Tag: change management

Next-Generation Options Change Relationships with Service Providers | Sherpas in Blue Shirts

The 16th century political theorist Machiavelli wrote that there is “nothing more dangerous, or more doubtful of success, than to attempt to introduce a new order of things.” I think we should remember his words as we embark on the journey to embrace the next-generation solutions entering the services marketplace. Next-generation options are now changing the nature of the relationship between buyers and service providers. And there is plenty of significant change for both sides.

The traditional structure of solutions focused on cost reductions, RFPs prepared from a proscriptive perspective, and rigid MSAs included in the RFP package along with process descriptions, service level specifications and pricing exhibits. Value was created by onerous contract terms or traps for the provider.

Next-generation solutions give way to a much more fluid partnership approach to create value. The parties distribute the risks and develop a relationship built on flexibility and innovation. Contractual documents evolve with the discussions and negotiations. In a next-gen deal buyers and providers collaborate on how they might execute the buyer’s business objectives. Together they create value through building a framework for a successful relationship rather than through an onerous contract. The contract reflects the principles the parties agree to rather than predetermined contractual terms and conditions.

This highly collaborative process in developing the commercial requirements of the contract covers such issues as who owns the intellectual property. In many of these constructs, buyers ask their providers to develop or bring intellectual property with the buyer using it on a consumption basis. The discussions and negotiations articulate both parties’ risk, understanding of the business impact and the desired solution. They jointly develop the initial governance model and also participate jointly in refining it over time.

In a relationship developing a next-gen solution, the parties need to discuss — not dictate — the commercial requirements. Competitive tension is far less useful than in the traditional RFP structure where price is the dominant issue discussed. Instead, in next-gen deals, the parties discuss capabilities and design as levers for creating value.

Next Gen SP Tweet

There is another significant aspect that differentiates next-gen relationships. The commercial construct must allow for a journey rather than a destination. As the commercial constructs take place, the buyer often faces substantial change in organizational philosophies, policies and processes. This journey of change can be as daunting and significant as the one the provider must go through.

From our experience in working with clients in these kinds of relationships, the first step toward success is for the buyer to build a robust strategic intent that includes both its objectives and its vision of how to get there. Both parties can then use this strategic intent to keep all parties aligned over time and create a North Star to follow as they navigate through a collaborative but complicated process.

Photo credit: Hartwig HKD

Digital Transformation: P&L for the CMO? Really? | Sherpas in Blue Shirts

Sigmund Freud once said, “Most people do not really want freedom, because freedom involves responsibility, and most people are frightened of responsibility.” Had he added a phrase about fear of business ownership, the father of psychoanalysis could easily have been talking about most Chief Marketing Officers (CMO) in the current world of digital transformation. The freedom given by digital disruption to transform marketing function may come with a frightening responsibility of owning a P&L.

Today’s CMOs are expected to leverage disruptive technologies, and thus are receiving more technology funding than their IT counterparts. However, many CEOs will push their CMOs to own P&L if they need that funding for digital initiatives.

While most marketers dread the prospect of P&L ownership, the reality is that digital transformation has the power to enable them to assume a more strategic and central leadership role. And mobility, analytics, social platforms, and cloud services – many of which are available outside the control of corporate IT – can give them the needed ammunition to transform marketing into a business builder and create real impact than being a strategic overhead.

Those marketers looking forward to the challenge realize that unlike the traditional models, the rapid digital transformation of the marketing function enables the CMO’s office to influence and generate revenue, as well as run operations efficiently. Digital transformation provides significantly more engaging, flexible, and agile platforms to attract, retain, and grow consumers than traditional models. They allow “fail fast” with manageable cost repercussions. These new mechanisms give marketers direct, quicker, and clearer access to the end-consumer. Marketers now have the technology to run data-driven real time analysis of consumer buying behaviour and enhance their strategies accordingly.

