Understanding the Global Business Services’ Iron Triangle
The nature of the Global Business Services (GBS) function can be better understood by addressing a fundamental question that has gained prominence due to recent digital advancements:
What do we really want to achieve?
This question, which may seem trivial at first, is crucial in defining the objectives and strategies of the GBS function. Traditionally, we hear phrases like:
“It is not enough to do things right; we must do the right thing.” But what actions or modes of operation lead us to do things that are unnecessary?
“Don’t do what is not needed.” How do we identify those elusive ‘right things’?
The challenge is that we often stop short of providing the Global Business Services organization with a clear roadmap or compass, especially as the need for digitalization becomes more pressing. This leads to a fragmented approach, jumping from one worthwhile project to another without a coherent strategy.
Reframing the Iron Triangle Rule
The Iron Triangle is a traditional management concept that consists of three essential components: Scope, Cost, and Time. The idea is that the triangle should stay balanced, meaning a change in one constraint requires compensating adjustments in the others.
However, when implementing a process of ongoing improvement with a primary focus on digital solutions, this traditional Iron Triangle model needs to be reconsidered. The new model should emphasize Throughput, Inventory and Operating Expense.
In other words, the primary focus on:
- Increasing Throughput
- Decreasing Inventory
- Decreasing Operating Expense
Immediate Improvements vs Long-Run Strategies
In the short term, the pressure to improve the GBS function performance often focuses on reducing Operating Expense, typically through layoffs. However, in the long run, simply reducing Inventory and Operating Expense offers limited opportunities.
Throughput, on the other hand, does not have inherent limitations. In many organizations, we hinder Throughput by excessively cutting Operating Expenses in the GBS organization. Fragmented improvements and successful local pilots are not sufficient to move the entire GBS function forward effectively. If even one key stakeholder within the process is not engaged in ongoing improvement, the GBS organization cannot improve efficiently and effectively.
Integrating the Global Business Services Function
For a significant improvement effort to start, all key stakeholders must buy in, which is particularly crucial for digital transformation initiatives. Importantly, the optimal performance of the GBS function does not equate to the optimal performance of the entire company. Often, the focus on achieving the Global Business Services organization optimization overlooks the broader company goals.
Closing Thoughts
When Throughput becomes the dominant factor, the entire perspective changes. Prioritizing Throughput forces the realization that the GBS function operates as a network of interdependent variables. This holistic approach ensures that improvements in the Global Business Services organization contribute effectively to the overall success of the company.
In summary, the Iron Triangle of Scope, Cost, and Time needs to be reimagined in the context of digital transformation and ongoing improvement. By focusing on increasing Throughput, decreasing Inventory, and reducing Operating Expense in a balanced manner, the Global Business Services function can align more closely with the overall strategic objectives of the company in large.
