BRG CSO Consortium: Q2 2016

Eleven CSOs from major global companies with revenues ranging from $5 billion to $70 billion met by phone to share leading practices and discuss topics of mutual interest based on an agenda created through advance interviews.

Topics addressed included organizational awareness and perpetual agility, as well as shared services. The group represented a cross-industry perspective including healthcare, telecommunications, retail, HR services, construction, manufacturing, and financial services.

Out of this dialogue comes the opportunity to deepen market understanding, share best thinking, benchmark, and collaborate with respected others.

Following are key takeaways from the latest discussion:

Quotes of the Day

“[Thanks to scenario planning and monitoring] we have been able to make some material bets on adjacencies which would not have obvious bets at the time for a [company in our industry]. So the ability to think 7 to 15 years down the road has really opened our eyes.”

“Historically, environmental scanning [led by the ERM group] was very focused on downside risk; [we] were missing the opportunity side.”

“Having them [IT staff] distributed around the company, with little pockets of them here and there, was very subscale and also hurt recruiting. Pulling them into a team of 50 data scientists, in our data science center, has helped us move much faster in the technology swim lane.”

“The overriding goal [of centralizing functions] was functional excellence. The hardest part to manage, which we focus on every day, is the dual responsibility of the people who are in those functional roles.”

“We had a lot of noise as we migrated to a matrix—did a lot of sessions to understand root causes—some of it was fear of being charged X but not getting value for the money, but at end of day most conflict came down to predispositions of the leadership.”

Organizational Awareness and Perpetual Agility

Key Takeaways

• Members discussed strategies for identifying external disruptions and surfacing opportunities and innovation in an agile manner. During the discussion, it became apparent many have moved beyond risk scanning alone and are now seeking to identify both positive and negative disruptions and, more concretely, ways to harness them.
• New approaches to environmental scanning, which cast a wider net for external input, can have two-fold benefits. First, they improve the company’s ability to spot external trends and identify new technologies. Second, they create a feeder point for possible M&A activity in emerging business sectors.
• In one example, a CSO opened an “online marketplace” that attracts startups and entrepreneurs. Another member has been running accelerator programs for the last three years in entrepreneurial hubs such as Tel Aviv. Potentially interesting startups are invited to join a 13-week program aimed at accelerating their business plans. Purchasing the most interesting/relevant startups is also an option.
• Internal sources are also being tapped for broad trend awareness. In one example, a member has drawn up a list of high-potential directors with keen scanning, innovation, and entrepreneurial skills. The executives are included in meetings/projects as necessary.
• Another member is leveraging their entire staff to test and generate ideas via the company’s internal Facebook-style network. The network theoretically includes 300,000 staff, but in reality the uptake is with the most digitally savvy staff of about 10,000.
• Members use a range of techniques to both enhance their ability to “see around corners” and help business units make decisions that take into consideration “what could be” 3 to 15 years into the future. Companies are using scenario-planning models and storytelling to help the business lines understand the need for change and frame up actions to take. One CSO is additionally monitoring their scenarios and the pathways on which the company has landed itself, using methods such as digital mass-input sensing tools and third-party input.
• It was also noted that external inputs, such as those that come from developing an app with an external team, play an extremely important role in helping to remove the internal “blinders” that can impede long-term internal thinking and strategy.
• Members and BRG further touched on the need to maintain links between strategy’s external engagement efforts and the business to, in effect, “sell” the necessary change and avoid disconnects when decisions and actions are required. Or, as one CSO put it: to stop documents and reports on suggested actions, from simply becoming “shelfware.”
• To support the connection between “sensing” and action, one member has established a “Center for Next Generation Growth.” The center is charged with maintaining an external perspective and triggering decisions/actions relative to that perspective.
• Partnering closely with strategists in the relevant businesses, sharing with them what the center is seeing/learning, and putting them in an ownership position of some of the sensing is part of their process and is proving to be a promising approach to buy in. The member using high-potential directors as sensing and innovation sources agreed, saying their participation tends to increase the executive team’s confidence in the change and/or innovation options offered to them.

Shared Services and Business Interplay

Key Takeaways

• Members see Shared Services (SS) and/or Centers of Excellence (COEs) as a useful route to cost cutting, functional excellence, and increasing organizational agility, particularly in the case of IT and data analytics/business intelligence. One CSO said they felt HR was the most challenging area to functionalize.
  Examples of specific benefits include easier recruiting, thanks to having larger teams with clearer career paths; reduced duplication; and greater productivity and agility, again due to having talent concentrated and supported in a highly skilled cluster.
• Discussing metrics, members agreed that it’s easier to measure the success of an initial move to a SS/COE than the function’s ongoing capability. One member said their new data COE, which has a team of 100, has cut resource needs (including third parties) by 50 percent and costs by 30 percent, but ongoing capacity and ROI measurements are still being sought.
• While matrix structures are seen as supporting centralized functions, particularly in terms of increasing business alignment, the challenge is to “manage the two bosses” of the functional SS/COE and the business line. The solution appears to be continuous daily management and having the right people, with the right mindset, at the intersection.
• Delving deeper into the matrix issue, it was agreed that matrix success depends primarily on people and culture—namely the predispositions of leadership—and that those who want to make it work will do so, while those who don’t tend to blame it on the matrix.
• In a proactive move, one CSO provides off-site training to help leaders thrive in matrix environments. Another has evolved their leadership construct to ensure they have the right personalities and skills that support the optimal functioning of a matrix structure.
• To ease SS center transitions and operations, both existing culture and certain semantics should be respected. In one case, the terms “functional support” and COE are used instead of “shared services” to encourage collaborative work, rather than a P&L-driven mindset.
• In another case, during a first round of SS creation, a form of “cultural appeasement” was used to overcome resistance from business leaders, who felt their resources were being stripped. Despite a negative impact on the SS business case, the leaders were allowed to retain certain resource controls. This was unnecessary in the second wave.
• Members discussed cost allocation issues, saying poorly performing business units often complain about such costs, perhaps to shift the blame. It was agreed that, to proactively address this, SS/COE leaders must rigorously benchmark costs against the open market.