Cost to Serve – The changing face of technology costs
One of the fundamentally flawed assumptions we may be working to is that (as for most of history) People use technology…
We are on the cusp of working in a business reality where we must lead, manage, and make decisions in an environment where Technology uses technology in significant manner and scale.
Consolidation and more complex service architectures are driving FSI organisations to greater automation to cut cost and increase the efficiency of digital channels, and therefore, stand up Centaur Teams (people teams enabled by generative or predictive AI).
Establishing how efficient one application of technology is over another is, or indeed how technology can become inefficient as new connections (e.g. API’s) and features are added, it will become increasingly difficult.
Moreover, applying traditional Lean Six Sigma efficiency analysis to uncover NOISE/MUDA/WASTE/EXCESS CAPACITY needs to address the nuances of technology service provision, not just taking the total cost of IT and dividing it by FTE/Customer/Volume.
This shift demands an informed approach to analysing operations with technology… Technology is no longer just an extension of human capability; it is an autonomous decision-maker, fundamentally altering the landscape of our operations.
Uncovering and understanding the hidden costs of technology is vital for being able to design, develop and evolve operating models. As we have said before a Modern Operating Model must foster adaptive capabilities, regularly review processes, and shift continuously to stay competitive.
Building modern models in the context of the above we suggest should include:
- Prioritising Technology Investments: Technology is a catalyst for efficiency; smart investments today lead to streamlined operations and sustained growth tomorrow. But these strategic investments hinge on evaluating their necessity, ensuring they do not create undue cost, and that they align with our operational goals.
- Analysing Resource Costs: Resource costs often exceed 50% of total operating costs, with over 33% lost to non-productive ‘Noise’ activities (Source: XeP3). It is crucial to scrutinise resource costs, understand how they are being allocated, then strategically automating processes that make sense.
- Improving Data Quality: As mentioned in our first bulletin, Automation’s potential is only as good as the data it relies on – ensuring quality data is a non-negotiable to understand the true cost of technology, empowering strategic decision-making.
How can cost be measured to best support a modern operating model?
The XeP3 total cost-to-serve model provides deep insights into resource allocation, technology investments, and operational inefficiencies. This robust framework driven by metrics and analytics to optimise costs, aligns seamlessly with regulations such as SPG516 – Business Performance Review, ensuring strategies are aligned with long-term objectives.
Understanding resource costs and technology impacts needs strong strategic oversight. By addressing these areas, we can help you transform operations, reduce costs, and improve service delivery. At IQ Group we understand this, and with XeP3, can provide comprehensive insights into cost to serve, enabling you to optimise resources and deliver exceptional service to your members.
Written by Graham Sammells
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