NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich...
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Transcript of NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich...
Value Addition – Too
Big an Opportunity
to Miss
March 21, 2012
NASSCOM GIC Conclave
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
McKinsey & Company | 1
Key messages
Call for action – Too big an opportunity to miss; success
will require five shifts both onshore and offshore 3
The prize – Large potential in excess of 3-5X of traditional
operational efficiency levers 1
Current status – Isolated examples with great successes,
but no concerted push so far 2
McKinsey & Company | 2
GICs are delivering impact beyond traditional operational
efficiency levers
1 Technology GIC
2 Insurance GIC
Helped generate an additional ~500 Mn TCV orders through a transformed account planning process
Contributes ~15% of BU’s revenue target through expansion of services to previously unviable business segments
4 Engineering and Design GIC
5 Financial services GIC
6 Engineering and Design GIC
3 Technology GICs
Helping fundamentally alter product designs based on customer insights generated from technical helpdesk
Increased online sales by reengineering new account activation process and dramatically reducing the turn around time (7 days to 2 hours)
Contact Center is now cost neutral based on service to sales successes
Taken complete ownership of platform development and customer front-end for a product line across emerging markets
McKinsey & Company | 3
GICs are now uniquely positioned to drive value addition
leveraging their set of intrinsic and developed strengths
Critical scale
and strategic
importance
Access to larger
data sets
Domain expertise
and leadership
maturity
Co-location
across functions
and businesses
Proximity to
local markets
Deep
integration
with the
enterprise
McKinsey & Company | 4
Four key value dimensions likely to emerge and drive
sustainable value proposition for GICs
Cost-efficient
operations with
continuous productivity
improvements
Top line growth by
extending services and/
or building new services
Capabilities beyond
“back-office” – high
expertise delivered end
to end
Operational
efficiency
1
Revenue
impact
4
2
High-skill
capability
3
Total
customer
experience
Operations
focused on end
customer needs
McKinsey & Company | 5
High-skill
capability
Total
customer
experience
Revenue
impact
Operational
efficiency
Each value dimension has three levels of impact …
Levels of impact
Level 2 – Ownership Level 3 – Leadership Level 1 – Execution
Transformation –
fundamentally altered
processes
Reengineered
processes exported
to the enterprise
Revenue impact
through leakage
prevention
Deliver high expertise
processes end to end
Develop new
capabilities for the
enterprise which did
not exist
Expand to upstream
segments on core
processes
Labor arbitrage
benefits at scale with
continuous
improvements
Revenue contribution
from existing services
delivered to new
segments
Innovation for
emerging markets and
globally
Adapt processes to
address customer
needs
Transform customer
experience and take
accountability
Measure customer
experience
McKinsey & Company | 6
High-skill
capability
Total
customer
experience
Revenue
impact
Operational
efficiency
… that said, senior enterprise leaders have rising (baseline)
expectations of performance and, therefore, value addition Value addition potential
Baseline expectation in the near future Levels of impact
Level 2 – Ownership Level 3 – Leadership Level 1 – Execution
Transformation –
fundamentally altered
processes
Reengineered
processes exported
to the enterprise
Revenue impact
through leakage
prevention
Deliver high expertise
processes end to end
Develop new
capabilities for the
enterprise which did
not exist
Expand to upstream
segments on core
processes
Labor arbitrage
benefits at scale with
continuous
improvements
Revenue contribution
from existing services
delivered to new
segments
Innovation for
emerging markets and
globally
Adapt processes to
address customer
needs
Transform customer
experience and take
accountability
Measure customer
experience
McKinsey & Company | 7
Current status
Call for action
The prize –
Large potential in
excess of 3-5X of
traditional
operational
efficiency levers
Recap of our key messages – The prize
▪ GICs are now uniquely positioned to drive value
addition leveraging a set of intrinsic and develped
strengths (e.g., domain expertise, critical scale, co-
location and emerging market understanding)
▪ Four key value dimensions likely to emerge and drive
sustainable value proposition for GICs: Operational
efficiency, high-skill capabilities, customer experience
and revenue impact
▪ Senior enterprise leaders have rising expectations of
impact across all value dimensions from GICs, given
current scale and high-quality service delivery
1
2
3
McKinsey & Company | 8
Where GICs add value
Impact levels
Level 2 – Ownership Level 3 – Leadership Level 1 – Execution
High-skill
capability
Total
customer
experience
Revenue
impact
Operational
efficiency
McKinsey & Company | 9
Clear evidence exists of GICs directly contributing to
enterprise revenue, although not pervasive (or systematic)
Select examples
Leveraged a global product to launch a successful
domestic business in India
Contributed to the organization’s research library and
built a compelling value proposition for attracting talent
in India
Research GIC
Created ‘on demand’ financial processing and analytics
capability for both internal employees and franchisees
Fees charged from franchisees is driving direct revenue
contribution
Financial services GIC
Leveraged low ‘cost-to-serve’ to expand existing
collection services to lower ticket sizes
Reduced revenue leakage through segmented
collections strategy and differentiated settlement offers
Financial
services GIC
Revenue
impact
Level 2
Level 3
Level 3
McKinsey & Company | 10
Analyzing and extending existing services can itself generate
significant value vs. large-scale disruptive innovations
Analytics on maintenance call data led to
reduced spend & better purchase decisions
Leverage expertise and tools to
move from ‘data to insights’
Established a new judgment based claims
adjudication capability
Move upstream or to judgment-
based processes
High-skill
capability
Established a linkage between support and
product design teams to enhance product
design
Leverage customer data to
redesign processes that
impact customer experience
Created specialized high touch queue to
improve customer experience Preempt customer needs and
provide differentiated service
Total
customer
experience
Increasing scope of outreach to improve
collections efficiency
Expand services through lower
‘cost to serve’
Built a new service plan to meet customer
need for comprehensive support
Product/service innovation for
emerging or international markets
Revenue
impact
Key principles Select examples
McKinsey & Company | 11
Call for action
Current status –
Isolated
examples with
great successes,
but no concerted
push so far
Recap of our key messages – Current status
The prize
▪ Most value addition concentrated in high-skill
capabilities where GICs showcase ‘centers of
excellence’
▪ Clear evidence exists of GICs directly contributing to
enterprise revenue, although not pervasive (or
systematic)
▪ Analyzing and extending existing services can itself
generate significant value vs. large-scale disruptive
innovations
▪ Structural challenge on lack of proximity/insufficient
domain expertise to markets/clients limiting value-
addition at scale
▪ Driving value addition requires a different mindset,
talent, operating and leadership model. Current
process centric approach may also limit rapid scale-up
2
1
3
McKinsey & Company | 12
Call for action –
Too big an
opportunity to
miss; success will
require five shifts
both onshore and
offshore
Recap of our key messages – Call for action
The prize
▪ Govern GICs at the CXO/ business leadership level
with adequate operational flexibility and decision
rights
▪ Build a team of business leaders who demonstrate
entrepreneurship and commercial acumen
▪ Escalate level of engagement with network of
business leaders and establish a ‘burning platform’
Current status
1
2
3
▪ Measure impact systematically to align stakeholders
and build credibility
▪ Leverage access to local markets to develop
business context and drive products/ services
innovation
McKinsey & Company | 13
Key messages
Call for action – Too big an opportunity to miss; success
will require five shifts both onshore and offshore 3
The prize – Large potential in excess of 3-5X of traditional
operational efficiency levers 1
Current status – Isolated examples with great successes,
but no concerted push so far 2