Quick Wins from Digital Transformation. Really???

In previous articles on cost reduction we have covered the full spectrum of approaches from Quick Wins to Changing the Way You Do Business to eliminate cost and simultaneously improve performance.   The spectrum roughly spreads from immediate and easy to complex and longer-term.

One such approach that we examined in Enlightened Approach – Business Perspective, was creating value through transformation.  Traditionally this would be long-term and complex, but emerging technologies and a fresh approach means there are significant opportunities for quick wins.

McKinsey and Co undertook extensive research in 2017 that revealed that 1/3 of working hours in a modern economy are spent doing tasks that can be automated with readily available technology.   In the back office functions such as HR, Finance, Customer Support and Logistics this is even higher – approaching 50-60% in some cases.

That’s a significant element of an organisation’s General and Admin costs tied up in people carrying out mundane, repetitive activities that could be better done by a computer such as data entry, taking information from one application and entering it into another etc..  . In many cases this is also placing a constraint on the employees’ ability to execute higher value activities that can only be done by a human – e.g. innovation, creativity, building relationships.

Digital Transformation was supposed to be tackling this.  What’s holding it back?   The compound issues of cost, time and risk.   

Technology driven transformation typically requires a period of analysis and design followed by investment in software, configuration of the software, testing and implementation.   It takes a long time to get started, there’s a big up-front cost and once implemented the cost of making changes once delivered is high – creating significant risk.   Another McKinsey and Co study shows that 70% of digital transformation initiatives fail to achieve their stated goals.  No wonder many organisations are reluctant to get started.   

Robotic Process Automation (RPA) is a technology that has been much hyped alongside AI, Blockchain and Data Analytics.   RPA uses ‘software robots’ to replicate a business process and execute tasks that would otherwise be performed manually.   The software robot is programmed to follow ‘if this, then that’ instructions.  The robot interacts with existing systems in the same way as a human user – meaning it is non-invasive and extremely fast to deploy.  It is genuinely accelerating digital transformation in many sectors.

However, the ‘traditional’ approach to RPA can still feel like a smaller version of the painful transformation experience above.  There’s up-front investment in software licences and the software robots still need a developer to ‘train’ them, business analysts to identify and map processes and ongoing support to manage change.   ROI on projects is typically very high, but it can take 12-18 months to really feel the benefit of a strategic programme.

A ‘fresh’ approach that I’ve seen recently is to use the RPA technology in a ‘Process-as-a-Service’ model.   This takes away the pain of up-front investment and provides the automation for a fixed monthly fee.   Implementation is fast – typically 4-5 – weeks but it can be done in days if necessary.  This allows for an agile approach for generating rapid returns: 

• Identify a process and understand its cost
• Analysis of a process for RPA can be done in less than 2 hours – including a price for delivery.
• If the business case stacks up, the process can be automated inside a month
• The returns are realised immediately

The following example comes from a busy finance function.  A team of staff had to work flat out to get a month’s work done every month – Accounts Payable, Accounts Receivable, Reconciliations, Journal Entries, Month-end Consolidation and Close and finally update forecasts and issue the management accounts to the business.   Next to no time was left over for identifying opportunities to add value – let alone pursuing them.

An obvious place to start was Accounts Payable – 3 staff capturing and validating invoices, coordinating authorisation and then making payments.  The software robot was able to take on 80% of the activity – it receives the invoices, scrapes the data from the PDFs and turns it into structured format allowing it to validate the figures and update finance systems.  The robot even issues the authorisation list to managers in the business (and chases them if there is no response).  This released 2.4 Full Time Equivalents (FTEs) for the cost of less than 1 FTE – but in this case, rather than take the direct savings,  the business redeployed to create capacity elsewhere.

The two junior staff were redeployed to Accounts Receivable in the short-term – with the express intention of reducing debtor days (and thereby increasing cash).   The senior person used the benefit of the experience of automating their activities to identify further opportunities across the function. 

Before long the software robot was doing daily bank reconciliations, updating journal entries and working weekends doing data housekeeping tasks that freed the rest of the team up to add value.

As McKinsey & Co’s report highlights, there is a massive opportunity for automation in every organisation.  The challenge is how to tackle it, quickly and at miminal risk – often whilst there are multiple burning platforms across the business.

A ‘fresh approach’ to Robotic Process Automation can help a business quickly realise savings and create the capacity to generate value. 

If you’d like to discuss how we could help you generate quick wins by exploiting a fresh approach to RPA, please contact Jonny Michael e: j.michael@jmclconsulting.com or mobile: 07831 390161.