Business leaders are under extreme pressure to increase their contribution to overall business profitability revenue growth and customer success. Unfortunately, they struggle to deliver greater financial return without the visibility to understand current and future performance, pinpoint opportunities for improvement, and stop repeating mistakes. The result is services leadership trying to bail a boat with a leaking bucket and rough seas still to navigate.
What Does It Mean to Be Visible?
So how do we define visibility? While we could spend a lot of time describing attributes of services business intelligence, let's keep it simple and define visibility as having timely, reliable, and relevant information that provides clarity on performance indicators covering time of sale through project delivery to final invoice collection.
- Timely In order to correct poor performance, you need to identify its cause before it's too late to change. Real-time ability to drill into inconsistencies and under performing metrics allows you to maximize the productivity of the remaining hours available, increase performance, and forecast more accurately.
- Reliable Information that is not trusted does not improve decision making and raises more questions than it answers. Use system-generated reports that directly generate revenue/margin/resource forecasts from source systems and provide current actual performance to identify gaps. Develop weekly discipline to maintain time, expense, and project data to ensure actual and forecast data is complete and accurate.
- Relevant End-to-end insight requires a holistic view of the project life cycle. Focus on backlog, sold bill rates, utilization, project margin and overruns, unbilled time/expenses, residual funding, and collection write-offs to manage performance levers and minimize surprises.
- Empower better business decisions throughout the organization by giving management and project leaders the information they need to drive better results.
- Gain actionable insights into margin erosion/improvement over the entire life of a project from time of sale to the last invoice collected.
- Increase data quality and ownership.
- Improve forecast accuracy through direct linkage between current and future performance for projects and resources.
- Reduce rework and redundancy in reporting administration.
The Far-Too-Common Reality of Today
Despite the growing maturity and use of professional services automation (PSA) solutions, many businesses rarely gain the end-to-end, seamless visibility they set out to achieve. Even in some of the most mature organizations, we see weekly operations meetings that require flipping through a variety of individual spreadsheets or having your eyes glued to the mega spreadsheet that magically pulls together a bundle of updated spreadsheets and data extracts. Manual reporting is an inefficient use of time and a high-cost tool.
To make matters worse, the resulting report is often wrought with inaccuracies because of incomplete and inconsistent data sources that need to be normalized to even make sense. So we are never really managing from the source of truth, but rather layers of interpretations, and then we wonder why our results do not meet our expectations. In some cases we have observed a gap upwards of 30 percent between actual and expected performance.
The paradoxical reality is that high-tech services organizations have been too comfortable for too long using low-tech solutions. The PSA value proposition has long been understood implement an integrated mechanism that provides direct linkage and consistency between projects, resources, and opportunities. And yet we still see a proliferation of disparate and manual solutions. Implementation and adoption challenges are central to the problem.
Some of the major reasons include:
- Tactical design and implementation of services automation compounded by inadequate modifications to upstream and downstream systems.
- A historically remote and disconnected workforce.
- Comfort with legacy approach of creating tools with office applications such as Excel.
- Relatively low focus on business/financial competency development.
- A culture of throwing human labor at problems rather than innovating built out of a resource-intensive business model.
Advances in connectivity and service automation applications have removed many of these historical barriers to better utilizing PSA technology, if we are willing to invest in changing our business practices and culture.
Optimizing revenue and margin requires insights that are only gained by seamless visibility throughout the project life-cycle elements opportunity management, project management, and resource management (Figure 1). Without it, our hands are partially tied as we try to drive incremental disconnected improvements. Imagine finance trying to forecast cash flow without knowledge of the bank cash balance, receivables, and expenses.
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PSA solutions have the capability to deliver this seamless visibility, however too many organizations simply implement service automation solutions to fulfill the needs of the basic quote-to-cash transaction. While everyone agrees it is necessary to capture time and create an invoice, too many implementations declare victory after completing this basic plumbing.
Further, the business processes may still not be well defined, and often are not well integrated notably, project management and revenue recognition. While dealing with process and data inconsistencies, many organizations never revisit if they achieved any of their original business intent.
