Angela Ahrendts became the CEO of Burberry in 2006. Newly at the helm, she devised a strategy comprised of initiatives including growth in non-apparel revenue and a foray into new markets. Her strategy, at its core, represented a fundamental transformation for the British fashion brand. Much of Ahrendts’s success can be attributed to her sustained commitment to metrics and, importantly, making tangible progress visible. Under her leadership, the company doubled its revenue.
Just as the threads of a Burberry sweater come together into a distinctive, finished product, the brand wove value and impact into every committed initiative. Burberry’s story illuminates an important truth: Transformation value is about both clear aspirations and measured progress towards them. In our research, 70 percent of those with recent transformation success expect at least five percent revenue growth in the coming year. Conversely, misalignment between strategy and results stymies potential.
We see these patterns play out in our Managed Services work. In a Managed Service, you need a clear strategy that ties back to the business’s highest-level aspirations. It should articulate the value it’s creating, the capabilities it will enhance, how it will evolve, and how it might influence your overall transformation roadmap. Using the wrong metrics to gauge success widens the disconnect between vision and value. Key Performance Indicators (KPIs), such as on-time delivery or percent system availability, are process-related metrics and not linked to value and outcomes. With this approach, how can the C-suite be confident that day-to-day Managed Services activities are driving towards their aspirations and fostering organizational capability along the way?
It starts at the top
To realize value on the Managed Services frontlines, we must first look at the top team. Your business cases should reflect a shared, enterprise-wide definition of value—one that maximizes outcomes at the intersection of customer, workforce, and operational needs. Yet we’ve found that most companies are considering financial and operational sources to assess value. Moving forward, a broader perspective can consider value in the form of customers, employees, enhanced capability, time, opportunity, and more. And as you deliver the activities to support strategic goals, consider how these sources of value may need to change based on internal and external factors.
When considering the diverse Managed Services expertise, skills, and tools you’ll need to maintain your key initiatives, these value drivers should stay front and center. How? In the form of Value Performance Indicators. In a Managed Services engagement, Value Performance Indicators tie back to your strategy’s value drivers. Importantly, they can flex alongside any changes in your company’s strategic direction. This approach helps you sustain a robust, adaptive Managed Service to meet ongoing demands. When anchoring Value Performance Indicators to your overarching strategy and shared definition of value, consider metrics like:
- Customer: Improved customer satisfaction, increased customer loyalty
- Employees: Accelerated skillset development, recruiting efficiency, increased retention
- Business: Revenue, profit, operational efficiency
- Capability: Maturity scores, reduction in defects
- Risk/Flexibility: Reduced operational risk, improved compliance ratings
- Stakeholders: Improved partner satisfaction scores, payables and receivables efficiency
- Time/Opportunity: Labor hours saved, cost savings
How might these Value Performance Indicators look in practice? Suppose a pharmacy implements a new point-of-sale system across thousands of locations, requiring employee upskilling. Primary sources of value include a seamless customer experience, an accelerated ability to collect payments, and a reduction in errors. In this case, your Value Performance Indicators for the program roll-out could include an improved Net Promoter Score (NPS), increased operational efficiency, and higher employee capability maturity scores. When you positively affect these metrics, you can be sure that your efforts are moving the value needle.
When you use Value Performance Indicators to gauge and ensure outcomes, Managed Services transcends a fixed set of milestones or activities. Instead, it becomes a sustained, adaptive force that helps the business progress toward its shared vision.
Here are several considerations to make the best use of Value Performance Indicators in your organization:
- Review regularly for alignment to business objectives. Ensure that your Managed Services Value Performance Indicators drive you toward your highest-level strategic goals, using leading and lagging indicators to assess whether you’re on track. While you’ll select Value Performance Indicators in the premobilization stage, you’ll need to keep an eye on them throughout the Managed Services lifecycle. By continuously connecting your approach and all initiatives back to value, you’ll ensure tactical work stays closely tied to executive vision. Along the way, avoid the temptation to collect more Value Performance Indicators than you need to assess performance. Instead, focus on a few core metrics and how you can influence those to drive value.
- Take a long-term view. Resist the temptation to focus only on short-term results. While traditional KPIs, Service-Level Agreements (SLAs), and Objectives and Key Results (OKRs) typically run on shorter time frames (e.g., percentage of packages delivered on time), remember that unlocking value typically requires profound, longer-term change over time. For instance, consider sources of value like organizational capability: There’s a longer-term, more fundamental mindset shift that needs to take place to ensure sustained focus on learning and development. And rather than only looking at financial or operational metrics, consider the measures of success that employees can directly affect with their day-to-day actions.
- Keep an eye on opportunities to scale. Across the stages of a Managed Services engagement, we believe the most value lies in the evolution phase, where you can expand or flex your set of Value Performance Indicators based on business function and objectives. Identify opportunities to scale Value Performance Indicators into other functions and programs. That way, you’ll ensure that a greater share of initiatives—from HR to Marketing to IT—are consistently connected to strategy as a common anchoring point.
What’s the thread that ties executive vision to the work that gets done? Value. When Ahrendts stepped down as CEO in 2014, Burberry realized its aspirations through consistent, impact-focused measurement. In that same spirit, design your Managed Service around a set of Value Performance Indicators that accelerate your organization toward its highest priorities.
 June 2020 North Highland-sponsored survey of > 200 employees at U.S. and U.K.-based organizations with > $1B annual revenue.