This post is the second of a 3 part series on how GIC (Global In-House Centers) can become a source of competitive advantage for their global organizations. This post highlights what steps existing GICs are already taking to become world class in India-
What are other service organizations doing on value addition?
Now that we have looked at the “why’’ of World Class lets go back and look at the ‘’what’’in more detail. We have spent a lot of time over the past 3-4 years in NASSCOM and surveyed over 50 companies to understand what GICs are doing on value addition, and based on that developed a framework that can be used across the industry.
Our framework for value addition for GICs has 4 interlocking levers – Innovation, Expertise, Customer Experience and Revenue Growth. These are interlocking levers as they all have an impact on each other. I call Innovation and Expertise the input levers and Customer Experience and Revenue impact the output levers from an organization perspective.
- Many GICs started their Value Addition journey by focusing on Expertise. We see many examples: business research, investment research, analytics, R&D and many more. While building these hi-skill capabilities in itself has been a great value-add, they have also helped raise the organization DNA of the GICs. This has helped create more opportunities for innovation and also raise relevance of the GIC for the senior management.
- We have already mentioned Innovation many times. Most GICs have historically had a strong culture of process improvement as transition of work offshore was a natural opportunity to upgrade the processes. GICs are beginning to go beyond process innovation and focus more on product innovation. Tech product companies like Cadence and SAP have been doing some great work on product innovation and there is opportunity for Service companies to learn from them
- In the fiercely competitive business environment we have today, improving customer experience is a key priority. For example, in my firm Fidelity improving our customer Net Promoter Score (NPS) has become one of our foremost KPIs, as or perhaps even more important than asset gathering and profitability. Given the scale of GICs and the fact that they are engaging deeper and deeper into the customer delivery process, GICs have a unique opportunity for raising the bar on customer experience
- Revenue impact is the Holy Grail. Most GICs started as cost centers but there is real opportunity for them to contribute to the top line both directly and indirectly. Analytics has opened up so many avenues for improving marketing effectiveness and therefore revenue yield. What I find very exciting is that many GICs are designing and delivering end-to-end services that have significant revenue impact thus making a direct impact to the top-line.
There is some skepticism on impact GICs can make on Customer Experience and Revenue Growth. To some, these might seem like a bridge too far. I have seen 6 principles to drive end-customer and revenue centric value addition.
- Leverage lower cost to serve to extend coverage of services to segments that are difficult to serve with traditional models. A significantly lower cost structure opens up opportunities that might otherwise be difficult to access. Many banking GICs have used this principle to extend the coverage of Collections services below traditional ticket sizes. Investment banks have also used this principle to extend their stock coverage.
- Source superior talent (given availability of hi-quality talent at low costs) to dramatically raise service quality- Instead of aiming for 5-6X cost arbitrage, some companies go for lower arbitrage and invest the surplus into significantly raising the talent profile relative to what they have worked with in the past. This is huge opportunity to totally redefine service quality. When the McKinsey Knowledge Centre started in 1998, it started by hiring 10 MBAs. This was a significant departure from tradition as McKinsey had until then largely relied on library and information science profiles for its research function. This was a game changer and eventually led to a significant upgradation in the scope and role of research function globally in McKinsey.
- Reduce “hurdle rate” for innovation making possible initiatives that might otherwise be not feasible. Combination of low costs and hi-quality talent is a great enabler for innovation. I call it the “Golden Equation”. Traditionally lower costs have been leveraged for reducing the cost per unit of services. The same can be leveraged to reduce the investment costs for innovations. This can allow an enterprise to de-risk its innovation program and simultaneously increase the innovation capacity significantly. I have leveraged this principle both in McKinsey and Fidelity, where we set up new specialized Analytics services for the firms from India. Setting these new capabilities in New York and London respectively would have been very expensive and thus these ideas might have never seen the light of day. We were able to get going on pilots for these in India with minimal investments and prove the concept. Many companies intuitively leverage this principle. There is a tremendous opportunity to use it more explicitly.
- Leverage customer data to do “pattern recognition” of customer needs to design new/ refined services- Many GICs run customer delivery processes and are therefore close to customer requests and data. This is a tremendous opportunity to not just learn more about customers but to leverage the insights to develop new products to serve repetitive customer needs and solve pain points. At the McKinsey Knowledge Centre we analysed the research requests coming from consulting teams to develop a series of research products that not only raised the analyst productivity but improved the quality significantly. These research products eventually formed the basis for new research oriented services that McKinsey introduced for its clients.
- Leverage co-location of functional and regional capabilities to drive new service models and innovation- Many GICs are a microcosm of their entire firm. They often house multiple functions and serve different business lines and geographies.This co-location is a unique opportunity for collaboration, which might not be available to the firm anywhere else in the world. New, innovative ideas often come not within a box but at the intersection of many boxes. Especially powerful are the collaboration opportunities between Analytics and Technology in the Big Data space and between Operations and Technology given the increasing push towards automation and creating service platforms. Also powerful is the opportunity for knowledge sharing and creating global products/capabilities when functions serving different geographies are co-located.
- Drive product/service innovation for emerging markets- Many enterprises have leveraged their GICs as an incubator for launching their businesses in the local markets. The opportunity goes beyond just rolling out traditional services in these markets. Emerging markets like India are often very competitive and require innovations in service offerings and delivery models to be successful. These innovations in services and products can be powerful exports to more developed markets.McKinsey did some of its most significant experiments in “productizing”its knowledge capabilities into new client service lines in India leveraging its Knowledge Centre. Many of these services eventually developed into large global service lines.
This blog has been slightly modified and published with permission from Nitin Seth. The original blog can be read here- http://bpoinsights.blogspot.in/2015/04/being-world-class-in-india.html