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  • 1. The journal of high-performance business | 2013, Number 1Cross-industry ecosystemsGrowth outsidethe boxPLUSRadically rethinking public servicesWhy gamification is serious businessHow end-to-end sustainablesystems drive value
  • 2. OutlookOutlookVol. XXV2013, No. 1Outlook is published by Accenture.© 2013 Accenture.All rights reserved.Editor-in-Chief Chairman & CEODavid Cudaback Pierre NantermeManaging Editor Chief Marketing &Letitia B. Burton Communications Officer Roxanne TaylorSenior EditorJacqueline H. Kessler For more information about Accenture, please visitSenior Contributing Editor F. NunesContributing EditorsDavid Light The views and opinions expressed in theseCraig Mindrum articles are meant to stimulate thought and discussion. As each business hasIndustry Editor unique requirements and objectives, theseWendy Cooper ideas should not be viewed as professional advice with respect to your business.Contributing Writers Accenture, its logo and High Per­ ormance fLance Ealey Delivered are trademarks of Accenture.John Kerr This document makes reference to trade-Assistant Editor marks that may be owned by others. TheCarolyn Shea use of such trademarks herein is not an assertion of ownership of such trademarksDesign & Production by Accenture and is not intended to repre-IridiumGroup Inc. sent or imply the existence of an association between Accenture and the lawful of such trademarks.This publication is printed on10 percent post-consumer fiber.
  • 3. The Long View Bold ideas for a digital economy likely to be created through collabo- not limited to the private sector. ration, within “ecosystems” made up Caught between rising citizens’ of mutually supportive companies expectations and a looming fiscal from multiple industries. (The article crisis, many innovative local, begins on page 22.) state and national governments are experimenting with new, Another disruptive idea discussed more efficient and more effective in this issue is intended to enhance service-delivery models that can current business models rather also help close major funding gaps. than replace them—“gamification,” (This article on the public sector the application of the mechanics of begins on page 12.) digital gaming to a wide spectrum of business challenges. In fact, “Ecosystems,” “gamification,” companies across several industries “inclusive business initiatives,” Pierre Nanterme are already using the concept to “public entrepreneurship”—going Chairman & CEO encourage innovation, build more forward, we will be hearing more Accenture effective marketing campaigns about these additions to the new and retain talent (page 30). business lexicon. And I hope you As the locus of global growth find our discussion of the ideas shifts and competition intensifies, The high-growth markets of Asia, behind them useful. identifying new markets and Latin America and Africa will opportunities is not the biggest continue to be at the center of challenge facing business. The strategic thinking for most com- harder part may well turn out to panies, with particular attention be coming up with bold, new, often paid to an emerging middle class disruptive approaches and models of consumers. Here, too, innovative that are required to achieve high new models and approaches are performance in a digital economy. essential for success. In this issue of Outlook, we look One of our articles looks at “inclusive at a number of these models, some business initiatives,” enterprises of which are already proving to that partner with governments, be highly successful. NGOs and local entrepreneurs to scale innovation and boost profit- The idea explored in one article calls ability in low-income communities into question a bedrock assumption (page 38). Another looks at the about the world’s economy—that it other end of the income scale, at is structured as a relatively small China’s affluent, sophisticated number of discrete industries, urban consumers. Their behavior compartmentalized collections has changed so dramatically in of businesses that pursue value recent years that companies must be essentially on their own, in their willing to embrace unconventional own markets. The article challenges and often counterintuitive marketing this Industrial Age concept. It argues strategies to reach them (page 48). that in today’s connectivity-enabled global marketplace, value and When it comes to delivering value, differentiated offerings are more however, bold new thinking is 1
  • 4. Contents Perspective Features The Long View Public Service Strategy1 Bold ideas for 12 Coup d’état: 22 Cross-industry a digital economy Radically rethinking ecosystems: Growth By Pierre Nanterme public services outside the box By Bernard Le Masson, Brian J. By Cedric Vatier Moran and Steve Rohleder To reap future growth As they attempt to square benefits, companies public service demand must smash through the Industry Report against supply, governments traditional confines of worldwide must do more, industry walls to seek Media Entertainment better, with less. To be collaborative opportunities4 eyes have it: The successful, they need to that stretch across multiple Guess who controls overthrow old ideas and business sectors. embrace the next generation of the future of TV tools and ways of working. By Robin Murdoch, Youssef D. Tuma Strategy II and Marco Vernocchi 30 Why gamification is Television is about to serious business undergo the same kind of By Marco Ryan, Andy Sleigh, disruption that occurred Kai Wee Soh and Zed Li with the introduction of the smartphone. What will By using the mechanics of change when the largest digital gaming, companies screen in the home has a in a wide range of industries big say in how we consume are boosting innovation, content, information and building more effective services over the Internet? marketing campaigns and driving value. A few leading companies are making the changes demanded by sustainability science and creating competitive advantage for their businesses. “ ow end-to-end sustainable systems drive H business value” (page 58)2 Outlook 2013, Number 1
  • 5. F or additional thought leadership from Accenture, including the Accenture Institute for High Performance and Accenture Technology Labs, please visit For a personalized electronic newsletter tailored to highlight specific industries and issues, subscribe to My Outlook at High-Growth Markets Sustainability Information Technology38 Scaling innovation 58 How end-to-end 78 IT governance: for an emerging sustainable systems Spinning into control middle class drive business value By Saideep Raj, Jack Sepple and Leslie Willcocks By Raghav Narsalay and By Peter Lacy Ryan T. Coffey Plenty of companies have For today’s IT executive, Efforts to create innovations taken significant steps the job has never been more that can meet both social and toward becoming more difficult. The solution? business goals in low-income sustainable, but none has Mastering a new set of markets are fraught with turned incremental progress capabilities focused on areas unanticipated dangers. into truly transformational that are generally not part A study of 18 initiatives change. That requires of traditional IT governance. from around the world reveals innovation and collaborative how ventures can succeed initiatives right across the Business Process Outsourcing | where others have failed. enterprise—from strategy to Talent Organization operations to the supply chain. 88 asters of the mix M China By Michael J. Salvino, Walter G.48 Meet the new Supply Chain Management Gossage and Mary Lacity Chinese consumer 68 When product The benefits of effective By Jeffrey I. Beg, Tzeh Chyi Chan complexity hurts true change management in BPO and Xuyu Chen profitability are measured at both an individual and organizational Successful consumer By Johan Sjöström Bayer, Mikael Hilding, Antal Kamps, level. Companies that are marketing in China is, in Gustaf Sahlén and Robin Sparrefors attentive to transition many ways, as much art issues and to supporting as science. It combines a To meet the challenges the retained workforce can sophisticated understanding inherent in today’s volatile drive topline benefits from of local perceptions and global marketplace, companies a more effective functional preferences with a willingness need the right analytical lens organization. to embrace unconventional to clarify the incremental strategies and the best profit generated by offering new technology. more innovative and differentiated products. 3
  • 6. Industry Report | Media EntertainmentThe eyes have itGuess who controlsthe future of TVBy Robin Murdoch, Youssef D. Tuma and Marco VernocchiTelevision is about to undergo the same kind of disruption that occurred with theintroduction of the smartphone. What will change when the largest screen in the homehas a big say in how we consume content, information and services over the Internet?Picture a typical nine-year-old her classmates and loaded into screen-viewing time. The fact is,watching TV today. She probably has her home’s cloud-based content the TV is here to stay. Its role ina tablet in her lap, ready to check out librar y. After her friends leave, delivering compelling viewingvideos related to the Animal Planet she might pick up the easy-to-use experiences—collective andspecial she’s watching. Or perhaps TV remote to take a high-resolution individual—will continue. However,she’s borrowed her big sister’s phone tour around the Beijing neighborhood the big screen in the living room isso she can vote on this week’s episode where her big sister lives. Or maybe indeed undergoing a metamorphosis,of Dancing with the Stars. she’ll search for a favorite scene in because what goes on behind the one of the Twilight movies. screen is changing dramatically.By the time she’s old enough tohead off to university, however, Good-bye to the familiar old TV set? For most of us, the TV will developher TV viewing experience will Au contraire. For years now, the as an even more valuable vehiclebe markedly richer. By then, she demise of the popular appliance for entertainment and, increasingly,may be inviting her friends over has been predicted as the Web has for education and information. Butto watch the “sitcom” filmed by claimed more and more of our for business leaders up and down the 5
