Interestingly, I had a chance to look at two Open innovation networks sites of P&G and Innocentive last week are raised a question on the longevity, impact and value of these networks on my blog article: http://insightful-journey.blogspot.com/2008/06/open-innovation-networks-does-it-have.html
It was interesting to see Mckinsey Quarterly article on "The next step of open Innovation article" yesterday taking an agnostic view of Open network and potraying an Uncertain future. I really believed Mckinsey had a foresight on what will be the next step of Open Innovation networks! While, I was disappointed on not getting the right answer from Mckinsey :-) (as usual) but atleast it provoked me to think ahead on what trends can emerge out of Open Innovation networks
1. Consumerism and mass customization will reach a tipping point. This will force companies to produce unique product/service that caters to needs and wants of just one customer at a time (Read the latest Prahalads book on Co-creation where he mentions this as N:1 scenario)
2. Companies will be forced to reshape/redesign/realign their resource and capabilities dynamically to meet "A" customer need & want (R:G case in Prahalads co-creation model)
3. Shifting of paradigms where value capture will be premised on how networked and closely knit a company is in its eco-system and how quickly it can leverage it to deliver on customers need & want (My own thesis!)
4. Shifting of organizations P&L centricity from product/service lines to customer (Similar to what is happening in Telcos & Utility companies)
5. Emergence of new sets of business laws & practices: stakeholders, privacy, ownerships, contracts, IP....??? (My own thesis)
Any more trends that you think of and can suggest?
Tuesday, June 24, 2008
Is outsourcing initiative directed to capture maximum value without assuming ownership for its costs & risks?
I happened to read the ITIL V3 publications on Service Strategy recently. A really well-defined article and came across this very interesting quote that client wants to capture value by passing on the ownership of costs and risks of deriving the value. The focus of due-diligence hence is to evaluate the degree of ownership in assuming the risks and costs for delivering the value for the service provider.
I thought that the former argument was carrying the idea too far, while the latter was too shallow a definition of due-diligence.
This is why I say so:
clients always carry risk of outsourcing critical functions and pay a price to a service provider for acquiring the value of it as well. No matter the degree to which the functions are outsourced. There may be several ways in which the client may protect himself from the costs and the impacts of risks through stringent contracts, SLAs and so on but still carries the risk of loosing the utility and gaining the warranty.
On the topic of due-diligence is too superficial and here is why I say so:
The due-diligence exercise intends to firm up the service offer to a client by not only assessing the risks and costs but also the validating the assumptions, clarifying the issues and firming the scope of work.
Any agreements/disagreements/PoVs....
I thought that the former argument was carrying the idea too far, while the latter was too shallow a definition of due-diligence.
This is why I say so:
clients always carry risk of outsourcing critical functions and pay a price to a service provider for acquiring the value of it as well. No matter the degree to which the functions are outsourced. There may be several ways in which the client may protect himself from the costs and the impacts of risks through stringent contracts, SLAs and so on but still carries the risk of loosing the utility and gaining the warranty.
On the topic of due-diligence is too superficial and here is why I say so:
The due-diligence exercise intends to firm up the service offer to a client by not only assessing the risks and costs but also the validating the assumptions, clarifying the issues and firming the scope of work.
Any agreements/disagreements/PoVs....
Madness in the methods!
4.3 trillion combinations possible in a rubic cube. If one knows what he/she is doing it can be solved in 25 moves....
Isnt the above a amazing method to solve the Rubics madness.
But you can't apply the same method to winning a chess game, can you?
Methods have their limitations when applied to a problem. Not all problems can be solved through methods. Typical failures can occur under following circumstances:
1. Incorrect definition of problem
2. Applying the wrong methods or methods wrongly
3. Deriving the wrong conclusions of resolution
4. Underestimating the complexity and power of execution
5. Carrying rationality of thoughts too far!
6. Underestimating the intangibles!
7. Many other countless reasons.....that I've not listed
Dont you think a typical undergraduate can apply collection of methods to solve worlds hunger then?
Isnt the above a amazing method to solve the Rubics madness.
But you can't apply the same method to winning a chess game, can you?
Methods have their limitations when applied to a problem. Not all problems can be solved through methods. Typical failures can occur under following circumstances:
1. Incorrect definition of problem
2. Applying the wrong methods or methods wrongly
3. Deriving the wrong conclusions of resolution
4. Underestimating the complexity and power of execution
5. Carrying rationality of thoughts too far!
6. Underestimating the intangibles!
7. Many other countless reasons.....that I've not listed
Dont you think a typical undergraduate can apply collection of methods to solve worlds hunger then?
Thursday, June 19, 2008
Innovation in Monopolistic market
Microsoft is (almost) operating in monopolistic Corporate/business users market for its Windows operating system. Conventional theory would say that in a monopolistic market the incumbent are better-off not innovating as there are no new entrant who pursues innovation as an entry strategy (lets forget Linux for now as it have very limited presence in Business user/corporate market). Why so?
