A U T O M A T I O N O F S E R V I C E P R O C E S S E S

Working together with robots that thinkPage 6

Back to the botsPage 26

Steering services intelligentlyPage 16

O P E R A T I O N S P E R F O R M A N C E M A N A G E M E N T

R O B O S H O R I N G

HORVÁTH DIRECTIONSMAGAZINE FOR P IONEERING CORPORATE PERFORMANCE MANAGEMENT AND PERFORMANCE OPT IMIZAT ION

02 2017www.horvath-partners.com magazine by Horváth & Partners

PUBLICATION DETAILS

Publisher: Horváth AG, Phoenixbau, Königstr. 5,

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Responsible in the sense of publication law: Dr. Michael Kieninger

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Copyright: ©2017 Horváth & Partners Reproduction

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CONTENTS EDITORIAL

Dear Reader,

EDITORIAL

PINBOARD

AUTOMATION OF SERVICE PROCESSES

Working together with robots that think STUDY: THE USE OF ROBOTS IN SERVICE PROCESSES

INTERVIEW WITH GÜL ABATIN SUN, DEUTSCHE BANK

“Robots drive productivity” OPERATIONS PERFORMANCE MANAGEMENT

Steering services intelligently INTERVIEW WITH ANJA KRUSEL, BOREALIS

“We need an e-culture” CFO ORGANIZATION 4.0

Entering a new era INTERVIEW WITH ISABELL A MARTORELL NASSL, VERSICHERUNGSKAMMER INSURANCE GROUP

Software with a nose for trouble

ROBOSHORING

Back to the bots

STUDY: THE RELEVANCE OF ROBOTS

GUEST COMMENTARY BY PROF. DR. ING. DIETER SPATH

Skills for the workplace of the future

PUBLICATION DETAILS

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FOCUS

AUTOMATION OF SERVICE PROCESSES

Will deserted factories now be succeeded by empty administrative offices, as machines take over an ever-increasing number of service tasks? Robotic process automation (RPA) is one of the key concepts underpinning the next wave of automation, and is leaving production processes in its wake while moving on to engulf administrative processes. Although robots have not driven people completely out of the factories, there are far fewer people now working in production, some of whom are highly-qualified specialists. As part of the Industry 4.0 revolution, we are now embarking on the next level of automation. It promises increased efficiency and leaps in quality, but will also fundamentally change the number and type of jobs available. This revolution is now beginning in the service and administrative sectors. New digital techno logies offer the opportunity to drastically speed up administrative processes such as those in the field of accounting – or even to automate them completely. This will promote new business models and secure existing ones, for example in the financial services industry. The flipside of this is the far-reaching change it will instigate in our working world: many of the jobs of today will no longer exist in the future. The new jobs that emerge will require different skills and will not compensate for the loss of the older ones. Consequently, part of the transformative challenge posed by automation includes corporate responsibility.

Organizations would be well advised to act expediently to address the opportunities offered by robots in service segments and processes, and the effects this would have. This edition of Horváth Directions takes a look at where the journey is taking us, and highlights the risks and opportunities associated with the new technologies – and how they can be steered by means of operations performance management, for example. Interviews with managers at Deutsche Bank, the Versicherungskammer insurance group and Borealis also offer insights into experiences with robot-based solutions and artificial intelligence. You can find these as well as other opinions and comments in digital format at www.horvath-partners.com magazine.

I hope you will find this issue an informative, enjoyable read! Yours,

Dr. Michael KieningerCEO, Horváth AG

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In the age of digitization, competition for the “hybrid customer” is keeping the insurance industry on its toes. Insurers need to strengthen customer

loyalty and reinforce their control over their points of contact by ensuring a positive customer experience. After all, every contact brings with it the

opportunity to awaken enthusiasm and re-inject some positive energy into the services. The “Customer Experience” study by Horváth & Partners and forsa

shows how companies can tap into new sales potential by offering policyholders tangible added value through appreciative dialog. As the survey of over 1,000

insurance customers in Germany showed, a great many opportunities have been allowed to pass by to date. According to the survey, not even half of customers were

asked about their personal circumstances and plans for the future when taking out an insurance policy. In the event of a claim, personal health only plays a role in

a quarter of contacts. This means there is a lack of important infor mation that could facilitate needs-oriented coverage and allow a degree of enthusiasm to be introduced.

PINBOARD

Customer experience as a sales opportunity

Focus on production consulting

Study

New subsidiary

Publication

“Predictive Analytics and Big Data”

Reliable forecasts about economic developments can constitute a decisive competitive advantage. This book,

published by Ronald Gleich, shows how predictive ana-lytics can be used to identify connections and patterns.

Readers will also learn how to access the right data to plan effectively and minimize risks.

Haufe, 2017, ISBN: 978-3-648-10422-4

Big data applications

Global Business Radar for decision makers

After several years of development, the experts at the Horváth & Partners Steering Lab have created a tool that offers decision

makers a superior strategic overview of their markets, competitors, suppliers and societal developments. The Global Business Radar

analyzes information from thousands of worldwide data sources in real time, and thereby enables companies to identify innovations,

trends, risks or events all over the globe at an early stage; to track these and to respond to them strategically, tactically or operationally.

The suite offers various big data applications, which can be used individually or as a complete software-as-a-service package.

Read more about the Global Business Radar Suite at www.horvath-partners.com BusinessRadar

Read more about the range of services offered by the new subsidiary at www.consult-ing.de

In June 2017, Horváth & Partners founded a subsidiary focusing on per-formance optimization in the manufacturing environment. CONSULT ING

Horváth Engineers GmbH in Berlin specializes in production optimization in the digital age. The topics addressed by the company range from strategy

and lean operations, supplier management and quality improvement, to the establishment of management systems based on standards such as ISO

or VDA. Consultants at the subsidiary have solid engineering credentials and expertise in the area of technological production consulting. The executive

board consists of Martin Münch and Burkhard Dietel – two internationally experienced experts in the fields of production optimization and supplier

management – as well as Horváth partners Christian Daxböck and Ralf Gaydoul.

