Keynote address at E&Y GCC Leadership Forum, Delhi, July 11, 2018
Back in 2010, in the aftermath of the global financial crisis, Global Capability Centers also known as Global In-House Centers or Captives were facing an existential crisis. That’s when we, as an industry, gave the big push on value creation, going beyond cost efficiency and delivery. While the existential questions have since been addressed, where GCCs go from here and what role they play in the evolution of global enterprises is a story that is yet to play out. The portents are looking good, but we are not there yet.
Even as most GCCs have been on a journey of ramping up and scaling efficiencies, some of them have focused on business value addition and building high-skill capabilities over the last couple of years to become a source of breakthrough innovation. While GCCs are seen as vehicles for reducing cost per unit, when you combine that with great talent, you reduce the hurdle rate for cutting-edge innovation. Increasing the innovation capacity of a global enterprise significantly is the biggest value that GCCs can bring. And in recent times, we have seen a real momentum building up in this space.
The world we are operating in is undergoing rapid transformation. The customer is much more demanding, the markets are shifting, the competition is changing and there is immense pressure on growth and profitability. Product and business cycles are becoming shorter, the hunters are becoming the hunted and ‘business as usual’ has gone out of the window. In this scenario, digital transformation is a must-have and constant innovation is the only ticket to success – and possibly even survival. This is the window of opportunity for GCCs – either you capture the digital transformation opportunity or you regress.
The challenges
As GCCs are maturing, we can see deep enterprise integration with respect to business context, scale and domain expertise. These are all big positives that are making GCCs ready to take on the new opportunities. However, there are also significant challenges to overcome. The first challenge is to change internal mind-sets. To be prepared to step away from the comfort zone, from execution to innovation and from a support mindset to thought leadership. Secondly, the need to shift the positioning of the GCC within the enterprise – from operations/technology center, back office and cost center to becoming a business-focused revenue center and being an incubator of innovation. Third, is to build deep business context that is necessary to drive business-focused innovation, which is difficult in an offshore center that is distant from the core business and customers. And fourth, is to get engagement and support at the CEO/CXO and Board level for the transformation journey.
Staying in a “business as usual” mode is a kiss of death for GCCs. Those GCCs that are not able to progress on a value addition and innovation journey risk not able to retain top talent impacting delivery, high costs not justified by nature of capabilities, loss of positioning in local market, and eventually the parent looking to sell or outsource the GCC operations.
The way forward
So, what is the way forward for GCCs? These are the six steps GCCs must take to progress on the value addition journey and realize their potential for being a source of breakthrough innovation:
First, reshape the expectations of the stakeholders. You have to go beyond functional stakeholders – COOs and CIOs – and build relationships with business stakeholders.
Second, develop the right governance model. While global integration is necessary, there’s an important role for local leaders, who have today been reduced to glorified admin managers. The delivery may happen through vertical integration, but innovation will come through local autonomy and leveraging co-location benefits.
Third, upscale the talent profile. Tech talent is scarce and start-ups are attracting the best talent. Leverage your GCC card of being a global brand that can provide global careers, to attract hi-quality talent.
Fourth, make the right Make vs. Buy choices. The Make vs. Buy conflict is overestimated. They both have a role to play and the challenge is to strike a balance between GCC and provider model.
Fifth, leverage the local innovation ecosystem. India has one of the most vibrant start-up ecosystems in the world. While some progressive companies have set up in-house incubators, others are leveraging open innovation ecosystems through collaboration. If you are not doing this, do it.
And finally, develop next generation leaders. We need a generational shift, a DNA change. Not just operational leaders, but business leaders; not just executives, but innovators; not just bureaucrats, but entrepreneurs and finally, not just local champions, but global players.
Having been in this domain for over 16 years and seen some really rough days, today I feel we are in a good space. There are great opportunities and you can make the most of them. GCCs are now making a real difference by contributing significantly to the businesses.
Your time is now!
