Collaborative Servicing - A Partnering Solution for a Sustainable Business Model

Want to reduce capital and operational costs and at the same time drive productivity improvements? Consider collaborative servicing.

by David Mond, Managing Director and Chief Executive Officer – recoveriescorp

Productivity, cost saving and innovation are key drivers for corporate success in Australia’s current environment of competitive pressures. These pressures are not going to let up, so every Australian business must continually re-examine the functions that drive earnings and question whether they can be done more effectively and at lower cost. I think they can, and here’s how.

‘Collaborative servicing’ is a function that’s overtaking straightforward ‘outsourcing’, as businesses and government departments alike, realise that committing to a long-term engagement with a commercial partner can bring significant benefits.

The goal of collaborative servicing is to encourage a cooperative effort which brings innovation and positive economic and cultural change to service delivery and efficiency on the back of a proven cost/benefit model.

I believe reductions in costs of around 20% can be achieved with equal or better outcomes in service delivery when elements of established ‘core’ functions and ‘non-core’ functions are undertaken by a collaborative servicing partner.

There are a number of reasons for this, starting with the obvious pace of technological change. Dedicated, expert technological solutions are required if a business is going to achieve sustainability and growth.

If in truth, this is not a core function of your business and you do not have the expertise to keep up with the game, is this a function you should retain or hand over to a collaborative servicing partner who specialises in this area?

Transfer Costs and Risk to a Collaborative Partner

A large number of functions and services can be better managed by a partner, including administrative and other ‘exportable’ services. As the collaborative servicer must make a profit, you’ll find innovations and cost efficiencies are driven within your business.

Operational costs can also be significantly reduced by transferring the risk and holding costs of fluctuating demands for services from your business or government department to the collaborative partner. Under current labour laws for example, a change in business circumstances which requires reducing staff levels is likely to be costly and damaging. Worse still, this approach, often repeated in many workplaces, is likely to send a negative cultural message leading to disengagement by retained staff. This dilemma is significantly reduced or avoidable through the development of a long term collaborative service partner and the provision of an elastic engagement model.

Capital investment costs are another issue. Your business can actually save millions by transferring the costs that drive private enterprise innovation to a collaborative partner who has already made the investment in capital infrastructure and has as a key driver for success, a continuous improvement capital investment program.

I would suggest it’s time to set up a Strategic Committee (SM) to examine every department within your company or government department, with the view to identifying perceived core and agreed non-core activities and expenditures which could be appropriate for the collaborative servicing model.

The SM can also undertake an arm’s length cost/benefit analysis to set realistic targets for such a change, including reductions in cost with equal or better outcomes in service delivery.

It is vital that the members of the SM are not even remotely conflicted, as very few people are prepared to vote themselves out of a job!

Offshoring v Collaborative Servicing

Some 70% of GDP in Australia comes from the provision of services, and offshoring is becoming more and more a part of ‘business as usual’. While it can be an important contributor to a composite service delivery solution amid rising costs, it does not necessarily provide positive cultural and economic change within the Australian business.

Driving such change within your Australian operation can be achieved by bringing in corporate expertise with enterprise knowledge and experience to partner your business. This can give real impetus to positive change management.

This issue becomes even more critical when your customer base includes government tenders that require work to be performed within Australia. A collaborative servicing partnership can enable you to achieve Australian-sourced efficiencies that make the difference between tender and operational success and failure.

This is particularly important as new State Governments in Australia seek to provide basic services at a lower cost. Collaborative servicing with the private sector could make a significant contribution to achieving savings that could reduce government debt or fund other much-needed services.

Client demands for rapid innovative solutions and excellence in service delivery in the second decade of the 21st century requires a new way of thinking about your business model. Consider collaborative servicing and stay ahead of the game.