Transcending cost savings to pursue strategic transformation.
By Atul Vashistha
Business transformation is one way that great globalizers leverage services globalization to create competitive advantage. Services globalization should now constitute an important part of the strategic plan of any firm.
Successful globalizers see that globalization is about more than cost savings, and they ask themselves: What can globalization do for my business in addition to reducing costs? How can I leverage it to build competitive advantage? There are six steps to leveraging transformation opportunities in services globalization:
Generating solid leadership commitment. Cooperation, buy-in, and commitment of an organization’s employees must come from the top to the bottom.
Developing a new design and structure. The organization must define the new roles for the global delivery centers that account for new jobs and work structures, performance management systems and governance.
Collaboratively mapping and executing change management. Prepare to help existing team members to become resilient, enable knowledge transfer, engage resource planning, and communicate.
Communicating effectively. Plan for the human impact of the change and prepare to deal with potential points of resistance.
Educating and developing new competencies. Identify training needs and develop training curriculum for the existing onshore and the new global organizations.
Redesigning business processes. This includes automation, new onshore/offshore interactions, and knowledge management, plus management of increasingly complex business networks.
A few years ago, Electronic Arts (EA) realized it needed innovation from outside the U.S. to address increasingly large client bases in Asian and European markets. They asked: How do we grow business in Asia where the typical U.S.-type PC console mode doesn’t work? Globalization, for them, was about addressing the market in a different way. Now, they have facilities in China and India, and they leverage partners around the world.
Plantronics CEO Ken Kannappan told me how he looks for the advantages that each potential location will offer. “Europe, for example, is at the forefront of Bluetooth® technology, so that’s where we develop those products. China is a far more cost-effective location for some processes, compared to California, so we have functions done there, too. It’s natural to get those competency centers where you can get a rich trove of talent of the most cost-effective process.” I heard similar stories from Yahoo, Oracle, and Google engineering executives.
Genpact, formerly Gecis, succeeded in its global business transformation initiatives in part because of the commitment and buy-in that came from CEO Jack Welch. Gecis began in India as a small firm and became one of the largest offshore operations in the world. Early on, top-level managers created a governance team with defined strategic and tactical objectives to guide Gecis in its transformation process. Eventually the governance team expanded its focus to include increasing the company’s operational complexity all due to an enduring commitment, combined with a leadership mandate.
HSBC Holdings plc (HSBC) exemplifies innovative redesign and structure. Six years after opening its first offshore operating centers in China, HSBC had established offshore operations in 10 Asian countries. That globalization was coordinated by a group that evolved from a small team reporting to a senior manager to a strategic division reporting to the Group CEO.
Effective communication is a critical step to successful business transformation. In many cases, the transformative opportunity in globalization is the ability to focus on core competencies. Group VP and CIO Ron Kifer explained that globalization allowed Applied Materials to transform his organization, by becoming focused on those core competencies that added competitive value.
He said, “Services globalization provides us with the opportunity to take all those me-too capabilities that don’t add any value to the business and move them to where they can be most effectively supplied, where we can take advantage of the more mature processes, metrics, and capabilities of our strategic partners and refocus our entire internal team on real value-added core competencies.”
Because globalization increases the complexity of an organization’s business networks, it is vital that those networks be optimally managed to ensure the highest level of efficiency in the delivery cycle. Otherwise, the potential benefits of a global business transformation could easily be eroded by new inefficiencies.
Through these six critical steps, many companies have demonstrated successful business transformations through services globalization. What began as a purely cost-saving proposition has now proven itself as a fully transformative lever—provided that organizations use it as such.
Atul Vashistha is founder and chairman of Neo Advisory (formerly neoIT), a management consultancy focused on offshore and global sourcing. He can be reached atul@neoIT.com
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