Innovation for Healthcare - A Strategic Priority

“Embrace Infant Warmer” is an innovative, affordable infant warmer that doesn’t require a constant supply of electricity and costs less than 1% of the USD 20,000 that traditional incubators cost. With about 25 million low-birth-weight and premature babies being given birth every year around the world (primarily in developing countries) and about four million babies dieing within the first 28 days of life (nearly 450 babies every hour)1, the Embrace Infant Warmer is a life saver for the millions of vulnerable newborns in the developing and underdeveloped countries. GE Healthcare, the developer of the product, also offers the USD 500 MACi cardiology device for India, which allows physicians to give scans for the cost of a bottle of water.

With the center of global economic activity shifting from the west to the east, emerging economies such as China and India with a significantly large pool of under-served patients represent the next big opportunity for growth and profitability for the healthcare industry. The good news – the customer base is way too large; the bad news – lack of universal health insurance resulting in low affordability.

Clearly, the only way out is to design products and services that are affordable and easily accessible. Innovation, thus, has to be strategic priority and not just one of the long-term initiatives. GE Healthcare’s is an amazing case study of the power of reverse innovation—a new model of product development that empowers local teams to develop technologies in their country, for their country—to address local needs and enable access to technology where it may never have been available before.

And the success stories are not limited to products. The Aravind Eye Care System in the state of Tamilnadu and the Narayana Hrudayalaya in Bangalore, India provide compelling case studies of making quality healthcare services available by containing costs. Aravind’s business proposition is simple – volume brings down the cost and ensures the viability of the enterprise. Volume in turn is ensured by the combination of low cost, high quality and efficient procedures, as well as the appropriate use of technology. Narayana Hrudayalaya, on the other hand, has contained costs by tweaking processes, driving hard bargains and negotiating creative partnership deals.

The fact that the next phase of demand is going to be driven by consumers who can not be served using the traditional business models makes it imperative for global organizations to make “Innovation”, the engine of their growth strategy. China remains the world’s most populous country and is consequently home to a large patient base. The country is home to more than 120 million people who are aged 65 or older—a population in continuous need of medical care. India, the second most populous country globally, is home to 1.2 billion people, approximately 5% of which are aged 65 or older. It’s estimated that shortly after 2020, India’s population will surpass China, making it the most populous country in the world. As the population continues to grow and people continue to age, the underlying demand for healthcare is also expected to increase.

The winners will be the ones with “Innovation” as the center and these 3As – Affordability, Access, and Awareness – as the spokes of their wheel of growth.

The 3rd World War has begun. It’s the war for talent

I am back and I had to be back. It’s been almost two years since I last blogged. The sabbatical was definitely not intentional nor did I plan it that way. It’s just that I had nothing to write. I became less of an observer and failed to prioritize objectives, both on the personal and the professional front. I made bad investment decisions, made wrong choices and started to live with many more long-distance relationships as many of my closest pals moved on in their lives and career.

But I am back!! I know no one reads what I vent in my blog but something happened very recently, something that motivated me to break my long sabbatical and be back in action. Read On….

It was a usual but a pleasant morning. A wakeup alarm is one thing that you hate to sleep with but sleep with every day. As expected, it proves its loyalty once again and rings as if the world is going to fall apart. It’s 9’o clock in the morning and I know I am already late for office. A super-quick shower (characterized with more spray of a deodorant than that of water) and I am off to the streets to catch an auto rickshaw. A brief struggle and I manage to hop into one.

It’s quarter to 10 and I am at my desk. Two days to go to the New Year’s Eve and the entire world seems to be on a vacation. My outlook reads only 12 unread emails as against the 60-70 that I have to go through on an average morning. The day was important for another reason. After almost a year of struggle and countless telephonic discussions, the time has come when I can write to my boss saying that my team is in full strength now and we have filled-in all the vacant positions. All I need is an email from my colleague in the human resources (HR) department confirming the acceptance of offer by one of the candidates.

And that’s what I am looking for in my inbox. Suddenly, my phone rings and it’s the HR person on line. She tells me that the candidate wants to talk to me before accepting the offer that we have made. I say “OK”, put the receiver down and pause for a while. I don’t know whether it’s somewhat of a norm in other organizations but I find it unusual.

It’s 5 o’clock in the evening and I am back at my desk after a tea break. I decide to make a call to the candidate. I dial in the number and she picks up the call in no time. I had interviewed her earlier and so I didn’t need to introduce myself. After a brief HI and HELLO type discussion, she throws a bouncer and drags the earth from under my feet.

“Why Should I join you?”, she asks. “What is it that you offer me that other organizations don’t?”

It’s my sixth year in the professional services industry and all I have asked and have been asked is “Why should we hire you and what is it that you’ll bring to the table”. I had to take a long pause before proceeding on to the discussion. I won’t reveal whether I managed to answer all her questions and whether she joined us. That’s not the motive behind this blog post.

What seems like a very simple and basic question that a prospective employee asks an employer is a reflection of a significant development that organizations not just in India but also in other parts of the world have started to realize.

“The 3rd World War has begun. It’s the war for talent”

And it’s not a war that’s being fought in corporate boardrooms to be the market leader. There is no battleground here. It’s being fought anywhere and everywhere – in universities and business schools, in professional and social networking portals and even within companies. The war is to hire and retain the best talent. The war is to build an arsenal for the war to be the leading corporation of the world.

As more and more emerging market companies start to realize their global aspirations and as many more of their multinational counterparts embrace globalization as a means to increase growth and profitability, the war for talent is going to intensify. The winners will be those who are quicker in identifying, hiring and retaining the right talent at the right place and at the right time.

It’s not going to be about existing skills and experience any more. It’ll be about identifying people with the attitude to learn and the aptitude to apply the learning.