1. Diverting the precious resources (capital, people, etc.) in innovation endeavor, when instead they can be reduced to increase their margins.
2. Innovation resulting in new product version may lead to cannibalizing their existing products
3. The new version may lead to losing their captive customers due to the cost involved in upgrading/learning/supporting the new version
It seems that is not true for Microsoft, which has been a non-disruptive innovator. Being a monopolist, Microsoft has successfully managed to move their installed base to the latest version of the OS every time, though the product can be frustratingly buggy :-)...How do they do it? By withdrawing support, patches (mean to fix bugs) to the product base and frightening good souls out there of pernicious virus and Trojans that can exploit the loop holes leave aside the fact they never mention that they had more bugs that can harm you then those viruses/Trojans.
However, we don’t seem to see the same pattern when it comes to tangible products (esp. hardware). Here it seems the innovation has mostly been disruptive. Do you recall what ever happened to the 5.25 inch disks? Reading innovators dilemma gives us countless organizations that have failed by releasing new versions of their archaic products. This was due to new innovations that had not only introduced better features but at lesser cost. This has resulted in monopolists always loosing out due to disruptive innovation by new entrant.
I was reading the "Loyal servant" prototypical game in game theory and realized the above pattern was unique where theory didn’t exactly apply. It prompted me to think on these lines and raised few questions:
1. Is there any disruptive innovation in the software product market?
2. How do we spot them if they are already available? (Remember more convenience/features & lower cost for tangible products)
3. What are the right things that these corporations have to do to bring faster adoption of the innovative product (same time faster obsolescence of their existing product)?
1. Diverting the precious resources (capital, people, etc.) in innovation endeavor, when instead they can be reduced to increase their margins.
2. Innovation resulting in new product version may lead to cannibalizing their existing products
3. The new version may lead to losing their captive customers due to the cost involved in upgrading/learning/supporting the new version
It seems that is not true for Microsoft, which has been a non-disruptive innovator. Being a monopolist, Microsoft has successfully managed to move their installed base to the latest version of the OS every time, though the product can be frustratingly buggy :-)...How do they do it? By withdrawing support, patches (mean to fix bugs) to the product base and frightening good souls out there of pernicious virus and Trojans that can exploit the loop holes leave aside the fact they never mention that they had more bugs that can harm you then those viruses/Trojans.
However, we don’t seem to see the same pattern when it comes to tangible products (esp. hardware). Here it seems the innovation has mostly been disruptive. Do you recall what ever happened to the 5.25 inch disks? Reading innovators dilemma gives us countless organizations that have failed by releasing new versions of their archaic products. This was due to new innovations that had not only introduced better features but at lesser cost. This has resulted in monopolists always loosing out due to disruptive innovation by new entrant.
I was reading the "Loyal servant" prototypical game in game theory and realized the above pattern was unique where theory didn’t exactly apply. It prompted me to think on these lines and raised few questions:
1. Is there any disruptive innovation in the software product market?
2. How do we spot them if they are already available? (Remember more convenience/features & lower cost for tangible products)
3. What are the right things that these corporations have to do to bring faster adoption of the innovative product (same time faster obsolescence of their existing product)?
Wednesday, June 18, 2008
Open Innovation Networks: Does it have commercial value for its stakeholders?
Interesting that I caught up on the innovation network sites recommended by my good friend Navneet recently. It was amazing to see Innovation networks where one can solve problems and in the process make money. Some of the sites I visited:
1. www.pgconnectdevelop.com: Connectors who bring together partners, innovators and P&G lines of business
2. www.innocentive.com: Plays as an aggregator of Innovators and businesses (who want science problems solved)
I'm sure there are more such sites, but I restricted the above two worthy of mention as they provide incentives for innovators for solving their problems. The concept of open networks for a business value is not new. Linux sort of revolutionized this idea where software programmers contributed to the development of the OS (carefully monitored by expert who decide what goes into the production version). It was seen that very quickly businesses such as Red-Hat encircled them by providing support/services and eventually also ending up doing R&D.
But is the open innovation network models really provide business value?
This is one large question difficult to answer as these models evolve. But one can use the benefit of hindsight for software products like Linux. Interestingly so, being in sales and business development in the IT landscape, I can tell for sure the product is difficult to sell to businesses and make a commercial business out of it. Several reasons afflict them and we will not even try and enumerate them here. (you can mail me if you like and I'll share my perspectives on it for a price :-)). Going by the above I feel these networks will die as the savvy scientists and technologists would not like to sell their intellectual capital for free. The best of the ideas will often surface outside these networks and find commercial value outside these networks. Imagine what it will do to the sponsors of research in large universities, commercial organizations that recruit scientists and pay them huge sums for breakthrough ideas/products and so on...Lets not even think about the legal challenges these may pose (I am a novice in IP laws).
My hypothesis:
a. Companies cannot think these networks to replace the R&D divisions yet.
b. Nor will the best of scientists and technologist openly throw away their intellectual capital for pennies.
