Global Services Blog

Globalization Wisdom Series: Secret #2

Posted on October 27, 2009 by AtulNo Comments

This
is the third in a series of an excerpt from the newly published book by Atul
Vashistha, Globalization Wisdom: The Seven Secrets of Great Globalizers.

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. As I have
said before, if your three-year or even one-year business plan doesn’t include
the globalization of services, throw it out and rewrite it or you’ll be written
off. That may sound harsh, but in today’s competitive business world services
globalization is no longer an option that a few elite companies take; it is a
business imperative for any company that wishes to survive and flourish,
especially in this economy.

As
discussed in Secret #1, services globalization is much more than offshore
outsourcing. It is the complete embracing of cross-border operations as a means
to reduce costs, improve quality, and enable business growth. It is also a
means for business transformation.

And
that’s the second secret of successful globalizers: Welcome globalization as a
transformation lever.  Companies
that have really embraced the idea of globalization as a transformation lever
see it as a way to do business differently. They use it as a lever to, for
example, change the way they keep in touch with their customers, launch new
products, and even treat their employees.

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? Once they figure out the answer, they act quickly
to realize it.

There
are six steps to leveraging transformation opportunities in services
globalization:

o   Generating
solid leadership commitment. A
successful business transformation—especially one as highly visible and
potentially disruptive as globalization—requires the cooperation, buy-in, and
commitment of an organization’s employees, from the top to the bottom.

o   Developing
a new organizational design and structure. Specifically, the organization must define the new roles for the
global delivery centers and redefine the roles for existing centers—developing
new operating models that account for new jobs and work structures, performance
management systems and governance teams.

o   Collaboratively
mapping out and executing change management. Here, change management involves helping existing team members to
become resilient, enable knowledge transfer, engage resource planning and
communicate.

o   Communicating
effectively. Effective communication
involves planning for the human impact of the change and identifying potential
points of resistance as well as developing a plan to accommodate that impact
and deal with that resistance.

o   Educating
and developing new competencies. The
education process should begin with the identification of training needs and
development of a training curriculum for both the existing onshore and the new
global organizations.

o   Redesigning
business processes to include
automation, new onshore/offshore interactions, knowledge management, and other
support systems and to manage increasingly complex business networks. Sometimes
process redesign involves thinking about business practices in an entirely new
way.

A
few years ago, Electronic Arts (EA) began to realize that they needed
innovation from outside the U.S. to address increasingly large client bases in
Asian and European markets. They asked: How do I grow my 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 whole different way. Now, they have facilities
in China and India and leverage partners in Ukraine, Vietnam, China, India,
Russia and other such locations.

Plantronics
CEO
Ken Kannappan told me how he looks for
the unique 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 solid leadership commitment and buy-in that started at the
top with CEO Jack Welch. Gecis began in India as a small operation and became
one of the largest offshore operations in the world. Early on, top-level
managers created a governance team with clearly defined strategic and tactical
objectives to guide Gecis in its transformation process. Eventually the
governance team, still fully supported by top-level management, expanded its
focus to include increasing the company’s operational complexity. It was that
type of enduring commitment, combined with the leadership mandate handed down
from the top that allowed Gecis to leverage services globalization as a
business transformation agent and be the successful global services firm,
Genpact, today.

HSBC
Holdings plc (HSBC) is a good example of an organization that developed a new
organizational design and structure in order to facilitate its global business
transformation. Six years after opening its first offshore operating centers in
China, HSBC had established offshore operations in ten Asian countries. That
globalization was coordinated by a group called the Global Processing Team,
which evolved from a small team reporting to the company’s UK Senior Manager
for Personal Financial Services to a strategic division of its own that reports
directly to the Group CEO.

