What Makes Continuous Innovation in BPO So Difficult?

The promise of ongoing innovation is often one of the primary reasons companies consider business process outsourcing (BPO).  Each BPO provider’s marketing heavily touts their ability to drive …

"Some level of dissatisfaction is unavoidable and can, in fact, be constructive," writes Paul Singer of Pace Harmon.

The promise of ongoing innovation is often one of the primary reasons companies consider business process outsourcing (BPO).  Each BPO provider’s marketing heavily touts their ability to drive constant, positive change for their clients, leveraging their industry and process experience and learnings from the myriad of engagements they support.  The promise of ‘continuous innovation’ is, in cases when everything else is comparable, often the deciding factor behind moving an internal function to a specific BPO provider.  While companies are keen to realize the benefits of continuous innovation, many are unable to take the steps required to do so. The result in these cases often manifests in disappointing relationships with the BPO provider and missed opportunities to realize the business case behind outsourcing in the first place.

Given this dynamic, it is not surprising that ‘lack of innovation’ is a major reason companies change BPO providers or move from outsourcing to bring functions back in-house.  While everyone is talking about innovation, few are really doing it, and those that attempt to do it are likely not doing it particularly well. The fact is that when it comes to innovation a number of challenges turn into roadblocks and make it difficult to put innovation into practice.  But fear not – there are several relatively simple steps to ensuring that innovation not only happens but is maximized.

Defining Innovation

The biggest challenge comes from not having a clear and agreed understanding of what innovation is really all about.  It is about driving differentiation by continually challenging and changing the way we work. At its core, innovation is about thinking and doing things differently to achieve better results, not just making a massive investment in some new technology or change for the sake of change.  Innovation comes from applying a deep understanding of a process to change the way it is executed while performing it at the lowest possible cost in a manner that provides competitive differentiation.

Innovation starts when a process or task is deconstructed so that each of its components and interrelationships can be clearly understood.  With that interrelation understood, innovators can begin identifying options for putting the process or function back together again, focusing on doing so in a way that ensures the desired end result is achieved efficiently and effectively.   If companies and their BPO providers are thinking about innovation in this manner, then they are aligned and can begin applying these principles.

Applying Innovation

Once all parties are in agreement about what innovation means, the second challenge is identifying innovation opportunities on a regular basis — making these a part of an organization’s DNA so they can be continuously implemented.  Typically, this can be accomplished in three steps:

  1. Leverage BPO Provider Insight and Experience: BPO providers have exposure to extensive industry, functional, operational and market experiences across the full breadth of their service offerings.  BPO providers should have a six sigma or process improvement team that is constantly aggregating and analyzing the insights that are identified across their portfolio.  This analysis enables BPO service providers to remain ‘in the know’ as to how what is changing or developing as part of one client engagement, in fact may be part of a broader shift across the marketplace.
  2. Break down the process: Leveraging the provider’s cross functional and cross industry insight, with newly acquired knowledge about the client’s processes, the provider should be able to break down the initial processes into more efficient activities. These activities can be used as building blocks to change the way the tasks were previously performed. Additionally, the BPO provider should be able to translate their experience and visibility into industry trends across their portfolio to create better financial and operational metrics for these processes.
  3. Automate: Innovation is often dependent on implementing or modifying technology to enable a shift in the way tasks are performed and business processes are approached. This may require an investment on the part of the BPO provider and may in turn also require an investment on the part of the client. These investments should be anticipated in the original business case and be budgeted for every year.

Sustaining Innovation

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Innovation is not a one-time event or project, but rather needs to become a part of daily life and, as mentioned above, have its own recurring funding. One effective way to sustain innovation is to add dedicated ‘innovation identification’ resources to the governance organization focused on the BPO provider relationship.

Set contractual performance goals and investment requirements for both the client and the provider to achieve every year. Examples could include documenting specific business case expectations within the BPO agreement to improve operations, increasing outputs (e.g., number of checks auto matched every day) or reducing the number of FTEs to perform a task every year. Such contract terms could require the BPO provider to analyze each outsourced function six months after go-live and report back to the interested business units on opportunities to improve the process or to improve performance targets.

While these are not exhaustive examples, making innovation a contractual requirement and aligning that contractual requirement with a strong governance approach can create an effective forum for users and the BPO provider to sit down and talk about business outcomes and the process changes required to achieve them.

Overcoming Innovation Challenges

Innovation, one of the long-term strategic benefits a business should expect to achieve when outsourcing a business process function, is difficult when there is not a common understanding about what it is, what it takes to create it, and how to keep it going. Like all things worthwhile, innovation requires some hard work and dedication on the part of both the outsourcing client and the BPO provider.

Understanding the framework to follow to make that hard work and dedication pay off makes the difference between a successful BPO relationship and one that will likely be considered a failure.  Don’t fall prey to expecting innovation to simply happen.  Plan for the time and resources investment in a structured approach with the BPO provider to ensure those strategic benefits are realized. And don’t expect innovation to be a one and done type of occurrence – innovation is all about continuous, sustained change and development.

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