The irony is that the best talent out there in the market is less averse to taking risks then the companies with million of dollars in their coffers. “Entrepreneurship” and “Out-of-the box thinking” are not fancy buzzwords anymore. Go to any Ivy League university and you’ll be flooded with ideas with mind-blowing commercial potential. Startups of today are able to acquire and retain more talent than their super-large competitors. It’s time; the global organizations take notice of the long term implications of the war they are fighting. It’s high time, they react and fight back.

To all of them: Explore the most unusual profiles and you’ll be pleasantly shocked with the outcome. Look for unique perspectives and cross-industry best practices. You never now what’s in store in avenues beyond your industry boundaries. Respect talent. They are not just “resources”, they are human capital, they are knowledge powerhouses and they are going to decide whether you exist or perish. They are going to make the move and they are going to call the shots.

To the educated youth of this world. Take a bow my friends. You are the future. Go and win!!!!!!

MORE (Market Opportunities and Risks Evaluation)

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Understanding the attractiveness of a market vis-à-vis others has always been of paramount strategic importance to everyone – be it a large multinational giant, a small start-up or a PE/VC firm looking to capture a market opportunity pie.
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From an individual entity’s standpoint, frameworks and models such as the SWOT Analysis, Boston Consulting Group’s Growth-Share Matrix, McKinsey’ Industry Attractiveness-Business Strength Matrix and Porter’s Five Forces have always served the need. However, considering the fact that that most of these frameworks look at the External Operating Environment (EOE) from a particular entity’s standpoint, a neutral judgment of a market vis-à-vis another market, irrespective of who is judging it, becomes extremely difficult.

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A PEST (Political, Economic, Sociological, and Technological) analysis, to some extent, attempts to solve this dilemma by listing the attributes that characterize a market. However, a PEST analysis looks at a market with a macro perspective and thus doesn’t necessarily segregate multiple markets on the basis of their PEST attributes.

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Several modifications to the existing frameworks and models have been attempted to tackle this issue and to provide an independent bird’s eye view of the comparative attractiveness of different markets – the notable of which are the “SWOT Analysis of Market(s)” and the “External Factor Evaluation (EFE)”.

• SWOT analyses are ideally performed on companies and not on markets, the justification for which is very simple. In case of companies there is a clear demarcation of the boundary that differentiates the internal factors (Strengths, Weaknesses) from the ones in the External Operating Environment (Opportunities, Threats). In a market however, there is no clear definition of an External Operating Environment and thus is hard to distinguish the strengths from the opportunities and the weaknesses from the threats.
• External Factor Evaluation (EFE), on the other hand, comes very close to tackling the issue by identifying and quantifying the EOE factors that shape and characterize the market(s), a company operates in. However, the fact remains that EFE Analyses are never performed in isolation and always follow, what is called the Internal Factor Evaluation (IFE) – the end objective being to build the Internal-External (IE) Matrix. And hence, the bias remains.

Essentially, the trick is to build a framework that does an Internal Factor Evaluation (IFE) by considering the markets as individual entities. In other words, it’s an IFE, independent of the influence of an External Operating Environment (EOE). Here I propose, what I call, MORE (Market Opportunities and Risks Evaluation).

MORE (Market Opportunities and Risks Evaluation):
MORE is a qualitative attribute based study that takes into account all the factors (Opportunities and Risks) that shape and characterize a market. Examples of market opportunities could be:

• Ease of market entry/exit
• High market growth forecasts
• High consumer demand forecasts
• Early stage of the industry in the evolutionary life-cycle

Examples of risks could be:

• Fragmented market and thus chances of loosing out to competition
• Recession sensitive – the ongoing recession might lower the spending
• Increasing demand for price reduction
• Non-reimbursable and hence sensitive to macro-economic scenario such as inflation
• Highly sensitive to technological changes

The first step in building a “MORE Matrix” involves listing out the opportunities and risks for all the markets for which a comparative attractiveness analysis is being done. The second step involves weighing the opportunities and risks independently on the basis of their relative importance to the market. The weights are then multiplied with an Impact Factor. The Impact Factor is basically a score, in a scale of 1 to 5, which measures the strength and likelihood of the opportunity/risk. What comes out of all these is a score specific to each MORE attribute (Opportunities and Risks) of a market. The opportunities and risks scores are then averaged out independently to assign a consolidated Opportunity and Risk score to each market. The scores are then plotted (Opportunities in Y-Axis and Risks in X-Axis) in a 2x2 matrix to measure and visualize the relative attractiveness of the different markets being studied.

Since the matrix, at no point, takes any particular company into consideration, it almost succeeds in delivering a neutral judgment of a market vis-à-vis another market, irrespective of who is judging it.

Satyam Computer Services: India's Enron

April 21, 2008

“Fiscal 2008 was an outstanding year for Satyam. We achieved record revenues and record net income.”

Source: 21st Annual Report 2007-08, Satyam Computer Services Limited

January 7, 2009

“Dear Board Members,

It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:

1. The Balance Sheet carries as of September 30, 2008
   Inflated (non-existent) cash and bank balances of Rs.5,040 crore (as against Rs. 5361 crore reflected in the books)
   An accrued interest of Rs. 376 crore which is non-existent
   An understated liability of Rs. 1,230 crore on account of funds arranged by me
   An over stated debtors position of Rs. 490 crore (as against Rs. 2651 reflected in the books)
2. For the September quarter (Q2) we reported a revenue of Rs.2,700 crore and an operating margin of Rs. 649 crore (24% Of revenues) as against the actual revenues of Rs. 2,112 crore and an actual operating margin of Rs. 61 Crore (3% of revenues). This has resulted in artificial cash and bank balances going up by Rs. 588 crore in Q2 alone.”

Source: Letter to the board of directors of Satyam Computer Services Ltd.

It’s hard to believe that the aforementioned are the wordings of Mr. B. Ramalinga Raju, the founder and ex-Chairman of Satyam, India’s fourth largest IT services company. What a contrast – unbelievably a sad chapter in India’s IT story.