  • 7. Industry Report | Media Entertainment media value chain—from filmmakers continue to be so. There is still no and broadcast channels to Internet substitute for the collective viewing service providers to “last mile” experience of watching the big game communications operators—the or the season finale of a popular reinvented TV is a huge disruption. drama. Plus, the new Accenture study reveals that young people are There will be winners—businesses much more engaged with TV than that quickly grasp the nuances of might be supposed. the resulting changes in the creation, financing, production and delivery of Even 25-to-34-year-olds view, on content. But others may find them- average, almost 140 hours a month of selves facing fierce new competition. “traditional” TV programming—more Take, for instance, the pressure than 20 times as many hours as they the cable companies are facing spend watching video on the Internet from so-called over-the-top (OTT) or on their phones (see chart, page 9). providers, such as Netf lix and And nearly half of all users still sit Hulu, which send their content down in front of the TV—not their through the Internet. In short, smartphones or tablets—to watch we’re now seeing the collapse of some type of OTT video content. the walls that previously excluded Another relevant measure: YouTube new entrants to the TV business. users average five or so hours of video viewing per month—a figure So how can the TV still be relevant that is dwarfed by the time they in a tablet and smartphone age? spend in front of the TV. To be sure, TV viewing time has Bottom line: Television still has become fragmented—the result of great power to pull audiences. And busy lives that see consumers record- big changes are coming that will ing, for example, the Boardwalk continue to engage viewers. Empire episode that the school board meeting forced them to miss. And of Not too many years from now, course, “screen time” today is shared we will be able to use the TV unit with laptops, phones and tablets. to access an entire ecosystem of content—richly immersive, far more Accenture’s latest research on of it fully interactive and all of consumer viewing habits finds that it on-demand via the Internet. It fully 62 percent of TV viewers are will be easily sourced from content concurrently using a computer or catalogs and accessed with a a laptop and 41 percent are using handheld device—a next-generation a mobile phone—messaging friends smartphone, perhaps, or a dedicated about a sitcom joke or fact-checking device that is as simple and intuitive politicians’ claims, perhaps. Coupled to use as today’s remote. with the widespread availability of high-speed wireless Internet, Just as significantly, individual today’s viewing experience is more consumers, armed with high- interactive, more consumable and performance hardware and software, far more sharable in real time. will become content creators, able to provide more of what the news Dominant medium channels deliver. (Think of higher- But the truth is that the living quality versions of the public’s room screen remains a dominant mobile-phone news bulletins of communications medium, and will Hurricane Sandy’s devastation.)6 Outlook 2013, Number 1
  • 8. the same time, the major movie The easy answer, of course, is them prefer using genres—that is,studios are meeting the growing “technology”—from the TV hardware content types such as “spaghettidemand for premium video content. to the social media with which to Westerns,” “cartoons” and others—Look at the money pouring into share content to the cloud services as search criteria for finding newblockbusters—$150 million to produce that make it effective to store vast video content. And 43 percent preferSkyfall, the latest James Bond film, amounts of data. The fact is, however, finding new video content by usingfor example, and the estimated that the consumer is the undisputed personalized recommendation$250 million spent on the newest king of content. engines that track what they’veBatman movie, The Dark Knight watched and suggest similar content.Rises. These movies are being Over the past decade, control ofengineered during original production the viewing experience has shifted In a similar vein, 28 percent of usersto maximize the downstream rapidly to the one who holds the have already created video playlistsopportunity in extras, web videos, remote. TiVo and many other digital on their current video services,apps and so on. And, increasingly, recording systems have made it such as Netflix and YouTube. Thesecontent is as likely to be distributed easy for people to choose when they companies make it ever easier to doby an Amazon or a Google as it is watch their favorite programs. But this, particularly by using historicalto show up courtesy of Bravo. consumers also want to be able to behavior to recommend relevant personalize the services they con- viewing experiences. The story isKing of content sume, with search, recommendations much the same with music servicesNetwork executives and cable and social features becoming such as Pandora and Spotify asoperators don’t need to look far increasingly integrated across media. well as with a wholeto see what is rocking their world. Accenture found that 64 percent of range of merchandise. Reinventing TV: Nine key questions for established media players There are dramatic changes in the television industry going on behind the screen (see story). Traditional media players must respond by reinventing them- selves, a process that begins with self-examination. Crucial questions for the C-suite management team include: 1. Should traditional media and entertainment companies reinvent themselves as consumer businesses? If so, how? 2. Can new digital economic models be made to work for all parts of the media value chain? 3. How might new OTT offerings threaten the subscription pay-TV giants? 4. What new types of partnerships and collaborations should media businesses consider in order to better match consumers’ new digital experience requirements? 5. Will new industry business models sustain investments in high-quality content—or will profits be channeled elsewhere? 6. How can the ad industry’s traditional players collaborate to move toward a new world of multiplatform advertising? 7. How can data and analytics be used to galvanize new business models? 8. Should traditional vertically integrated media companies resist or embrace open platforms? 9. How do content companies maximize revenue across linear and on-demand as the balance shifts toward the latter? 7
  • 9. Industry Report | Media Entertainment At the same time, consumers are This is not just about controlling becoming distributors. Social content; it’s about content creation as media users have an average of well. The term “prosumer” is entering 3.2 friends who post videos at least the language to describe talented once a day; almost four out of amateurs who use sophisticated but 10 consumers post video online via affordable consumer technology social media. More than half of the to produce quality news reports or respondents polled by Accenture instructional videos, for instance. would be interested in recommending Today, aspiring adventurers can buy video to others as part of belonging a GoPro camera for less than $300, to a video service. attach it to their mountain bike or UK viewers now get “all channels” digital TV In the summer of 2012, the British public got another broadcast TV). It includes a unique content discovery way to watch “telly.” The new Internet TV service, called platform: a central catalog that allows global search, YouView, has been hailed by some industry insiders browsing by genre/popularity across content providers, as the natural successor to Britain’s current model of and a “backward-looking” electronic program guide free-to-air TV. Some researchers expect that 3 million (EPG). “Unlike a lot of smart TVs, it doesn’t zone off UK homes will have YouView by 2015. on-demand content in a separate section that you access from another menu—the whole lot is integrated,” YouView combines the United Kingdom’s free-to-air notes one reviewer. Its open application platform can digital channels with on-demand content, all delivered be used by any participating content provider, offering without subscription. An easy-to-use set-top box brings consumers a tremendous range of content. It also together IP and broadcast TV technologies, making them upgrades easily, accepting new features over time such accessible to viewers through a single consistent and as behavioral targeting and predictive recommendations intuitive user interface. The service is backed by a generated by analysis of social media data—such as consortium of seven partners, including the country’s iTunes Genius music recommendations. main terrestrial broadcasters (BBC, ITV, Channel 4 and Channel 5), two ISPs (BT and TalkTalk) and a network YouView provides a strong springboard for innovation. services provider, Arqiva. Its unified and open ecosystem is expected to disrupt the existing TV business model, affecting content The service’s big innovation happens behind the screen. providers, broadcasters, ISPs, advertisers, set-top-box Its application platform gives consumers access to a manufacturers and many other technology enablers. vast array of content options. For example, if the box is And it offers abundant opportunities to create new connected to a broadband line from a partner ISP, then products and features, becoming increasingly attractive an application providing that ISP’s IPTV service will to consumers and providers of content, devices and appear automatically. As the number of content sources TV services. in its ecosystem grows, YouView’s attractiveness to both consumers and to potential new content, devices To date, consumer feedback on the user interface and service providers will continue to increase. At has been very positive. UK telecom company TalkTalk— launch, more than 140 content providers had signed up just one of multiple sales channels for YouView—signed to add their content to the YouView platform; today, up 29,000 YouView customers in the first month more than 300 providers are interested. after launch. A thousand new customers are signing up each day for the service, according to a TalkTalk YouView is not simply another version of a web-enabled spokesperson. TV service. It features a single, consistent, intuitive user interface (integrating on-demand, catch-up and8 Outlook 2013, Number 1
  • 10. mask, and capture aston- If those technology-enabled factors not a stretch to say that companiesishingly high-quality video that is are pushing the media industry from such as Amazon and Google willeasily edited on any laptop and just one side, its key sources of revenue— make big gains, as will othersas easily shared via social media. notably advertisers—are pulling it that grasp the significance of theIndeed, the growth in so-called on the other side. Increasingly, disaggregation of traditional mediauser-generated content has exploded. businesses expect to be able to value chains and the developmentYouTube now has more than 800 measure what they get for their of new forms of media value creationmillion unique users every month, investments. Traditional media has and consumption.and while the vast majority of them always had a hard time deliveringare watching, growing numbers of precise measurement, and while We’ve already seen the arrival andthem are posting content that they the explosion of Internet media is growth of businesses that offer newor others they know have generated. exacerbating the situation by further ways for consumers to access digital fragmenting viewing attention, it content. New entrants like YouTubeThe capabilities are developing is also creating opportunities for and Netflix are also now creatingso quickly, and spreading so widely, better measurement. their own content to differentiatethat it’s safe to say that prosumer their brand and sidestep the battlecontent will soon provide serious Following the money for content rights.competition for some genres of So who wins in a new media world?professionally produced content— The consumer does, of course. Amazon, Google and Apple alreadynews footage, for instance, and some But the other winners are likely to offer consumers access to significantreality TV shows. Consumers are come from outside the boundaries amounts of content, even thougheven changing the funding of content that have defined the industry it is not at the core of any of theircreation (see sidebar, page 10). over the past half-century. It is businesses. For instance, Google’sScreen of choiceTV is still the primary device for watching full-length shows and live content in both the United States and the United Kingdom.Portion of US and UK viewers who watch video content over the Internet, on each device 70% 32%Full-length movies and TV 4% 7% 65 30Live content 6 5 12 74Short videos/clips 24 12 9 TV 49 PC/laptopUser-generated content 15 Mobile/smartphone 9 TabletSource: Accenture analysis 9
