NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich...

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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

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Transcript of NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich...

Page 1: NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich (Session 9)

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

Page 2: NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich (Session 9)

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

Page 3: NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich (Session 9)

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

Page 4: NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich (Session 9)

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

Page 5: NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich (Session 9)

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

Page 6: NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich (Session 9)

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

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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

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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

Page 9: NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich (Session 9)

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

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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

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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

Page 12: NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich (Session 9)

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

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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

Page 14: NASSCOM GIC Conclave 2012: Value addition - too big an opportunity to miss - Alexander R. Edlich (Session 9)

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