What fact do you have to prove or disprove above hypothesis? Please share with me...
1. www.pgconnectdevelop.com: Connectors who bring together partners, innovators and P&G lines of business
2. www.innocentive.com: Plays as an aggregator of Innovators and businesses (who want science problems solved)
I'm sure there are more such sites, but I restricted the above two worthy of mention as they provide incentives for innovators for solving their problems. The concept of open networks for a business value is not new. Linux sort of revolutionized this idea where software programmers contributed to the development of the OS (carefully monitored by expert who decide what goes into the production version). It was seen that very quickly businesses such as Red-Hat encircled them by providing support/services and eventually also ending up doing R&D.
But is the open innovation network models really provide business value?
This is one large question difficult to answer as these models evolve. But one can use the benefit of hindsight for software products like Linux. Interestingly so, being in sales and business development in the IT landscape, I can tell for sure the product is difficult to sell to businesses and make a commercial business out of it. Several reasons afflict them and we will not even try and enumerate them here. (you can mail me if you like and I'll share my perspectives on it for a price :-)). Going by the above I feel these networks will die as the savvy scientists and technologists would not like to sell their intellectual capital for free. The best of the ideas will often surface outside these networks and find commercial value outside these networks. Imagine what it will do to the sponsors of research in large universities, commercial organizations that recruit scientists and pay them huge sums for breakthrough ideas/products and so on...Lets not even think about the legal challenges these may pose (I am a novice in IP laws).
My hypothesis:
a. Companies cannot think these networks to replace the R&D divisions yet.
b. Nor will the best of scientists and technologist openly throw away their intellectual capital for pennies.
What fact do you have to prove or disprove above hypothesis? Please share with me...
Tuesday, June 17, 2008
Busting Business complexity: Shannons Entropy, Constraint theory and Game Theory
Business ecosystems are becoming increasingly complex. The ability of an organization to forecast and achieve growth and profitability in the complex business ecosystem is more than an art. Imagine how complex this would become for a new entrant in Hi technology industry. In the previous blogs we've seen how value networks can be used as an effective tool to model businesses, analyze, and define strategy. (We are not even talking about executing them! Will leave it to art for now!!!)
Complexity is not unique to business, several technologists and scientists (I've deliberately chosen to separate them) have traversed down the path and created techniques and tools to bust them. A business therefore isn’t so unique except that the factors are many and the dynamism of the factors themselves is uncontrollable. But if we can model an ideal business (assuming limited factors and controllable state) we can converge on strategies.
In this space one can consider some of the existing techniques/tools that have been used in several disciplines: defining a value network, using Shannon’s entropy to determine complexity of the ecosystem within which the business operates, using constraint theory to maximize revenue and growth KPI for organizations and of course use game theory (Stackleberg/Nash games) to model the dynamism in the business. There are several interesting articles I came across recently in this field and itching to apply them in real-life scenarios!
Is there a strategy problem out there for piloting these ideas?
Complexity is not unique to business, several technologists and scientists (I've deliberately chosen to separate them) have traversed down the path and created techniques and tools to bust them. A business therefore isn’t so unique except that the factors are many and the dynamism of the factors themselves is uncontrollable. But if we can model an ideal business (assuming limited factors and controllable state) we can converge on strategies.
In this space one can consider some of the existing techniques/tools that have been used in several disciplines: defining a value network, using Shannon’s entropy to determine complexity of the ecosystem within which the business operates, using constraint theory to maximize revenue and growth KPI for organizations and of course use game theory (Stackleberg/Nash games) to model the dynamism in the business. There are several interesting articles I came across recently in this field and itching to apply them in real-life scenarios!
Is there a strategy problem out there for piloting these ideas?
Friday, June 13, 2008
Is your competitor also your best complement?
There are very businesses that have their greatest competitor as their complement as well. One can see this more pronounced in the Enterprise software segment that I looked at. Let us look at some interesting successful organizations that are both competitor and complement:
1.Windows-Oracle
a. The largest market share for Oracle database is on Windows platform, but Oracle competes aggressively with Microsoft in the database segment MSSQL Vs Oracle.
b. Oracle Accelerate solution competes with Microsoft NetDynamics, Axatpa, & their insignificant other acquisitions
2. Windows-SAP: They sing a duet with SAP enterprise software running on Windows, but they compete as well Microsoft NetDynamics, Axatpa, & their insignificant other acquisitions and SAP Business One.
Seeing the above some interesting question arose:
1. How can you uncover the complement in your competitor?
2. How do you nurture such relationships for economic value while fighting in the market place?
To answer the first question maybe it helps to look at the ecosystem and value networks in which these organizations operate.
For the second question, it is about execution of well strategized Go-to-Market initiatives (as we popularly call them in the Partners & Alliances world).
Any thoughts/experiences you want to share on this….