  • 11. Industry Report | Media EntertainmentFor further reading core business is search, yet it streams House of Cards, the US version of more than 4 billion hours of video the UK political series of the sameAccenture Video-Over-Internet per month via YouTube. name directed by David FincherConsumer Survey 2012: Winning the and starring Kevin Spacey.Battle for Consumer Trust, Accenture Apple generates the vast majority2012: of its income from sales of its The tectonic shifts underneath theen/Pages/insight-video-over-internet- devices, yet it made $2 billion in media industry will permanentlyconsumer-survey-2012.aspx revenue in the third quarter of reshape the landscape, altering 2012 alone from its iTunes Store, everything from the flow of“Taking The Pulse” study, Accenture 2012: App Store, the iBookstore, sales of advertising dollars to the iPod services, and Apple-branded of the industry itself. and third-party iPod accessories.“Changing Faces: The TV Company To that last point: Some of theof the Future,” Accenture 2012: The newcomers are following the writing may already be on the money. They understand that success wall. In recent months, some purePages/insight-changing-faces-tv- in the media sector has revolved OTT content providers have gonecompany-future-summary.aspx around premium content, and from strength to strength. Netflix that it will continue to do so in the now has more subscribers thanFor more related content, future. Which explains YouTube’s many pay-TV operators in theplease visit announcement, in October 2011, of a United States. That is an astonishing $100 million investment in premium statistic, given that Netflix was channels and the announcement by founded only in 1997. Netflix in May 2012 of its plan for a $185 million, five-year investment At the same time, the most in original content. Just two forward-thinking of the traditional examples of Netflix’s investments: operators are making significant The new season of Arrested moves to properly position them- Development, releasing shortly, and selves in the new media world. Not waiting for deep pockets By 2010, a movie director named Steve Taylor secured funding to create a film adaptation of Donald Miller’s book, Blue Like Jazz. The following year, the film lost the support of a major investor, forcing Taylor to stop production. That’s when two fans of the book stepped in. To raise the $125,000 required to resume production, they created a Kickstarter webpage called “SAVE Blue Like Jazz! (the movie).” The campaign reached its funding target of $125,000 in 10 days—and blew past it, becoming the most successful Kickstarter fundraiser of 2010. In total, $345,992 was raised by 4,495 backers—an average of just $76.97 each. In April 2012, Blue Like Jazz opened nationwide across 136 screens. In just eight weeks—before distribution internationally and through rental and cable channels—it had netted half of the movie’s total budget. It is just one of several examples of crowdfunding. The trend is borne out by Accenture’s recent consumer research: 36 percent of digital consumers would be willing to donate small sums to fund their favorite movie or TV program.10 Outlook 2013, Number 1
  • 12. take just two examples: British from traditional advertising The decisions that new entrantsSky Broadcasting is making its models—digital data is more are making today up and downexisting content offerings available accurate and more granular than the media value chain are alreadyon as many devices as possible, its analog predecessor. forcing some serious rethinkingand YouView—a new open-platform within the established mediasystem that makes IP and broadcast But there is still much to do before industry. The traditional broadcastTV technologies easily accessible the typical marketing department is networks—those most at risk ofto viewers through one intuitive able to effectively use sophisticated disruption—must act more promptlyuser interface—is backed by such analytics to deliver premium, and assertively than they areindustry giants as BT and the BBC personalized, interactive advertising, accustomed to if they are to survive(see sidebar, page 8). and create a richer, more detailed in the new world. understanding of specific consumerRemoving the guesswork groups—or fan bases—that will But the decisions being made byTraditional subscription models respond to new offers. the Amazons and Googles haveare not the only ones at risk from ramifications far beyond the mediathe new media model. Advertising So what does the new face of TV business itself. They will color thewill also have to accommodate the mean for today’s established media choices that advertisers—business-steady shift to digital content and businesses? The ascent of the to-business as well as business-to-the inexorable move to OTT content, consumer requires business models consumer—will have to make. Theytogether with the fact that more that are built around consumer will have an impact on the world ofand more content is being viewed needs rather than those of a education. They may well changeholistically, with digital entertainment particular channel, platform or the directions of development ofexperiences encompassing TV, film, advertiser. A single shared view a host of new content-deliveryweb video, gaming and apps. of the customer—often across products. And they could even different channels—is a prerequisite reshape the role of media as itThus far, the managed migration for a successful, consumer-focused reflects and affects public policy.of rights to new platforms has multiplatform strategy.preserved traditional TV advertising To paraphrase the old politicaland pay-TV subscriptions as the The businesses that adapt success- maxim: Where TV goes, so goesgreatest drivers of revenue. But the fully will need to try different the nation.industry may be about to change approaches concurrently. They’lltoo fast for that to remain true. need to create and run with hybridPossible signs of things to come: business models and constantly About the authorsSubscriptions could well shift away reevaluate their place in the mediafrom bloated bundles to à la carte value “ecosystem”—perhaps taking Robin Murdoch leads the strategy groupoptions that allow consumers to on new roles—so they can spot and within Accenture Communications,pick and pay for exactly the content capture new revenue opportunities. Media Technology. He is basedthey want and no more, from a In short, players all across the media in Seattle.range of different providers—new value chain now have to plan for a robin.murdoch@accenture.comInternet-based players among them. new and fundamentally different media delivery architecture. Youssef D. Tuma leads Accenture DigitalAlready, chief marketing officers Services for the United Kingdom. He iseverywhere are scrambling to based in London.reallocate and optimize marketing Ten years from now, the TV will youssef.d.tuma@accenture.combudgets across platforms. They are still be one of the largest pieces ofgetting some help from increasingly furniture in the living room, and Marco Vernocchi leads the Media sophisticated customer data it will still have a central place in Entertainment group within Accenturecollection and analytics tools, family life. But the TV business Communications, Media Technology.which are beginning to enable new overall may be unrecognizable— He is based in Milan.forms of cross-screen targeting certainly when compared to the marco.vernocchi@accenture.comand measurement. To a large extent, operating models and industrydigital removes the guesswork makeup that prevail today. 11
  • 13. Public ServiceCoup d’étatRadically rethinkingpublic servicesBy Bernard Le Masson, Brian J. Moran and Steve RohlederAs they attempt to square public service demand against supply, governments worldwidemust do more, better, with less. To be successful, they need to overthrow old ideas andembrace the next generation of tools and ways of working.12 Outlook 2013, Number 1
  • 14. 13
  • 15. Public Service Consider this: If 10 key countries business-as-usual level of public- increased their aggregate public- service delivery. sector efficiency a mere 1 percent a year, they would collectively save Our findings are sobering. Through nearly $2 trillion annually by 2025. 2025, the gap between expected demand for public services and But to do this, these same countries government’s ability to meet it must identify and achieve substantial in these countries ranges from cost savings. According to Accenture $10 billion in Singapore to nearly research, by 2025, the gap between a trillion dollars in the United States expected demand for services in (see chart, page 16). Expressed in these 10 countries and the ability terms of GDP, the shortfalls range to pay for them is projected to total from 1.3 percent in Italy to 5.4 $1.6 trillion. percent in the United Kingdom. Today’s political and economic reali- It is clear, in the words of the OECD, ties are putting enormous demands that the “fiscal positions in many on public services throughout the countries [are] unsustainable.” world. Aging populations, growing fiscal uncertainties and rising citizen Given current budget situations in expectations have put governments many countries, these expenditure worldwide in unsustainable positions. gaps are simply not viable. Worse, For example, already high govern- most citizens already consider ment debt in countries in the OECD public-service levels inadequate. ballooned by some 30 percent of GDP A 2012 Ipsos MORI/Accenture between 2007 and 2011. survey shows that only 36 percent of citizens across all 10 countries are Citizens’ expectations—in many cases, either very or even fairly satisfied conditioned by their experiences as with public services. In other words, customers of best-in-class private- the delivery gap is actually larger sector players—have shifted than these funding shortfalls suggest significantly in recent years, and because most governments already the public sector has often been slow fail to meet citizen expectations. to accommodate these changing attitudes. At the same time, Shifting gears governments must contend with But governments can do better. dwindling resources as tax revenues In the course of extensive work in remain stagnant in countries still the public sector, Accenture has hampered by underperforming identified four paradigm-breaking economies, rising expenses and, for shifts governments can make to many, an inability to provide the close major funding gaps while comprehensive service solutions delivering higher levels of service. their citizens want. • hift from offering standardized S To better understand the fundamental to personalized services. disconnect between what govern- ments are being asked to achieve • eplace reactive approaches with R through public services and what’s insight-driven ones. actually possible, Accenture launched a research program across 10 major • ove from standard public M countries focused on the economic management techniques to impact of maintaining the current a public entrepreneurship style.14 Outlook 2013, Number 1