However, to make this a reality, marketers need to work more closely with different departments within their organization, and develop perspectives on the various business units. While their lack of knowhow of organizational operations will be a recipe for disaster, increasing use of collaboration platforms and process digitization can help. Marketers can now communicate and collaborate with their counterparts from other units more effectively in a shorter time span leveraging digital services.

It’s always challenging to transform a cost center to own a P&L. In marketing’s case, it’s not only about revenue attribution, but also:

  1. a complete change in the thought process of the marketers themselves
  2. their self-perception and confidence in running a business (rather than just enabling it)
  3. staking claims at the high seats of the corporate hierarchy
  4. changes in the hiring, incentives, and retention strategies of marketing organizations

P&L ownership also impacts the way marketers are perceived in their organizations, as well as senior business leaders’ attitude toward them. Marketers will have to undertake a lot of internal selling of the idea. And a lot of organizational machinery will need to be oiled and transformed to make the marketing department own a P&L.

Most client conversations indicate this is still a utopia. However, some executives do believe it’s high time that the digital transformation makes marketing more accountable. They consider the CMO to be everything related to a customer (Chief Experience Officer, Chief Customer Officer, etc.) and believe that marketers now have the right technology and tools to create real business impact.

The onus is on the CMOs, and the opportunity is vast. However, they need to get out of their mindset as a business support function, where they are assisting businesses to leverage digital services much like an external consultant, and instead take center stage. But it’s not going to be easy.

Sigmund Freud today would probably have said “CMOs who want to enjoy the freedom bestowed by digital transformation must not scare away from the responsibility of the P&L.”

Infosys Appoints Dr. Vishal Sikka as CEO, Making a Brilliant Pilot a Swimming Coach | Sherpas in Blue Shirts

In a landmark move with far-reaching implications, Infosys appointed ex-SAP CTO Dr. Vishal Sikka as its new CEO and managing director, making him the first non-founder at the helm in the firm’s 33-year history. Accompanying this change, the founders are getting out of the new chief’s way. Current CEO and co-founder SD Shibulal will leave by end of July, while NR Narayana Murthy will vacate his role as executive chairman on 14 June, continuing in a non-executive board role until 10 October to ensure a smooth transition.

The fact that Infosys engaged an executive recruiter to look for a successor reflects a dramatic shift in ethos for the firm. It represents the strategic decision to bust up a certain inward-looking culture that has come to represent Infosys. That Infosys reacted to market and customer expectations by bringing in an external technology visionary bodes well for the critical imperative to change to a customer-centric culture, rather than firm-centric. 

What Works 

The Gujarat-born Dr. Sikka holds a Ph.D. in artificial intelligence. He spearheaded the development and marketing of HANA, SAP’s flagship analytics product. His experience in these areas could give Infosys a sizable edge as service providers look to establish credentials in next-generation technology avenues such as big data, analytics, cloud, robotics, and artificial intelligence.

He seems to have been given a wide mandate, per the large-scale changes in senior management that are accompanying his appointment. This will allow him to exercise a free hand as he attempts to reshape the beleaguered company. Infosys’ long-standing strategic imperative to let the founders control the firm has been widely criticized.

He joins a long list of industry outsiders taking charge of IT majors. Louis Gerstner was unanimously credited with turning around IBM’s fortunes when he took over in 1993, after previously leading RJR Nabisco and American Express. Closer to the Indian IT services landscape, Vivek Paul, a GE-alumnus transformed Wipro, fast tracking growth from a US$150 million company in 1999 to over US$1 billion in sales in five years. Last year, Apple announced UK fashion chain Burberry’s CEO as the head of its retail and online business.

Appointing an outsider tends to bring fresh perspective to inherent legacy issues plaguing companies. Free from the baggage and expectations associated with firm veterans, Dr. Sikka can look to usher new life into Infosys. 