Everyone is hurt and so am I. To me, Mr. Raju was Satyam, personified but is he the only one to blame. True, he hurt investors. True, he cheated the people who contributed in making Satyam what it is today. But, is he the only one? What about the other directors? What about PricewaterhouseCoppers, the accounting giant? What about SEBI? What about the stock exchanges? There are many more questions that need to be answered. Surely, there is much more than what meets the eye.

The US Financial Crisis: What's up in outsourcing?

Date - September 14, 2008.

Event – The UK based Barclays PLC pulls the curtain – inking a full-stop to the journey of the 158-year-old Lehman Brothers. John Thain, the CEO of Merrill Lynch succeeds in saving his company by arranging the sale of his company to Bank of America for about $50 billion.

One single day and the US financial system changed – forever. America will never be the same again. Actually, the world will never be the same again.

What does it mean to India and its services industry space? Is it all over? Where are we heading to? Well, who else can answer these questions better than the leaders of the Indian outsourcing vendors? However, talk to the CXO of any Indian service provider and it’s highly likely that you’ll end of listening to the same story – we knew this is going to come and had already fastened our seat-belts, we’re un-affected, we’ve got a strong foundation, we’re embracing a unique business model that shields us from these macro-events, blah..blah..blah. Give us a break guys.

I don’t know why – but traditionally, Indian service providers have always shown reticence to the hard reality – a reality that’s giving them sleepless nights, a reality which if continues will threaten their survival. The following statistics will tell you “why?”

• 44% of Genpact’s clients are from the BFSI (Banking, Financial Services and Insurance) industry segment (as on December 31, 2007).


• In the fiscal year ending March 31, 2008, 57.4% of WNS’s revenues came from the BFSI industry segment. The figure stood at 35.7% for Infosys and at 44.14% for Tata Consultancy Services.


• In the quarter ended June 30, 2008, 27.3% of HCL Technologies’ revenue came from the BFSI industry segment.


• In Q1, this fiscal, BFSI accounted for 21.38% of Satyam’s revenue.

Interestingly, the aforementioned are the big guys of the Indian IT and ITeS industry and these are not the only ones. Considering that the BFSI industry segment has traditionally been the biggest outsourcer and the biggest revenue generator for the Indian vendors, the threat is apparent.

Politics of Globalization

Yesterday, the 22nd of July 2008, saw an end to the 2-day long econo-political drama that folded, unfolded and refolded within the Indian Parliament. What was supposed to be a consensus building exercise in favor of the Indo-US nuclear deal turned into a battleground marked by a spree of allegations and counter-allegations, questions and counter-questions, attacks and counter-attacks.

But why am I discussing this here? Neither I aspire to have my blog listed in the long list of political blogging platfornms nor does the issue make sense to what I have intended to rant in my blog (read outsourcing) – or it does? Well – the following lines will have an answer.

While the United Progressive Alliance (UPA) government survived the vote of confidence, it also paved the way for the controversial Indo-US nuclear deal to see the light of the day. The deal, which would give India an access to the global market for nuclear energy and technologies, must now be approved by the International Atomic Energy Agency (IAEA) and the Nuclear Suppliers Group (NSG), following which the US congress will have its say.

However, what’s important and notable was not the UPA win - not the newly emerged political equation either. Rather, it’s the emergence of a new breed of econo-political voices that made its mark during these two days – something that motivated me to make it a subject of my post. If you guessed it right – yes – I am talking about the Rahul Gandhis, the Omar Abdullahs and the Sachin Pilots of Indian politics – people whom I call the true YOUNGISTANIs.

Do I sound like a staunch Congress man? Well, I can’t help it if I do – but the fact is that the Rahul Gandhis, the Omar Abdullahs, the Sachin Pilots, the Jyotiraditya Scindias, and the Milind Deoras, all voted in favor of the government (read Indo-US nuclear deal). What was most interesting was the way they were heard and reacted in the parliament house. It’s not every day that you see a political stalwart like Mr. Laloo Prasad Yadav stand and argue in support of what a novice like Rahul Gandhi had to say.

The young leaders voting in favor of the proposed deal was a reflection of the acceptance and recognition of “Globalization” as a means to solve macro-economic challenges that India is facing – an issue which till now never got its due in parliamentary debates. In fact, Rahul Gandhi was quick to add that instead of waiting the world to impact India we should take steps that will ensure that India impacts the world. While he started his speech by saying that he wouldn’t speak as a member of a political party and would actually speak as an Indian, he concluded it by adding that the fear of unknown should not motivate us to back out of taking decisions that will ensure India a secured foothold in a globalized world.

While the entire event had its highs and lows, one thing came out pretty clear. The India of the future is more than willing to embrace “Globalization” as a means to fight poverty, illiteracy, corruption and other challenges that our nation has been a victim of. Its time CEOs of global organizations stop worrying about the political climate in India. While “political stability” traditionally gets sighted as a driver that motivates global organizations to invest in or offshore to a country, I personally believe that more than political stability, it’s the willingness to ensure organizational stability that will ensure organizations a secure and profitable foothold in any country.

Governments come and go – Values stay, forever.

Future of Knowledge Process Offshoring: The India Story

End of the India story? This is one question that featured in almost all national and internal newspapers, magazines, journals, TV channels and every other form of media in the last few months. The question was a generic response following the US subprime crisis which was later followed by oil price inflation, crashing stock market and a host of other developments.

Knowledge Process Offshoring has become the next big thing in India. After IT Services and BPO, it’s probably the next most widely discussed topic on the offshoring front. However, unlike IT and BPO, knowledge process is a very broad and a poorly defined term. Intellectual Property, Legal Research, Business/Market Research, Investment/Equity Research, Clinical Data Management, Animation, Documentation – the list is endless. So, how do we differentiate a “Knowledge Process” from a “Business Process”? The most significant differential feature probably is the kind of manpower that it employs – MBAs, CAs, CFAs, Lawyers, Doctors, and Engineers. Also, there is this additional attribute that is typically associated with a knowledge process – i.e. the business value of the offshored work.
Traditionally, a “Business Process” is offshored to:

• Invest time and resources to focus more on the core business;
• Reduce cost; and
• Leverage the time gap among geographies thus making the business, work round the clock, 24x7.