  • 16.• eplace piecemeal efficiency R countries we surveyed could reduce improvements with a holistic public spending by approximately “mission productivity” mindset. 7 percent by 2025. A full 1 percent annual efficiency gain would cutThe rewards for making these shifts public spending requirements byare potentially huge. Using 2010 data 13.5 percent over the same a baseline, Oxford Economics The United States alone could saveprojected that an overall public- as much as $995 billion by 2025 byservice efficiency gain of half increasing public-sector efficiencya percent per year across the 10 by just 1 percent a year.One size does not fit all: Personalizing servicesTraditional public services often Governments can providefollow a one-size-fits-all model: personalized services using fewerGovernments pour resources into resources by taking advantagea standard mold to produce the of new technology and organiza-same public services for everyone. tional design to make it easier forUnfortunately, simply funneling service providers to collaborate. Themore resources into the mold Istituto Nazionale della Previdenzato improve service levels does Sociale, the main Italian welfarenot typically produce the desired agency, has organized its servicesresults. Data from OECD member around the citizen. Users submitstates shows that even massive a single request and regardlessspending increases for standardized of how many subsidiary agencieseducation services, for example, are involved, the INPS and localdo not necessarily lead to better authorities collaborate to addressoutcomes in areas such as the user’s needs. Personalizationreading scores. can also reduce the cost to deliver services via better-targeted, moreThis standardized services model preventative approaches.stands in sharp contrast to the “mar-ket-of-one” evolution in the private Effective public-service personal-sector, which has allowed commercial ization depends on three actions.organizations to serve customersbetter at reduced costs. The personalcomputer industry has embraced Develop deep citizen insightsthe market-of-one concept of masscustomization for years, enabling These should form the core ofcustomers to “spec” their machine personalization initiatives. Whilewith a wide variety of performance the public sector has cautiouslyoptions and accessories. To drive embraced advanced analytics toproductivity, governments must improve service, several examplesshift to this same model of personal- already illustrate how “rich data”ized services. This implies design- can provide insights and guideing services in partnership with actions in public services.citizens—and delivering them inintegrated ways to provide exactly New York City’s Health and Humanwhat’s needed, when and in the most Services developed a program thatappropriate manner. employs advanced data management 15
  • 17. Public Service methods to create a comprehensive, Services. This measure decreased cost-effective view of a citizen’s administrative overhead and will interactions with city services. deliver efficiencies of $140 million Caseworkers across agencies can over four years. use the information collaboratively to create tailored services for The government of Maharashtra, families or individuals. India’s second most populous state, is at the forefront of implementing the Aadhaar (UID) project that Design citizen-centered services will ensure the delivery of benefits more efficiently. To date, 40 million Greater personalization requires residents have been enrolled. By governments to put citizens at reducing database duplication, the center of service design. As the state is projected to achieve outlined in the Driving Efficiency savings of up to 25 percent. report in the Australian govern- ment’s 2011–2012 budget, Canberra Designing citizen-centered services supported the development of implies a much greater level of ICT systems that make it easier integration, but so far, many initia- for customers to access Centrelink, tives have simply been “bolted on” Medicare and Child Support as a way of bypassing entrenchedDeeper in the redThe expenditure gaps—the difference between the demand for public services and the ability to pay for them—by 2025across 10 countries are expected to range from $10 billion in Singapore to as much as $940 billion in the United States. Total public- Annual percentage service expenditure, Expenditure gap by Expenditure gap as a increase in efficiency to Country in US $ billion 2025, in US $ billion percent of GDP in 2025 close the expenditure gap Australia $419 $50 3.0 0.91 Brazil $915 $70 1.9 0.57 Canada $724 $90 4.1 0.92 France $1,281 $100 3.3 0.58 Germany $1,402 $80 2.0 0.42 India $501 $70 1.5 1.11 Italy $873 $30 1.3 0.25 Singapore $53 $10 2.3 1.40 United Kingdom $1,016 $170 5.4 1.25 United States $7,328 $940 4.4 1.00Note: Economic modeling used 2010 data.Source: Oxford Economics, 201216 Outlook 2013, Number 1
  • 18. and jurisdictional Delivery of Services Bill instructures. In the future, govern- 2011, which, if enacted, wouldments need to integrate these direct every government agencyfragmented structures so that to deliver all public servicespublic services are centered on the electronically.holistic needs of citizens. In the future, citizens will become more involved in theEngage citizens as service design of their own public services,design partners and governments will begin to treat them as genuine partners. FredericiaPersonalization gives citizens Kommune, a local authority inmore power to determine how Denmark, has developed preventativethey are served. Enabling citizen solutions that enable older citizensparticipation in cost-effective to live independently at home, thusways requires a strong set of reducing the need for institutionalonline digital services, and for- care. By emphasizing healthtunately, many governments are education, enablement and smartalready on this path. One survey home-based technologies, theindicates that more than 60 initiative is generating significantcountries currently have online savings. Approximately 43 percent“e-participation” policies, which of participating patients now becomefocus on the use of information self-sufficient compared with onlyand communications technologies 5 percent three years ago, generatingin national government and annual savings of approximatelygovernance processes. India, for $2.7 million, or 14 percent of theexample, introduced the Electronic authority’s total budget.Tomorrow’s services today:Adopting insight-driven approachesGovernments will soon shift out Collaborate and cooperateof their reactive postures andembrace insights that enable them Effective cross-agency collaborationto anticipate the public-service often requires strategic information-needs of citizens. Why? The global sharing programs. In one examplepace of change has accelerated from the public safety field, Europol,and become more volatile and dis- the European Union law enforcementruptive, making reactive approaches agency, has established centralizedobsolete. Adopting an insight-driven capabilities for data matching thatpublic-service strategy will allow can identify the nature of criminalgovernments to predict tomorrow’s activity affecting multiple countries.service needs and cost-effectively What’s more, Europol’s Secureprovide the resources required to Information Exchange Networkmeet them. Application (SIENA) is one of a small number of secure internationalTo make the shift to insight-driven police systems, connecting all majormanagement, governments should police forces in Europe on the samefocus on the following priorities. platform. What’s unique about 17
  • 19. Public Service SIENA is that it complies with all legal ities from the bottom up without data protection and confidentiality major input from above. requirements and as a result ensures that member countries can exchange sensitive information securely. Adopt “emergent identity” services Share insights effectively With identity theft and fraud rampant worldwide, governments Getting the right information to need more reliable ways to ensure decision makers—whether police, that citizens are who they say they caseworkers, border agents or are. In 2012, Amsterdam Airport citizens—when and where they Schiphol piloted an automated need it while safeguarding privacy border control system featuring rights is an essential element facial recognition technology that of any insight-driven strategy. compares passenger identities For police and defense forces in against the digital photographs in particular, mobile devices coupled their passports. The system can with efficient information-sharing also identify forged passports and solutions enable those on the recognize people who may be on ground to organize complex activ- an authority’s “wanted” list. Public entrepreneurship: Focusing on value creation Governments today are underutilizing Beyond needed policy and legislation existing public-sector talent that changes that should, for example, could help them make the transition emphasize such areas as education to “public entrepreneurs.” Making and workforce development, the shift this shift can help governments to public entrepreneurship requires drive much-needed sustainable governments to do three things. job creation and long-term growth in the current tough economic environment. Public entrepreneurs Collaborate to boost impact focus on creating value, forging new relationships, collaborating Public entrepreneurs have a across traditional boundaries and number of options for building breaking through organizational collaborative partnerships that can silos to get things done. They multiply the impact of initiatives. partner to deliver value and take Using new delivery and organiza- calculated risks, understanding tional models can drive innovation that while some efforts may fail, and stimulate better economic others will not. outcomes; these efforts often involve spinning entities out of The shift to public entrepreneurship the public sector. repurposes the machinery of govern- ment to stimulate economic outcomes, For example, in the United Kingdom, collaborate and multiply the impact one healthcare center that converted of government investments. to an employee-owned mutual18 Outlook 2013, Number 1
