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SERVICES VALUE CHAIN

FOOD FOR THOUGHT MAY 2001

L I N K B Y L I N K : S I X VA L U E - A D D S T O S E RV I C E C H A I N S U C C E S S

The U.S. economy continues to move toward a KPMG Consulting places increasingly establishing themselves as service
services orientation. The U.S. Department of great emphasis on capturing bureaus in order to remain viable and to
Commerce estimates that more than 70 percent provide value to their internal customers. In
organizational effectiveness.
of all revenues in 2003 will be associated directly all cases, service companies and organizations
To facilitate this for services
or indirectly with services. Companies that need to reach a balance between operational
organizations, we are defining
traditionally produced goods only are seeking efficiency and organizational effectiveness. A
the critical interrelated
ways to package their knowledge and core heavy concentration on lowering operating
competencies to capitalize on the service trend. activities that comprise the costs can hamper creativity and innovation.
They are re-inventing themselves as supply chain services value chain.

management integrators, logistics planners, Alternatively, constant innovation can create

complex engineering providers, Internet services instability and adversely affect business

providers, and a variety of other innovative operations. The dotcoms provide us with a

offerings. In a parallel trend, business process outsourcing is recent example of what can happen when innovation becomes

on the upward swing, marked by companies providing their the rule and sound business plans, operations, and

core competencies as packaged services wrapped with performance management become secondary priorities.

service-level agreements.
PRIORITIZING VALUE-PRODUCING
The question is, do these companies recognize the value- ACTIVITIES TO PROPEL EFFECTIVENESS
producing activities, and harness the required solutions necessary What must a services company or organization do extremely
for a successful foray into service delivery? well in order to grow the business on the top line while still
producing solid bottom line earnings?
The reach and convenience provided by the Internet, customer
retention and care strategies, and the lure of higher profit KPMG Consulting places great emphasis on capturing
margins and annuity business models associated with services organizational effectiveness. To facilitate this for services
are some of the primary factors fueling this renaissance. organizations, we are defining the critical interrelated activities
Companies that have been providing services as their core that comprise the services value chain. These activities have
business suddenly find themselves with new market compe- traditionally been individually addressed from an operational
tition. These entrants often come with brand recognition and efficiency standpoint, primarily utilizing point solutions and
compelling value propositions intact. business process improvement strategies. We stress the need to
evaluate these activities in context with their inter-relations to
New competitors are delivering their products embedded
achieve organizational effectiveness and significant gains on
within a broad range of service offerings. In addition, service
the top line without compromising the bottom line.
organizations (such as IT, Recruiting, Human Resources, and
Financial Management) embedded within large companies are

S E R V I C E S VA L U E C H A I N PA G E 1
Six of the key value-producing activities are: Partnership Development and Collaboration—
Ensuring that partnerships are providing value and that
Customer Management—Understanding the enterprise’s
the cost of managing them is proportional to the value
business vision, strategies, plans, and challenges, and
they are providing. Also, looking for ways to utilize
mobilizing the organization to provide services and
partnerships to deliver more innovative services to a
solutions that directly support the end customer and add
customer base constantly looking for value propositions
significant value, while providing unmatched customer
that support their changing business landscape.
care. Doing these things well can positively impact
customer retention, and can promote a deeper,
INTERLINKING SOLUTIONS
collaborative relationship.
KPMG Consulting offers technology and business operation

Resource Management—Utilizing people effectively by solutions to address each of the six value-producing activities

matching their skills, capabilities, knowledge, and career within the Services Value Chain. When implemented in a

interests to projects and initiatives. These steps are vital prioritized and comprehensive manner, we can help drive our

to retaining employees, and can be a leading factor in families of solutions to guide your value-producing activities

retaining customers. and garner both operational efficiencies and organizational


effectiveness.
Skills Acquisition—Aligning permanent hire and
contingent workforce procurement with the competency For example, an enterprise focused Customer Relationship

models required to deliver highly valued services to the Management solution, like our end-to-end offering Connect-

customer, while maintaining a culture of continuous to-Customer, can establish true 360 degree customer views.

learning, improvement, and collaboration. Leveraging Internet technologies to deliver a seamless

Workforce Optimization—Combining requirements


from booked and forecasted business to effectively
LINK BY LINK: SIX VALUE-ADDS
forecast skill, capability, and knowledge needs. The FIGURE 1
TO SERVICE CHAIN SUCCESS
output is staff transition, skill development, and skill
acquisition plans that provide enough lead time to
COLLABORATION AND PLANNING
staff projects and initiatives with capable and
motivated people. DEMAND MANAGEMENT SUPPLY

Human Capital Development—Proactively building WORKFORCE


training and distance learning programs in advance OPTIMIZATION

of needs, driven by forecasted customer requirements


and market trends. In addition, utilizing performance CUSTOMER RESOURCE SKILLS
appraisal systems and management tools to ensure people MANAGEMENT MANAGEMENT ACQUISITION

are developing both intellectual and social capital to meet


ever increasing demands and challenges. PARTNERSHIP HUMAN CAPITAL
DEVELOPMENT DEVELOPMENT

