Value Addition has been a passionate personal journey for me for the past 10 years. It started at the McKinsey’s Knowledge Centre (MCKC) where I had the privilege to help build a world-class research and analytics hub over 8 wonderful years. My journey now continues at Fidelity where I have the opportunity to explore value addition in a broader financial services context. In addition, I had the opportunity to shape Value Addition as an industry theme over the past year and half in my work with the NASSCOM GIC (Global In-house Centre) Forum.
It is very satisfying to see a theme that was nascent a few years back now become mainstream and a core priority for the GIC community. Notable examples of Value Addition are happening across the industry where GICs are going beyond the traditional focus on cost & productivity on back-office processes. There is significant momentum already on building hi-skill capabilities like research and analytics. In addition, there are emerging examples of product/service innovation, impacting customer experience and even contributing to additional revenues. We are perhaps seeing a movement that will define the future of GICs in a positive and transformational way.
Through this note I want to reiterate why Value Addition is such a critical topic for GICs to focus on:
- Focus on Value Addition can allow GICs to make a contribution that is a multiple of what they have been delivering traditionally via cost & productivity benefits on back-office processes. They can thus contribute not just to the bottom line but to the top line of their parent organizations. This can happen through both innovation and extending existing services. It is now not far fetched to visualize that GICs can evolve from Cost Centers to Revenue Centers. Realizing this opportunity for value addition can help GICs significantly step up their role and importance within their parent organizations.
- Value Addition opportunity is no more a pipe dream. Growing maturity of GICs is making it more possible to realize these opportunities. Many GICs have now been in existence for over 10 years. Over time, they have grown not just in delivery capability and scale but also in business expertise, leadership maturity and credibility within their global organizations. They can thus better realise the inherent advantages of the in-house model i.e., high level of integration with the onshore organization, access to company’s IP and alignment of goals with the parent organization. This is helping many GICs reach an inflection point where they can step up from being Execution centers to Expertise centers. This might not have been possible a few years back.
- Parent organizations now need this added value more than ever before. Business climate is tough in most industries and companies are looking for new and innovative ways of driving growth and competitive advantage. GICs with their increasing expertise and maturity can become a “secret weapon” for their parent organizations. GICs through value addition could help companies serve existing customers better, develop new products/services, enter new markets and increase market share. They could thus provide a solution to companies for gaining competitive advantage in a very difficult business climate.
- Companies can get the significant business advantages of Value Addition without needing to make massive capital investments. They already have the investments in talent and infrastructure in their GICs that provides them a great platform to build on. Additional investment will likely be needed to realize the Value Addition opportunities. However, their scale will be much lower and the ROI likely much higher compared to other investment options for driving business innovation and growth. In addition, the unique combination of “low cost + hi-quality talent” that most GICs have can help lower the hurdle rate on investments. This can thus make some investments possible that might otherwise not be viable with developed market cost structures.
- While Value Addition is a huge opportunity it is also a necessity for GICs to retain relevance. While GICs have moved well past the predictions of doom and gloom that were rampant 2–3 years ago, they still face some significant challenges – the biggest being retaining top talent and escalating costs. Focus on value addition is a great solution to the above challenges. It provides an excellent opportunity to engage top talent and answer the “what next” question for them. It can address the cost challenge by moving higher cost resources to more value and, potentially, revenue generating activities. The consequences of maintaining the status quo and not pushing forward on value addition are severe. It can lead to attrition, loss of expertise, and consequently, a constant struggle to maintain quality and costs. Clearly, value addition for GICs is not just an opportunity but an imperative.
Clearly, value addition is too big and too important an opportunity to not act upon. In addition to all the business benefits, it also provides a fresh lease of energy and drive to GIC leaders. Sometimes, GIC leaders are caught in a “Comfort Zone” – they are able to deliver well on parent company’s expectations and there is no apparent need to push beyond that. This can lead to a negative cycle and eventually stagnation in their professional development. Value addition journey is a great way for GIC leaders to rouse themselves, take on interesting challenges, and grow to their full potential. Value Addition is thus a win-win for parent organizations, GICs and GIC leaders.
I believe the ball is now in the court of GIC leaders. They are best placed to spark Value Addition journeys for their organizations. They see the opportunities most closely and have great incentive for realizing them. I hope many more GIC leaders step-up to embark on this exciting journey and take their organizations, themselves and the industry to the next level!!