What May Not

Since he comes from primarily a products-driven business, it will be interesting to see how he adapts to the IT services industry, which has inherently different business dynamics and challenges. The focus will be on streamlining project management, client delivery, and sales efforts. Dr. Sikka’s experience in driving sales and marketing at SAP will be a crucial asset in this regard. Being a CTO of a products-based company is an entirely different ball game than leading a global services behemoth, as product-driven businesses rely primarily on the strength of intellectual assets, while services businesses are an amalgamation of resource management, delivery, and expectations handling.

In spite of the large-scale management changes, Dr. Sikka has his work cut out as he navigates disgruntled senior management. How he soothes frayed nerves and reassures them will be essential for stability. A cultural shift he will seek to implement will revolve around Infosys’ limited risk appetite for investments. Infosys needs to invest significantly in boosting its expertise in next-generation solutions through alliances and possibly acquisitions. Although it has made some notable acquisitions such as Lodestone, the firm has generally been fairly risk-averse in exercising its significant cash pile.

The role that NRN Murthy assumes will also determine the efficacy of Dr. Sikka’s roadmap for revival. If Murthy remains strictly in a mentorship role overseeing the transition, without overriding Dr. Sikka’s strategic decisions, the sailing should be smooth. However, if those lines blur, it could create a vicious cycle of conflict, decisions embargo, and execution paralysis.

Another important but often ignored challenge of such senior-level changes is the risk of culture mismatches outweighing the business positives. Echoing Peter Drucker’s “Culture eats strategy for breakfast,” bringing in a rank outsider can have controversial implications. For example, John Sculley joined Apple from PepsiCo, and during his time had long-standing disagreements with Steve Jobs due to divergent management styles and priorities, ultimately resulting in Jobs’ exit in 1985. The entry of a new top-level entrant is not easily accepted by the old guard, leaving open the possibility of wilful sabotage. Dr. Sikka will need to build bridges with senior stakeholders to avoid stepping on toes.

Swimming in Choppy Waters Ahead 

Essentially, whether or not Dr. Sikka manages to snap the once industry bellwether out of its funk will depend on his ability to make the transition from a technology visionary to an empathetic business leader combining technical expertise, client management, and people development, while maintaining the focus on innovation and thought leadership. He will try to take Infosys out its comfort zone, bridge service gaps with more nimble rivals, and ultimately reassure clients that their business is in sound hands. He needs to show that a brilliant pilot can be a swimming coach as well.

Location Strategies and the Inevitability of Change | Sherpas in Blue Shirts

Everest Group’s Eric Simonson, Managing Partner, Research, recently led a panel titled “Location Strategies: Optimising Your Operations in Growth Markets” at the 12 – 15 May SSON Shared Services & Outsourcing Week in Dublin, Ireland. Sarah Burnett, VP, Everest Group, was in the audience and shares the insights she gleaned from the discussion. 

Last week I attended Shared Services Outsourcing Week (SSOW) in Dublin, where Eric Simonson, Everest Group Managing Partner – Research, ran a panel session to discuss location strategies. Taking part in the panel were:

  • Jamie Davies, Finance SSC Manager, Computacenter
  • Petter Frisell, Finance Operations Manager, Dixons Retail
  • Gerry Meegan, Head of Operational Excellence, GBS, Europe and Asia, The Coca Cola Company

Location Strategies: Optimising Your Operations in Growth Markets at SSOW Europe

Emerging from the debate was that change is inevitable — so location strategies cannot stay the same for long periods of time. Accordingly, Shared Services Center (SSC) organizations must be highly skilled in managing location as well as transformational change while delivering services, keeping staff motivated, and achieving ever increasing year-on-year efficiency and improvement targets.

Factors that contribute to change include:

  • Internal dynamics such as shifting corporate priorities and business strategy leading to changes in location requirements
  • External reasons such as problems with retaining skilled staff in off-shore locations.

For example, one company had moved some of its IT services offshore to India but had problems with talent retention. The quick turn over of staff made the services unsustainable and led to the company bringing its capabilities back onshore. This is the type of problem that could be exacerbated by the lack of brand awareness among the local workers who might prefer to work for an IT company rather than the IT unit of a different type of business.