1.Windows-Oracle
a. The largest market share for Oracle database is on Windows platform, but Oracle competes aggressively with Microsoft in the database segment MSSQL Vs Oracle.
b. Oracle Accelerate solution competes with Microsoft NetDynamics, Axatpa, & their insignificant other acquisitions
2. Windows-SAP: They sing a duet with SAP enterprise software running on Windows, but they compete as well Microsoft NetDynamics, Axatpa, & their insignificant other acquisitions and SAP Business One.
Seeing the above some interesting question arose:
1. How can you uncover the complement in your competitor?
2. How do you nurture such relationships for economic value while fighting in the market place?
To answer the first question maybe it helps to look at the ecosystem and value networks in which these organizations operate.
For the second question, it is about execution of well strategized Go-to-Market initiatives (as we popularly call them in the Partners & Alliances world).
Any thoughts/experiences you want to share on this….
Tuesday, June 10, 2008
Value Chain, Value Networks, and everything else
Value networks is an interesting way to analyze a firms ecosystem and the context in which it operates. This cant be more pronounced in anyother field than in the High-technology industries where products/services have a very small shelf-life, time to market for innovation is short-spanned and almost anything is quickly cloned and commoditized. Few questions arose in my mind:
1. Is it true then that in this hi-tech industry realm no copyright, patents or licensing can give market protection for economic value exploitation by innovators?
2. Is the only way for organization to capture the maximum economic value then rest on ability of the organization to exploit the value chain to maximize its value capture (by doing things like build strong brands, scale quickly to meet imcreasing consumer apetite, agile to create several new innovative product/service parallely, produce highly reliable products...and so on)
3. Given the dynamics of the emergent players in the value chain and its ecosystem can one capture better value by constantly and dynamically capturing the changes in the eco-system through value network diagram? (Here I'm impressed by erstwile Sun Microsystems CEO Ed Zander who later moved to Motorola, whereby he said that he revives the organization strategy everyday...)
I happened to read some interesting articles on value networks from the site http://www.value-network.com where several cases are posted on how value networks (bubble charts) are detailed to capture the roles and exchanges of players in the ecosystem and how this with System Dynamic Modelling (swirly charts) captures the interactions and influences of the players. I was partticularly impressed by the case on Boeing not for the depth of the article or the details on how Value Network analysis and System Dynamic modelling is effectiveley used to test several aircrafts models, but for the ability of the organization to continuously pioneer/adapt such interesting models like DSM, Lean, Six-sigma and so on without inventing them :-)...It sets a precedent and a desire for everyone to adapt it in their own context....
It has now thrown open a zillion ideas in my mind on how Value networks, System dynamic modelling, Constraint theory/Optimization models, Queuing systems can be juggled to solve complex daily business problems like SLA management, Recruitment, delivery management...if only i can get an opportunity to prevail upon my desires in the mundane corporate world....
1. Is it true then that in this hi-tech industry realm no copyright, patents or licensing can give market protection for economic value exploitation by innovators?
2. Is the only way for organization to capture the maximum economic value then rest on ability of the organization to exploit the value chain to maximize its value capture (by doing things like build strong brands, scale quickly to meet imcreasing consumer apetite, agile to create several new innovative product/service parallely, produce highly reliable products...and so on)
3. Given the dynamics of the emergent players in the value chain and its ecosystem can one capture better value by constantly and dynamically capturing the changes in the eco-system through value network diagram? (Here I'm impressed by erstwile Sun Microsystems CEO Ed Zander who later moved to Motorola, whereby he said that he revives the organization strategy everyday...)
I happened to read some interesting articles on value networks from the site http://www.value-network.com where several cases are posted on how value networks (bubble charts) are detailed to capture the roles and exchanges of players in the ecosystem and how this with System Dynamic Modelling (swirly charts) captures the interactions and influences of the players. I was partticularly impressed by the case on Boeing not for the depth of the article or the details on how Value Network analysis and System Dynamic modelling is effectiveley used to test several aircrafts models, but for the ability of the organization to continuously pioneer/adapt such interesting models like DSM, Lean, Six-sigma and so on without inventing them :-)...It sets a precedent and a desire for everyone to adapt it in their own context....
It has now thrown open a zillion ideas in my mind on how Value networks, System dynamic modelling, Constraint theory/Optimization models, Queuing systems can be juggled to solve complex daily business problems like SLA management, Recruitment, delivery management...if only i can get an opportunity to prevail upon my desires in the mundane corporate world....
Monday, June 9, 2008
IT Services Outsourcing Cost saving: Whats are easier then Hows?
Clients outsource IT services (typical run activities) for non-core applications to reduce the (SG&A) cost of providing the services to Line of Business. Off late clients are not just happy with the initial cost savings that may accrue to the business due to outsourcing of these services, they often demand that the service provider come-up with initiatives to reduce the year-on-year cost systematically over the duration of the deal. Service providers embark on such initiatives to reduce y-o-y costs starting right after the services are transitioned to a service provider. Typical questions that one often ask at this juncture are:
1. How much cost savings can be committed to y-o-y?
2. What are the levers one can deploy to reduce the y-o-y cost?
3. How will the initiatives be run around to reach target yo-y savings through each lever?
To answer the 1st part of the question, it has been observed that any the industry wide y-o-y cost saving cannot exceed 25-30%. The reason for that range is that anything at the higher end of the range affects the stability of the engagement to a layer that it makes it unsustainable.
