Friday, August 28, 2009

Staying On Top: The Challenge to India's Leadership in Off-shoring

In a recent (August 2009) article in the McKinsey Quarterly (accessible by clicking here, and then clicking on the shortened URL link mentioned in the archived tweet), Noshir Kaka et al. suggest that Innovation will be a critical success factor for India to maintain a leadership position in the globalized business / technology services industry. Here's an extract from that article:
Indian business and technology services companies needn’t stand by passively and watch their global market share decline. Innovation will be the key to maintaining and even expanding their market share. Business models that continue to focus on low labor costs won’t suffice.
While it is true that 'business models that continue to focus on low labor costs won't suffice', in August 2009 this cannot be a epiphanic revelation! This is yesterday's news, not thought leadership. Most companies foresaw this many years ago, and (as the McKinsey article suggests) turned to Innovation (among other strategies), hoping to leverage it to create a sustainable competitive advantage for India as a destination. All Indian industry majors have been chanting the Innovation mantra since then. (Show me one Indian company of some standing in the global business / technology services space that does not lay claim to 'Innovation' as its key differentiator, several times over, at its web-site or in its brochures.) Several companies have been relentlessly trying to institutionalize Innovation in everything they do, in a bid to maintain their market share in the face of competition - from within the Indian market as well as from companies based in the other BRIC countries (and their corresponding regional neighbours in Latin America, Eastern Europe, Asia / South Asia / South-East Asia) and also emerging destinations such as Egypt (and, potentially, other West Asian / African countries). However, the very act of institutionalization makes it a replicable commodity, just like any other 'best practice'. Which means others can do it too.

My comment to the article (not visible at the site at the time of writing this post) is reproduced here below, and what follows subsequently is an elaboration of the rationale behind my argument and an elucidation of my point of view on the subject.
India's competitive advantage (beyond wage arbitrage) has always been scale and process maturity. Other destinations simply cannot match the ability of Indian companies to offer large pools of talent to dip into (in terms of breadth as well as depth), or to ramp-up their teams quickly. Besides, a lot of non-Indian companies are still struggling with the challenges of managing process quality in very large projects. However this is not a sustainable competitive advantage. China has the potential to match and surpass India's strengths in terms of both scale as well as process maturity, given the size of their literate population and their culture of rigour and discipline (which is being applied even now, for example, to learning English as well as learning large scale process management). But other than China, there aren't too many countries that represent a real threat to India. Innovation is a buzz word, in my opinion, and though this may sound counter-intuitive, it is a fairly commoditizable and replicable attribute. It does not represent a sustainable competitive advantage. Talent pools from the countries / cultures that presently constitute off-shore destinations (or aspire to join the club) are equally good or bad at learning, practising and delivering on the promise of innovation. There is nothing unique about Indian ingenuity that makes Indian talent intrinsically and significantly more innovative than the average knowledge worker in, say, China or Egypt or Eastern Europe or even Latin America!
Clients based in North America and Western Europe (the predominant 'buyer' markets) have been tapping into India as a destination for well over a decade, and by now have a good understanding of the issues and opportunities that India represents. They know where the trade-offs are: while on the plus side, as I have argued, India offers a wider range of skills, better scale and better process quality, the down-side comes primarily in the form of higher attrition, greater geographical distances and time-zone differences, cultural incompatibility and to some extent lack of infrastructural robustness. Attrition can be a major problem for clients who have invested time, cost and energy in transferring knowledge. Secondly, while it is true that India enjoys the advantage of a large educated and English-speaking resource base, one must also remember that cultural compatibility is not just about being able to speak in a common language (which itself is debatable in the first place, since a lot of the knowledge workers who originate from smaller towns in India cannot really boast of fluency in English, not to mention American colloquialism). Thirdly, while time-zone differences of up to 12 hours do offer the advantage of having someone, somewhere, working on a project 24x7, they do not solve the problem of logistics (when professionals on either shore need to travel great distances to the other shore) and the problem of disrupted daily routine (when professionals on either shore need to be on conference calls at odd hours in their working day).

Comparatively, Central and South American destinations are closer, by way of both time-zone compatibility (in terms of virtual meetings / conferences) as well as geographical proximity (in terms of travel), for North American clients. The same goes for Eastern Europe in the case of European clients. Also, clients find better cultural compatibility in dealing with teams in those destinations, and business communication between client and provider teams is relatively easier and smoother. Language barriers are not significantly higher than when dealing with India, and in some cases may even be lower. Also, attrition is comparatively much lower in most of these destinations. The only disadvantage these destinations have is in terms of skill mix, scalability (especially in terms of ramp-up time) and process maturity. And that is where India has been scoring. Of all competing destinations, China is the only one that has the capability (not to mention the will!) of outstripping India on these fronts. Through concerted efforts in strengthening infrastructure (power, telecoms, etc.), in fighting attrition, in broadening and deepening the pool of trained and qualified professionals, and in imparting cross-cultural and soft-skills training to its resources (a la finishing schools), India can hope to keep the No. 2 slot if / when China overtakes India (may just be a matter of time). Perhaps this is a more pragmatic goal for India as an off-shoring destination.

