"Blue Ocean" Mindset Supports Innovation

SSON interview with Peter Villanyi, Managing Director, Avis Budget Group EMEA Business Support Centre

BH: Peter, which services are you supplying to Avis Budget, and who are your customers?

PV: From Budapest we provide mainly finance processes including accounting, and purchase-to-pay. We also provide customer support, including cash application, debt collection, and some billing activities; as well as post-rental customer services. We have a team focusing on data management – customer as well as pricing – and we have a small IT shared services, as well.

How many people do you have in your Budapest office?

Today we have 350, and we are still growing.

What is the market like in Budapest today?

In 2010 the shared services and BPO industry consisted of about 80 centres, and employed about 30,000 people. Considering the country has 10 million people, that's quite a big number. We are expecting numbers to show an increase of 2000 jobs, in 2011. So the reality is that it calmed down a little bit.

Most of these centres are already reorganising themselves, moving towards a hybrid model, with an outsourcer or BPO provider. The main push is in new technology and going for the value-added tasks, to attract either another service line to extend the scope, or another geography. So it's rare that we see big newcomers, today.

You run one of the largest global business services centres that exist in Eastern Europe, with a reputation for best practice and excellence. How did you get to where you are today?

Our story really started back in 2003, when Avis Europe decided to go down the shared services route. The idea was to create a centre in Budapest, which would provide back-office services to the classic West European countries. The launch was focused on a PeopleSoft ERP implementation, which would support standardisation and industry best practices.

By the time the centre was actually created, however, some priorities had changed within the company and the mandate we had been operating under was, effectively, withdrawn. That presented somewhat of a challenge, but we proceeded and created a model where we could pull work from the different countries. We also developed a governance model, which would guide our customer service as well as satisfy our original goals of standardisation and transactional performance excellence.

The first thing we did was set up our operating model based on processes, and within the processes we created country teams that could support the various countries in their own languages. So that made up two layers in our structure. Then we created a strong framework to measure two things: One was our key performance indicators, based on our service level agreements; but, importantly, we also tracked the perception of our customers – the countries – regarding the quality of our work.

By combining these two metrics, but keeping them separate in terms of reporting, we could track where we had performance issues within the processes; where we needed to address "perception" through change management within countries; or where we needed to work on the customer relationship.

As we stabilised operations, we wanted to create a new vision for ourselves regarding how we were positioned within the group. So we created the idea of centre of excellence. And my personal belief is that this is the only way for a captive shared service centre to survive, because when we standardise and improve processes using smart tools and automation, outsourcing solutions will increasingly become part of the package, and we need to be able to evaluate them.

I think that all the providers are getting smarter and better at what they are doing. At the end of the day, the big question is "do we need a captive shared service centre?" The answer to that will be to create a centre of excellence, which provides the added value; for other situations, outsourcing will be the solution. We are not at that stage right now – I am talking about our vision.

But it is really important to create the vision, because that is how we can start creating the culture within the organisation and give something to the people, which they can follow. And if you give them the tools, then they can implement a bottom-up approach for improving the processes and creating excellence and innovation in everything that we do.

Let’s talk about value, for a moment. You have done a lot of work on tracking the value perception of your services. So how do customers perceive value and what impacts this perception?

I can describe that via a Maslow pyramid. There is a very simple requirement, and that is to do the basics right first time. It is very difficult when a new organisation is set up: new people come on board and there are a lot of problems with the transfers and technical issues at the start. But it is key that we stabilise the basics from the very beginning and make sure that the transfer is as smooth as possible. More importantly, how we react to the issues and making sure that we have a robust system underpinning them, will be crucial.

So a quality management system is one of the key elements, whereby we monitor and detect all the quality issues we can and take action where necessary. And if you can convince the countries of your value, and demonstrate it visually, then you gain their trust. And then you need to keep that trust.

That is the next level, where relationship management and voice of customer techniques can help. It's not a one-off exercise. Again, it requires a robust system. We make sure that we measure partner satisfaction, and if they give us any feedback that we respond to it. We also make sure that we use the right tools. If it's a performance issue, then we need to fix the process. If it's a perception issue, then we make sure that we use change management techniques and fix the relationship.

Which technologies have you found to be the most valuable in terms of return on investment or impact on the business?

If you talk about the technology side, we are at the beginning of that journey. But now we are on the path; the processes are well-documented and well-defined. So it's actually just a question of investment.

If I had to take a guess at where the return of investment is the biggest, the first point would be automation vs employment — ie, increasing productivity. And secondly, there is a sharp increase in control, because more manual work means more manual errors.

The knock-on effect is huge. For example, in purchase-to-pay, if suppliers are paid quicker, we'll have fewer requests from them. So there are all those processes where we can define the transactions quite well, and I think those are the processes where we need to have the highest level of automation — or an optimum, at least.

