What would you do if your company has been the darling of its industry with leading industry growth but now struggles to adapt to new market requirements in the digital world and faces a shrinking book of business? How would you change existing and potential clients’ perception of your company’s expertise?
In observing how India’s service providers adapt to the new realities and transition to become digital transformation partners, Mindtree is one of the firms going all-in on the digital sweepstakes. A mid-size service provider that made its mark by doing strong work in building applications, Mindtree is well positioned to make the transition into the digital marketplace. It has existing advantages, such as its collaborative culture, that aid in this effort.
But changing market perceptions and client perceptions – from a firm that provides good but cheap offshore services to a firm that is a digital transformation partner in position to help clients build innovative digital technologies – is a steep hill to climb. So, the firm is investing in a two-pronged attack to change its branding.
The first line of attack was to buy a series of digital firms, which helps more strongly position Mindtree toward being a digital company. In the second line of attack, Mindtree built two digital pumpkins – digital innovation hubs. This is like developments we see at Accenture, Infosys, TCS and other providers transitioning to digital. I like the branding of the innovation hub as a digital pumpkin. It brings a cool marketing vibe to a model that other providers have already rolled out into the marketplace.
I recently attended the launch of Mindtree’s second digital pumpkin, a US digital innovation hub in New Jersey. Like its first digital pumpkin, located in Bangalore, the hub is a collaborative, interactive space demonstrating Mindtree’s digital expertise and is designed to help clients accelerate their digital journey. It displays interesting examples of digital projects that Mindtree ran in its Bangalore pumpkin.
Like other service providers, Mindtree’s Bangalore digital innovation hub takes advantage of the significant footfall of enterprise clients as they visit their delivery partners in India. A visit to the hub for a few hours illustrates the kinds of digital capabilities that Mindtree can perform on a client’s behalf.
Its digital pumpkin in New Jersey gives clients a space to co-create and manage new digital capabilities, turn innovation sessions into pilots and then to more meaningful initiatives with deeper adoption across a client’s space.
Mindtree is combining acquisitions and innovation hubs to make a case to its existing and prospective clients that they should consider Mindtree as a partner that will help take full advantage of new digital technologies.
So, What’s Missing?
Despite both digital innovation hubs and the acquisition, Mindtree still faces an uphill battle. It needs to do two things:
- Overcome the shrinking in its core marketplace. All service providers transitioning to the digital world face substantial shrinking of their revenue based on the labor arbitrage model. As clients engage in portfolio rationalization happening in the mature labor arbitrage space, they seek to reduce the number of service providers in their portfolio, taking work away from smaller providers and giving it to larger providers in exchange for better pricing and lower costs. As a sub-billion-dollar firm, Mindtree loses out in the portfolio rationalization.
- Create differentiation by changing its business model. The firm doesn’t yet appear to have come to grips with the need for a differentiated delivery model aligned with the new digital reality.
It remains to be seen how effective Mindtree will be in changing market perceptions and in selling enough digital work to offset the losses in the labor arbitrage space and establish a healthy growth rate. Its two-pronged approach is a good step in that direction. But with the entire market following a similar path, Mindtree will need to work very hard to create a differentiated position from other service providers.