Read more about the study at www.horvath-partners.com study_CXInsurance

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WORKING TOGETHER WITH ROBOTS THAT THINKMany decision makers have recognized the signs

of the times: a company‘s administrative and service

divisions can only efficiently meet increasingly

challenging customer requirements if they automate

their processes to the greatest extent possible. Holistic

approaches are needed to anchor new technologies deep

within the corporate structure.

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AUTOMATION OF SERVICE PROCESSES

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umans and robots working hand in hand, completing coordinated processes until the finished product leaves the factory – this scena-rio has been commonplace in production faci-lities all over the world for many years. Robots

and other computer-controlled systems are integral components of automated production processes, and are generally accom-panied by a substantial increase in efficiency. The tasks which fall to human workers on modern production lines are quite different from what they used to be: they now control production processes, fulfill any special customer requests and take action to solve problems in the event of a failure. Instead of tradi tional conveyor belt work, employees now tackle more demanding activities and act as experts in automation technology, robot control or production design. Accordingly, employees’ skills more significantly involve the interplay between human and machine.

TIME FOR CHANGE

Unlike the production environment with its highly refined technology, the processes and tasks involved in business admi-nistration and company services have hardly changed in recent decades – despite digitization and ever-more-powerful infor-mation technology. Manual processes continue to dominate. Administrative staff busily input information from Excel lists by hand, and media failure means that data must be recorded redundantly. In other words, there is still considerable potential for optimizing processes and working more efficiently.

There have been repeated attempts within the service industry to increase productivity. In the past, decision makers have introduced new platforms and have been willing to invest in automation solutions. However, these efforts met with little success for various reasons, including the increasing complexity of process and product landscapes and the fact that the auto-mation technologies implemented did not achieve the stability and economic efficiency required. Finally, the necessary invest-ments exceeded companies’ financial means. In the past, the alternative to process automation was often found in outsour-

cing particular work steps to low-wage locations, and completing the work there with little or no change except for lower labor costs.

In the age of digitization, however, this strategy is reaching its limits. The digital transformation has fundamentally changed the conditions under which companies act and the requirements to which they are subject. The advantage of higher efficiency is no longer the only argument in favor of automation. Rather, customer expectations can today only be met by employing a high degree of automation. In addition, technologies which are essential for the consistent automation of service processes have reached a new level of maturity. Robotic process automa-tion (RPA), machine learning and natural language processing (NLP) – which includes speech recognition and the translation of texts – can now reasonably be used by wide circles of users, and are close to making a general breakthrough as realistic alter-natives for the handling of service processes.

BETWEEN INTENTIONS AND REALITY

The two Horváth & Partners studies, “The Use of Bots in the Financial Services Industry” and “Production Management in Service Centers”, demonstrate that the backlog in terms of process automation in the business administration and services sectors is not due to a lack of willingness on the part of managers. The reports examine the effects of using robots and artificial intelligence on the future design of processes – and bring to light a considerable discrepancy between intentions and reality. “In most cases, decision makers are aware that their companies are lagging behind technological developments, and recognize the need to automate processes and create intelligent working en-vironments,” states Sebastian Ostrowicz, Principal at Horváth & Partners.

This self-assessment is just as clear as the expectations with regard to process automation. In customer administration and financial processes in particular, decision makers are coun-ting on average increases in efficiency of between 20 % and

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AUTOMATION OF SERVICE PROCESSES

H

Many decision makers recog­nize that the expectations of

current and future customers can only be met through the

highest degree of automation.

AUTOMATION OF SERVICE PROCESSES

PROGRESS OF INTELLIGENT PROCESS AUTOMATION

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INTEGRATED DESK TOPConsolidated data for consistent process execution

01

2010 TODAY 2020 2025

Current initiatives focus on process automation by means of bots RPA. Today’s robot technologies manage processes with structured data in an autonomous, rule-based manner. In the future, pattern recognition, predictive workflow

management and artificial intelligence will be added.

Source: Horváth & Partners 2017

AUTOMATIC CORRECTIONPattern recognition for automatic correc-tion and proactive management

AUTONOMOUS SOLUTIONSCognitive computing:Self-learning systems that apply their experience to new requirements

PROCESS AUTOMATIONUse of various existing applications by bots RPA to overcome media discontinuities

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In order to implement the new possibilities in a profitable manner, there is a need for a concept that will integrate the technical innovation usefully and stringently into a management framework. Horváth & Partners has summarized these challen-ges in an approach to Operations Performance Management 4.0, which transfers the automation principles used in the manufac-turing industry seamlessly to the requirements and peculiarities of digital service processes, and anchors them in performance management and optimization (see article on page 16). One of the sectors intentionally driving the use of RPA is the financial services sector. Institutions in German-speaking coun-tries are pushing for the full automation of processes. In view of increasing pressure on revenue and cost, resulting from low interest rates and stringent regulation, the implemen-tation of bots promises banks sustainable progress in their efforts to minimize expenditures. RPA is more efficient than the

can now be completed in seconds.” It is not necessarily essential to change your IT environment in order for robots to take over routine front- and back-office tasks through automation. RPA uses the interfaces of existing systems. On the basis of algo-rithms, robots detect anomalies in the process, implement mea-sures autonomously and boost sales. They analyze incoming data, assign it to the respective processes, identify relevant subject content, and use necessary applications.

