Savvy IT, sourcing and operations excellence go hand in hand

25 February 2016

CIOs today face a number of front-burner issues that either didn’t exist or barely registered on the radars of their counterparts in 2000. Yet at the same time, the more things change, the more things stay the same.

One imperative today is to deliver business agility and competitive edge through technology, specifically through the effective application of analytics and Robotic Process Automation (RPA) to predict and rapidly respond to business requirements. With regards to RPA, enterprises seek to identify the right processes to automate, execute the optimal implementation strategy and effectively manage the fundamental and potentially disruptive change associated with an RPA initiative.

Further agility and flexibility is also delivered through the “as-a-service” model which presents its own set of opportunities and challenges with regard to pricing, contracting, applications transportability, scalability and change management.

Another key is to address a growing plethora of compliance and regulatory mandates. While banking and financial services are particularly affected, these mandates impact all organisations and require a granular level of service delivery oversight and process discipline, together with a data management strategy that addresses ever increasing volumes of data that must be stored, processed, protected, analysed and acted on by multiple business units.

Need for a comprehensive security strategy

Then there’s the need for a comprehensive security strategy, one that keeps abreast of increasingly sophisticated cyber attacks, addresses new technologies such as cloud and considers the broader implications of mobile devices and how to reconcile private use with access to company data.

What do all of these trends have in common? First and foremost, they all cost money. And amidst all the disruption and game-changing innovation we’ve witnessed in recent years, the “do less with more” mantra humming in the heads of CIOs has remained a constant. This presents the problem of where to find the funds to invest in initiatives that leverage RPA, that facilitate compliance to regulatory standards and that ensure a secure environment. The solution often lies in identifying improvement opportunities within existing operations and contracts. In many cases, the opportunities to be found can be surprisingly significant. Let’s look at three areas.

First, the basic economics of the network marketplace and the dynamics of contracting represent a significant opportunity for buyers. Consider: 12 to 18 months after a network contract is signed, rates are often already more than 10 per cent out of line from day one of the agreement. Put differently, the minute a contract is signed, the price for every circuit or service ordered begins its downward slide. In this environment, regular assessments of contracts in the context of competitive market standards can yield significant savings that can support investment in other areas. At a more granular level, periodic audits and reviews of telecom invoices can identify discrepancies in the buyer’s favour – some studies suggest that the average telecom invoice is 8-10 per cent in error if not regularly reviewed. When every dollar counts, this basic responsibility to simply “mind the store” cannot be ignored.

Digital Transformation

Digital assets represent a second area of opportunity. An effective negotiation strategy that leverages competitive market rates and insight into technology trends typically achieves savings of approximately 25 per cent on software negotiations and 15 per cent for hardware purchases. Software rationalisation across an entire solution portfolio often leads to cost and efficiency opportunities. Digital assets, in particular software, offer the opportunity to leverage the latest licensing (SaaS/subscription) and deployment (cloud/hosting) options that can provide direct and indirect savings. Equally important, an asset management strategy is essential to mitigating audit risk related to violations of enterprise licensing agreements, as well as to restructuring vendor contracts during and after mergers, acquisitions and divestitures.

A third area of cost-saving focus is print services. Enterprises today spend millions of dollars on equipment, paper and ink to print invoices, statements, reports and other materials. For a Fortune 1000 organisation, total print costs can range from $5M to $100M+ a year, depending on the industry. Financial services and insurance have traditionally been particularly paper-intensive. Print operations are typically dispersed across a number of different business units, such as marketing, procurement, facilities and IT. As a result, enterprises lack centralised oversight or ownership on how and where to drive improvements and cost reduction. Moreover, because of this decentralisation, estimates of total print costs will vary significantly.

A three-pronged print services strategy that assesses existing print operations, optimises internal processes and applies outsourcing where appropriate can drive cost reductions of 20 to 30 per cent on average. In addition to reducing cost, a print strategy can build a foundation for a transition to digital communications and drive further savings by dramatically reducing print volumes.

Disruptive innovation

While these are certainly exciting and fast-paced times, CIOs face constant pressure to implement high-profile technologies and solutions, often at the expense of tending to the basics. But executives can’t afford to lose sight of the fundamentals of cost discipline, boring as they may seem compared to the bright and shiny objects of robotics, cloud and big data. Truly savvy IT leaders are recognising that disruptive innovation needn’t preclude old-fashioned operational efficiency and sourcing rigour – in fact, the two can work together.

An article from Homan Haghighi, a Director with global sourcing advisory and consulting firm Alsbridge.


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Four ways digitalisation is transforming car brands and dealers

16 April 2019

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”