  • 20. in 2008 reported involvement, Mexican central, state to compete globally, the effortsproductivity gains of 20 percent and local governments are recasting are unlikely to succeed. Given thein 2009; the quality of clinical the city center as a hub for the complexity inherent in the skillsoutcomes improved or was digital media industry with a goal development challenge, coordinationsustained as well. The greater of providing employment for 30,000 among the public, private and socialautonomy enjoyed by employees people while building an environ- sectors1 is critical.under the mutual model drove mentally sustainable creative culturethese productivity improvements. that can provide a better quality of However, a recent Accenture survey life for the local population. of European decision makers foundSome countries are creating public/ that although organizations fromprivate collaborations that harness all three sectors believe that suchtechnologies to drive both economic Develop labor pool skills collaboration is essential, less thanand social outcome improvements. 20 percent are working together onOne example is a major redevelop- Public entrepreneurs can attempt skills issues with players in the otherment effort in Guadalajara, Mexico. to help businesses flourish, but if sectors. Public entrepreneurs canWith significant private-sector a nation’s workforce lacks the skills address this shortcoming by building1 S ituated between the public and private sectors, the social sector includes cooperative organizations, nonprofits and charities.Big savingsIf the 10 countries listed below were able to improve efficiency in the deliveryof public services by just 1 percent per year, they would save a combined total ofalmost $2 trillion by 2025 annually.Savings in US$ billions Estimated 0.5% Estimated 1% Country efficiency improvement efficiency improvement Australia $30 $58 Brazil $63 $122 Canada $51 $99 France $91 $177 Germany $99 $192 India $34 $66 Italy $62 $121 Singapore $4 $7 United Kingdom $72 $139 United States $514 $995 Total $1.02 trillion $1.98 trillionSource: Oxford Economics, 2012 19
  • 21. Public ServiceFor further reading coalitions and partnerships between of streetlight that reduced running businesses, public agencies and costs and associated carbon footprint“Singapore Ministry of Finance: not-for-profit players to provide the levels by 33 percent.Shared Services,” Accenture 2012 labor skills needed for the future. Governments can also make betterPages/success-singapore-ministry- Accenture’s own Skills to Succeed use of the data they collect. Forfinance-shared-services.aspx initiative provides an example of this example, “data mashing” enables approach. By the end of fiscal 2011, agencies to merge public informa-For more related content, the initiative had equipped more than tion with different types of dataplease visit 160,000 people worldwide—two-thirds to produce new products and of the way to the goal of training a services that they then can sell. quarter of a million people—with the In Denmark, Geomatic, a private workplace and entrepreneurial skills company, uses government data to they need to get a job or build a busi- develop market insights that they ness. Partners in the Skills to Succeed sell to clients for marketing and initiative include the International strategy development purposes. Federation of Red Cross and Red Crescent Societies, Junior Achieve- Another opportunity: using tech- ment, Plan, Save the Children and nology to simplify interactions Youth Business International. between business and government. One leading example is Norway’s Altinn portal, which provides a Introduce intelligent stewardship single connecting platform to cover a whole range of government agencies. Governments have many ways Through Altinn, small and medium- to capitalize more fully on the size enterprises can obtain informa- resources they manage. They can, tion and submit applications without for example, use their sizable having to contend with multiple procurement budgets to catalyze authorities at different administrative innovation. Near Dublin, the Dún levels. Between 2008 and 2026, the Laoghaire-Rathdown County government expects Altinn to save Council invited teams of academics Norwegian businesses approximately and businesses to bid for a low- $1.6 billion through data handling energy street-lighting contract. The cost savings and the more efficient winning bid involved a new kind use of time. Optimal efficiency: Encouraging a ”mission productivity” mindset Instead of pursuing piecemeal public sector’s considerable scale attempts to improve efficiency, and assets. governments need to shift to a holistic “mission productivity” Savings from these actions could mindset that embraces broad, be substantial. Oxford Economics integrated thinking to prioritize estimates that if the United States and manage initiatives better. achieved annual 0.5 percent They must also take steps efficiency gains, it would realize to eliminate service delivery more than $500 billion annually in duplications and make use of the savings by 2025 (see chart, page 19).20 Outlook 2013, Number 1
  • 22. capture such gains, governments By restructuring core functions massive opportunities to makeshould pursue three courses of action. through consolidation and public services more effective and collaboration, governments can efficient. Leaders must realize, drive considerably higher levels of however, that the four shiftsFocus on outcomes public-service productivity through described here will require a economies of scale and scope, reformist’s zeal and a true commit-This will require governments to which can dramatically reduce ment to significant change.introduce performance management overhead costs and duplication.approaches that prioritize services In a notable example, Service While undoubtedly difficult,based on desired outcomes. While Canada merged more than 70 these shifts can help governmentsfull-scale prioritization efforts services from multiple agencies— worldwide resolve today’s seeminglycan be difficult, their impact can from the Canada Pension Plan and intractable public-service problemsbe profound: In Sweden, a priority Old Age Security to Employment while effectively positioning themreview during the 1990s reduced Insurance—into a single customer to meet the needs of tomorrow’saverage departmental spending service organization. The program 11 percent, helping to move saved more than $265 million infrom a budget deficit of 10 percent its first year alone.into a 1.9 percent surplus within About the authorsfour years. Introduce operationally Bernard Le Masson is the managementSome public-service organizations excellent administration consulting managing director forhave increasingly adopted practices Accenture Health Public Service.performance management to drive He is based in Paris.improved outcomes. While this is a These will support and enable more bernard.le.masson@accenture.comgood start, we believe they should productive core functions in twoalso use performance systems to ways. First, public entrepreneurs Brian J. Moran is the managingdrive continuous improvements should fully exploit government scale director of Accenture’s Public Servicein the value of investments. This to drive efficiencies. New Zealand’s Operations Management group.approach requires a budgeting government agencies, by jointly He is based in Cleveland.process that rewards outcome purchasing supplies and services brian.j.moran@accenture.comdelivery and shifts away from such as vehicles, office supplies,inflation-based budget adjustments. air travel and legal services, are Steve Rohleder is the group chiefSouth Korea has developed a unique expected to save almost $300 mil- executive of Accenture Health Publicperformance management mechanism lion over the next few years. Service. He is based in Austin, TX.whereby all public agencies must stephen.j.rohleder@accenture.comregularly review their programs Second, they should make betterthrough self-assessments focused use of existing assets. For instance,on total cost. Programs that are government agencies in Singaporerated ineffective face 10 percent developed a shared human resources,budget cuts. finance and procurement system to provide support to 15 agencies and 17,000 users. Over its lifespan,Restructure core functions the system is expected to help cut the cost of IT infrastructureThe second main thrust for by 30 percent.optimizing efficiency involvesthe core functions of governmentagencies. Worldwide, public services Governments worldwide faceare delivered in highly fragmented daunting public-service challenges.ways. For example, New York But with the right approach, weState alone has nearly 5,000 local believe they can overcome thesegovernment entities. obstacles by tapping into the 21
  • 23. StrategyCross-industry ecosystemsGrowth outsidethe boxBy Cedric VatierTo reap future growth benefits, companies must smash through the traditionalconfines of industry walls to seek collaborative opportunities that stretch acrossmultiple business sectors. 23
  • 24. Strategy Are industries obsolete? Consider, for instance, how Apple leads an ecosystem that spans Until recently, the concept of at least four industries—personal standalone industries made sense. computers, consumer electronics, From the Industrial Revolution on, information and communications— the world’s economy has consisted and now encompasses even of dozens of compartmentalized more, such as music and TV collections of companies, each (see chart, page 27). serving its own markets, teaming up with its own suppliers and Breaking out pursuing its own ways of capturing Because of today’s advanced value. In more settled times, this connectivity solutions and value- paradigm worked well; staying laden emerging markets, many within an industry’s established companies have never been better lines of business and ways of doing positioned to engage in multi-industry things made competition compara- collaborations. But few have broken tively straightforward and was out of the static industry box. the normal path to profitability. In fact, lacking today’s digital They had better figure out a way means to change the game or global to do so soon. Several Accenture opportunities to form new business studies suggest that future growth models, breaking out of the industry opportunities will increasingly box was all but impossible. emerge outside a company’s traditional business. And each of Today, however, disruptions in these opportunities will require everything from the flow of raw disruptive new approaches and materials to the nature of end collaborative models. markets have conspired to knock even well-rooted industries off- Meanwhile, the new competitive kilter. Fortunately, companies have dynamics will be shaped by a variety of technology-enabled two important factors. The first ways to smash through the confines is collectively known as Big of industry walls and unlock Data—increasingly vast pools new value-laden synergies in of information that empower pursuit of collaborative opportu- companies to link previously nities that stretch across multiple distinct industries. business sectors. But even though Big Data is blazing Welcome to the bold new world of countless fresh paths to growth, in business ecosystems, a term first many cases, companies need new coined two decades ago by James F. ecosystem partners to pursue them. Moore, an expert on leadership and These cohorts can help make up for change in large-scale systems, in a lack of internal competence or a Harvard Business Review article. provide access to information. What’s Instead of being rigidly grouped more, the intimate knowledge housed around a specific business or branch in an organization’s customer of manufacturing, ecosystems databases can open potential new draw together mutually supportive revenue streams beyond a company’s companies from multiple industries core business. that collectively seek to create differentiated offerings and capture The pursuit of new business oppor- value they could not reach alone. tunities depends on the availability24 Outlook 2013, Number 1