However, the success of process automation is also dependent on certain conditions. A holistic approach is needed in order for the available efficiency potential to be realized across a wide range of processes, products, and services. In shared services centers, the interplay between humans and bots must be synchronized, process and product design must be standardized, and employee skills must be developed with regard to the utilization of bots. The psychological component also plays an important role in this respect. Management should take employees’ fears of being replaced by machines seriously, and involve them from the start in change management initiatives within pilot projects. Getting employees on board with process automation means spreading the message that bots are digital assistants that will relieve their human co-workers of unnecessary and cumbersome tasks. They are not intended to replace people, but rather to free up human capacity for higher-value tasks. If, on the other hand, the impression develops that only the machines are controlling the processes, acceptance and cooperation can hardly be expected.

INTEGRATED CONCEPT AS A NECESSITY

With the growing dissemination of RPA, the automation of service and customer processes is reaching a new level, appro-aching the conditions described above for the manufacturing industry, where bots are already handling many work steps. Digitization is contributing to overcoming technological disruptions in processes. In the future, process management and administrative processes will focus on handling special requests and exceptional cases, while standard activities will be per-formed by machines.

Robots can complete within seconds processes that have previously been handled manually at great expense.

30 %, with peak values as high as 50 %. From a cross-sectoral perspective, approximately two in three companies expect that the implementation of bots and intelligent machines will be of high to very high relevance in the future. The studies show that the automated handling of mass processes is especially impor-tant for shared services center organizations, such as those in the areas of HR, IT, finance and operations.

NO STANDARDS

The study paints an equally clear picture of the barriers which obstruct the implementation of automation solutions: the main problem identified by more than 70 % of respondents is a lack of process standardization, followed by insufficient expertise and employee resistance, each at 50 %. The differences between the various industries and sectors – sometimes huge – concerning the level of dissemination of bot technologies are striking. While three-quarters of companies in the financial services sector have already gained experience through their initial pilot projects, or are currently implementing such projects, only every second company in the manufacturing industry is planning to use bots in service processes.

Pressure on companies to act is increasing, however. The costs associated with manual work steps, common media disruptions, long process run times and incomplete sources of information are increasing. Companies wishing to assert their market positions must be able to generate relevant data from unstruc-tured content quickly and precisely. In short, there is no longer any escaping gradual digitization and automation.

TOWARDS THE DIGITAL COMPANY

RPA is a key technology in ensuring that the process of trans-formation from the analogue to the networked, digital company is a success. “Bots offer huge potential for the handling of sales, service and administrative processes,” explains Sebastian Ostrowicz. “Processes that were previously handled manually and laboriously, in distributed systems with high error rates,

Developmental milestones such as artificial intelligence and improved speech integration are already within reach.

outsourcing that has taken place for many years (see article on page 26). “Using a software robot can result in considerab-le cost savings,” emphasizes Sebastian Ostrowicz. “In light of this, banks are toying with the idea of pulling back their outsour-ced functions. RPA is especially important for non-customer- related activities and leads to higher process speeds and improved service quality.”

MACHINES THAT LEARN

RPA functions precisely and reliably, but reaches its limits as soon as it is faced with unstructured data such as emails or letters, or processes that deviate from defined rules. If, on the other hand, bot-assisted process automation is supplemented by learning software, even unstructured data can be transferred to the system. Self-learning software validates parameters, cons-

AUTOMATION OF SERVICE PROCESSESAUTOMATION OF SERVICE PROCESSES

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STUDY

tantly learns as it goes along, and indicates when it has reached its limits. Other significant development stages are already with-in reach, with the integration of artificial intelligence (AI) into processes, and improved speech integration. Now, it is simply a matter of time until they reach their full potential.

It is not only the experts who agree that artificial intelligence will make its way into an ever-increasing number of sectors. Analytics company IDC estimates the current volume of the sector at $8 billion and is predicting that this figure will grow to $47 billion by 2020. “AI systems work on binary code, like conventional computers,” explains Sebastian Ostrowicz. “However, they are set up in such a way that they can perform millions of calculations simultaneously, constantly evaluate their work and are involved in the pending resolution of new challenges. The computers have a built-in optimization pro-gram, so to speak.” The artificial brain consists of thousands of computer chips. The engineers looked to nature in designing and structuring the system: similarly to neurons in a brain,

the chips react to one another, send each other signals and autonomously become active or passive. In this way, huge data sets are collected in the control and nerve centers of the machines, and these data sets help the systems to learn. Taking a wide range of parameters into account, they make auto nomous decisions and imitate human reasoning, as well as the resultant behavior. AI software is trained using training sets as examples. Such technology results in robots that think, shorter response times and higher customer satis - faction levels.

Sebastian Ostrowicz

SOstrowicz@horvath­partners.com Tel. +49 69 2695898­1353

ESTIMATED POTENTIAL SAVINGS THROUGH THE USE OF ROBOTICS RPA IN

VARIOUS COMPANY DIVISIONS

LOGISTICS

CUSTOMER SERVICE

REPORTING

IT TECHNOLOGY

MARKETING

ACCOUNTING

FUNCTION-SPECIFIC MULTI - FUNCTIONAL SHARED SERVICES CENTER

PROCUREMENT

SALES

HR MANAGEMENT

CONTROLLING

Number of respondents in %

THE USE OF ROBOTS IN SERVICE PROCESSESAUTOMATION OF SERVICE PROCESSES

Read more about the study at www.horvath-partners.com study_robotics

5 TIPS FOR PROCESS AUTOMATION

Think big, start smallA target design serves as a “compass” for automation measures; the company can gain initial experience with robots in pilot processes.

Digital process platformIt is practical to invest in a digital platform for the integrated management of all process types. This continuous end-to-end process overview expands the room for maneuver.

1 2

Modular architectureBot solutions can only reach their full potential if the process architecture is modularized and standardized simultaneously.

Integrated planningIntegrated management and planning of all labor resources ensures that the intended increase in efficiency will be achieved, and prevents idle capacity.

Getting employees on boardIf the pilot processes represent cumber-some, unpopular activities, employees will perceive the bots as a positive source of support.