To answer the second part of the question, there are 3 broad areas we can consider:
1. Arbitrage lever: For example Increase the Offshore % citrus-paribus (an economic talk!)
2. Resource Productivity lever: reducing the number of resources required to perform the service. This can be further broken down (reserve my USPs here...you need to pay me for this!)
3. Resource-mix lever: Getting to do more of the activities by junior resources who cost less.
Answering point 3 is the most difficult. The reason the initiatives that are rallied around these levers for y-o-y cost savings are highly subjective to the following:
A. Deal context (the initial engagement beginning parameters for the levers)
B. Organization context (both the client, and service provider dynamics)
C. IT Landscape context (services, applications, technology...etc.)
D. Other extraneous factors (blame it on the economy)
One may claim to achieve y-o-y savings through the jargon galore if the one does not appreciate the factors contributing to the subjectivity: standardized processes, skill development a.k.a ongoing training, lean, six-sigma, server-queue modelling, well i'm running short of those. We will discuss more of these later.
1. How much cost savings can be committed to y-o-y?
2. What are the levers one can deploy to reduce the y-o-y cost?
3. How will the initiatives be run around to reach target yo-y savings through each lever?
To answer the 1st part of the question, it has been observed that any the industry wide y-o-y cost saving cannot exceed 25-30%. The reason for that range is that anything at the higher end of the range affects the stability of the engagement to a layer that it makes it unsustainable.
To answer the second part of the question, there are 3 broad areas we can consider:
1. Arbitrage lever: For example Increase the Offshore % citrus-paribus (an economic talk!)
2. Resource Productivity lever: reducing the number of resources required to perform the service. This can be further broken down (reserve my USPs here...you need to pay me for this!)
3. Resource-mix lever: Getting to do more of the activities by junior resources who cost less.
Answering point 3 is the most difficult. The reason the initiatives that are rallied around these levers for y-o-y cost savings are highly subjective to the following:
A. Deal context (the initial engagement beginning parameters for the levers)
B. Organization context (both the client, and service provider dynamics)
C. IT Landscape context (services, applications, technology...etc.)
D. Other extraneous factors (blame it on the economy)
One may claim to achieve y-o-y savings through the jargon galore if the one does not appreciate the factors contributing to the subjectivity: standardized processes, skill development a.k.a ongoing training, lean, six-sigma, server-queue modelling, well i'm running short of those. We will discuss more of these later.
Saturday, June 7, 2008
Innovation Trends - A Case
Innovation Trends – A case study
We are often use Return on investment as a measure of efficiency of an organization. Let us try an take a look at Return on Innovation (ROIn) that companies may want to use to measure their innovation efficiencies. There are several interesting topics I came across recently on this topic, which sparked my thought process. The questions that arise in my mind:
1. Why do companies invest in innovation?
2. How much do companies invest in innovation initiatives?
3. How does companies measure success of their innovation initiative?
4. Is there a potential business in outsourcing for innovation?
In this, article we try and address some of these topics.
Reasons for Investment in Innovation
Typical reasons often seen are:
-
Gain market share
-
Increase profitability
-
Long-term survival
-
Others
Of course, all the above are the most important in Pharmaceuticals, health-care and bio-tech companies. Off late one is seeing rampant invest across the industry spectrum for competitive advantage.
Investments in Innovation
The answer to this question varies from company to company. It is best to see what is the typical investment in R&D for an industry group (similar set of companies) and compare it with how the company fares. Rather than looking at just the absolute R&D investment figures (some companies do not report it and others do it just to capitalize on the incentives provided for R&D such as tax breaks.). Some of the numbers we look at are staggering. NA companies spent USD 194.2 billion between 2005-2006 with a y-o-y growth of 10-15% (study conducted by Booz Allen and Hamilton). Other geographies are also quickly catching up as per the study. It is estimated that India & china spend about USD 2.1 billion and growing at 25% y-o-y.
But unfortunately, all spend do not necessarily translate to innovation. The recently published report from DSIR in India is a good indicator of the number of patent filed (since 2005) as a proportion to the R&D spend for Automotive industry. For example Tata Motors ranks as number 4 in the Worlds most innovative companies in Business week, , their R&D spend for the year 2006-2007 was USD 113 million (using Rs 43 per USD) and they filed 5 patents. Interestingly so TVS Motor company had spent USD 3.8 million and filed 29 patents.