That said, the opportunity for Indian companies to maintain their leadership position lies not in trying to fight the up-hill battle of keeping India as the most preferred destination. In fact, it lies in not confining themselves to India as a destination. Again, this is not an epiphany - in fact it is not even news. Most of the top-tier India-based service providers (including those founded by Persons of Indian Origin) have already started the process of building (or in some cases, consolidating) 'near-shore' hubs in Central and South America, Eastern Europe and other regions. A few have done this through organic growth, but most have done so through acquisitions of stake in local players, to whom Indian companies offer stability, scale, leadership in process maturity and access to other markets, in return for a better presence in the local / regional market, a ready local client base, and the ability to provide a multi-locational offering to their global clients. Leading Indian companies have already figured out that globalization is no longer about staying in India and offering ITO / BPO type of services to the world, as clients have increasingly started demanding lower attrition rates and flexibility in terms of location and time-zones, over and above range of skills, scalability and process maturity.

India as a destination will lose its leadership position in a few years - at the very least, the gap between India and other destinations will start closing rapidly (it already is) as they ramp-up and start competing. Innovativeness is not a special gift that is unique to India-based talent pools and believing that it is so can at best be termed as misplaced patriotism (at worst, it is a kind of jingoistic denial of reality) on the part of Indians. Innovation is a great value proposition and I am not suggesting that it should be abandoned altogether (especially because others will start offering it too!) The smart thing to do, for service providers of Indian origin, is to focus on developing a global delivery footprint (not just sales offices) and the ability to provide the right mix of capability, capacity (i.e., scale), team stability and cultural compatibility, and process excellence, at locations preferred by the client - on-site / off-site / near-shore / off-shore. And as the adoption of globalization shifts to the mid-tier client base, focus on forging strong partnerships with clients to achieve the distinction of becoming an extended team. Cultural compatibility and responsiveness to changing client needs are key. Innovation will just be a hygiene factor.

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Thursday, August 27, 2009

[This is not really a blog post]

Seriously, it isn't. I am just testing Disqus ... I hope it works now. I've been trying to get it to work, and I pride myself on a little more savvy than the average user (what with my techie background and all that - so what if it was in a bygone era?) but installing Disqus and getting it to work has been a major challenge.

If this works, you should be able to leave a comment - as a Disqus user, as a Facebook user, as a Twitter user, or with your OpenID, or just plain anonymous, with Name and email address.

Help me test this if you will. Thanks!

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Friday, August 07, 2009

Notes on Lead/Follow Models

All this "mass un-following" on Twitter recently got me thinking once again about the concept of following (and its antonym, leading), which I have been pondering over for some time now. But before I jump into the main subject of this post, let me complete my train of thought around Twitter's methodology to make social connections. Twitter's use of 'following' is a misnomer -- all it signifies, really, is an asymmetric connection where the unidirectional vector of 'interest to connect' may point either from someone to you, or, to someone from you. However, some people take 'following' in Twitter quite literally and tend to imagine that they could have a large band of 'followers', like the fan following of a celebrity, if they did things right. Earlier in the hype cycle of Twitter, users evolved a de-facto social protocol of following those who followed them -- a polite gesture to maintain the symmetry of the connection, based on normal social etiquette. Then came the 'auto-follow' tools like Twollow that did this automatically for you. As Twitter's popularity grew, and grew explosively, this has led to a culture of gathering followers arbitrarily, just so one may boast of a large following. Several services in the Twitter ecosystem promise tweeters a quick way of getting hundreds of followers, while tools like Twitalyzer measure one's 'success' as a tweeter using parameters like influence, clout, etc., which are a function of how many followers one has, among other things. Be that as it may, on to my main point in this post.

It seems to me, to my simple and lay mind (which hasn't been trained in social anthropology or whatever category this falls under in the taxonomy of things), that there are 4 types of what I'm calling the 'Lead/Follow' model -- four ways, broadly speaking, in which the idea of leadership and following could find a workable implementation in a society or a group of people. I am outlining them here, in the order of 'least evolved' to 'most evolved'. Please note that this is not about right and wrong, or about good and bad -- I use the word 'evolved' in contrast to the word 'primitive'. Humans are more evolved than aardvarks, who in turn are more evolved than cicadas, but that doesn't make us better or more morally righteous or give us more rights (though, sadly, some people seem to think so).