345

31 – 50 %

11 – 30 %

1 – 10 %

Estimated potential savings

0 50 100

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ALL INDUSTRIES ARE FOCUSSING ON ROBOT TECHNOLO-GIES AS PART OF THE DIGITIZATION PROCESSES. HOW RELEVANT IS THIS TOPIC FOR BANKS? SUN It is very relevant, as our industry is traditionally paper- based and uses relatively heterogeneous IT equipment. Although almost all banks have been moving towards a higher degree of digitization for some time now, we still have a considerable way to go. Business models and the infrastructure they require must undergo radical development – especially since customer be havior is changing drastically due to the use of digital access channels. Robot solutions such as robotic process automation offer techno-logies that allow service and settlement processes to be automa-ted, from the digital customer interface to procedures anchored deep inside banking operations.

WHAT CONDITIONS HAS DEUTSCHE BANK PUT IN PLACE FOR THIS CHANGE? SUN Deutsche Bank is extremely well prepared. Almost ten years ago, we established an operations platform that can be scaled to accommodate new technologies. In implementing this platform, we wanted to bundle the decentralized back office units in a small number of operations centers, and focus on pro-cess optimization and an IT-based workflow solution from the outset. Our platform offers all-round transparency, both with regard to customers and the internal provision of services, so that we can manage our operations highly effectively and in real time. Human workforce management builds on this foun-dation and allows for productivity management that facilitates intraday (i.e. very fast) responses to fluctuations in capacity. The underlying process architecture means that we can gradually develop and introduce individual digitized services and proces-ses. This is already part of our daily business. HOW IMPORTANT IS THE TOPIC OF ROBOTS FOR YOUR ORGANIZATION? SUN We have already done some automating of processes in the past – in some cases to the extent of achieving start-to-end order processing. However, we hit limits on what we could

do, partly because many of our orders are still received in paper form or as unstructured data. Because of online forms, scanning and OCR text recognition being in wider use, the share of struc-tured data is increasing – and this is where robots come into play. They can document and check the data and transfer it to the corresponding core systems. This in turn means that we can automate formerly manual activities using comparatively sim-ple means. In this way, robots are a production resource that extends established human workforce management, and are an addi tional driver of productivity that enables us to reduce our production costs significantly in some areas. However, they are only one component of our overall approach and must not necess arily cover order processing as a whole. They could also be used in a targeted manner for individual, repetitive processes.

WHAT FORM DOES YOUR OVERALL OPERATIONS MANAGEMENT APPROACH TAKE?

SUN As the basis for our approach we have implemented a production platform which consists of a process and service architecture and a workflow system. This is already very close to the principles used in industrial production. Building on this, we have developed a sophisticated performance management system which puts us in a position to fulfill all of our service level agreements while ensuring the highly efficient provision of services. As part of the approach, the target-oriented utili-zation of all resources – human workers, robots and service providers – is managed in such a way that an optimum over-all level is achieved. Resource management must therefore be developed further for the integration of robots.

WHAT ARE THE SUCCESS FACTORS FOR “DIGITAL” OPERATIONS?

SUN In addition to the processes and the platform, leader-ship is a definitive factor! Our most important success factor is our management system, which helps us support our employees every day in terms of the possibilities offered by automation. This facilitates us in enabling them to further expand the concept of service, and dedicate the selves to it in their daily work.

INTERVIEW WITH GÜL ABATIN SUN, DEUTSCHE BANKINTERVIEW WITH GÜL ABATIN SUN, DEUTSCHE BANK

drive productivityRobots

Robot solutions represent an opportunity for the financial sector to make

a quantum leap in productivity. Deutsche Bank is already using

these new technologies. In this interview, Gülabatin Sun, Head of Operations

PW&CC at Deutsche Bank, outlines the importance of effective

robot implementation and the success factors behind it.

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and internal clients in terms of the agreed service level. This includes both the service provision process and its planning and steering. Based on the Industry 4.0 model, the concept adapts planning and management approaches from the industrial pro-duction sector to the specific requirements of service units. The new technical possibilities available are utilized to digitize the creation and management of services.

Digital platform as a virtual production line

Digital process and service architecture plays a key role in this process. It allows products, services, process steps, the underlying IT and the necessary skills of employees and units to be considered as integrated elements. In addition, it forms the basis for the planning, transactional and management components of OPM 4.0. The consistent E2E view plays a decisive role in this process, since it allows all necessary processes to be designed optimally and digitized as effectively as possible from a customer perspective. The process steps of all units involved, including the robot technologies used, are described appropriately and documented with the nece s-sary skill levels and time requirements for each, in a manner

igitization is driving the further development of business processes within companies in all sectors. Smart networking in the manufacturing industry is progressing particularly far under the buzzword Industry 4.0. The new technologies

also offer huge potential for the service provision, whether in shared services centers for back-office processes, or in the opera-tions centers of banks and insurance agencies.

Industry as a model

Organizations are coming under pressure to act due to growing cost and competitive pressure, as well as new and changed requirements from customers, who often expect instant respon-ses from service centers in light of the digital communications channels in use. However, digital technologies alone are not enough to provide services more efficiently and more effec tive-ly. Operations Performance Management 4.0 (OPM 4.0) offers support in this regard.

The approach takes into account all the key service provision tasks with the goal of fulfilling the requirements of customers

D

STEERING SERVICES INTELLIGENTLY

Transferring digital technologies and management approaches

from the industrial sector is a key that allows service

companies and units to provide their services more efficiently

and more effectively. Operations Performance Management 4.0 from

Horváth & Partners supports organizations in doing just that.

OPM 4.0 allows for efficient, effective service provision in the digital age.

OPERATIONS PERFORMANCE MANAGEMENT OPERATIONS PERFORMANCE MANAGEMENT

1716

Markus Brenner

MBrenner@horvath­partners.com Tel. +49 711 66919­1231

reminiscent of a work plan for use in the industrial manufactu-ring sector.

