I have been thinking quite a bit about the future of the corporate compliance function. Our profession seems to be an inflection point, moving away from the lawyer-driven written policies and procedures to a more operationalized regime where compliance is a part of the overall ecosystem embedded directly in business process focused discipline. Seen in this manner, compliance will be seen not as a cost center but as a value creation center, helping the company to make business processes more efficient and then more profitable.
I was intrigued by a Harvard Business Review article, entitled “In the Ecosystem Economy, What’s Your Strategy?”, by Michael Jacobides. While the focus of his article was on customers and sales, it was clear to me that if you substituted compliance and business processes, you could very quickly get to the same place. Moreover, to be the orchestrator and prime mover of an ecosystem, you need a superior product or service that is hard to replicate. This means some combination of compliance, a large network of internal users [i.e. customers] and strong branding. I adapted his ideas for the compliance discipline and compliance professional.
Help Others Create Value
One of the key concepts of the ecosystem culture is that “success is as much about helping other firms innovate as it is about being innovative yourself. Companies that have built a successful ecosystem have often done so incrementally, broadening the value proposition of their core offering by finding opportunities to apply one of its features or functionalities to some previously unrelated product or service.” This should be the role of compliance, to help make other corporate disciplines more efficient through creating an effective, fully operationalized compliance program. Put another way, there should be shared functionality between compliance program components and other corporate functions.
Play a Supporting Role
Compliance does not have to provide the answer to the creation of a business process, it only needs to improve it. This means compliance does not have to take the lead but can play a complimentary role. Compliance can do so through more efficient compliance internal controls or, in some instances, less controls. Compliance needs to have the ability to respond more fully but also the understanding that it is business operations that drive the sales for an organization. But this does not mean putting all your eggs into the short-term profit basket. The creation of long-term value is more favored by partnering with other disciplines within your company.
How Do You Participate
Here there are two key concepts. The first is access and the second is attachment. Under access, the more open the system is the better. This means that compliance needs to have a seat at the table and be seen as a trusted partner rather than Dr. No from the Land of No. Additionally, access also includes the end using customer so this may mean compliance has to take into account what the business wants rather than simply a compliance dictate. This can be difficult if compliance is run out of the legal function which normally does not work with the business unit to make process more efficient.
Under attachment, the key is that the end users will use but not change the developments without the signoff of compliance. For instance, if you’ve developed an app for mobile use, does it have the look and feel of current apps or does it look and feel like it was designed by a bunch of old guys? If you can demonstrate tangible benefits in business efficiency, this will go a long way towards attachment. Here you need only think of the Anheuser-Busch InBev’s BrewRight program where the business operations folks derived greater business efficiency insight from the company’s compliance innovation.
Compliance Must Adapt
This should be a trait of every compliance professional but it is critical in the ecosystem culture. It mandates an “outward facing culture and the ability to manage multiple relationships.” Clearly the requirement of any successful Chief Compliance Officer (CCO) or compliance professional. Beyond strategy, to build an ecosystem you will need to manage your organization. Once again this is a key concept for operationalizing compliance. The bottom line is that compliance ecosystems must be more closely aligned with the business core of any organization. This comes only through a thorough understanding of the business unit functions and processes and a thorough knowledge of the compliance processes.
Managing Multiple Ecosystems
If you have ever sat in the CCO chair you know that your life is constantly juggling multiple balls in the air at once. Perhaps my favorite metaphor is fixing or even swapping out jet engines while flying at 400 MHP at 35,000 ft. Moreover, in the corporate world think about all the other disciplines compliance does touch or should touch. For instance, how many touch points are the in the Human Resources (HR) sphere around compliance. I submit there are client touchpoints at each step the HR lifecycle of employment for any person in any organization. The same is true for the entire sales cycle and the procurement cycle. Compliance should work in each of those ecosystems to more fully operationalize compliance by adding value through increased business efficiencies, not bureaucratic burdens.
There is another way that this ecosystem approach can make your compliance program more effective. Think about the third parties your company has both on the sales and the supply chain side. If you could work to create a closer ecosystem with those stakeholders from the compliance perspective, it would not only make the business relationship stronger but also make the entire business process more efficient.
Compliance is undergoing a paradigm shift as a result of technological and digital innovation. CCOs who cannot interpret the data from their own systems will likely find themselves consigned to the dustbin of corporate luddites. Compliance will be moving into a new era of collaboration and connection to more fully operationalize compliance to make all business stakeholders more efficient and at the end of the day more profitable.