Business Outcomes, Not Business Overheads
The ability to consider business needs and initiatives in terms of business outcomes, not simply operational overheads, separates strategic thinkers from the teams delivering on these initiatives within the business. That is not to say an understanding of operational considerations is a disadvantage to these strategic thinkers; merely that it sits lower in their decision-making priorities.
It is this focus on outcomes, rather than overheads and ownership, that is driving high-level change in the business strategy of many companies today.
Access, Not Ownership
In a world of finite resources, but increasing population, attitudes towards ownership are changing.
Consider the case for Uber and other taxi services, these have risen in popularity as people want the flexibility of travelling from A to B without the overheads of purchasing and maintaining a car, insuring and taxing it, finding parking, route planning, and indeed driving.
The fun of driving and prestige of car ownership are not always enough to tip the balance in favour of driving. Sometimes it’s more important to focus on the outcome of arriving at point B, without the overheads involved in how to get there.
In a similar way, the rise in popularity of Deliveroo, Just Eat, and similar services has enabled customers to jump straight to the outcome of enjoying a quality meal without the overheads of shopping, preparing, and cooking it themselves, or booking, travelling to, and paying to eat in a restaurant.
Even our record/CD and video/DVD collections have been superseded by instant access to high quality audio and video on demand, via streaming services.
Advances in technology and networks -and an evolution in our attitudes to ownership – has brought people closer to the outcomes they desire than ever before.
These changes are not just occurring in the lifestyle of individuals. Businesses have also seen a move towards access over ownership, with software invariably licensed rather than purchased outright and the rise of as-a-service offerings, from Software-as-a-Service (SaaS) to Infrastructure-as-a-Service (IaaS) and beyond.
The market share of SaaS solution offerings has grown significantly (to over 70% of the enterprise software market in 2021) as businesses capitalise on the cost savings in accessing the latest automation, AI and other technologies without the operating expense of owning and running these in-house.
But access to services and licensing is closer to the example of hiring a car than taking an Uber; you still need to put in the work to integrate, deploy, manage and maintain your chosen solution. As-a-service offerings certainly remove some of the overheads, but do not deliver the desired business outcomes in their own right.
Managed services take the premise of as-a-service solutions further, packaging them with service management by experts in that solution area. Managed services remove the need to recruit, train, manage, and retain staff to deploy, manage, and maintain the respective service.
For many businesses, this triggers the conceptual debate of outsourcing vs. in-house paradigms, although the reality is virtually every business already outsources its postal delivery, property maintenance, and many other functions without such a debate.
However, one of the more frequent criticisms levelled at managed services is the potential for disconnect between the service managers and the business objectives of the service customers. To go back to our Uber analogy, this would be like having to direct your driver turn-by-turn on your journey. Without the appropriate service level agreements, performance benchmarks and baselines, businesses may lack the metrics to identify and rectify these wrong turns before they impact their business.
Outcomes, not Overheads
No one in a strategic financial position ever really wants to invest in a specific piece of software, nor recruit for a particular role. Truth be told, senior decision-makers are more interested in the business outcomes these investments can lead to. It’s just accepted that many – if not all – of these outcomes need investment in systems and the staff to manage them.
However, in the challenging recruitment market of the 2020s, some businesses are looking beyond these traditional preconceptions. In a 2021 Forrester survey conducted on behalf of Corcentric of over 650 financial leaders in the US and Europe, it was found that 85% of businesses were looking for expert partners and/or managed services to meet the gaps in bandwidth and skills to meet their strategic financial goals.
To once more reference the analogy of Uber, this 85% are the financial leaders who are determined to get from A to B as quickly and safely as possible, so do not care to be bogged down with searching for a car, driver, map, etc. They are simply working with the optimal blend of technology enabled managed services and funding to reach their business outcome as quickly as possible.
Managed Services + Funding = Guaranteed Business Outcomes
One of the smartest solutions to accelerating the delivery of business outcomes is the application of funding to the managed services equation. The most common objections to managed services – loss of control and quality of outcome – simply goes away if the onus for payment shifts onto the managed service provider.
Take, for example, the concept of managed services to support the accounts receivable process. It’s likely that the business outcome sought is to reduce days sales outstanding, without negatively impacting customer experience. Managed services may be able to bring novel technology and a greater number of contact staff to manage the process, but there’s no implicit guarantee the business outcome of lower DSO will be met. However, if the managed service provider underwrites a service level agreement to fix DSO at say 15 days by funding this – essentially buying the receivables ledger – it becomes the managed service provider’s problem to ensure invoices are delivered and payment collected as quickly as possible.
The key difference between the above example of managed accounts receivable and simply selling the AR ledger to a factoring company is the ongoing nature of a managed service agreement as an extension of the business. This requires the service provider to uphold your brand values and maintain the best possible customer experience throughout invoicing and collections, in order to ensure the managed service contract is ongoing.
Guaranteed Financial Business Outcomes
In these increasingly uncertain times, business owners need to balance cash flow more carefully than ever to maintain liquidity as a hedge against uncertainty. As a result, financial outcomes, such as improvements to the cash conversion cycle (CCC), can be found higher on the agenda than traditional objectives, such as improved conversion rates and improved profit margin.
Business outcomes that reflect these strategic financial objectives, whilst reducing overhead costs and remaining in touch with customers’ needs throughout their entire lifecycle, are crucial for business success.
So, next time you are investing in business overheads – people, process or products – to meet a business outcome, take a moment to ask yourself whether a managed service partner like Corcentric could help you reach your business outcome, and guarantee that outcome, more quickly and efficiently.
WithManaged AR, you receive a guaranteed business outcome (a dramatic reduction in DSO) regardless of any customer insolvency or late payment. Bad debt simply ceases to exist, as Corcentric absorbs this risk as part of the service. You can find out more about how Corcentric Managed ARliberates working capital in this white paper.