On the contrary, the outsourced processes that fall under “Knowledge Process Offshoring” are never non-core and are always critical to the organizations that offshore those. In essence, BPO is all about processing whereas KPO is all about execution.

However, it’s not so simple. There is considerable ambiguity with the processes and operational characteristics that define a business unit as a KPO operation. When a global investment bank opens up a business unit in India to do “equity research”, it’s called a captive KPO operation. However, how many times have you heard someone referring to the Indian units of Frost & Sullivan and Datamonitor as captive KPO units? – Hardly anyone.

The logic is simple. Companies like Goldman Sachs, Morgan Stanley, JP Morgan, UBS, Credit Suisse and Deutsche Bank generate revenue by doing equity research. Similarly, McKinsey, Boston Consulting Group, Bain & Co., Thomson, IDC, Gartner, TNS, IMS Health, Frost & Sullivan and Datamonitor generate revenue by doing business and market research. If you investigate further, you will find that, none of these companies experiment with a long-term third-party relationship and almost all of them boast of dedicated in house knowledge processing operations in India. Thus, it will be wrong to tag their operations in India with a captive KPO tag. The Indian operations can rather be called as subsidiaries of the parent entity. Had they been offshoring their equity/business/market research work to an India based third-party to do it for them, the case would have been different. On the contrary, Novartis doesn’t generate revenue by doing market research. Thus, when they open a center in India to do market research and forecasting, it becomes a captive KPO unit.

Essentially, while all third party knowledge processors can be tagged with the KPO tag, all captives can not be.

Also, there is ambiguity with the term, “KPO” itself. While the KPO providers claim that the services that they deliver involve interpretation, analysis, judgement and insight, they continue to label these services with a “knowledge process” tag. I will reiterate what I said earlier – processes follow a standardized flow to get processed and don’t involve interpretation, analysis, judgement and insight. How many times have you heard an IT company labeling its services with a “Process” tag? – Hardly any. The same logic applies to knowledge intensive works for which the word “Process” doesn’t look apt. The Noida based RocSearch made sense when it re-named the entire domain as “Knowledge Services Outsourcing”, in short KSO. Also, its time companies start differentiating themselves by being more specific to what their services are. In other words, while a RocSearch or a Grail Research or a MarketRx becomes an ISO (Information Services Outsourcing) Provider, a Pangea3 or an Intellevate or a Lexadigm becomes a LSO (Legal Services Outsourcing) Provider.

While Indian knowledge processors claim that, it’s the access to highly skilled manpower that has also been motivating global organizations to offshore knowledge processes – ask the outsourcers and they will have a different story to tell. Don’t trust me if you don’t want to but the fact is more than anything else, its cost arbitrage and geographic time difference. In fact, the geographic time difference between India and the US has led to the evolution of what is called “spot research”. “Spot Research” can vary from researching press releases on a certain issue to a quick opportunity assessment of a market.

Gurgaon, India, 8:00 AM IST: The Life Sciences practice manager of an outsourced information services provider logs on into his mail inbox to look for any new research request. Bob, a senior executive in a medium-sized New York based Pharmaceuticals Company wants to know the media’s reactions to a recent announcement by the US FDA. He has a presentation to deliver to an in-house audience the next day for which he wants some press releases. The request demands a “spot research”. The manager assigns the research assignment to a two member team which spends the entire day digging the internet to source anything relevant.

Gurgaon, India, 5­­:00 PM IST: The team spends half an hour to one hour for context relevance of the collected press releases and rejects the ones that don’t make much sense. The press releases are next sent to the manager for a final round of quality check. The HTML documents are than PDFed and appended to make one consolidated file to be sent to the client.

New York, USA, 10:30 AM EST (8:00 PM IST): The file is sent to the US based accountability team for review and delivery. The ever busy business development executive delivers it directly to Bob and requests for a feedback on the quality. Bob spends the next couple of hours to review the entire document, selects some of the already highlighted press statements and prepares a slide to be included in the presentation scheduled at 3:00 PM EST.

New York, USA, 3:30 PM EST: Bob is extremely happy with the outcome of the presentation – comes to his desk – writes a quick feedback for the quality of service and responsiveness. Bob is elated as he didn’t even spend $100 for something that could have consumed his entire day.

And you know what – they have got a fancy name for what they did for Bob. They call it an “Insight Map”.

The geographic time gap has been advantageous in another way. In today’s competitive business, you don’t have all the time of the world to introduce products and services. We have several case studies on global organizations which have become immensely successful by leveraging their first mover advantage. The geographic time gap has resulted in businesses working round the clock, 24×7. While operational efficiency has increased tremendously, organizations have been fast in planning and implementing strategies.

After analyzing the work activities of Pfizer employees, Jordan Cohen, Senior Director of Organizational Effectiveness at Pfizer learnt that employees spent 20% - 40% of their time in doing scut work – creating documents, manipulating and analyzing spreadsheets, scheduling meetings and researching. While these Ivy League educated MBAs were supposed to devise strategy, they were breaking their heads in googling and making PowerPoints. All these combined with the company’s annual budget cut of $4 billions in 2005 called for smarter and cost-effective ways to do work – resulting in the birth of OOF, short for Office of the Future. OOF is an outsourcing partnership between Pfizer, the Chennai based OfficeTiger and the Bangalore based Genpact. While it was born of a financial crisis, it brought a paradigm shift in the way Pfizer employees did their job. According to Nancy Steele, Executive Director of New Business Development at Pfizer, “Rather than spending six months analyzing a segment to understand whether it’s a market opportunity, we spend closer to three months”

What could have taken Nancy whole six months to reach to a conclusion on whether or not to focus on the said market, took only three months. Not only, it was cost-beneficial, it also saved quality man-hours.