There are another group of processes where we cannot always define the process by transaction; they are more complicated and are driven by other factors. For example, there is debt collection. We are a service company with a very diverse customer portfolio, so we have big customers, small customers, all types. Where we add value is by setting up the right processes and procedures to improve the cash flow. That has a real business impact in the local marketplace. The focus is not on number of calls, but rather, on how to be as effective as possible to improve the cash flow.

What would be some of tips to share on improving excellence and innovation?

Probably the most important thing for me is the mindset within the organisation, so culture creation is very, very important. I'll give you an example. When we kicked off our quality excellence programme, which is mainly based on ISO 9001 compliance processes, we said, "Okay, that's very dry – how can we sell that to our people? How will they use it? How will it help our organisation to innovate and look for new problems and solutions?" We realized we wanted to go farther: we wanted an awareness programme, as well.

At the end of the day, that proved to be very successful. So whenever we try to do something about excellence and innovation we always start by trying to understand what it could mean to our people – do we have the right mindset to engage them? I really believe in bottom-up approaches in mature organisations. We have a lot of top down initiatives, which are very good for transformation type of changes, but we need to use the bottom-up approach for the fine tuning. The bottom-up approach also helps us to think differently because there are always lots of ideas coming up. So mindset is important.

Second, and connected to that is the idea of "openness," because we need to accept that somebody else will have another idea which is completely different to what we are currently doing, and we need to evaluate those, too. So for me, innovation is looking at completely new ways of doing things, and asking new questions around what we do.

The third thing is that I believe that innovation requires a process as well, so it's not just somebody having an idea but not knowing what to do with it; we need to create a process behind it. Then innovation is not just the privilege of very creative people within the company but it becomes the essence of the whole organisation. One of the philosophies that we are using here is the Blue Ocean philosophy.

What is Blue Ocean about?

It's all about innovation and the process behind it. Our company, as a Group, has applied this concept, and I try to apply it to our shared services industry, as well.

It's not easy because it’s essentially about the fact that if you are always competing with your competitors by doing the same thing for less, you’ll never get ahead. Instead, the question in Blue Ocean is how you can create another kind of value to your customer, without needing to deal with the competition. And that's the real innovation.

It's called Blue Ocean because most of the companies competing with each other could actually find their own Blue Ocean. It's big, and there is a lot of value to be found out there.

Interesting concept.

It's a very interesting concept and it can be combined with a lot of disciplined techniques. It requires thinking with the left and right brain. There are no rules or limitations, just a focus on the requirements and our vision. The main message is that innovation has a process as well, so everybody can learn it.

Can you outline your process for innovation? What does it look like?

The process is that we try to visualise innovations. Every year when we do our annual business planning, we gather different kinds of people together, and we give them the vision – but at a very high level – of where we would like to be and what we would like to achieve long term. We tell them to forget everything about our limitation.

Take recruitment, for example. We have, say, 80 shared service centres in Hungary. There is a natural market and most everyone is using exactly the same methods – two or three techniques or best practices for recruiting. And if I challenge them to higher recruiting numbers, the reaction would be to do more of this or that technique, use our internet page more, or engage more head hunters.

In our innovation process we would say: "Let's come together and think a little bit about values and value curves. A value curve is a very simple tool, because we step back and say: okay, I'm somebody on the marketplace looking for a job, so what represents value for me from Avis Budget shared services? And we try to map the value for the target group and under which circumstances they would choose us.

We come up with some very crazy ideas, but the important thing is that we are not basing ourselves on assumptions that are already in the marketplace or existing in practices; we are coming from our customer side – in this case, the potential employee.

So do most of your ideas come from within a forum? You described this meeting as bringing all these people together.

Yes. In the shared service centre it's about workshops linked to our business planning process. One of the examples I want to mention here is that there was a move in Budapest, where everybody started to do continuous improvement at the same time, and there was quite a short list of people who'd done Lean or Six Sigma in a shared services environment. Everyone was looking for experienced people from a shared services background.

And then, in one of our innovation workshops, we realised that it's much better if they don’t come from shared services, because then we can learn something from production, or we can learn something from another industry. What matters is the methodology, whether it's Lean shared services or Lean production. Actually, it's better if somebody is coming from production because they have a history of 50 years of doing Lean. So, it's in their mindset.

And this is the Blue Ocean concept, isn't it?

Yes. Even if it's a small thing, it's innovation for me because it's another kind of thinking.

Peter Villanyi will discuss, Innovation to Achieve Centre of Excellence Status
at SSON’s Eastern European Shared Services Summit 2012 in Budapest March 19-21. Visit www.ssoeasterneurope.com for more information.