The core of OPM 4.0 involves connecting process and IT archi-tecture – similarly to established platform strategies in the industrial sector. As part of this approach relevant, standard-ized process components are mapped as reusable IT components within an integrated platform, based on the “Lego principle”. This platform functions as a virtual production line, serving processes, employees and customer requests at the same time.

Resources and orders under control

The comprehensive planning and steering of all resources is centralized – since this is the key to consistently high produc-tivity. With OPM 4.0, the service products to be generated are planned on the basis of quantities over the course of time, and also based on cycle times. With the aid of rolling planning and opportunities for flexibilization – a result of using robot technologies – the required resources can be adjusted to the expected product quantities right up to the start of produc-tion. Furthermore, fine control of resource utilization allows for effective productivity management. Thanks to new, digital tech-nologies, this planning logic can be implemented significantly more effectively, for example by means of predictive planning when forecasting product quantities.

Optimal management of incoming orders forms the basis for service production. In this regard, OMP 4.0 distinguishes bet-ween customer orders and the production orders and proces-ses necessary for the provision of services. From the customer’s point of view, the focus is on fulfilling orders within an expected period. From a production perspective, however, it is also im-

portant to ensure that resources such as employees, robots and service providers are utilized as efficiently as possible. Both aspects are managed with the aid of workflow systems using the smart logic documented in these systems.

Improve performance, boost potential

Integrated performance management allows potential to be realized across the board. Real-time reporting of order status data, which usually originates from the workflow system, is aligned with information on the availability and utilization of resources on an ongoing basis. With the help of process mining, the quality of the defined processes is analyzed and continuous process improvement (CPI) is institutionalized.

In addition to the technological possibilities, people also play a role critical for success. Those at management levels, in particular, must recognize the added value of number-based management support, and must drive its implementation and acceptance among their employees.

This is certainly worthwhile, as a recent study by Horváth & Partners shows. The study reveals that, although the approa-ches used by OPM 4.0 are still a future consideration for most companies, some service providers are already enjoying consi-derable benefits from them. These are taking advantage of the possibilities offered by OPM 4.0 to provide their services more efficiently and more effectively in the digital age.

Digital production platform; E2E processes and work plans

Customer and production orders

Integrated capacity planning

Performance management and leadershipOPM 4.0

WHAT DO YOU BELIEVE YOU CAN EXPECT FROM ROBOTIC PROCESS AUTOMATION (RPA)?

KRUSEL First and foremost, I expect a substantial increase in productivity. At the moment, we expend a very large proportion of our resources on manual activities. When you look at these indi-vidually, they are very often little things, which together add up to a considerable outlay in terms of time. Since many of these tasks are structured, repetitive processes, automating them is a simple matter.

HOW CAN YOU TAKE FULL ADVAN TAGE OF THE OPPORTUNITIES OFFERED BY RPA? KRUSEL I believe we must invest in the development of our own skills, i.e. that we must create an in-house capability for RPA, and that we must continuously evaluate current and future possibilities for the use of robots.

WHAT CHALLENGES DO AUTOMATED PROCESSES POSE TO STAFF?

KRUSEL Some employees may be afraid that they will lose their jobs if processes are automated. In this respect, the implementation of RPA necessitates efficient change management. Further-more, the skills required in the indivi-dual functions will probably change. This means that employees will be expected to have additional or different skills. Finally, of course, the entire organization must develop an e-culture to ensure that digitization within the company is not re-stricted to a handful of experts.

INTERVIEW WITH ANJA KRUSEL, BOREALIS

RPA AT BOREALIS AG

“We need an e-culture.”

Chemicals company Borealis AG is planning to focus more

strongly on robots for automating processes in

the area of finance. We put three questions to Anja Krusel,

Vice President of Group Controlling at Borealis.

OPERATIONS PERFORMANCE MANAGEMENT

1

2

3

4

18 19

Finance divisions will need to reinvent themselves in order to

fully exploit the potential of digitization. In addition to

robot-based technologies and automated processes, extensive

organizational transformation will also be necessary. Moving

successfully into the 4.0 era requires CFOs and employees

who have a fundamental willingness to change.

he digital future has already arrived in the production sector. For some years now, manu-facturing companies have already been focusing on state-of-the-art information and communica-tions technologies for the intelligent network-

ing of machines, processes and products, under the buzzword Industry 4.0. And it is certainly paying off. Thanks to digitiza-tion, they are now enjoying the benefits of faster, more flexib-le, more tailored and more cost-effective production. In finance divisions, too, smart solutions represent an opportunity for in-creasing digitization and for automation of value creation. This will allow CFOs to increase productivity, process quality and compliance within their organizations, and to tackle growing pressure for efficiency head on.

At the same time, allowing robot software to take over more and more rule-based routine activities – such as for accounting or reporting – will free up valuable resources in the finance division. In the future, these capacities will then be available for faster, more efficient corporate performance management. Further more, thanks to real-time access to a steadily growing pool of data and highly efficient advanced analytics processes,

digitization allows for more effective corporate performance management, moving from reactive analytical to proactive fore-cast-based approaches.

AUTOMATION ON THE AGENDA

CFOs wishing to succeed in taking advantage of these oppor-tunities will need to completely transform their organizations. This is because the automation that is becoming possible as part of the digital transformation is revolutionizing finance divisions to an unprecedented extent. “As well as technologi-cal innovations, in the future there will also be demand for completely new processes, roles and skills that will change the finance division and the field of corporate performance manage-ment from the ground up,” stresses Kai Grönke, a partner at Horváth & Partners. Those who leave it too late to switch tracks risk getting stuck in a siding.