As the cases indicate, Indian knowledge processors have been smart enough to leverage every possible advantage of being in India. Cost arbitrage, geographic time gap, skilled talent pool and a host of other factors have all acted together to result in this revolution – a knowledge revolution.

A section of experts anticipate an end of the Indian knowledge revolution by arguing that the country is slowly loosing its cost advantage to other emerging knowledge economies. However, I personally believe that the Indian knowledge story is far from over and the revolution is embracing an entirely new dimension – one that will see more and more KOs (Knowledge Outsourcers) starting their captive knowledge processing centers in this country and more and more KPs (Knowledge Processors) exploring other geographies across the globe. The Indian KPO structure is heading towards a hybrid model – a dedicated mix of in-sourcing and outsourcing. In other words, while companies will keep on exploring and executing the captive model, they will still continue to partner with third party knowledge processors to make sure that they get an independent execution and judgment of every business issue they face.

The brightest case example could be that of Novartis AG. The Switzerland based Novartis is the fourth largest global pharmaceuticals company with business interests in Pharmaceuticals, Biotech and Medical Devices. The company recorded sales revenue of $29.5 billions in 2007, a growth of 9.5% over 2006. Novartis as an outsourcer has been pretty active in India’s KPO space. The company has the experience of working with more than one India based knowledge processors – the prominent being the Bangalore based PharmARC Analytic Solutions and Manthan Services and the Gurgaon based Evalueserve. At a time when factors like ever-increasing R&D costs, patent expiries, shrinking product pipeline, tightening FDA regulations and other regulatory hurdles are all acting together to block the top-line growth of the leading pharma majors, offshoring is rapidly emerging as the preferred choice to reduce cost.

Novartis in 2006 redefined the Indian KPO landscape when it started its first full fledged knowledge process execution center in Hyderabad. A fully operational KPO cactive, Novartis Global Services India (GSi), as it is known, has got big expansion plans. While the opening of the captive marked a loss of business to PharmARC Analytic Solutions, the company is continuing to maintain its relationships with Manthan Services and Evalueserve, although might be on a small scale. While experts may argue that such an event is primarily driven by the motivation to further reduce cost, the Novartis case pin-points to an additional angle to the whole story.

The movement from third-party to captive clearly depends upon the type of work being outsourced. In Novartis’ case, while both PharmARC and Manthan were executing business sensitive processes such as Sales forecasting and pipeline intelligence, Evalueserve was also into more or less, the same kind of processes. When processes are business sensitive, issues such as data security and confidentiality take precedence over anything else. While Indian knowledge processors including PharmARC, Manthan and Evalueserve boast of robust data security protocols, mechanisms and technologies, from an outsourcer’s perspective, there is nothing like executing things in-house.

Another equally important issue is the challenge to retain trained intellectual capital. Importantly, the Indian knowledge processors earn in dollars and wages are paid in Indian rupees. While the Indian rupee continues to appreciate against the US dollar, the KPO space has seen a tremendous hike in wage growth in the recent past. With the market being increasingly competitive, prospective employees are being offered unexpectedly fatter pay packets. Over the years, employee turnover has emerged as the biggest threat to the growth of the industry. While Indian knowledge processors have been the worst hit, the client organizations are also getting the heat of the burn, more so the ones who are into a dedicated FTE model. Such a trend is in turn forcing client organizations to think and explore the captive model. In a third-party model, the employee gets paid a small percentage of what the client actually pays for him/her. In other words, if the client organization pays $15 per hour, the KPO provider (knowledge processor) retains a major percentage of it and pays the rest to the employee. In a captive mode however, the employee gets paid directly and that makes the pay packet looks fatter. In essence, organizations operating through the captive route are better positioned to attract and retain quality human assets.

As the Novartis case indicates, the Indian KPO space is up for an entirely new business model. Let’s not forget – it required only one Evalueserve to re-write the rules of the offshoring game. On the captive model front, the one Novartis is up and running.

While one may argue that the creation of more and more captives will make the third-party knowledge processors loose business, that’s unlikely to happen in the near future. Here is why?

• In the “Information Research & Analysis (IRA)” space, the pace at which the knowledge processors are moving up the value chain has been pretty fast. Majority of knowledge processors operate in the entire IRA value chain and have been building up niche expertise that will be difficult to replicate;
• Most global organizations, even if its spot research, don’t rely on one single provider. In the real world of business third party analysis and independent judgment is as critical as an in-house analysis. Who else can be these third parties than the Indian knowledge processors with a pedigree in providing independent analysis;
• The acquisitions, stake ownerships and financing deals that have been inked in the past clearly reflect the confidence that global organizations, VCs and private equity firms have over these knowledge processors. The US based Fortune 500 RR Donnelley acquired OfficeTiger in 2006. Genpact is 22% owned by GE. Warburg Pincus, the global private equity powerhouse has a majority stake in WNS.
• I strongly believe that there is still a lot work that can be outsourced which has not yet been detected by the Indian outsourcing radar. For instance, in a manufacturing organization, everything else except R&D, manufacturing and selling is non-core. The one question that the Indian outsourcing providers are increasingly asking themselves and their clients is – what else?
• Today the Evalueserves of India are fighting neck-to-neck with the McKinseys of the world. Be it the their illustrious list of clientele, be it the quality of business processes they execute, the employee motivating attributes that they boast of or the career path and professional aspirations that they fulfill, Indian knowledge processors are giving their global counterparts a run for money. The future will see global organizations struggling to choose between a McKinsey and Evalueserve and not between a captive and a third party.
• Most importantly, a captive model is not everyone’s cup of tea. There are thousands of small and medium enterprises (SMEs), all based in the US and Europe for whom offshoring is an equal strategic necessity.

Also, a third-party model brings along with a whole lot of operational advantages such as cost savings against infrastructure and operations. Also, organizations don’t get exposed to the risks of running a business in a country they are not accustomed with.