  • 25. increasingly scarce financing, Emerging markets are expectedwhich is the second factor shaping to drive up to 70 percent ofthe new competitive dynamics. This future growth for multinationalscarcity, along with the instability corporations. But penetratingin financial markets, is spurring these markets can present seriousthe emergence of innovative ways obstacles for most companies.for companies to obtain the capital In many cases, organizationsthey need. will need to develop innovative business models to meet specificAt the same time, burgeoning local market needs.public debt is forcing governmentsto reposition themselves as project Leading companies no longer viewinitiators that depend on outside environmental concerns as a barriersources of funding when it comes to growth, seeing them insteadto public-sector procurement (see as opportunities to be pursuedsidebar, below). Sharing costs with partner enterprises. The newand risks has therefore become sources of growth being created bya necessity for both private- and environmental issues often requirepublic-sector companies. a collaborative strategy that crosses industries. For example, offeringsFor these new multi-industry focused on energy efficiency arecollaborations, opportunities will be already being created by ecosystemsfound in three broad areas: emerging of energy providers, technologymarkets, the environment and providers, construction companiesmaturing Western markets. and more. Collaborating for cash Although originally, multiparty, cross-industry collaboration mainly consisted of public-private partnerships, it actually encompassed a wide variety of different models. More than half of these partnerships in emerging countries between 1990 and 2001 involved cooperation between the government and the private sector that was limited to the founding contract. These agreements also included technical and quality objectives, although they were secondary to the initial issue of financing. Today, traditional public-private partnership contracts are considered too complex; they are also considered inflexible because they lock partici- pants in for extended periods (often 20 to 60 years), making it extremely difficult to adapt to unexpected shifts in technology or environmental concerns. In the area of municipal services, however, an entirely different approach is emerging. A number of “smart city” initiatives reflect renewed interest in both public- private and private-private partnerships based on simple and innovative collaborative business models. These partnerships provide innovative ways for cities and their stakeholders to work together to access the resources needed to effect change (see story). 25
  • 26. Strategy Maturing Western markets still Better Place wants to introduce contain significant numbers of a totally new transportation sophisticated, affluent consumers. business model by positioning Instead of writing off these markets, itself as the provider of an end-to- companies need to capture value by end network and service solution pursuing new sources of competitive for electric vehicles. The company differentiation. Positioning an has established an ecosystem organization as an innovative market that links public authorities, disruptor can be both risky and which support development difficult, but it remains one of the through tax credits; automakers, best ways to generate significant which develop EV technology; profitable growth. battery suppliers; energy suppliers; and investors.Positioning an Disruptive business models These growth opportunities have At the same time, disruptiveorganization as an been spotted by a number of initiatives involving multipleinnovative market organizations that have already industries are transforming the seen the benefits of collaboration way we travel. Some ecosystemsdisruptor is one and have created cross-industry have already successfully deployedof the best ways to ecosystems. tools like location-based smartphone apps in airports. The “My Waygenerate significant Consider so-called smart cities. Aéroports de Paris” smartphone In the Netherlands, the city of app enables Paris-Charles deprofitable growth. Amsterdam teamed with energy Gaulle Airport terminals and network company Alliander, Android smartphone providers telecom operator KPN and city- to collaborate to help travelers affiliated agency Amsterdam navigate their way to airport shops, Innovation Motor (AIM) to create restaurants, parking terminals an experimental cross-industry and, ultimately, their flights. public-private ecosystem to reduce the city’s carbon footprint. Looking Other companies could develop beyond a basic commitment to ecosystems using location-based funding clean infrastructure, the technology as well. Clothing retailer project partners built a platform where Gap, for instance, in partnership a diverse array of different-size with a credit-card company, has companies can share expertise and introduced the Gap Mobile4U jointly lead projects to improve urban location-based service for text- living, working and mobility, and, at enabled mobile phones, which the same time, reduce the impact these sends Gap customers text messages projects have on the environment. with personal offers for deals at the nearest store. Electric vehicles also offer a compelling illustration of how More generally, highly diverse cross-industry ecosystems can segments of the population have usher in major paradigm shifts. come to expect uninterrupted Better Place, a venture capital-backed connectivity and virtual interaction. company, is structuring a new As a result, consumers no longer collaboration that ranges from the perceive travel as a solitary development of EVs with removable experience; regardless of age or batteries by automakers to the whether their trip is for business installation of networks of battery or pleasure, today’s travelers want charging and swapping stations. to be connected throughout their26 Outlook 2013, Number 1
  • 27. Transportation providers, companies have an easier timeInternet service providers and launching such cross-industry playsa vast array of other businesses as mobile payments or e-healthcare.can collaborate to enhance thetravel experience and address this In Pakistan, Telenor Pakistanemerging trend. partnered with Tameer Microfinance Bank in 2009 to introduce branchlessSuccessful cross-industry eco- banking for the first time to thesystem plays will differ mark- country. Launched under the brandedly based on whether they are in Easypaisa, the service is availableemerging or developed markets. to anyone in Pakistan through any authorized shop, Telenor Franchise, Telenor Sales Service Center orEmerging markets: Tameer Bank branch. CustomersEcosystem innovators can, among other things, pay bills, send and receive money fromEmerging markets offer particularly either within the country or fromfertile ground for developing abroad, purchase airtime for theircross-industry ecosystems, in part handsets and open a mobile bankbecause ways of doing business and account. Currently, there are 18,000customer expectations both tend Easypaisa shops operating in 700to be more flexible than those in cities across Pakistan.developed economies. In someemerging markets, for example, Health services players have adoptedmany consumers have long preferred an innovative model that integratesmobile over fixed-line telephony information and communicationsdue to the decrepit state of most technologies with healthcare tolandline networks. As a consequence, create new value for patients andThe new ecosystemsCross-industry collaborations can be structured to meet multiple objectives, such as reachingthe digital consumer or mastering mobile commerce, and can span multiple industries. Mobile Digital Commodity commerce consumer Retail New energy trading Banking Retail Retail Agribusiness Capital markets Retail Consumer Consumer Energy Energy Electronics Communications Banking Automotive Utilities and high tech Electronics Communications Postal and high tech Banking Communications Energy Electronics and high techSource: Accenture analysis 27
  • 28. StrategyFor further reading caregivers alike. In Mali, ecosystems managing the contract receives of telecom and healthcare partners a performance fee.“Cross-industry collaboration: have introduced remote X-ray imageCreating the enablers for disruptive analysis performed at often-distant An effective energy performancemodels,” Accenture 2012 regional hospitals. Alcatel-Lucent, ecosystem will focus on results Fondation Orange Mali, Afrique rather than resources. It willFor more related content, Initiatives, Medicament Export deploy expertise in new constructionplease visit (Medex) and Kafo Yeredeme worked and energy installations, and together to develop Pesinet, a service offer a financing solution (with that offsets the country’s shortage the investment repaid by the of doctors by greatly reducing resulting energy savings) as well physicians’ need to travel, allowing as an insurance solution (given them to focus on diagnostics and the uncertainty of the gains). advice from afar. Partnering with the Germany has been a pioneer in Ministry of Health in Mali, Pesinet this type of contract, which is now provides remote access to primary being adopted in other countries. healthcare for children by capturing data and transmitting it over the These approaches remain experi- GSM mobile network to doctors for mental and are not easy to get offsite monitoring. right. To succeed, it is essential for service providers to develop innovative tools, techniques and Mature markets: expertise that can reduce the A solid value proposition customer’s energy consumption even more than expected. In mature, extremely competitive markets, cross-industry collabo- Although cross-industry initiatives rations need to create significant have already proven their value, value or they will likely fail. Energy most companies still have not performance contracts provide created an ecosystem. Here are a viable example of what works. some suggestions for jump-starting these partnerships. These contracts add value in what may seem like static markets— buildings are already constructed, Focus on governance and customers have existing agreements proactive coordination with their utility and consumption patterns are established. With a A successful ecosystem requires performance contract, however, an strong governance. Significant ecosystem of partners, typically project resources must be allocated from the energy, construction to forging links among partners, and financial services industries, which means much more than simply commits to reducing a home or ensuring that everyone is aligned building owner’s energy bill, carrying with common objectives or when out any necessary refurbishment resolving conflicts. At each stage, or upgrades of energy-efficient project managers need to make use equipment and systems and of the wealth of stakeholder expertise encouraging behavioral changes to multiply the value created and to reduce consumption. If energy address issues as they arise. Project consumption is lower than the managers must also ensure open target set by the owner in the access to data and find innovative contract, the company or ecosystem ways to use the collective database.28 Outlook 2013, Number 1