The recent “Finance Excellence 2020” study by Horváth & Partners shows that the majority of companies see a need for action. According to the study, reorganization and the automa-tion of processes is a top priority for 91% of the CFOs surveyed,

CFO ORGANIZATION 4.0

21

T

CFO ORGANIZATION 4.0

ENTERING A NEW ERA

20

CFO ORGANIZATION 4.0

with 89 % perceiving the automation of performance ma-nagement tasks as a must – more than 120 CFOs participated. However, corresponding process optimizations have only been implemented by 42 % of companies, while just 29 % have implemented controlling optimizations. A MODEL FOR THE DIGITAL FUTURE

So CFOs are facing the question of how to best prepare their organizations for the age of automation. “We recommend setting up a comprehensive re-engineering program,” says Kai Grönke. “This should involve a number of other aspects in addition to the digitization of processes. These aspects include a future-oriented model for the CFO function, a clearly-defined role model, a lean organizational structure, and the develop-ment of sustainable skills.”

Many chief financial officers find it difficult to judge where their organizations stand in terms of digitization. However, determining one’s position is the prerequisite for reorientation and for defining a suitable model. Horváth & Partners has there fore developed an assessment radar that structures the degree of digital maturity of finance divisions based on quanti-fiable criteria, and classifies companies in relation to one another. The strategic actions that make up the transformation processes can be prioritized on this basis.

NEW SKILLS IN DEMAND

The digital transformation will radically change tasks within the CFO organization. Since the creation and supply of information requires skills that differ from those required for the utilization of data, specialized roles will develop in order to fulfill the different requirements as well as possible. While employees in governance & leadership roles will be responsible for defi-ning standards, methods, and systems, and for ensuring these are respected, business partners will act as strategic partners for management. Transaction-related financial activities and data procurement processes will be amalgamated within the production role, whereas data scientists will extract relevant

information from large quantities of data, and prepare this in a manner appropriate to the target groups involved. The differ-ent roles will be anchored in critical control points within the company, while data analytics will be an independent area of expertise. “This division of tasks is necessary for standardized, automated processes that offer increased efficiency and consis-tent quality,” Kai Grönke explains. Furthermore, the differentia-tion will strengthen the business partner function, which in turn will ensure that the finance division can contribute better to the success of the company.

In order to meet the requirements of these specialized roles, the CFO organization will need new skills in the future. For example, there is demand for highly qualified experts who can translate technical questions into data models and develop evaluation algorithms. Controllers whose workloads have been lightened thanks to process automation will be able to concentrate more closely on their roles as business partners in the future. To this end, they will need the skills to collaborate with data scientists and will need to trust in their methods. Furthermore, they will still need a deep understanding of the company’s business model, as well as the ability to develop forward-thinking, implement ation-oriented performance optimization measures.

CHANGE AS A CONSTANT

In view of the extensive upheaval that is underway, accompa-nying change management is inevitable. If a company is to succeed in entering the 4.0 era, all employees must be invol-ved and must develop a “digital mindset”. “Digitization can only work if the transformation is anchored deep at the heart of the organization,” emphasizes Kai Grönke. How quickly a CFO can implement the digital transformation will ultimately depend on how willing his or her team is to change.

Kai Grönke KGroenke@horvath­partners.com Tel. +49 211 577908­1269

The digitization and automation of the CFO function can only succeed if the transformation is anchored at the core of the organization.

CHALLENGES AND MEASURES WITHIN THE CFO FUNCTION

CFO ORGANIZATION 4.0

Standardizing system landscapes

Reorganizing and automating processes

Optimizing results through reducing costs

Automating performance management

Developing business partners further

Further training for employees

Design steering to be proactive and preventive

Implementing integrated controlling logic

Implementing strong central governance

Anchoring data analytics within the organization

91 %

89 %

89 %

87 %

85 %

84 %

78 %

74 %

70 %

92 %

62 %

42 %

24 %

83 %

29 %

52 %

71 %

48 %

66 %

46 %

Read more about the study atwww.horvath-partners.com study_FinEx2020

Relevance Current achievements

Source: Study “Finance Excellence 2020: Digitization of CFO Functions”

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At the Versicherungskammer insurance group, Watson intelligent software

can detect whether customers are angry. The IBM system has been reading

thousands of letters every day since 2016, making the group one of the

first German insurers to use artificial intelligence. In our interview, Isabella

Martorell Nassl, Head of the Operations Division at the Versicherungs-

kammer group, discusses how the company has implemented the cognitive

system and convinced employees of its usefulness.

WHY DID THE VERSICHERUNGSKAMMER GROUP DECIDE TO USE COGNITIVE SERVICES? MARTORELL NASSL As with all companies, it is of the ut-most importance for us to know our data inside out. The better we can surmise the needs of our customers based on the data, the more focused we can be in responding to those customers. Further more, the Versicherungskammer Group is a growing com-pany with an ever-increasing premium volume. We are therefore constantly seeking to optimize processes. Managing the addi-tional volume of work efficiently means we need to automate processes. That is how we came upon the Watson cognitive sys-tem. As we focused more closely on technology, we thought: “We’d love to try that out in our company!”

WHICH PROCESSES DO YOU USE ARTIFICIAL INTELLI-GENCE FOR AND WHAT ADVANTAGES DOES IT OFFER?

MARTORELL NASSL We use cognitive systems to detect discontentment and a desire for certain offerings among our customers. We receive approximately 20,000 letters each day, all of which are scanned, digitized, and registered. Finally, we use cognitive systems to check whether these documents contain expressions of discontentment or for certain specific requests. If they do, we mark them explicitly and they are forwar-ded automatically to the relevant employee. This enables us to act in a more targeted manner, optimize our service and thereby increase customer satisfaction. Furthermore, cognitive systems free up our administrative staff, who then have more time for individual topics – in keeping with the motto “Individualization in the age of automation”. HOW HAVE YOU ADAPTED YOUR EXISTING PROCESSES TO WATSON?