The future also belongs to “nested outsourcing”. “Nested Outsourcing” entails the offshoring of processes to an India based knowledge processor which offshores the same to another of its execution center located elsewhere. Essentially, the Indian knowledge processors are expected to more aggressively embrace geographic diversification:

• To address the continuing shortfall of skilled workforce in India;
• To execute processes that require local language capabilities; and
• To counter the impact on bottom-line due to rupee’s appreciation against US dollars.

Most importantly, a global delivery model hedges against uncertain risks (Political, Economic, Regulatory) typically associated with having an execution center in one location.

In essence, Indian knowledge processors are already in a position to pull up their socks following events of uncertainty. The only segment that will be at the receiving end following increased adoption of “nested outsourcing” is the prospective Indian workforce. Geographic diversification clearly means the movement of jobs from India to elsewhere.

In fact, the Gurgaon based Evalueserve is already up and running in Valparaiso, Chile and Shanghai, China. The Chennai based OfficeTiger is in Manila, Philippines for quite a sometime now. The Chennai and Bangalore based HP DSAS (HP Decision Support and Analytics Services) has got a delivery center in Shanghai, China.

The future will also see knowledge processors being forced to explore Tier II and Tier III locations. While for IT and BPO service providers, the move is driven only by the motivation to further reduce operational cost, for knowledge processors, the move will be much more strategic. Here is a real world case that will tell you – why.

In 2005, Pfizer, Inc., the largest global pharmaceuticals company announced an annual budget cut of $4 billions to counterbalance revenue loss due to multiple patent expiries. While the company handed off pink slips to 10% of its workforce, it also started exploring other cost saving opportunities – including offshoring. The company, sometime in between the last quarter of 2005 and the first quarter of 2006 engaged the Chennai based OfficeTiger to initiate a test run that included processing and execution of a range of works such as document creation, meeting support, research, spreadsheet support etc. Unfortunately, the initial test run didn’t work as expected. One of the reasons was the prevalent decentralization and fragmentation within OfficeTiger. For instance, research requests that came to OfficeTiger needed to be researched, synthesized, formatted, copy-edited and quality-checked for language and presentation. Essentially, each engagement involved multiple expertises and there were too many handoffs. The management took the initiative of centralizing the flow that resulted in a Pfizer-dedicated team of research experts, graphic designers, document creators, proofreaders and copy-editors.

OfficeTiger could do that because the company essentially was a BPO service provider which moved up to the KPO value chain and boasted off a pedigree in providing document creation and graphic designing services.

However, the same scenario could not have been as simple and straight forward for a pure-play knowledge processor. Knowledge support people such as graphic designers, document creators and other allied experts are not paid the same way as research analysts and financial analysts. Most of these people come from modest academic background and find it difficult to cope with the financial demand of a Tier I location. Also since most of these people do not work as billable FTEs, knowledge processors find it difficult to negotiate a premium wage for these employees. While the trend will continue to move towards a situation wherein dedicated long-term contract will be the most profitable prospect for any knowledge processor, it will bring it with the challenge of recruiting and retaining allied information service experts. A Tier II or Tier III location could thus be an option that makes huge strategic sense.

While all these are raw predictions, the Indian KPO industry, for sure, is not going operate the way its operating today.

Relative SWOT Analysis and Competitor Scorecard

“In the real world of business, “perfect” strategies are not called for. What counts…is not performance in absolute terms but performance relative to competitors.”

-Kenichi Ohmae
The Mind of the Strategist: The Art of Japanese Business
(New York: McGraw Hill, 1982)


Think strategy and the first picture that comes into mind is a SWOT matrix. A SWOT Analysis attempts to identify a set of internal and external factors (SWOT attributes) which help the firm to understand its stand in the external environment that it operates in. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are the internal factors – Opportunities and Threats being the external ones. Firms which prepare SWOTs understand the vitality of performing the analysis on their own company as well as on the competitors. However, the one thing that typically lacks in most SWOT Analyses is the impact of relativity. The following hypothetical case makes it clearer:

Hyopthetics, Inc. is in the business of manufacturing and selling photocopiers. The company competes with only two other players which boast of a similar line of products – Imaginary, Inc. and UnReal, Inc.

If Hypothetics chooses to exit from the market, it clearly creates an opportunity both for Imaginary and Unreal. In other words, Hypothetics’ exit becomes a generic opportunity for all the other players operating in the said market – In this case, Imaginary and Unreal. The traditional SWOT Analysis captures this as an opportunity for both the companies. However, what it fails to capture is the relative positioning of the two companies to tap this opportunity. In other words, it doesn’t answer how strongly/moderately/weakly positioned each of the companies is to take advantage of the opportunity. Imaginary, Inc. with a sales force of >1,000 would be better positioned to tap the new markets than Unreal which has a modest sales strength of ~200.

Hypothetics’ exit also creates another opportunity – an inorganic growth opportunity. Again, the traditional SWOT Analysis captures this as an opportunity for both the companies. UnReal is a conglomerate with business interests in other areas as well. With a market capitalization of $50 billions and current assets worth $12 billions, the company will be better positioned to takeover Hypothetics (market cap of $10 billions and current assets worth $1 billion). Imaginary on the other hand is only into photocopiers and boasts of a modest market cap of $11 billions and current assets worth $1.5 billion. Also, a traditional SWOT Analyses doesn’t take into account factors like the willingness of the management to go for an inorganic haul etc.

Having said all these, I do acknowledge that traditional SWOT Analyses framed internally are not executed in vacuum and the management takes a host of other factors into consideration before actually planning and executing a strategy. However, the bottom-line is the fact that SWOT Analyses are not prepared by keeping a specific target audience in mind. Also, in most of the cases, multiple third parties (External consultants/Research houses) are involved in preparing a SWOT Analysis. If the analysis doesn’t prompt the audience to go further down and investigate the relativity aspect, it doesn’t serve a purpose.

