Within its Lean Digital approach, Genpact is using digital and design thinking (DT) to assist organizations in identifying and addressing what is possible rather than just aiming to match current best-in-class, a concept now made passé by new market entrants.

At a recent event hosted at Genpact’s new center in Palo Alto, one client speaker described Genpact’s approach to DT. The company, a global consumer goods giant, had set up a separate unit within its large and mature GBS organization with a remit to identify major disruptions - with a big emphasis on “major”. It set a target of 10x improvement (rather than, say 30%) to ensure thinking differently about activities, in order to achieve major changes in approach, not simply incremental improvements within existing process frameworks. The company already had mature best-of-breed processes and was being told by shared service consultants that the GBS organization merely needed to continue to apply more technology to existing order management processes. However, the company perceived a need to “do over” its processes to target fundamental and 10x improvements rather than continue to enhance the status quo.

The establishment of a separate entity within the GBS organization to target this level of improvement was important in order to put personnel into a psychological safety zone separated from the influence of existing operations experts, existing process perceived wisdom, and a tendency to be satisfied with incremental change. The unit then mapped out 160 processes and screened them for disruption potential, using two criteria to identify potential candidates:

• Are relevant disruptive technologies available and sufficiently mature now? Technologies ruled out at this stage included IoT and virtual customer service agents (the latter because they felt a 1% error rate was unacceptable in a commercial process)
• Does the company have the will to disrupt the process?

The exercise identified five initial areas for disruption with one of these being order management.

On order management, the company then sought external input from an organization that could contribute both subject matter expertise and DT capability. And Genpact, not an existing supplier to the GBS organization for order management, provided a team of 5-10 dedicated personnel supported by a supplementary team of ~30 personnel.

The team undertook an initial workshop of 2-3 days followed by a 6-8 week design thinking and envisioning journey. The key principles here were “to fall in love with the problem, not the solution”, with the client perceiving many DT consultancies as being too ready to lock-in to a (preferred) solution too early in the DT exercise, and to use creative inputs, not experts. In this case, personnel with experience in STP in capital markets were introduced in support of generating new thinking, and it was five weeks into the DT exercise before the client’s team was introduced to possible technologies.

This DT exercise identified two fundamental principles for changing the nature of order management:

• “No orders/no borders”, questioning the idea of whether an order was really necessary, instead viewing order management as a data problem, one that involves identifying the timing of replenishment based on various signals including those from retailers
• The concept of the order management agent as an ‘orchestrator’ rather than a ‘doer’, with algorithms being used for basic ‘information directing’ rather than agents.

This company identified the key criteria for selecting a design thinking partner to be a service provider that:

• Has the courage (and insight) to disrupt themselves and destroy their own revenue
• Will spend a long time on the problem and not force a favored solution.

Genpact claims to be ready to cannibalize its own revenue (as do, indeed, all BPS providers we have spoken to – the expected quid pro quo being that the client outsources other activities to them). However, in this example, the order management “agents” being disrupted consist of 200-300 in-house client FTEs and 400-500 FTEs from other BPS service providers, so there is no immediate threat to Genpact revenues.

The Real Impact of RPA/AI is Still Some Way Off

Clearly the application of digital, RPA and AI technologies is going to have a significant impact on the nature of BPS vendor revenues in future, and, of course, on commercial models. However, at present, the level of revenue disruption facing BPS vendors is being limited by:

• Organizations typically seeking 6%-7% cost reduction per annum, rather than higher, truly disruptive, targets
• Genpact’s own estimate that ~80% of clients currently reject disruptive value propositions.

Nonetheless, organizations are showing considerable interest in concepts such as Lean Digital. Genpact CEO ‘Tiger’ Tyagarajan says he has been involved in 79 CEO meetings (to discuss digital process transformation/disruptive propositions as a result of the company’s lean digital positioning) in 2016 compared to fewer than 10 CEO meetings in the previous 11 years.

Order Management an Activity Where Major Disruption Will Occur

Finally, this example (one of several that we have seen) illustrates that order management, which tends to have significant manual processing and to be client or industry-specific, is becoming a major target for the disruptive application of new digital technologies. 

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See also Genpact Combining Design Thinking & Digital Technologies to Generate Digital Asset Utilities by Rachael Stormonth, published this week here.