Case studies
Product complexity reduction in financial services
Looking to rapidly gain scale, the company had taken on multiple, large clients, but lacked the time and internal discipline to develop a common set of products and services. As a result, clients were serviced through largely unique delivery platforms. The resulting complexity in operations drove higher costs than the competition, impacted the quality of service, and hampered the company’s ability to respond quickly to new client demands and evolving market trends.
Compounding the issue, an excessively customer-friendly corporate culture was encouraging customization, and the highly siloed organization was diluting accountability and preventing a coordinated approach to cost management.
Challenge
The company recognized that the complexity of its product set and operations was a key driver for excessive costs and poor quality. It engaged A.T. Kearney to develop a standardization methodology and apply it to two important service lines in its benefits outsourcing business. The specific objectives of the project were threefold:
- Develop an approach robust and versatile enough to standardize products and operations processes across its outsourcing business over time
- Pilot the methodology to selected service offerings, and use the results of the pilot to further accelerate change across the organization
- Gain training and experience to develop an ongoing, internal capability for complexity management
Approach
In an initial discovery phase, A.T. Kearney reviewed the product and service portfolio and identified, through workshops with the client, high priority areas where standardization was needed most. These areas were selected for their potential to rapidly reduce the cost base and address clients’ quality complaints.
A.T. Kearney then applied a disciplined approach to standardization:
- Variability across all clients was mapped, using variant trees and other analytical tools
- Each variant was identified and quantified in detail, assessing cost-to-serve, performance level, and quality
- Potential standards were then developed on two parallel tracks: an incremental track, looking at paring down existing variants; and a "zero-based" track, building a new, potential standard from the ground up, based on market needs and common client expectations - these two tracks were then merged to develop the final set of standards
- New standards were piloted to validate performance expectations, and gather client and customer feedback before rollout
Across these different steps, client resources were heavily involved to provide data, support the analytical process, generate ideas along with our consulting team, and review recommendations. This collaboration, which is typical of A.T. Kearney's working style, was even more critical to success in this project, as compliance to the future standards requires the full support of different functions, which are not necessarily accustomed to working to the same plan.
Results
The pilot phase demonstrated the effectiveness and the potential of the standardization methodology:
- Costs were reduced by 24% for the products and activities in scope – the initiative became a key contributor to the clients’ corporate-wide drive to reduce its Cost Per Participant (CPP)
- Quality, which had become a burning topic while the project was under way, was dramatically improved: key drivers for customer satisfaction were significantly impacted; for example, processing time for key processes was reduced by 25%, and the error rate for a critical application process was divided by 3
- Even more important, the account response was positive, and the pilot standards were adopted by clients as a "win-win" initiative to introduce efficiencies
- The standardization program provided the sales force with a compelling, positive message at a time when accounts needed to be reassured about the client’s continued ability to serve them
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