Measuring success of Innovation
A very interesting study was recently published by BCG polling some 377 senior executives on measuring innovation. In this study only 28% of executives believe that they have received returns from investments on innovation. It is important to understand what are the key metrics that are used to measure innovation. This is best understood by categorizing these metrics as Efficiency, Effectiveness, and Size metrics (similar to the financial ration analysis category metrics we use):
Size metrics
-
R&D investment as % of sales
-
Number of patents filed
Effectiveness metrics
-
Net new revenue generated from new products/services (read innovation)
-
Profitability attributed directly to Innovation
-
Time to Market improvements due to Innovation
Efficiency metrics
-
% Revenue generated from new products/services vis-a-vis existing offerings
-
% Margin improvements from new products/services vis-a-vis existing offerings
Trends in Outsourcing Innovation
Innovation outsourcing is not new, but lately one is monitoring and tracking it. US government has publishes a detailed report “Innovation in Global Industries” detailing this trend. To improve the innovation efficiency and effectiveness metrics companies look to outsourcing for innovation. The key criteria used for outsourcing innovation are:
-
Cost arbitrages
-
Availability of talent
-
Proximity to markets
-
Industry eco-system advantages
Thursday, June 5, 2008
Talent Management - A critical perspective
Managing talent is on top of many business leaders agenda lately. No one can agree more on this topic then the Project managers in IT Service industry. When one starts talking about Talent management several questions arise:
1. What is talent?
2. How can this be sourced?
3. How can this be developed?
4. How can the talent be deployed to meet the demand appropriately?
5. How do we manage the entire talent cycle?
Answering these questions requires one to define the scope and context of the subject under discussion. Lets simplify it by looking at the IT Service industry. For the project managers in IT services, finding the solution for the above question is quintessential for the success of the project/engagement they manage. Not many organizations and their project managers out there found a good solution for the above. Lets look at some of the challenges impairing their ability to find solutions:
A. Difficulty in cleary & consistently defining talent. What do we mean by this? Quiet simply this boils down to knowing what are the capabilities of the resources. The capabilities can be defined given there is base set of factors/parameters pair values standard used to qualify them. To understand this I would draw us all to an analogy of a aircraft which has the capability to transport people, cargo, etc quickly, safely, consistently (in specified time window), and repeatably. The aircraft itself can be different based on the components that go into making them. Ofcourse we know by know there are standards, there are specific components made by differnt companies and when all of them put together make an specific type of aircraft and that aircraft has certain unique capability.
B. Difficulty in clearly & consistently sourcing the defined talent as there is no shared pool of resources that we can draw out from one. In airline industry it is possible to get an aircraft as an outright purchase, wet or dry lease from vendors in the market to manage a certain load in a route. Can we say the same about sourcing talent?
C. Lack of standardization in assets and capabilities to develop talent. We can understand it by appreciating this question: Is it possible to say that every resources going through the same course come out with same level of talent? We know well that Airbus or boing can develop an aircraft in their shop floor with a gaurantee that the end product is of a specific type say A380.
D. Inability to forecast the demand for specific talent. For example not all deploy a SAP FICO/Oracle E-Biz Financials suite in the same way, though the package is the same. This gives rise to different and unique talent required to implement/support/maintain them. However in the airline industry, on e has been able to predict the load factors between any two given cities for operation, thereby making it easy to determine the number of aircrafts/trips to be planned between two cities. Atleast one can manage the economics: demand-supply by varying the ticket prices.
E. Lack of structures and schedules to manage the talent given that the underlying technology/tools are constantly changing in IT services. Even an aircraft has been structured and scheduled for regular preventive/corrective maintenance to keep it in shape and a fixed flying hour after which it is retired. Can we do that for talent?
Come to think of it there are some simle and easy frameworks that we can model, define, create and operate to manage talent. It just requires us to think Out-of-the-box. some of the solution for similar problems already exist. Can we develop a IT tool for the same? Think about it....
1. What is talent?
2. How can this be sourced?
3. How can this be developed?
4. How can the talent be deployed to meet the demand appropriately?
5. How do we manage the entire talent cycle?
Answering these questions requires one to define the scope and context of the subject under discussion. Lets simplify it by looking at the IT Service industry. For the project managers in IT services, finding the solution for the above question is quintessential for the success of the project/engagement they manage. Not many organizations and their project managers out there found a good solution for the above. Lets look at some of the challenges impairing their ability to find solutions:
A. Difficulty in cleary & consistently defining talent. What do we mean by this? Quiet simply this boils down to knowing what are the capabilities of the resources. The capabilities can be defined given there is base set of factors/parameters pair values standard used to qualify them. To understand this I would draw us all to an analogy of a aircraft which has the capability to transport people, cargo, etc quickly, safely, consistently (in specified time window), and repeatably. The aircraft itself can be different based on the components that go into making them. Ofcourse we know by know there are standards, there are specific components made by differnt companies and when all of them put together make an specific type of aircraft and that aircraft has certain unique capability.
B. Difficulty in clearly & consistently sourcing the defined talent as there is no shared pool of resources that we can draw out from one. In airline industry it is possible to get an aircraft as an outright purchase, wet or dry lease from vendors in the market to manage a certain load in a route. Can we say the same about sourcing talent?
