12th January 2023

BUSINESS OUTCOMES, THE NEXT COMPETITIVE PLAYING FIELD :
HOW TO MANAGE AND MEASURE EFFECTIVELY

By 2025, business-outcome-based SLA's will be the predominant success measure of outsourced relationships, rising from 15% in 2021 to over 70% (Gartner 2022)²

There has been a fundamental change in the commercial relationship between service providers and their clients. Companies looking for service outsourcing are increasingly expecting to measure the success of these relationships by the business outcomes delivered, e.g. better customer service or faster order processing.

Traditionally, services and products have been purchased based on the promise of potential results. Service providers focused on delivering and meeting service outcomes such as availability, support hours, open tickets, MTTR etc., leaving the client responsible for realising the benefits and value (or not) of their purchase.

The shift to a business outcome-based model shares the responsibility and risk of business value realisation between the service provider and the client. 

"Outcomes are the next competitive playing field" (Gartner 2022)³

Business outcomes are becoming a critical differentiator in a highly competitive marketplace. Successful organisations will be those that can bridge the value gap between technology and the business to demonstrate value in the context of their client's objectives and aspirations. Achieving this will require service providers to execute the complex task of understanding, managing, and evidencing the outcomes to be delivered for each client.

Setting up for success

Managing business outcome-based SLAs requires an agreed, accessible, and meaningful definition of the business outcome, against which the actions driving the results and outcomes delivered can be evaluated. Five core activities will deliver the transparency and control needed for success.

Figure 1 - Iterative business outcome management framework

1. Discovery

Develop a shared understanding of the client's required business outcomes and their key measures.

It is essential not to make assumptions. Recognise that your perception of relevant business outcomes may differ from the client's reality.

Start with the strategic objectives, e.g., increase revenue, and break these down into specific outcomes. Identify the key performance indicators that demonstrate and track the result, e.g., increase order processing by a percentage.

2. Design

Build a 'Big Picture View' of the service in the broader business context.

The design links the business objectives, organisational structure, people, processes, and technology elements. The aim is to simplify the complexity of the business environment creating a familiar and meaningful context for service delivery conversations with clients.

The design also identifies the data sources and metrics to feed into the key measures and guide required actions. Think in terms of both lagging and leading metrics. Over time leading metrics should positively impact the lagging metric or suggest the need for remediation actions to meet the objectives. You must also understand the collection method and frequency of the metrics data and consider the provenance and quality of the data, as this will influence stakeholder trust and acceptance of the results.

Lagging metrics measure the result and confirm an outcome is occurring.  (e.g., total number orders processed)

Leading metrics measure the progression to a result. (e.g., % of orders not processed in 2 hours)

3. Model

Build a dynamic model to create a 'business digital twin'.  

Integrate the identified data sources and metrics into the 'big picture view', creating a dynamic representation of the business context.

This model becomes a simple interface for exploring service delivery options, understanding the impact of actions, and evaluating progress on an ongoing basis. Integrating the data sources generates an initial performance baseline providing input into service delivery planning and the development of the service roadmap.

The model will need updating as the client's business landscape changes and new elements and data sources are identified. Maintaining the accuracy and validity of your model is an iterative process and fundamental to your success.

4. Optimise

Optimise and actively manage actions to ensure the desired results are achieved.

The ability to meet your contractual commitments depends on the active management and iterative evaluation of progress.

Effective optimisation will interrogate and analyse the data in the model to identify improvement opportunities and diagnose any issues when a course correction is required. By monitoring the impact of the identified actions, it is simple to close the loop on continuous service improvement initiatives and ensure they deliver value.

Framing this analysis in the business context ensures priorities are aligned and breaks down business value clearly into contributing operational metrics. Success is achieved by maximising the delivery of business results throughout the contract lifecycle in line with the client's evolving needs.

5. Evidence

Inform decision-making and drive action.

Conversations about value and impact must be meaningful and interactive to be effective. A collaborative environment that supports clear communication will remove friction and make progress transparent.

The model you have developed will create a shared understanding and an anchor for service delivery conversations. As a dynamic framework, the model will allow you to explore and interrogate performance data, structure value conversations, make recommendations and evidence the delivered business outcomes.

Effectively delivering against business outcomes requires an integrated and dynamic approach. Empowered service delivery teams can work in tandem with their clients to drive mutual success and competitive differentiation. Thus, transforming the client's perception of the service provider from the vendor to that of business enabler and partner.

If your customers are asking you to deliver business outcomes but need help knowing where to start, talk to Hublsoft today.

References:
1. Gartner (2022) - What do we mean by an outcome? 
2. Gartner (2022) - Predicts 2022: The Effect of Accelerated Digital Adoption on IT Services Sourcing
3. Gartner(2022)  - Quick Answer: What Is a Business Outcome and an Outcome-Based Business Model?