  • 29. balanced collaborative project and a “test and learn” philosophy that A variety of possible alliancemanagement model will include sees trials as learning opportunities. structures exist, each having aseveral elements. Objectives and That means pursuing several possible larger or smaller impact on theirtimelines must be clear and shared, scenarios at once, welcoming new member organizations. Integratingfor example, and the remuneration ideas and innovative concepts, and an appropriate, flexible ecosystemfor each of the partners needs to acquiring the knowledge needed to can represent the first step towardbe spelled out. In addition, leaders implement them. this new strategy, avoiding themust authorize all trials and often-costly process of fully mergingpilot initiatives. The key to a successful disruptive with a partner that might have strategy lies in the ability to manage a fundamentally different cultureMoreover, a systematic approach the different aspects of these and operating model.and specific tools will be essential explorations and to chart a course tofor key project components such concrete, viable results. This strategyas business case management. works best when a fully engaged While reports of the demise ofIn particular, project managers top management team empowers a traditional industries might beneed to shepherd the creation and leader to meld the different and often greatly exaggerated, new opportu-implementation of forward-facing far-flung elements of the ecosystem nities to reach across industries tobusiness models that align with into a cohesive whole. capture growth unavailable withinthe interests of all stakeholders. traditional sector confines have The Amsterdam Smart City platform, become feasible for a growing for example, spans a range of number of companies. Even thoughDrive open project platforms urban planning and environmental the strategy is in its infancy,and entrepreneurialism projects. A pivotal clause in the companies have only a limited partnership agreement stipulates timeframe to lock in desirableInformation systems play a that the platform must act as a partners and build sustainablefundamental role in deploying and vehicle to cascade best practices ecosystems.operating these new ecosystems. among partners, small and mediumAn open information platform enterprises, industrial companies For many leaders, moving out ofenables companies to integrate the and local authorities. the industry comfort zone can becritical components of a smart city a difficult decision, but changingor other ecosystem and make them The platform is “open” not only market dynamics and increased“interoperable” across different because it allows information pressure on growth can make itsystems and stakeholders. exchange and participant involvement a necessary one. but also because it ensures thatState-of-the-art solutions also interdependencies and loyaltiesinclude cross-functional information between partners are taken into About the authorplatforms that are hosted in the account. Being open also enables thecloud and available as a service. platform to support the development Cedric Vatier leads Accenture’sThis approach has multiple advan- of differentiating business intelligence Strategy and Sustainability groupstages: New features and services and analytic approaches. in France, Mauritius, Belgium, thecan be deployed faster, the platform’s Netherlands and Luxembourg. He ispartner companies do not need based in build their own systems and Shift from being owners cedric.vatier@accenture.comall can access cross-industry data to collaboratorsregarding their common endcustomers. As a result, the infor- Being part of an extended, openmation system is no longer simply ecosystem supports a shift from aa function but rather a customer- sense of ownership—of customers,centered growth driver. suppliers, innovations—to a col- laborative, networking mindsetWhat’s more, the entire ecosystem that wants to develop ideas andneeds an entrepreneurial dynamic share successes. 29
  • 30. Strategy IIWhy gamificationis serious businessBy Marco Ryan, Andy Sleigh, Kai Wee Soh and Zed LiBy using the mechanics of digital gaming, companies in a wide range of industries areboosting innovation, building more effective marketing campaigns and driving value. 31
  • 31. Strategy II In 2011, Volkswagen Group invited on fast. Gartner research projects consumers in China, its largest that by 2014, more than 70 percent and most important market, to of Forbes Global 2000 organizations help the company develop new will have at least one games-based versions of the “people’s car.” application, and that by 2015, Participants were given a tool to half of all companies that manage help them easily design their new innovation processes will have vehicle, and they were able to post “gamified” them. their designs for others to view and to pick their favorites. The results Alluring applications were tracked on leaderboards so However, these companies are contestants and the general public not, either literally or figuratively, could see how the competing playing games. Gamification is designs were faring. serious business. The companies leveraging it are taking the essence Within 10 weeks, the online crowd- of what makes games so alluring sourcing campaign had received (a shared sense of purpose, more than 50,000 ideas. By the challenge and reward), decoding end of the campaign’s first year, at the mechanics that make them least 33 million people had visited work (personalization, rankings and the site, and the general public had leaderboards) and then applying chosen three winning concepts. these mechanics in a multitude One of them, a two-seater, zero- of imaginative initiatives to help emissions vehicle that hovers over enhance customer loyalty, motivate electromagnetic road networks, shoppers to buy and provide more was turned into an online video compelling mechanisms for retaining that swiftly became a viral hit on and encouraging talent. YouTube. Small wonder that VW, acknowledging its long-term The approach can be especially importance for the company’s future effective when applied to complex product development strategy, has challenges. Foldit, for example, announced that the project will is an online puzzle game devised continue indefinitely. by scientists at the University of Washington in Seattle to help them The People’s Car Project owes its understand the structure of proteins. success to VW’s recognition that In 2011, the game’s 240,000 participation in a popular business registered players were invited initiative needs to be not only to configure the structure of an enticing and rewarding but also enzyme associated with the AIDS engaging and fun—more than virus. Tracking their competing a bit, in fact, like playing a game. scores through shared leaderboards, Indeed, the name of the elimination Foldit players solved a problem section of the design contest—P.K., in three weeks that had stumped which stands for “player kill”—was scientists for 15 years. borrowed directly from the sort of multiplayer, online games that The results of gamification in a millions now play worldwide. commercial context can be equally impressive. Witness, for example, The application of such game-like the success of Nike+, the sports elements to the sort of business shoe company’s mobile and challenge that VW faced is known Facebook app, which lets users as “gamification”—and it’s catching establish personal running goals32 Outlook 2013, Number 1
  • 32. rewards them for reaching Generation Y, the demographicmilestones with congratulatory born between 1980 and 2000, hasmessages from celebrity athletes. not only grown up in a digitalNike+ membership soared 40 percent world. They are also enthusiasticin 2011, helping boost revenues in online gamers, driving the growththe company’s Running category of an industry that Gartner reckonsby 30 percent. will be worth $112 billion globally by 2015. These consumers areThe potential power of such games- rapidly becoming employees asbased applications and ventures has well—by 2015, they’ll form thebeen magnified by the convergence majority of the US workingof two major trends: the coming population. And they like to beof age of Generation Y, and the communicated with, both whenovercrowding of the digital space, shopping and at work, via thewhich makes it harder for companies game-like mechanisms they plainlyto stand out. love (see sidebar, below). Generation Y: Learning from the source Among the expectations that distinguish Generation Y—the first to grow up with the Internet and smartphones—from its predecessors is the assumption by its members that they will be communicated with via mechanisms that imitate the competitive, connected and personalized world of the online games they play so enthusiastically. That should make Generation Y an ideal test bed for attempts to apply the principles of gaming to marketing, product differentiation, brand advocacy and employee motivation (see story). Yet despite its preferences and their concomitants—an apparent indifference to privacy issues, a tendency to text rather than talk and a desire for instant gratification—Gen Y will be a hard nut to crack. The under-35s fully anticipate that they will be “pitched”—but they also have clear views of what they want from those doing the pitching. They demand authenticity, in both voice and content. And they will shun, and even mock, approaches they perceive to be dishonest and manipulative, preferring to place a premium on the recommendations of socially networked “friends.” As employees, they can be equally picky. They typically like to multitask and tend to demand considerable job flexibility. Indeed, their desire for constant stimulation and personal recognition, if unfulfilled, can make them fickle workers who will jump ship all too readily. However, with more and more of this decisive demographic entering the workforce, the opportunity to learn from them directly is growing too. At a time when the design, development and testing of games-based initiatives is in its formative stages, tapping the talent of a generation that so instinctively understands the power of gaming could prove pivotal. 33
  • 33. Strategy II The appeal of game mechanics Consider, for example, TripAdvisor, extends well beyond this key the US-based travel website, which cohort, however. As the growing boasts more than 75 million reviews predominance of digital media and opinions—contributed voluntarily indicates—in the United States, by individuals who clearly enjoy online advertising was forecast their status as trusted sources of to overtake print in 2012 and is valued information. fast closing in on TV—many older adults are also becoming digital- Collective values device-savvy. And they are In some regions, notably SoutheastGame mechanics often just as keen as the young Asia, a peculiar combination ofhelp penetrate the to compete with their peers and well-entrenched collective values publicize their accomplishments—the and unusually developed digitalwalls that consumers essential principles of gamification. enthusiasm is driving an exception- In fact, 37 percent of US gamers ally healthy appetite for gamificationhave erected to filter are older than 35. In both the initiatives (see sidebar, opposite). Butout the deluge of United Kingdom and the United reaching consumers by these means States, adult social gamers—people in any geography requires an acuteinformation that who play games that include understanding of what makes gamesincreasingly clutters strong social elements—now so compelling. constitute the majority of playerstheir digital space. on mobile devices. In Accenture’s experience, seven elements are especially significant. Companies, of course, have been applying game-like elements to achieve business objectives for 1. Status decades. Consider the Solitaire application that Microsoft included Because gamers are motivated in its release of Windows 3.0 in by the recognition of others within 1990 to help acquaint users with their social community, business the newly introduced click-and-drag solutions leveraging game mechanics functions of the mouse. But the need to ensure that players’ Digital Age has thrown up new reputations can be enhanced. challenges, and the application of game mechanics offers companies Consider, for example, Stack the chance to crack one of its Overflow, a site for programmers particularly critical conundrums: and digital geeks that synthesizes how to penetrate the walls that wikis, blogs and Internet forums. consumers have erected to filter Users are invited to submit answers out the deluge of information and and solutions to questions and opportunities that increasingly challenges posed by their peers, clutter their digital spaces. through which they earn badges that appear on their user pages. Today’s consumers are more likely to junk business marketing messages than act on them. But if a trusted 2. Milestones source serves as the messenger, campaigns can become collaborative Levels are everything in gaming, exercises, utilizing social networks and enabling participants to perceive to spread the message—and applying progress through incremental game mechanics to engage more and more participants. (Continued on page 36)34 Outlook 2013, Number 1