C. Lack of standardization in assets and capabilities to develop talent. We can understand it by appreciating this question: Is it possible to say that every resources going through the same course come out with same level of talent? We know well that Airbus or boing can develop an aircraft in their shop floor with a gaurantee that the end product is of a specific type say A380.
D. Inability to forecast the demand for specific talent. For example not all deploy a SAP FICO/Oracle E-Biz Financials suite in the same way, though the package is the same. This gives rise to different and unique talent required to implement/support/maintain them. However in the airline industry, on e has been able to predict the load factors between any two given cities for operation, thereby making it easy to determine the number of aircrafts/trips to be planned between two cities. Atleast one can manage the economics: demand-supply by varying the ticket prices.
E. Lack of structures and schedules to manage the talent given that the underlying technology/tools are constantly changing in IT services. Even an aircraft has been structured and scheduled for regular preventive/corrective maintenance to keep it in shape and a fixed flying hour after which it is retired. Can we do that for talent?
Come to think of it there are some simle and easy frameworks that we can model, define, create and operate to manage talent. It just requires us to think Out-of-the-box. some of the solution for similar problems already exist. Can we develop a IT tool for the same? Think about it....
Wednesday, June 4, 2008
How do we maximize value capture for an organization in a value chain?
Understanding the value chain is crucial for any new player developing a product/component in a semiconductor industry. It helps the player to position themselves and package their solution to maximize the value capture in the value chain. Maximizing the value capture often leads to maximizing the margins. Here is an interesting Semiconductor Industry Value Chain Case Study for one to review and comment.
Tuesday, June 3, 2008
Offshoring/Outsourcing Apocalypse - Hindsight
Gartner in 2005 published an interesting article on 5 reasons why offshoring/outsourcing will go bust:
1. Unrealized cost saving: Quick withdrawal or rebidding of offshore services resulting in inability of clients to recoup the initial transition investment.
2. Loss of productivity: Long learning curves involved in some complex tasks leading to initial loss of productivity at service providers end.
3. Poor commitment and communications: Withdrawal of key mgmt team shortly after service stabilization and lack of internal communications on the stakeholders expectations for the deal.
4. Cultural differences: Between the offshored suppliers and the clients leading to poor satisfaction
5. Lack of offshoring expertise or readiness at client end.
It might have been interesting to have the benefit of hindsight and interesting to see how the industry handled these "supposedly" silver bullets for offshoring failures.
Now all the above in 2008 maybe passe! as one sees a clear trend emerging where outsourcing done over 3-5-7 year cycle with a clear goals for transformation/productivity gains in the range of 20-30%, Fixed price bidding for non-discretionary service coupled with clear SLA baselines and performance gaurantees laid in place to avoid perceived productivity loss, attrition KPIs and matured governance structures balancing the challenges on commitment/communication, cultural flattening of the world enabling ppl to work across seamlessly, and the best practices/reference visits by clients to catch-up fast on the expertise and readiness gaps for offshoring.
Here are some of the brass talks/hypothesis if you will on why some offshoring projects may still fail:
1. Too much delegation of risks (performance gaurantees thru'stringent SLAs) and costs (lowering pyramids and costs) to suppliers by clients leading to inability of service provider to sustain service provision to client. (meaning suppliers going underground bending their back on clients demand)
2. High volatility on underlying economic factors imparing the realized benefits of offshoring: Exchange rate fluctuations, Wage inflation, etc.
3. Talent sedimentation and crunch: Challenges in getting the right talent, with right skills/experiences at right-time coupled with trying to get more down from resources lower down on the pyramid.
4. Eroding Service differntiation and increasing commoditization of business clouding the ability of the ability to choose the right partner for offshoring based on capabilities. Client will end up choosing a service provide purely on marketing/sales pitch then on their capabilities to deliver flawlessly
5. Others: I dont know......
What are your thoughts?
1. Unrealized cost saving: Quick withdrawal or rebidding of offshore services resulting in inability of clients to recoup the initial transition investment.
2. Loss of productivity: Long learning curves involved in some complex tasks leading to initial loss of productivity at service providers end.
3. Poor commitment and communications: Withdrawal of key mgmt team shortly after service stabilization and lack of internal communications on the stakeholders expectations for the deal.
4. Cultural differences: Between the offshored suppliers and the clients leading to poor satisfaction
5. Lack of offshoring expertise or readiness at client end.
It might have been interesting to have the benefit of hindsight and interesting to see how the industry handled these "supposedly" silver bullets for offshoring failures.
Now all the above in 2008 maybe passe! as one sees a clear trend emerging where outsourcing done over 3-5-7 year cycle with a clear goals for transformation/productivity gains in the range of 20-30%, Fixed price bidding for non-discretionary service coupled with clear SLA baselines and performance gaurantees laid in place to avoid perceived productivity loss, attrition KPIs and matured governance structures balancing the challenges on commitment/communication, cultural flattening of the world enabling ppl to work across seamlessly, and the best practices/reference visits by clients to catch-up fast on the expertise and readiness gaps for offshoring.