The metrics and automated reporting needed to optimize revenue and margin are often insufficiently addressed or sustained over time. In many cases, a business review or forecast cycle requires an analyst to start gathering data manually, and the spreadsheet engine grows along with inaccessible data, inaccuracies, and dependencies on individuals. In a project-centric business, a profitability report two to three months after a project has ended is too late to drive action, and the metaphor a day late and a dollar short becomes an everyday experience.
To stay true to our performance management goals, our focus needs to expand from the quote-to-cash transaction to the holistic life cycle of a customer interaction. This creates focus on the leading indicators that impact revenue and margin, the process and reporting changes required, and adoption imperatives to build the organizations focus on performance results.
Move Forward to Gain Visibility and Drive Predictable Performance
As service models adapt to a constantly changing set of expectations, executive leadership need to invest in their organization and applications to attain real visibility that will provide the path to improved predictable performance, or risk losing the opportunity to invest in strategic capabilities.
At our organization, we use a three-phase Visibility Continuum to assess where our clients are in their quest to gain visibility transactional, visible, or predictable (Figure 2). While a host of other maturity models can be applied to look at core capabilities and competencies, process maturity boils down to the usefulness and reliability of the information stakeholders use to drive business results. In today's choppy seas, businesses need to focus on root causes and actually fix the leaks instead of bailing harder. By getting our boat riding higher in the water, we can see better, go faster, and steer with more confidence.
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PSA technology alone will not solve the visibility gap. It only provides the mechanism to capture the data required and the ability to automate processes. Fortunately, the technology is a relatively low investment. The larger, more important investment is in a sound information strategy, end-to-end business process design, cross-functional alignment, competency development, and management focus to foster the cultural discipline around performance measurement. If done well, the business return can be enormous and lasting.
Priority Actions to Attain Visibility in Your Business
How do we realize the business promise of PSA technology? It takes a commitment from management to invest in and empower the organization to achieve new heights of individual and organizational performance.
Executives who want to provide their organizations a greater ability to execute and drive higher business return should take the following actions:
- Prevent services from being the shoemaker's children. Service automation technology has come too far to not provide it effectively to the organization, but to maximize its value, leaders must be willing to modify processes, automate forecast reporting, and evolve from the spreadsheet-centric culture.
- Architect the house before you build or remodel. If you are looking to implement or gain more from an existing PSA solution, begin with a holistic view of end-to-end business measurement from sales/delivery/finance, business processes, and organizational capabilities. If a prior implementation is not providing the expected results and visibility, it is likely because the design, information architecture, and implementation were not sufficient to provide the visibility desired.
- Invest in the business acumen of your organization. High-tech services is known for technical engineering and implementation skill, but key roles such as client management and project management need business and financial savvy to transition from technical managers to business managers. Greater depth in business management leads to better decision-making ability and increases data quality.
- Focus on field empowerment, adoption, and data ownership. Enhancing business skills will only take the organization so far; evaluate processes, tools, support mechanisms, and incentive structures to provide customer teams the foundation to most easily perform their job, provide management the information needed to run the business, and allow everyone to share in success.
- Develop a culture of learning. As powerful as visibility is, using it in the most constructive way as a learning tool is critical to build adoption, sustain organizational focus, and drive continuous improvement.
Take A Quick Visibility Self Assessment
So what is the state of your visibility? Here are a few questions to ask yourself:
If you can't fully answer some of these questions, then you have an opportunity to increase your level of visibility. More importantly, you may be leaving significant money on the table.
As a first step, begin to work with your team to see which of the metrics noted above are available and how they are gathered and reported. It will give you insights into the maturity of your organization. Use it as an initial step toward capturing what matters to your business success, and seek to leverage PSA technology to propel your organizations level of performance.
About the Authors
Steven Sexton and Robert Armour are the founding partners of serVelocity, a management consulting, solutions implementation, and sustainability services firm focused on growing and transforming high tech services organizations. They may be reached at email@example.com and firstname.lastname@example.org. www.servelocity.us.com