Global Services Blog

Globalization Wisdom Series: Secret #4: Align Business & Globalization Objectives

Posted on February 14, 2010 by Atul1 Comment

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

I’ve
said before that a company that wishes to flourish in today’s global market
must adopt a services globalization strategy. But not every company is ready to
globalize every process today. A successful services
globalization strategy takes diligent planning and thought—and that takes time
and focused effort.

In
the last chapter on adopting a lifecycle approach (Secret #3), we talked about
answering the following questions: Should
the organization globalize? Why will
the organization globalize? What will
the organization globalize? When will
it globalize?

The
last two questions are more operational than strategic; the first two—about why
the organization is globalizing and if it even should globalize, are purely
strategic. In answering those strategic questions, an organization must look at
globalization in relation to its overall business strategy. This is the fourth
secret: Align business and globalization objectives.  If the two don’t align, the organization is wasting its
resources and should not globalize.

When
talking about GE’s globalization strategies, former CEO Jack Welch, arguably
one of the best strategists of modern business and a highly successful
globalizer, says “If GE's strategy
of investment in China is wrong, it represents a loss of a billion dollars,
perhaps a couple of billion dollars. If it is right, it is the future of this
company for the next century.”

Not
every organization will risk billions of dollars in its globalization strategy,
but each runs the risk of unsuccessfully globalizing and missing out on the
opportunity to complement business strategy with globalization. In order to
successfully leverage services globalization—to “be right” in globalization
decisions—organizations must ensure that their globalization strategy is driven
by and aligned with their business strategy.

The
sections that follow aim to offer insight into the questions an organization
needs to ask when determining if its business strategy and globalization
strategy align.

Is business strategy driving
services globalization? What part of your business strategy does globalization
help you execute?

Ensuring That Business Strategy Drives
Globalization Strategy, Not the Other Way Around

As
services globalization becomes a business imperative for industries from
financial services to health care, companies will be even more inclined to jump
on the bandwagon with their peers. Afraid of being left in the dust, too many
companies globalize without really considering whether services globalization
is right for them—and whether their particular approach to services
globalization is the best one.

While
it’s true that services globalization is becoming a business imperative and
should receive due consideration from executives at every organization,
services globalization is not a one-size-fits-all proposition: the way Company
A executes its global strategy will not necessarily work for Company B, just as
the reasons for Company B to globalize are not necessarily the same as Company
A’s reasons.

In
other words, too often globalization initiatives are taken on with no real
strategy at all. Or an organization allows its globalization strategy to drive
its business strategy. Successful globalizers, in contrast, develop very clear
globalization strategies before setting one foot out the door, and those plans
are driven every step of the way by the corporate strategy.

Applied
Materials’ Group VP and CIO Ron Kifer says that aligning business and
globalization objectives is really about securing the future for the company.
“Your business strategy should be the primary driver of the globalization
strategy because globalization doesn’t happen in isolation. If you look at what
Applied Materials is doing with globalization, we’re all-around optimizing
performance and focusing on the core, critical competencies of the
organization, the cost-effectiveness of the solutions closer to our customers,
and that means a different geographic footprint.”

Successful
globalizers thoroughly assess their business process portfolio, financial
state, goals, objectives, risk and transformation needs, as well as the
supplier landscape and market capabilities in provider locations. Using
information from those assessments, successful globalizers build a
globalization strategy that includes the following elements:

§  Future proofing

§  Risk management

§  IP protection

§  Transformation

§  Service extension

§  Resource redeployment

§  Innovation management

Armed
with a globalization strategy, successful globalizers develop an execution
roadmap, which includes:

§  Geographic placement

§  Ownership model

§  Third-party supplier relationships

§  Transition timing

§  Financial return

§  Governance organization

Case
Study: Too Much, Too Fast

One
S&P 100 global investment bank offers a good example of a company that did
not allow its business strategy to drive its globalization strategy. Instead,
perhaps eager to jump on the bandwagon of financial services firms adopting
services globalization, the company globalized too much, too fast.