The most basic of all Lead/Follow models is based on fear. You find this in a command and control hierarchy: leaders assume positions of authority, seize power and command their followers and control their behaviour. The idiom here deals with 'orders' and 'obedience'. The leader makes sure that followers remain afraid so that his/her orders and directives are obeyed. Followers do not have a right to think independently or develop their own opinions, much less voice them. If they do, they will be summarily excommunicated from the regime (or worse: executed). This is a sustainable model when followers also expect to be ordered and led in this manner and consider this to be the natural way of life. Examples: fascists like Hitler and Stalin, marauders like Genghis Khan, and corporate bullies like Microsoft and others of their ilk.

Then there is the model based on respect. People follow a leader because they respect the individual, and the leader makes sure that he/she earns the respect of followers so that rules and regulations promulgated by the leader are adhered to. Leaders are appointed to positions of authority and persuade their followers to accept their proposals and expect their compliance. Followers have a right to develop independent opinions, and are expected to voice them without fear. However, the final decision remains with the leader, and after followers have had their say, decisions are made (which generally take important opinions into account) which are binding, even on those who do not agree. Followers who do not conform are frowned upon and invite the scorn of others. This is sustainable for followers who consider this to be a fair and reasonable way of organizing their society. Examples: democratic leaders like Barack Obama, religious leaders like the Pope, and companies like Google.

Beyond respect, there is inspiration. People are not required (much less compelled) to follow such a leader, but the leader inspires them through discourse, with the power of their ideas, insights, vision etc., and their unique and original thinking. Leaders usually do not officially hold positions of authority, but mobilize their followers to move towards a certain goal, and followers voluntarily embrace the goals and ideologies of their leader. Where they disagree, they question and argue with their leader. The leader in turn welcomes questioning and argument, and in some cases may even use discourses in which there is intense debate, as tools to refine their own thought process. When people simply cannot agree, they agree to disagree without being disagreeable. Followers remain free to disengage at any time, if they are not comfortable with the norms (quite often implicit) that govern their system. This is sustainable for followers who zealously guard their right to independent thought, but are motivated and moved by their leader. Examples: visionaries like Gandhi and Martin Luther King Jr. and innovative companies like Apple.

And lastly, there is the model based on sharing. This is not really a Lead/Follow model (or alternatively, one may call it a sublimated Lead/Follow model), since everybody's a leader and everybody's a follower, in different spaces and/or at different times, but all together and all at once. Here one imagines society as a loose network of peers, where members share ideas, thoughts and opinions with one another as equals. There are no fixed positions of overall authority, though some may hold authoritative positions on subjects of their expertise. People do not consciously aim to influence other people -- they just share their ideas and thoughts as they collaborate with others in a spirit of partnership. In turn, other people may be influenced by those ideas and may draw on them to further improvise on the theme or to develop related ideas of their own. Platonic dialogue resolves contradictions or disagreements around an idea, and is seen as a way of enriching and evolving ideas, as different from establishing one as prevalent over the other. Conflicting interests are resolved through negotiation towards a positive-sum (i.e., non-zero-sum) outcome. There may be some who seem to (statistically) influence others more often, but such individuals desist from taking on 'leadership' of the group in the conventional sense, and in fact eschew the idea of others 'following' him/her. This is only sustainable in a society of people who have transcended the need to find a leader to follow, and who believe in self-regulation towards the common good. Examples: 'non'-leaders like J Krishnamurti and Lao-Tzu and the open-source movement.

The amazing thing is that all 4 models co-exist in the world as we know it today, though not necessarily in harmony. While an average person probably represents some mix of these four models, there seems to be one model which is their 'home', where they are most comfortable (could also be in the overlapping area between models a step away from each other). Then there are the outliers, who represent an extreme implementation of one model, with very little or no overlap with neighbouring models. The trouble starts when people whose memetic DNA (the metaphorical 'grain of wood' of their home model culture) of one type mingle with those whose memetic DNA is essentially different. Value systems vary significantly across these 4 types, as is perhaps obvious, and people who come from one home model would find it difficult to succeed in another. A typical follower from a fear-based model would be quite lost in a sharing model, since it would be impossible to find a leader who evokes fear and is always in command. Under such circumstances, smart folks try to adapt and fake it while they can, but in the long run, it is evident as to who they really are because it shows.

You know who you are. I do.

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