Here are some of the brass talks/hypothesis if you will on why some offshoring projects may still fail:
1. Too much delegation of risks (performance gaurantees thru'stringent SLAs) and costs (lowering pyramids and costs) to suppliers by clients leading to inability of service provider to sustain service provision to client. (meaning suppliers going underground bending their back on clients demand)
2. High volatility on underlying economic factors imparing the realized benefits of offshoring: Exchange rate fluctuations, Wage inflation, etc.
3. Talent sedimentation and crunch: Challenges in getting the right talent, with right skills/experiences at right-time coupled with trying to get more down from resources lower down on the pyramid.
4. Eroding Service differntiation and increasing commoditization of business clouding the ability of the ability to choose the right partner for offshoring based on capabilities. Client will end up choosing a service provide purely on marketing/sales pitch then on their capabilities to deliver flawlessly
5. Others: I dont know......
What are your thoughts?
What is the biggest challenge of Transformation/Change management engagement?
Any transformation or change management exercise in an organization involves high stakes and poses significant implementation challenges. Any change management initiative should start first by appreciating (read understanding) the stakes, the stakeholders and their current challenges well. The definition and design of the change management initiative then factors this understanding into it and creates an actionable plan. All that a general gyan!
What is the biggest challenge one faces in executing a transformation/change management plan:
A.Hard areas: Identification of methods, tools, techniques, frameworks, analytics (such as performance KPIs), etc.
B.Semi-Hard areas: Organization structure, existing processes, etc. that are changing as part of the change initiative
C. Soft-areas: Human behavioural- fear, emotion, passion of existing process, NIH syndromes...etc.
I believe the biggest challenges are often in the Soft areas which is often under-appreciated/attended. Are their frameworks or techniques or structure that one can be used in that area?. I'm looking for some things that could be used generically across engagements such that it can be applied for a fool-proof transformation/change management exercise.
What is the biggest challenge one faces in executing a transformation/change management plan:
A.Hard areas: Identification of methods, tools, techniques, frameworks, analytics (such as performance KPIs), etc.
B.Semi-Hard areas: Organization structure, existing processes, etc. that are changing as part of the change initiative
C. Soft-areas: Human behavioural- fear, emotion, passion of existing process, NIH syndromes...etc.
I believe the biggest challenges are often in the Soft areas which is often under-appreciated/attended. Are their frameworks or techniques or structure that one can be used in that area?. I'm looking for some things that could be used generically across engagements such that it can be applied for a fool-proof transformation/change management exercise.
Monday, June 2, 2008
A Perspective on Due-diligence for an Outsourcing Service
It is a common practice to perform due-diligence to validate the outsourcing service offering by understanding/accommodating the risks and cost-to-serve parameters for a deal. The outcome for a due-diligence can be widely varying depending on the scope and defined objective. The due-diligence, usually, is a vital link between the proposed RFP response and the revised final offer from a service provider. Most often the clients take decision on outsourcing based on the revised final offer from the service provider. Given the importance of the outcomes from the due-diligence exercise, one needs to understand the key dimensions around which one performs due-diligence. The key dimensions around which one performs the assessment of risks and costs are:
1. Strategic
2. Financials
3. Legal/Contractual
4. Organizational (HR, Structure, Governance, etc.) and
5. Service portfolio
In each of the above dimension a detailed assessment of the risks and cost-to-serve parameters are reviewed to ensure that the proposed solution is validated and revised. The entire process requires high-touch interactions with clients and the incumbent service providers so that the required information is secured for the revision. Most often the due-diligence exercise almost always results in revising the offer made by service provider to the client and there is tremendous pressure for the participants to improve the offering to client. Seldom does one see a service provider backing out of the deal considering the uncertainty, complexity and the increased cost-to-serve for the service provider. What are the frameworks available out there in the market that one can use consistently for all due-diligence exercise to determine whether to continue bid for the deal or withdraw from it? It would be interesting to understand the existing frameworks or developing one if there isn’t one in the market already?
Any thoughts/ideas?
1. Strategic
2. Financials
3. Legal/Contractual
4. Organizational (HR, Structure, Governance, etc.) and
5. Service portfolio
In each of the above dimension a detailed assessment of the risks and cost-to-serve parameters are reviewed to ensure that the proposed solution is validated and revised. The entire process requires high-touch interactions with clients and the incumbent service providers so that the required information is secured for the revision. Most often the due-diligence exercise almost always results in revising the offer made by service provider to the client and there is tremendous pressure for the participants to improve the offering to client. Seldom does one see a service provider backing out of the deal considering the uncertainty, complexity and the increased cost-to-serve for the service provider. What are the frameworks available out there in the market that one can use consistently for all due-diligence exercise to determine whether to continue bid for the deal or withdraw from it? It would be interesting to understand the existing frameworks or developing one if there isn’t one in the market already?
Any thoughts/ideas?
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