacks, and service levels are opaque and inflexible. Processes are disjointed and poorly integrated. Organizations are too rigid and slow-moving to meet changing business needs.

Exhibit 1

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These findings would be concerning enough for GBS leaders if the world were standing still. But it isn’t. As colleagues have written elsewhere, support functions face radical disruptions from within and without. Digitization is redefining the way work is done, automating previously manual tasks, eliminating old processes and introducing new demands. Business strategies are changing too, as companies introduce new products and business models at an ever-accelerating rate. And expectations are rising, as employees across the company demand ease of use, rapid deployment of capabilities, more data and greater transparency as a given.

Time to reverse your priorities

GBS organizations cannot, and should not, resist these forces. They will have to adapt quickly if they are to continue offering fundamental cost savings while delivering ever more value. The challenge for leaders is to ensure that their next iteration avoids the ailments of its predecessors.

This isn’t just a technology issue. While the GBS operation of the future will be digitized to a much greater degree, the poor implementation of new digital tools risks compounding today’s problems: embedding bad processes in great technology, reducing flexibility when agility is needed, and stifling innovation at a time when shared services have an opportunity to lead the organization.

Instead, we believe the GBS model must fundamentally redefine its mission and value proposition. Historically, GBS organizations have tried to make things cheaper, then faster, then better. Now they need to address these priorities in the opposite order: first better, then faster, and finally cheaper.

The structure needed to deliver these new priorities will look radically different from the GBS of today. It will take different forms, support different business priorities, and will engage with customers differently. As they build this re-invented GBS, leaders should be guided by four core imperatives.

1. Be laser-focused on customer experience

It is no longer acceptable to sacrifice flexibility and customer satisfaction in the name of efficiency. Instead, tomorrow’s GBS must put customers first. This means designing services that lead to intuitive, accessible, and engaging customer interactions. For inspiration, look at the way the most disruptive consumer-facing players of recent years have redefined industries such as payments, retail, and personal transportation. New entrants had to build complex and highly sophisticated back-end systems, but now lead their sectors thanks to user experiences that radically simplified painful, complicated, time-consuming processes.

Getting the customer experience right isn’t just about reducing frustration. It is also about providing more value to the wider business. At one engineering company, insights gathered by the organization’s global technical helpdesk have been used to drive fundamental product design improvements. The GBS at a financial-services player reengineered its account activation process, cutting the lead time from seven days to two hours. This change allowed the organization to develop a successful new online sales channel.

Great service and a clearer value proposition is a powerful demand driver that can transform the dynamics of the relationship between the GBS organization and business units from “push” to “pull.” Internal customers who are delighted with the services they are receiving are more likely to engage with their GBS peers in a productive way, and are more likely to ask that GBS expand support into other critical areas.

2. Re-imagine the way work is done

Yesterday’s processes simply won’t suit tomorrow’s business. To make the most of the opportunities presented by rapidly evolving digital technologies, and to meet ever-increasing customer demands, the GBS leaders of the future must be prepared to rethink everything.

In some cases, this means starting from a clean sheet rather than seeking incremental improvements or layering on automation. What is the minimum number of steps it should take to integrate a new supplier? How many of these steps could be automated? What is the simplest way to interact with customers? Could an entire service be managed through a single interface? Or could it be fully automated? Could a process be conducted in an entirely different way, for example using blockchain technologies to eliminate time-consuming verification and reconciliation tasks?

Technology shouldn’t just help the future GBS operation do what it does today more cheaply. It must unlock entirely new sources of value that allow GBS to be more proactive in solving problems. For example, using advanced analytics to sift through “mashups” of internal and external data is already helping predict outcomes, allowing GBS staff and their customers to focus on the issues that matter. New ways of displaying and visualizing data will aid problem solving and effective decision making. Artificial intelligence can help analysis transition from descriptive to prescriptive in recommending appropriate actions to respond to likely future events.

This process of creative destruction will be essential to achieve significant and lasting improvements that will help the GBS deliver the better service its customers crave, while also reducing costs. As important, it will also reveal entirely new opportunities for the GBS to offer value to the business as whole. 

3. Adopt an agile model

Continuous, rapid reinvention will become the norm in GBS operations. Internal customers throughout the wider business will need new services to meet changing business requirements and emerging opportunities. Existing processes must be updated to take advantage of technological advances and analytical insights. Those changes will happen fast. Development and deployment cycles are already shrinking from years or months to weeks or days.

Working at this accelerated cadence will require a different service delivery model. Leaders should take their cue from the agile development techniques that have transformed speed, quality, and productivity in software development, and which are now spreading into other areas of the organization, from financial processes to physical product development. Organizational silos and rigid processes will be replaced by cross-functional teams assembled to manage the development and delivery of specific new services. These teams will be tightly integrated, emphasizing design thinking, minimum viable products and services, rapid iterations, and regular customer feedback.

The need for new team structures, faster turns, and non-traditional measures of success makes it challenging to build an agile, especially for GBS operations used to a more rigid, traditional approach. It requires companies to rethink their organizational design and governance, develop new capabilities, and modify rewards and incentives. For businesses prepared to make the transition, however, the rewards will more than compensate for the effort and investment involved.

4. Be ready to widen your scope

Ambitious GBS leaders want their units to do more for the businesses they serve. Current business pressures seem likely to help fulfil that aim. The change in focus from process execution to end-to-end service delivery will, for example, require most GBS organizations to increase their scope. Survey respondents likewise report that they expect a broader shift in posture, with GBS evolving from its traditional role as a low-cost service provider to become a source of competitive advantage, ultimately, a strategic partner to the larger organization.

The most significant and sustainable scope increases, however, will be achieved by the GBS organization that can delight and impress its customers across the business by developing offerings that are easier to use, more efficient, and built faster than any alternative. These factors will create real pull for new services and additional support.

The path forward

Ultimately, GBS organizations that master these imperatives will have the agility, creativity, and customer-focus to become the indispensable strategic partner they aspire to be. But the path forward requires a willingness to experiment and the courage to try a very new way of working. We recommend a few steps for organizations looking to start this journey:

  • Start small. Pick a discrete process within the GBS with which to experiment. To minimize risk, this process should ideally involve a finite group of internal customers.
  • Figure out what matters to your internal customers. For the process you’ve chosen, start by mapping the entire experience from the internal customer’s perspective—the customer’s “journey”—and identify what truly matters. Know where you need to move the needle, be it cycle time, quality of output, or something else, and focus on that metric rather than pure efficiency.
  • Build from scratch. Core processes in GBS would not be designed the way they are if today’s technology had been available five or ten years ago. Build the new process from the ground up using what is available today, ignoring constraints from existing systems and processes, to define the future state. Then work out how to get there■

Ted Rounsaville is an associate partner in McKinsey’s Washington D.C. office, Jonathan Silver is a partner in the New York office, and Samir Singh is a senior expert in the New Jersey office.