“More than 90% of the SWOT Analyses performed on healthcare companies consider “Graying population” an opportunity, “Regulatory hurdles”, “FDA’s gate-keeping” and “Ever-increasing R&D costs” are considered threats. Similarly, almost all SWOT Analyses performed on oil companies consider “Depleting oil reserves” a threat. What these SWOTs essentially tell is nothing.”

The trick is to build a framework that places a company vis-à-vis its competitors by a comprehensive consideration of all the SWOT attributes for all the competitors. Here I propose a framework that attempts to answer some (if not all) of the questions.

Typical to any strategy framework, a SWOT matrix has its own set of limitations

• A SWOT analysis is a stand-alone and one off analysis and becomes obsolete with every change (s) in the internal and external operating environments;
• A SWOT analysis answers the whats but keeps mum on the whys and hows; and
• Since the analysis is non-relative, it prompts the strategist to overemphasize/underemphasize the different SWOT attributes

The proposed framework doesn’t make the analysis dynamic. However, as you will probably appreciate, it definitely eases the efforts that go into making it dynamic. The analysis doesn’t directly answer the whys and hows. What it rather does is – it prompts the target audience to understand the impact of relativity and encourages them to investigate the whys and hows. The analysis almost fully succeeds in making sure that no single attribute is over or underemphasized.

It’s important to note that, the flow of the analysis has to be both by attribute-to-attribute and by company-to-company. To start with, you need to look for an answer to the following questions.

• For each attributes considered strength of a specific company, what’s the magnitude? Is the company highly, moderately or lowly strong?
• For each attributes considered weakness of a specific company, what’s the intensity? Is the company highly, moderately or lowly weak?
• For each attributes considered opportunity for a specific company, how strongly/moderately/weakly positioned the company is to take advantage of the opportunity?
• For each attributes considered threat for a specific company, is the company highly/moderately/lowly prone to the threat?

When we say attribute-to-attribute, it actually means the identification of all generic attributes, internal and external, ones that make sense to all your competitors. Once all the generic attributes are identified, the next flow has to be a company-to-company one i.e. the identification of attributes, internal and external, that make sense to specific company (s) and not all.

Now comes the most important part. Each attribute for each competitor has to be scored by taking into consideration its magnitude if it’s a strength, its intensity if it’s a weakness, the positioning factor if it’s an opportunity and the prone factor if it’s a threat. Since the scores are relative, they make sure that no particular attribute is over or underemphasized.

Let’s get back to the case that was presented earlier. Considering Hypothetics’ exit a market opportunity, Imaginary will have a higher score than Unreal. Let’s remember, it’s the same attribute - Hypothetics’ exit from the market. Similarly, considering Hypothetics’ exit, an inorganic growth opportunity, UnReal will have a higher score than Imaginary.

One can consider several other factors while zeroing on the scores. One such factor could possibly be the probability that a specific opportunity or threat will actually see the light of the day. For generic attributes, this doesn’t have relevance as the probability will apply to all the competitors. However, for attributes specific to a company (s), a weighted average of the Intensity/Prone factor and the “Probability Score” (Highly/Moderately/Lowly probable) can be considered. Multiple different factors can be considered and weighed to reach at a consolidated score for a particular attribute.

UnReal has traditionally been inactive as far as acquisitions and takeovers are concerned and the company’s growth has primarily been an organic one. Although the company is better positioned to tap the inorganic growth opportunity following Hypothetics’ exit, it’s highly probable that the company would stick to its strategy of growing organically. Also, the company is a multi-business conglomerate. It might not find the opportunity lucrative enough to cough up so much money for one business only. All these factors, when taken into consideration and weighed will significantly reduce UnReal’s score for the opportunity.

Similar analysis can be performed on each attribute to arrive at a consolidated score for each one. What makes the analysis strong is the sheer volume of facts and insights that goes into each score.

Time now is to obtain consolidated scores for the Ss, Ws, Os and the Ts for all the competitors. That can be done by taking simple averages of all the attributes. Please recall that we started with some stand-alone qualitative information and ended of relatively quantifying each one to arrive at four consolidated SWOT scores, one each for the strengths, weaknesses, opportunities and threats for each competitor. The comparative SWOT standings of the competitors can then be obtained by plotting the scores in an X-Y format.

Such an analysis not only helps a firm identify its position itself relative to its competitors, it also helps in evaluating and executing the ideal SWOT strategy – SO, ST, WO or WT.

The business of “Business Research” and the market for “Market Research”

Conceptually, there is hardly any difference between the two, the terminologies being used interchangeably. So, does it make sense to talk and write about something that has already been talked and written about in multiple platforms? The answer is - yes it does. However, the backdrop this time is different. I will not talk and discuss about the technicalities of the two. This post will focus more on the business aspects - the backdrop being the prevalent knowledge revolution in India.

“Market Research” is not new and it has been there in the Indian offshoring horizon for quite a sometime now. However, MR in India was mainly limited to consumer surveys by large MNCs like Gallup, AC Nielsen, IDC, Gartner, TNS etc. – the clients being the healthcare and consumer product biggies like Johnson & Johnson, Proctor & Gamble, Unilever and Colgate Palmolive to name a few.

On the contrary, the emergence of “Business Research” coincides with the evolution of knowledge revolution in India. It all started in the late - 90s when global organizations increasingly started viewing Indian IT organizations as Business partners and not just a bunch of tech geeks who can help them reduce their technology cost. The same global giants then started exploring the offshoring possibility of other knowledge intensive work such as MR. The strong existence of multinational biggies such as Goldman Sachs, Morgan Stanley, McKinsey & Co., BCG, Frost & Sullivan etc. worked in favor of the Indian knowledge processors. The term “Business Research” was thus used to differentiate the pre-existing survey based MR services from the newly offshored business sensitive and functionally demanding services such as Market Engineering, Competitive Intelligence etc.