2 S E R V I C E S VA L U E C H A I N
experience in each transaction, Connect-to-Customer FIGURE 2 VALUE PROPOSITION
provides strategic planning, operational process, technological
infrastructure and application integration. Supporting CRM HIGH • CUSTOMER
solutions that could be part of the Connect-to-Customer MANAGEMENT
• STRATEGIC HR
solutions include 1-to-1 Marketing, Sales Force Automation,
• WORK/PROJECT • SKILLS
and CRM Assessment/Quickscan. Our solutions can help MANAGEMENT ACQUISITION

significantly improve both the quality and effectiveness of • VENDOR • WORKFORCE


IMPACT MANAGEMENT OPTIMIZATION
BUSINESS
every interaction with customers, strategic partners, vendors OBJECTIVES • PARTNERSHIP &
COLLABORATION
and employees by enabling a context-aware handoff and • T&E
MANAGEMENT
personalization across all communication channels. This
solution can help develop and foster the rich collaborative
environment necessary to move customer management to LOW
EFFICIENCY EFFECTIVENESS
become a value producing activity.

To address workforce optimization, resource management


and human capital development, we can help create value hiring, contingent workforce procurement, and partner
via our Workforce Solutions. Focused on connecting content, collaboration activities to fill project teams and open
applications and resources within the enterprise—and maxi- job positions with people who possess the right mix
mizing the value chain of that workforce for significant ROI— of skills, capabilities, experience, and knowledge, and
these solutions might include integration of personalized who are motivated by the challenges, opportunities,
role-based enterprise information portals, next-generation and compensation offered.
shared services, or professional services automation. Solutions
like these can help transform a client’s approach to developing VALUE-PRODUCING ACTIVITIES AND
and managing human capital into a highly leverageable asset. COMPELLING SOLUTIONS—CAN JUST
In this approach, resource managers can be enabled to place ANYONE PUT TWO AND TWO TOGETHER?
employees on projects or in skills development opportunities Where do value-producing activities and respondent
that are timely and well-matched to skill and goal sets. solutions meet? Certainly, select value-adds can be made
Likewise, employee can obtain access to role-based tools and possible by examining point solutions which address specific
information to better manage their benefits, personal data and areas. But isn’t a more durable, strategic focus what you had in
work flow. mind? If so, then the best step is to pair up with an integrator
and strategic counselor of KPMG Consulting’s scope and
And in our approach to skills acquisition, we can help align
bandwidth. Working with us, we can help ensure that your
competency models (intellectual and social capital) with the
value producing activities have connected and that compre-
client’s business vision, strategies, values, and goals. These
hensive solutions which propel your enterprise to substantive
models are then applied consistently across all permanent
results and ROI are implemented.

S E R V I C E S VA L U E C H A I N 3
ABOUT THE AUTHOR ABOUT KPMG CONSULTING, INC.
Fred Hencke is a Senior Manager within KPMG Consulting focused KPMG Consulting, Inc. (NASDAQ: KCIN),
on developing Service Value Chain solutions, partnerships, marketing based in McLean, Virginia, is one of the world’s
strategies, and business opportunities. KPMG Consulting’s Services Value largest consulting companies with more than
Chain solutions address human capital management, process optimization $2 billion in annual revenues. Our more than
and technology integration. Fred has more than 20 years’ experience enabling 10,000 employees provide business and
business transformation through process optimization, organizational devel- technology strategy, systems design and
opment, human capital development, and technology implementation. Fred architecture, applications implementation,
served as the Global Director for Competency Development at Computer and network and systems integration, designed
Task Group, an information technology services company. During his tenure to enable clients to leverage technology for
he successfully architected and deployed an eLearning program designed stronger return on investment and enhanced
to re-skill internal employees as Web developers within six weeks. He led service to their own customers, vendors and
an effort to create a comprehensive skills inventory integrated with human employees. We serve more than 2,500 clients,
resource policies and procedures. He has also developed several Centers of including global companies, Fortune 1000
Excellence focused on program management, Web development, business companies, small- and medium-sized businesses,
intelligence, security, network design, and systems management. He used a government agencies and other organizations,
virtual team organizational model to connect several hundred consultants through six industry-focused lines of business,
in a collaborative environment to support business development, solution including: financial services, consumer and
delivery, mentoring, and services innovation. Prior to joining KPMG industrial markets, high tech, communications
Consulting, he was the Chief Operating Officer for a Business Service and content, public services, and health care.
Provider, responsible for developing partnerships, marketing strategies,
and business opportunities, as well as managing operational and For more information about KPMG Consulting,

organizational performance. please contact us at 1-866-FOR-KCIN or visit


our Web site at www.kpmgconsulting.com.
Food For Thought regularly provides views and insights to help readers
navigate and succeed in the world of business technology.

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©2001 KPMG Consulting, Inc. All rights reserved. Printed in the U.S.A. 1351MARAD.
4 S E R V I C E S VA L U E C H A I N KPMG Consulting, Inc. is an independent consulting company.