The
organization globalized its application development, application support and maintenance,
IT infrastructure management, and internal IT help desk all at the same time.
Overloaded and lacking a clearly defined globalization strategy, the investment
bank began to experience performance and quality issues with its offshore
internal IT help desk services.

To
remedy the problem, the organization had to backtrack, taking steps that it
would have been wiser to take initially, including securing buy-in from key
client stakeholders, providing for effective knowledge transfer, and building a
well-planned, solid governance framework. After taking those steps and
determining that its newly defined services globalization strategy did follow
its overall business strategy, the company was able to successfully resume its
initiative.

Having a Clear Idea of the Part of the
Business Strategy That Globalization Will Help Execute

In
addition to aligning its globalization strategy with its business strategy and
ensuring that it is the business strategy that’s the driver, the successful
globalizer has a clear idea of what part of its business strategy globalization
will help execute.

Former
Lenovo CIO Steve Bandrowczak explains that globalization is not just for the
sake of lowering costs. "We were lowering costs not because we were not
competitive in the industry. We were lowering costs because our stakeholders
expected it and competition demands it. You keep getting back to what are the
strategic objectives of your business.”

Bandrowczak
added that in his staff meetings, the alignment between globalization and
business strategy was crystal clear. “If you had sat in my staff meeting, we
didn’t say ‘Okay we’re going to shut two data centers down and we’re going to
save three centers.’ Instead, we said ‘We’re going to improve our
expense-to-revenue ratio from an IT perspective because we’re going to get in
line with industry standards and we have to deliver $100 million to the bottom
line of Lenovo.’ You constantly have to keep tying your global initiatives to
those business and strategic directions.”

Case Study: Lack of Clarity and
Definition

A
Fortune 500 electronics company provides an example of an organization that did
not develop a clear idea of the part of its business strategy that
globalization would help execute before beginning its globalization initiative.
As a result, the organization encountered a number of (avoidable) problems.

The
company initially decided to offshore its corporate business customer service,
retail customer service, levels 1, 2 and 3 customer support, order processing,
accounts payable and receivable, and order-to-cash processes to third-party
suppliers as well as a captive center in India and the Philippines.

Once
the initiative was underway, the electronics company found significant
performance and quality issues with corporate business customer service
processes within its captive center. Additionally, the ramp-up of higher-end,
customer-facing processes was slower than the company had originally expected.

After
analyzing the problems that had occurred within its services globalization
initiative, the organization realized that its fault lay in not fully analyzing
its portfolio of processes to understand the fundamental what, when, where and
how questions that services globalization requires. Additionally, the company found
that its fragmented processes needed to be aggregated and that an effective
transition needed to be based on a detailed analysis of processes.

This
Fortune 500 electronics company responded to the deficiencies it found in its
services globalization rollout, re-planned the initiatives by answering those
critical what, when, where and how questions, and developed a clear picture of
how globalization would help the company accomplish its business objectives.
Now it has very successful offshore operations. 

Case Study: Leading with Strategy

A
Fortune 500 health and life insurance company provides a good example of the
strategic considerations a company might make at different levels of the
organization. This company had a very fragmented and inefficient life claims
process, with no existing manuals or desktop procedures. Each examiner had his
or her own version of the process and method for calculating claim amounts.

In
addition, the organization was bogged down in paper-based calculations that
were full of errors with no audit trail. Furthermore, process
output/productivity, accuracy, and efficiency were not tracked. As a result,
the firm was unable to leverage its systems and knowledge to compete in the
market against new players.

This
organization resisted the urge to adopt services globalization as a fix-it
solution to its inefficiencies. Instead, it considered its strategic goals and
how it could accomplish those goals with an aligned services globalization
strategy. Each executive team member contributed in a different way to the
strategic development: the CEO had a strategic focus, concerned with leading
the business into the future; the CIO took a performance focus, concerned with
flexibility, productivity, guaranteed services levels and proven technology.
The CFO took a bottom-line focus, concerned with reducing current costs and
managing future costs.

Instead
of using services globalization as a substitute for sound business strategy,
this Fortune 500 health and life insurance company used a well-developed
services globalization strategy to complement its business strategy, which was
geared in part toward overcoming several process inefficiencies.

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 Neo Group,
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.