The
emergence of an overarching governance group to guide HSBC in its newly
expanded global endeavors—and the flexible expansion of the group
itself—allowed HSBC to take full advantage of the business transformation
opportunities presented by the company’s globalization. As they undertook
global sourcing and transformation, leaders like P&G not only focused on
effective knowledge transfer but also worked to ensure that 99.5% of their affected
staff was placed with the outsourcers or alternate employers. Other firms such
as Schneider Electric made sure that cultural training was done at both ends to
enhance mutual understanding and collaboration.

Effective
communication is the fourth critical step to successful business
transformation.  E-Loan
found that by communicating effectively, openly and honestly that it built
trust relationships with its clients and it educated them on the benefits of
services globalization, in turn allowing the company to reap the cost savings
and other benefits it had envisioned for its global business transformation.

In
many cases, the transformative opportunity in globalization is the ability to
focus on core competencies. Group VP and CIO Ron Kifer explains that
globalization allowed Applied Materials to transform his organization, by
becoming focused on those core competencies that added competitive value.

“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,” he
says.

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.

In
other words, if an organization goes into a globalization initiative with only
cost savings in mind and does not take all of the six steps highlighted here,
the company may or may not achieve significant cost
savings, and likely will not see the
other benefits of a full-scale business transformation.

Successful
globalizers, in contrast, take on a globalization initiative with cost savings and other benefits—perhaps improved
efficiency, increased capacity and quality of service delivery—in mind. They
expect globalization to be a transformation lever for their business and they
take the six steps necessary to ensure the realization of that transformative
aspect.

Successful
globalizers understand that, as Andrew Grove (Former CEO & Chairman of
Intel) said, “A corporation is a living organism; it has to continue to shed
its skin. Methods have to change. Focus has to change. Values have to change.
The sum total of those changes is transformation.”

Atul
Vashistha is Founder & Chairman of Neo Advisory (formerly neoIT), a leading
management consultancy since 1999, focused on independent, objective and
actionable advice to enterprises that seek to transform their organizations by
capitalizing on outsourcing and globalization. He is also Founder of NeoGroup,
a firm focused on managing, monitoring and improving supply relationships.  His latest venture is
BestOutsourcingJobs.com, an online job portal focused on outsourcing careers.
He can be reached at atul@vashistha.com. 

Globalization Wisdom Series: Secret #1

Posted on October 11, 2009 by AtulNo Comments

By Atul Vashistha

This
is an excerpt from the newly published book by Atul Vashistha, Globalization
Wisdom: The Seven Secrets of Great Globalizers.

One
underlying fact successful globalizers understand is that services
globalization has come a long way from offshore outsourcing and continues to
evolve every day. As services globalization evolves, new opportunities arise.
The reality, as Applied Materials GVP and CIO Ron Kifer sees it, is that a
company can embrace, leverage and be a part of that globalization or it can
become its victim.

“It’s
greatly important that global organizations understand that we’re moving to a
globalized economy and understand that they have to have the flexibility to be
able to do the work wherever the work is more cost-effectively done and
wherever the work is high-touch to the customer. That’s why we’re pushing
globalization as a key strategic initiative in our organization because we want
to be on the leading edge of that,” Kifer explains.

That
concept of flexibility—of being open to new opportunities—leads into the first
secret of successful globalizers: Embrace globalization. Successful globalizers
welcome services globalization into their organizations with open arms; they
allow themselves to be constantly learning, constantly open to the new
opportunities—and challenges—that the evolution of services globalization
presents. Embracing globalization means looking at the big picture; considering
every corner of the world as a potential sourcing destination and thinking
about the unique advantages and opportunities that each location offers.

Embracing
globalization is also an important stepping-stone in the development of a
services globalization strategy. Whatever may come, organizations must be
always mindful that they are embracing globalization for all that it may offer.

Model for Embracing Globalization

The
basic model for embracing globalization has four components: 

1)   
Embrace
globalization across the business.

2)   
Ask whether your
processes should be performed better elsewhere.

3)   
Mandate the
globalization of processes that can be performed better elsewhere.

4)   
Keep an eye on
the future.