Taking services back onshore can bring its own issues, such as lack of onshore skills particularly in IT where skills are expensive. Of course, changing locations does not necessarily mean bringing services onshore but likely to other locations and nearshore, particularly where the company might already have offices. Panel members had experienced moving SSCs to existing nearshore offices. Having had staff already in place in these new locations had made the moves much easier.  The benefits of having an existing presence in a location had to be balanced against availability of the desired skills in that locality, for example required language skills or availability of specific technology platform expertise, such as, Oracle.

Having change management experience is essential for SSCs, not only to move locations but to modernize and transform services too. Some of the transformation challenges that panel members had dealt with included cultural resistance to change within their organizations. Their advice was to ensure good communication to engage well with stakeholders and all staff who will be affected by the change. One panel member gave the example of having to win hearts and minds to support even the simplest form of change; from paper to electronic payslips.

SSC managers also have to excel at marketing and sales in order to sell their services to the rest of the business. This activity requires performance data, monitoring and reporting, to demonstrate the value of the SSC in order to win new clients. This ties in to benchmarking and monitoring to measure year-on-year improvements.

Continuously improving performance can be very challenging, with expectations seemingly on an ever upward trajectory. This goes for year-on-year process and performance improvements as well as cost cutting targets. Consequently, panel members emphasized the need for SSC management to take a broad view of their services and how these can be improved. Some organizations have set up service optimization functions that work in parallel with the operational function of the SSC, but which are focused on achieving year-on-year improvements.

On the subject of continuous improvements, panel members believed that times of change, e.g. moving locations or bringing services back in house after outsourcing an SSC, provide good opportunities to review and improve processes, to fix them if they are broken, or to simplify them if they have become over-complicated.

Another important skill for SSC managers is good people management. The issue of staff retention has already been mentioned. Add to that the problem of staff in onshore or nearshore centers knowing that the service is very likely to be offshored at some point in the future. The SSC manager has to deal with the resulting job insecurity issues that this raises and the potential impact on staff engagement, motivation and retention.  Some companies have specific HR policies to address this issue, for example, they will not take on raw graduates in the main part of the business but have career paths for their SSC staff to transfer to the main part of the business instead.

Finally, if the service is outsourced, the panel recommended that some capabilities should be kept in house, such as the operational oversight and the optimization functions mentioned earlier. This would keep some important skills inhouse should the outsourcing not work out.

Photo credit: SSON

Don’t Buy an Analytics Ticket Unless You’re Prepared to Go on the Ride | Sherpas in Blue Shirts

There are bountiful opportunities today to use Big Data analytics and business intelligence technologies to change the game. But before you quicken your pace to the nearest tech store, you need to stop and recognize what “change the game” really means.

Certainly it means that the analytics software can yield insights that could help you improve interactions with your customers. The insights you gain could lead your organization to do something in a more compelling way.

But it’s important to recognize that the technology just gives you the chance to solve a business problem; it doesn’t actually solve it. You can spend money on technologies to create insights about how you can do things differently to great effect. But you can’t create just insights. You have to create organizational change and marshal the people in your organization so they WILL change and do things differently.

Creating organizational change is complicated. You will have to work your way through the dreaded snarls of change management. The rewards can be great; there’s no doubt about that. But the change can have far-ranging organizational implications and can be quite painful and disruptive to implement. Altering internal incentive structures. Entering new markets. Restructuring resource allocations. Reshaping your business model.

And if your organization fails to adapt to the new realities, it will thwart the impact and opportunity of the insight.

Our advice is to recognize up front that you will waste your investment in analytics technology if you are unprepared or unwilling to do down the path of a great transformational journey. Leaders must be prepared to deal with the consequences of the insights the analytics technology brings to light.

Don’t buy a ticket if you won’t go on the ride.

Photo credit: vincewilcox

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