Then and Now – there has been a sea change in the way the Indian knowledge processors are perceived and talked about. As far as BR/MR is concerned diversification has become the rule of the game. BR/MR as a process has moved beyond the traditional RAS services (Research, Synthesis and Analysis services) to more high-end, sophisticated and specialized services like Market Analytics, Financial Analytics, Investment/Equity Research and Strategic Advisory.

Some leading Indian names that have led this movement include Evalueserve, WNS, Genpact, OfficeTiger, RocSearch, Grail Research, EXL Services, Pipal Research, SmartAnalyst, The Smart Cube, Aranca, Copal Partners, Integreon, and Netscribes to name a few.

Having said that it’s important to quote those multinational names that re-wrote the rules of the game and played a prominent role in making India, a knowledge hub - Frost & Sullivan, Datamonitor, Capegemini, Ernst & Young, McKinsey & Co. (McKinsey Knowledge Center), Bain & Co., Boston Consulting Group, IMS Health, and Accenture are some of those.

Interestingly, there are several companies who chose not to diversify and have been amazingly successful in the niche areas that they operate in. Some prominent of them are Inductis, MarketRx, Mu-sigma, Marketics, Markelytics, Fractal Analytics, Latent View Analytics, and Market Tools. Most of these so called boutique knowledge processors operate primarily in the niche and high margin areas of Market Analytics and Financial Analytics.

However, the Indian knowledge biggies have been quick in responding to the opportunities that these niche business services have to offer. The spree of acquisition deals that have been inked in the recent past is a definite recognition of the business value that these firms have generated in the recent past. The major deals that garnered decent media attention are the acquisition of MarketRx by Cognizant Technology Solutions, the acquisition of Marketics by WNS and the one of Inductis by EXL Services.

“Information Services” is the latest name that has emerged to cover the entire gamut of business and market information services that the knowledge processors have to offer. Essentially, it’s a broader domain that encompasses Market Research, Business Research, Investment Research, Equity Research, Financial Research, Market Analytics, Financial Analytics, Investment Advisory, Business Advisory and a host of other services.

Shakespeare says – “What’s in a name?” However, the pace at which the knowledge processors are diversifying their service offerings, this famous quote doesn’t have much relevance. A brand new name can thus never be ruled out. I go to the history book by coining one – IRA. IRA stands for “Information Research & Analysis”. The good thing about IRA as a services domain-name is its specificity in limiting itself to “Research & Analysis” only and its flexibility in accommodating the different functional sub-domains while keeping the core intact - mIRA for “Market Information Research & Analysis”, bIRA for “Business Information Research & Analysis”, fIRA for “Financial Information Research & Analysis”, eIRA for “Economic Information Research & Analysis” and so on.

RBBA (Research-basesd Business Advisory): The Process Flow

Advertising and the Market Landscape

Direct to Consumer (DTC) advertising is regarded as the most important and the most lethal weapon in the marketing arsenal of majority of market players operating in the consumer products and the consumer directed services space in India.

The advertising strategies adopted by the organizations and the messages intended to be delivered through the DTC ad campaigns pin-point to the ever changing market dynamics and the competitive landscape.

The brightest case example that illustrates this trend can be the recent ad campaigns initiated by Vodafone India. The campaigns also illustrate the increasing focus on "Localization in Globalization”. Vodafone globalized by acquiring Hutch. It then localized by resorting to the same promotional strategy that made Hutch, a household name. It is only in this country that you can see a pug fighting head on with the likes of Shahrukh Khan (Airtel) and Abhishek Bachhan (Idea).

There used to be a time when competition in the mobile services space was only on the basis of price. The mobile services market in India has probably seen and experienced the bloodiest price war ever fought in recent times. However the shift on the basis for competition has been pretty fast. The focus has shifted from Price to Network to Value added services and most recently to customer care service, thanks to the latest campaign by Vodafone.

Interestingly, with Hutch, the pug symbolized the network whereas with Vodafone, it symbolizes the ever-responsive customer care service. At a time when the affordability of Indian consumers has increased tremendously (thanks to a burgeoning middle class), the focus is shifting from cost to the comfort and convenience of use – the Vodafone ad being a reflection of the same.

Where do you stand in the Value Chain?

With the flag bearers of the Indian BPO industry gaining significant grounds in the KPO value chain, the visibility of the business opportunity has increased tremendously. Additionally, with the leader not even commanding a 5% share of the opportunity pie, the industry is highly segregated with a bevy of competitors operating in diverse industry and functional areas. I would rather prefer to call it an opportunity pie and not a market pie. The logic: The industry is far from defining itself.

However, the subject that is most discussed in the KPO strategy board rooms is not competition but the challenge to move up the value chain. Research to Analysis to Advisory to Consulting. Although the differentiation is blur, it is still significant.

Research and Analysis go hand on hand and a majority of the industry players operate with these value elements as the focal processes.

To differentiate an advisory process from a consulting one, it is important to understand and appreciate the difference between prevention and treatment. Prevention is typically characterized by recommendations, dos and don’ts whereas treatment is characterized by solution implementation (therapy in this case). It also involves tracking, analyzing and responding to the solution implementation process. That’s the same with advisory and consulting: advisory signifies prevention whereas consulting signifies treatment. Unless and until the disease (business issue in this case) gets treated or cured or at least diagnosed, the process continues.

Being the only process that defines the connecting link between a KPO and a business consulting organization, advisory is interesting. Having said that, its important to understand the process intricacies of the service which is different in a KPO and a consulting firm. For the majority of knowledge processors Research based Advisory which till recently has been the traditional forte of the leading research houses (Frost & Sullivan and Datamonitor to name a few) signifies the high end value element. On the other hand Strategic Advisory is the generic stronghold for majority of consulting firms.

As far as business consulting is concerned, Indian knowledge processors are far from reaching that level. However, with the focus increasingly shifting from the bottom line to value creation, the target is not at all difficult to realize.