When
the offshore outsourcing trend first caught hold of U.S. businesses, most firms
saw it as an opportunity to reduce costs through labor arbitrage. But as the
movement has evolved—as offshore outsourcing has become services
globalization—companies have looked past cost considerations.

In
fact, flexibility is even more important than cost in services globalization.
“If cost was your primary consideration, I think that you’re going to fall
short of meeting the real objectives,” Kifer says.

“The
real objective of a sound globalization strategy is to have a flexible
workforce and global model and to realize that the markets, customers and
competitive environment is going to change, which will require a company to
maintain competitiveness to be able to do work in a different model in a
different place over time," he adds. And that’s why successful globalizers embrace it across the business.

Bill
Gates, Co-Founder of Microsoft, once said that, “If we are not realistic about
what we’re good at, then there is a chance of going backwards in the face of
further competition.” In asking why each process cannot be done elsewhere, an
organization must be realistic about which processes are a) core competencies
and b) performed most efficiently in-house.

There’s
no room for egoism in this process: to survive, a business must be willing to
strip itself bare, down to only those processes that are true core
competencies. Every business function should be on the table for globalization
until it’s taken off, and only because it can be performed most efficiently
in-house domestically.

Mandating
the globalization of processes that cannot be done elsewhere is an important
part of stripping an organization bare. Within a company, some people will
resist globalization. Successful globalizers neither back down from that
resistance nor tolerate it. Effective change management that secures top-level
commitment and buy-in and addresses points of resistance is a critical part of
a successful globalization initiative.

Companies
must be constantly vigilant and always prepared to scrap the old way of doing
business to take advantage of new opportunities. It used to be that to engage
in this sort of flexibility made companies leaders. Today it is a business
imperative. As Thomas Friedman wrote in The
World is Flat, “If you want to grow and flourish in a flat world, you
better learn how to change and align yourself with it.”

Companies
that have embraced globalization, including leading companies such as GE,
Aviva, Texas Instruments, Google and Proctor & Gamble, have found large
pools of productive labor in offshore destinations. But they have found
something more in offshore employees as well: top engineering talent, attention
to detail and quality, sophisticated mid-level and senior-level management, and
even a level of brand identity and loyalty that rivals that of their domestic employees.

The
most successful globalizers are companies who have visionary leaders at their
helms. Steve Bandrowczak,
former Lenovo CIO, says that trying to
succeed in globalization without visionary leaders is like trying to bake a
delicious cake with stale ingredients. “I don’t care how you mix it,” he
explains, “you’re going to come out with a bad cake.”

Visionary
leaders—the ones at the helm of globalization since the beginning of
globalization—saw the big picture as it emerged: how the playing field expanded
from the U.S. and Western Europe to encompass India, the Philippines, China,
Ireland, Poland, Chile, Brazil, Russia, South Africa, and more. These visionary
leaders understood, even in the early days of globalization, that global
sourcing would become a key competitive advantage. They saw that global
sourcing could not only allow them to reduce their costs, but it could also
allow them to grow more quickly, to cut time to market, and even to improve
efficiency and raise quality levels.

Embracing
globalization is the first secret of successful globalizers not because it is
necessarily the most important, but because it lays the foundation for the six
secrets that follow. Indeed, we’ll see the principles that underlie this first
secret pop up throughout the next chapters.

Embracing
globalization is about seeing the big picture. It’s about looking beyond a
single destination or a particular set of processes. It’s about an attitude
change; about bringing the principles of services globalization into the
business and embracing them in every decision that’s made.

Atul
Vashistha is Founder & Chairman of Neo Advisory (formerly neoIT), a leading
management consultancy since 1999, focused on independent, objective and
actionable advice to enterprises that seek to transform their organizations by
capitalizing on outsourcing and globalization. He is also Founder of NeoGroup,
a firm focused on managing, monitoring and improving supply relationships.  His latest venture is
BestOutsourcingJobs.com, an online job portal focused on outsourcing careers.
He can be reached at atul@vashistha.com.