MARTORELL NASSL I’ll need to give you a bit of background to answer that question. In order to find out whether Watson even worked the way we imagined, we launched a pilot project in 2015 together with IBM and Munich University of Applied Sciences. It was so successful that we actually won an award for our pioneering work in the insurance industry. So we began implementing the system in March 2016 and went live after nine months of preparation. When configuring the system, we focused particularly on ensuring that it would be able to com-municate with our existing systems. We also took a close look at the follow-on processes, adapting and optimizing these fairly quickly with the help of our own employees. HOW DID YOU PREPARE THE SYSTEM FOR ITS TASKS?

MARTORELL NASSL Do you know how a cognitive system learns? We always compare it with a three-year-old child. It can do the basics, but we need to send it to school – and ideally also to university at some point. We began the learning process with a number of letters and started Watson on a cycle of reading and understanding them. To get to that point, administrative workers first classified around 1,000 documents and transferred them to the system. Afterwards, we checked what Watson could detect, and we then made manual adjustments. By the end of the project, we had fed around 40,000 documents into the sys-tem – and Watson continues to learn from them. At the moment, Watson is completing the equivalent of an apprenticeship, but we aren’t far off adding a Bachelor’s degree.

WHAT WAS THE GREATEST CHALLENGE DURING THE PROJECT?

MARTORELL NASSL As always with new things, you first need to persuade the people involved. To this end, it was essential to get both employees and management involved from the outset, and allay any fears they may have. That was the greatest challenge, and we overcame it through open communication and a very transparent process.

IN WHICH SECTORS DO YOU SEE FUTURE AREAS OF APPLICATION FOR COGNITIVE SYSTEMS?

MARTORELL NASSL That is a difficult question. We have had such positive experiences to date that we definitely want to continue working in this area. At the moment, we are consider-ing a great many areas of application. For example, it is easy to imagine strengthening our knowledge management using cognitive systems. However, that is just an initial idea. We are currently in a start-up phase, during which we will first collect, assess and then decide.

HOW WILL ARTIFICIAL INTELLIGENCE CHANGE THE INSURANCE INDUSTRY AND WHAT DO YOU THINK COULD BE THE NEXT LEVELS OF DEVELOPMENT?

MARTORELL NASSL I personally think that cognitive systems and artificial intelligence can be used anywhere there are large quantities of unstructured data, the reading and evaluation of which involves a substantial effort. This can happen, for example, as part of recommended actions for experts. If supported by artificial intelligence, professionals would be faster and, thanks to shorter training periods, would also be in a position to make recommendations. I can easily believe that the topic of speech will keep coming up, well into the future. We at the Versicherungs-kammer Group are already examining approaches to determine how cognitive skills can be integrated into speech.

For more information on the Versicherungskammer group, please see www.vkb.de

INTERVIEW WITH ISABELL A MARTORELL NASSL, VERSICHERUNGSKAMMER INSURANCE GROUP

SOFT WARE WITH A NOSE FOR TROUBLE

2524

ince the mid-90s, bundling and outsourcing pro-duction, administrative or service-related tasks to neighboring countries or countries located further away (nearshoring or farshoring) has been consid - ered one of the most effective strategies for reducing

personnel costs. Tens of thousands of jobs have been outsourced from German-speaking countries to more cost-efficient locations. At first, these were mainly in the area of production, but since the turn of the millennium, an increasing number of jobs in the administrative sector have also been affected. The main objective of this tactic is to take advantage of lower factor costs.

In general, administrative tasks are bundled in shared services centers (SSC), some of which are based abroad. At the end of the last decade, for example, consumer goods manufacturer Henkel became one of the first DAX companies to outsource a large num-ber of its administrative processes overseas, and now operates multiple shared services centers all over the globe.

High-potential automation

Offshoring may soon lose its attraction in terms of factor costs, however. In the course of automation and with the advent of Industry 4.0, we need to reevaluate the effectiveness of la-bor arbitrage in Asia or Eastern Europe, compared with high- wage countries such as Germany, Austria or Switzerland. This is because the cost reductions that can be achieved by increa-sing efficiency through automation mitigate the effects of labor arbitrage.

This may prove particularly beneficial to sectors with high digiti-zation potential and heavily rule-based processes. It is relatively easy to transfer transactional operations in these areas from hu-mans to software robots. These include a wealth of operational activities in service companies, as well as back-office processes

BACK TO

THE BOTS

Robots are making it possible: a growing number of processes long

considered too costly for high-waged countries such as

Germany, Austria or Switzerland are now being clawed back from

lower-income countries. This applies not only to production,

but also, increasingly, to repetitive administrative tasks in shared

services centers. This Roboshoring represents an interesting

alternative to offshoring for companies.

S

ROBOSHORING ROBOSHORING

2726

in all sectors. There are a number of appealing applications, especially for companies that have standardized administrative tasks in the areas of purchasing, HR and accounting in recent years. Typical examples include transactional processes (e.g. procure to pay) or data administration processes (e.g. master data). “Companies are expecting to make considerable savings through the use of bots. A recent survey by Horváth & Partners revealed that decision makers estimate the savings potential at 30 % on average, with some believing it could be as high as 50 %,” says Kai Essiger, partner and Global Head of Process Management at Horváth & Partners.

Humans and machines, hand in hand

The use of automated systems supports uniform process execution, thereby improving quality. “Among other measures, introducing central governance – i.e. a uniform legal and factual framework – has been proven successful for sectors such as IT or data protection. However, it’s essential that responsibility and accountability for processes and results are also regulated,” explains Essiger. “The entire system, comprising both humans and machines, requires holistic resource management. After all, bots are also involved in operations that cannot be auto-mated consistently and integrated into a 24-hour operation.” In order for operations to be efficient, therefore, all upstream and downstream processes must be coordinated for use with robots. Both in the design and structuring of SSCs and when

developing automation solutions, companies can avail of subs-tantial support to establish efficient resource management for robot-aided SSC operation within their organizations.

