How intelligent are your operations? – FDE Q2 London round table

14 December 2015

FDE’s Q2 London round table, produced in association with Genpact, gave attendees, many of whom were either CFOs or heads of operational finance and global business services, the chance to discuss what they think an ‘intelligent’ operating model is and the extent to which they are introducing smarter working across their business processes.

The FDE event chairman Pascal Visée, a former Unilever chief enterprise support officer, now combining non-executive roles with advisory work, began by defining an 'intelligent' operating model. In his view, it could be summarised as an operation's ability to sense, act and learn. He then emphasises the important role of analytics.

"Increasingly, analytics capability is becoming an integral part of operations," he says. And intelligent operations are influenced by the latest technology developments, or the internet of things, as well as by recent developments in social media.

Co-host KP Santosh, SVP head of transformation services at Genpact, adds, "This is a central topic for today's most successful organisations that are focused on re-imagining their operations by harnessing the value of process, technology and analytics."

What is the daily reality in business?

Are there businesses that embrace this approach of designing operational systems that are 'truly intelligent', able to learn, interpret, improve and report?

The answer, according to the finance leaders present, was "yes, but...".

Google is perhaps the closest thing to a truly intelligent company as it now gives the individual insight and information that is relevant, based on what is done in the past and what someone is doing right now, and helps to get better outcomes for what is to be done next. However, the answer was also Amazon, because it simply reads what a consumer wants and customises a profile based on what that person buys.

The answers were revealing in that almost all those companies mentioned were firmly of the 'new economy' - technology, mobile and social media. Why, Visée wonders, were there no older, more established businesses mentioned as embodying the intelligent operation ethos? Opinions varied, but it was partly pinned on a lack of not just an investment in technology, but also a consistent commitment to that investment, which will ultimately offer more choice to the consumer.

So if the new economy players have a built-in advantage brought about by the timing of their birth and the focus of their investment, how can others compete? Is aspiring to build best-in-class intelligent operations a fool's errand, or are there ways in which long-established businesses can rid themselves of a legacy of inefficiency and upgrade themselves?

Visée himself has, since leaving Unilever, visited a range of companies across the world to look at the challenges they face and understand how leaders - finance and otherwise - are responding. One of the critical issues was, he says, what is and is not core. Depending on the industry, brands are core or energy is core, or plants are core and the product that these are producing are also core.

"But operations is 'only' a supporting function," he adds. "So operations are often neglected and, as a result, companies have underinvested for years. That is a good explanation for the fact that the general state of operations in many large companies is generally poor."

But that can no longer continue, given the speed and rapacity of new entrants into the market that aren't hamstrung by back-office complexity and legacy systems. Put simply, businesses must face this challenge or face being overtaken by upcoming competitors.

What are the tools that CFOs can equip themselves with to meet this challenge?

Developing a better understanding of how the business manages, hosts, uses and analyses information is a good place to start. To think about resources in a company in terms of money, people, capital and information, nobody truly owns information.

Finance often says 'we own it' but they'll have the other functions claim their part as well. So everyone and no one owns it, and, as a result, information and analytics are often not getting the leadership attention that they deserve.

Opinions vary, but one prediction made was that in five or ten years, the CIO, instead of being a mere technician, will transform into a true chief information and analytics officer, with technicians and information architects reporting to them. But that's not the case yet.

What is the role of global business services in all of this?

Global business services (GBS) have been cited by many as the key to unlocking operational improvements while, at the same time, driving down costs. Are those who run GBS actually realising these benefits and getting their operations to a smarter level? So far, the signs are good. One thing that comes from GBS is that it ensures that operations get standardised and industrialised, so it goes from hundreds of different ways of doing things to doing everything the same way. With GBS, it's easier to move forward with one global way, so it's a great benefit of doing things globally.

But achieving intelligent GBS systems doesn't only involve designing new, better ways of working. It has to tackle the legacy issues.Of course, there remains scepticism over what GBS can deliver in terms of specialised information and insight. Can a finance factory really provide that level of service?

Discussions at the event then centred on the concepts of responsibility, accountability and expertise, and how they have to be central to any effort, allied to a willingness to redesign reporting lines to achieve the improvements. One example illustrated operating companies with a local CFO, where he had under his accountability a range of functions from control to audit, and risk to tax. It was then realised that it's difficult for the CFO to be an expert in all these areas. As a solution, a concept was developed to bundle the tax units throughout the group and make them report to a single global head of tax, which would result in greater accountability and momentum in change, rather than the local CFO who has to be more generalist.

For the representatives of Genpact, it was clear that the assembled guests were committed to taking a lead on driving through improvements.

Genpact's Santosh was clear: "There is certainly the will and the determination among the CFO community to understand how they can improve operations. Their next step is to fully understand what their businesses need, and how process, technology and analytics can enable intelligent finance operations."

18 senior finance leaders took part at FDE’s Q2 2015 London round table at Four Seasons Hotel, Park Lane.
Chris Ling from British Gas amuses delegates.