Bots ahead of the curve

Roboshoring – the implementation of automated processes – can also offer strong support to shared services companies. The benefits are obvious: using RPA in repetitive service processes can help companies to significantly increase efficiency. In ad-dition to the clear advantage in terms of personnel costs, the minimal error rate of the machines also pays dividends. The workload can be distributed as effectively as possible thanks to 24 7 availability and activities can be documented and audited in full. The benefits of RPA truly come into their own when com-pared with human-based processes in typical offshore countries such as India, since RPA supports the establishment of standard-ized processes. There is often a risk of communication problems due to language barriers and – for example in the case of SSCs in the Far East – the time difference also gets in the way of seam-less operations. All of these factors combined can lead to losses in quality which can be mitigated by the use of robots.

The potential of RPA is not only of interest to companies wish-ing to increase efficiency in their shared services centers, but also to businesses that have not yet bundled and outsourced their administrative tasks. “Companies considering establis-hing an SSC abroad should examine the possibilities offered by automation before making a decision,” stresses Essiger. Thanks to the high efficiency of the robots, many processes – whether organized locally or in SSCs – can also be compet-itively managed within the country, with the appropriate preparation (e.g. optimization, bundling, governance).

Kai Essiger KEssiger@horvath­partners.com Tel. +49 89 544625­1493

Robots offer enormous increases in efficiency when it comes to performing repetitive processes in the shared services sector.

ROBOSHORING

STUDY

THE RELEVANCE OF ROBOTS

THE EXPECTED IMPORTANCE OF AUTOMATION USING ROBOTICS RPA IN VARIOUS

FUNCTIONAL AREAS AND PROCESSES

Read more about the study atwww.horvath-partners.com study_robotics

69 %

46 %

45 %

45 %

42 %

40 %

36 %

33 %

29 %

23 %

7 %

47 %

CUSTOMER SERVICE

ACCOUNTING

LOGISTICS

REPORTING

FUNCTION-SPECIFIC MULTIFUNC-TIONAL SHARED SERVICES CENTERS

IT TECHNOLOGY

SALES

CONTROLLING

PROCUREMENT

HR MANAGEMENT

MARKETING

OTHER

28 29

The fourth industrial revolution is not only changing companies’ production and business models, but is also transforming the working world as a whole. Learning machines, altered channels of distribution and integrated logistics are posing new challenges for work organization and humans alike. Today, employees are controlling increasingly complex pro-cesses with the aid of digital assistants. They need to learn to understand these, and to orchestrate them in flexible teams. Corporate management teams and human resources managers should support this transition as change managers. In the future, machines will not only take on a growing number of tasks in the field of industrial production, but the services and administrative sectors will also be reinterpreted through automation. Where today forms are often filled out manually, digitized, then printed out again and processed further, intelligently networked systems will take over many of these steps in the future. This will mean that many activities will no longer be necessary, particularly with general pro-cessing, as we describe it here in Germany. At the same time, more self-determined, more skilled and better-paid jobs will emerge. After all, employees –

with their power of judgment, creativity and wealth of experience – are central to the introduction of new technologies and networked production. Personnel development that understands this will strengthen solid, self-determined work.

ACHIEVING INDUSTRY 4.0 THROUGH FURTHER TRAINING

In the HR circle coordinated by acatech, HR heads and researchers alike have investigated how com-panies and employees can benefit equally from di-gitization. One result is that advanced and further training have been identified as core concerns and basic prerequisites within the company for success-fully attaining Industry 4.0. Companies should pro-mote the autonomy and flexibility of their employees and entrust them with new tasks. To this end, some regulatory scope for internal experimentation is desirable – both on the part of lawmakers and within companies.

When it comes to competency management, both in relation to the implementation of new products and the development of innovative business models, it is

absolutely true that decision makers in companies must develop an understanding of the disruptive changes that digital transformation brings with it. Based on this understanding, they can then derive strategies and measures for developing the skills of their employees. In addition to IT skills, data evalua-tion and analysis as well as cross-divisional process expertise and management are at the core of advan-ced and further training. Also continuing to grow in importance are soft skills, which assist with increa-singly flexible working across language and cultural barriers, in changing teams.

FROM PASSENGERS TO DRIVERS

In order to succeed in the platform economy, start-ups, medium-sized companies and large corporations will need to cooperate much more closely than ever before. This also applies in the area of employee training, wherein small and medium-sized companies are in particular need of support. Otherwise, our employee training study warns, there is the danger of a double digital divide: one between high- and low-skilled employees and one between large, small and medium-sized companies.

In an environment of dynamically changing net-worked work, one of the greatest challenges all com-panies will face is defining individual skill require-ments among their staff. On this basis, they can then develop tailor-made training formats. It is also important to test flexible forms of working and to attract the smartest talent from all over the globe. This will help companies transition from being driven by disruptive innovations to becoming drivers of such innovations, and will lay the foundations for their future growth. While they will need to invest substan-tially in the short term, in the medium term they will be able to tap into new, high-margin markets by of-fering innovative packages of products and services based on their traditional business models.

GUEST COMMENTARY

Digitization has ushered in a process of transformation which is quickly

gathering momentum. Companies should neither underestimate this

development nor be hesitant in taking it on. Great as the challenges may

be, companies in Germany largely perceive the digital transformation as

an opportunity.

SKILL S FOR THE WORKPL ACE OF THE FUTURE BY PROF. DR . ING . D IETER SPATH

Companies should promote the autonomy and flexibility of their employees and entrust them with new tasks.

PROF. DR . ING . D IETER SPATH has been President of acatech – the German Academy of Science and Engineering – since February 2017. Among other positions, he is the Director of the Fraunhofer Institute for Labor Economics and Organization, and is currently researching the effects of digital transformation processes on work. As a former member of the Board of Wittenstein SE, the occupational scientist has had previous experience of digital transformation in the mid-sized sector.Phot o : a ca t e c h C . R i e ken

GUEST COMMENTARY

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