  • 34. Asia: A passion for gamingFew regions of the world offer more promising territory for games-basedmarketing initiatives than Southeast Asia. In Singapore and Malaysia, forexample, 95 percent of the population—10 percent more than the globalaverage—owns a laptop or PC. And Singapore boasts the world’s third-largestsmartphone penetration, after Saudi Arabia and the United Arab Emirates.This digital predilection also influences the way people interact. Sixty-fivepercent of Indonesian Internet users are also daily users of social media,compared with just 54 percent of Internet users globally. Nearly half of Internetusers across the region play online games every week, 6 out of 10 of themvia social networks. And the regional digital gaming market is expected tomore than double between now and 2016, accounting for nearly 60 percentof global sales.What’s more, Southeast Asians respond with alacrity to the commercial messagingembedded in social media. Nearly half of Malaysian gamers, for example,search online to learn more about a product or brand they first saw advertisedin a game. And almost three-quarters of Indonesia’s social network users agreethat such networks are good places to learn more about brands and products.When Citibank launched a credit card aimed at 21-to-35-year-old Singaporeans,for example, it incorporated social media features designed to let them personalizetheir experiences. Users could gain points by checking in at specific locations,such as restaurants or stores, and “sharing” or “liking” deals on Facebook.They could also vote for a particular experience or location and win a specialDeal of the Month from winning establishments.Digital familiarity isn’t the only reason why the region matters so much toorganizations looking to apply game mechanics to their marketing and recruitmentdrives. It also contains a high proportion—10 percent higher than in China, and14 percent higher than the United States, for example—of Generation Y, thedemographic most likely to respond positively to such gamification initiatives(see sidebar, page 33).In Southeast Asia, moreover, this generation is well integrated within oftenextended families. Indeed, the strength of traditional collaborative values—known locally as kampong, or a village-based sense of community—can helpmobilize broad swathes of the community as campaigns go viral, providingthe collective legitimacy so important to launching products and establishinga presence in the region. 35
  • 35. Strategy IIFor further reading (Continued from page 34) But more important, users are able to see how they are doing in relation“Gamification and sustainable accomplishments is vital to to some aggregate of others in theirbehavior change in the workplace,” sustaining interest. Case in point: neighborhood, and that can motivateAccenture 2012: Starbucks Corp.’s rewards card, them to try to which awards a star for everysustainable-behavior-change.aspx coffee purchased. Users qualify for free drinks or food when they 5. Social connectedness“Playing Your Digital earn a certain number of stars.Cards Right,” Accenture 2012: People typically join a game because their socially networkedus-en/Pages/insight-playing- 3. Competition friends are playing it—and enoughdigital-cards-right-summary.aspx “likes” can unleash a tidal wave of Accenture’s own Steptacular interest. So successful gamificationFor more related content, application, which is designed to initiatives need to create a strongplease visit encourage employees to improve sense of community. In 2010, for their fitness by walking more, enables example, when the Japanese soft participants to compete with one drink seller Pocari Sweat decided to another by sharing and comparing embark on an aggressive marketing their achievements—a major motivator campaign for its electrolyte drink in maintaining engagement. It also in Indonesia, an online game rewards them with “Celebrating called Ionopolis played a critical Performance” points that can be role in the launch. Nearly 94,000 used to redeem such products as people signed up to collaborate in iPads and cameras. defeating a host of comic-book monsters hell-bent on dehydrating a virtual city. Players buy drinks 4. Rankings in return for in-game benefits, including codes to fill their hydration Visual displays of progress and meters; they can also post rankings help participants track status updates on Facebook or their performance against both their Twitter, and check into specific own goals and the performance locations on Foursquare to perform of others. The rankings tap into certain tasks. people’s natural competitiveness and encourage them to do better, boosting repeat visits motivated by 6. Immersion reality the desire to improve their position. With their detailed graphics and In the United States, for instance, exciting animation, digital games customers at more than 60 electric make players feel completely utilities receive home energy immersed in their virtual reality. reports generated by Virginia-based And companies seeking to apply software-as-a-service provider games mechanics to their business Opower. These reports include take visual stimulation seriously. their ranking versus their neigh- Witness the video script used to bors and targeted tips designed to market Nike+: “Picture yourself motivate them to reduce energy out on a run. With Nike+ that consumption to levels “normal” run becomes an endless parade of in their neighborhoods. The most information about you—how fast energy-efficient homes are recog- you’re going, how far you’ve gone, nized with smiley-face emoticons. how long you’ve been at it. . . . Got36 Outlook 2013, Number 1
  • 36. friends? Awesome. Put ’em And the gamification approachesto work. They can cheer you on need to be targeted where there iswhile you are running by posting significant demand—in markets orcomments to your Facebook page. employee groups where Generation YBetter yet, challenge them. If predominates, for example, or bythey’re really your friends, they’ll leveraging channels such as smart-still talk to you while they’re phones, tablets and social networkschoking on your dust.” where games-based applications will be familiar and expected.7. Personalization Nor should applying games-based solutions involve a revamp of theThe ability to customize promotes business model. Companies cana sense of ownership in the start small—with reward pointsgame through self-expression. per purchase, for instance. AndSuperBetter, for example, is a they could benefit by forging linkssocial platform designed to help with digital marketing agenciespeople recovering from an illness and specialist, turnkey providersor an accident (or, indeed, people to boost their knowledge andwho just want to feel better about understanding.themselves) boost their personalresilience. Users describe their There is no perfect place to start—challenges or goals and receive but neither is there any time topersonalized “power-ups”—strategies waste. The benefits of gamificationto beat anxiety, for instance, or may take time to realize, but incustomized diet plans—as well as an increasingly interactive world,“bad guys” to avoid, and person- they are likely to deliver enduringalized “quests.” They can keep competitive advantage.track of their progress—and shareit with others—via a customizedto-do list. About the authors Marco Ryan leads AccentureCompanies don’t need to utilize Interactive in the ASEAN region.all of these options to harness He is based in Singapore.the power of gamification. Much marco.ryan@accenture.comdepends on whether the initiative istargeted at consumers or employees, Andy Sleigh is the directorand whether its mission is to promote of research at Accenture’sproducts or processes. Management Consulting Innovation Centre in Singapore.Game mechanics are probably most andrew.sleigh@accenture.comeffective in tackling challengesthat have been difficult to solve. Kai Wee Soh is an analyst withConsider, for instance, the Google Accenture Interactive. He is basedImage Labeler game, which was in between 2006 and 2011 and kai.wee.soh@accenture.comhelped Google create better matchesbetween keywords and images Zed Li is a consultant with Accentureby inviting people to compete to Interactive. He is based in Singapore.extract the multitude of meanings millions of images. 37
  • 37. High-Growth MarketsInclusive business initiativesScaling innovation for anemerging middle classBy Raghav Narsalay and Ryan T. CoffeyEfforts to create innovations that can meet both social and business goals in low-incomemarkets are fraught with unanticipated dangers. A study of 18 initiatives from around theworld reveals how ventures can succeed where others have failed. 39
  • 38. High-Growth Markets It’s not easy innovating for company’s leaders felt was necessary the millions who are climbing to justify further investment. In short, from the bottom rung of the the initiative didn’t scale. income ladder in high-growth and emerging markets. Even when In a past issue of Outlook, we much goes right, many initiatives explored how a number of companies go wrong. are overcoming the many obstacles to “inclusive growth” and seeking Take the recent example of a large new markets in low-income com- company that had developed a munities. More recently, Accenture highly nutritious, low-cost food conducted further research into product. The company then recruited the subject, looking at what we call a sales force of local women, who “inclusive business initiatives,” or developed recipes and coordinated IBIs—businesses aimed at profitably cooking sessions in remote communi- scaling innovation in these markets— ties to market the product. and asking: Why do some initiatives achieve scale, bringing both social A yearlong trial proved that benefits to low-income populations prospective customers found the and profits to the company? To find product affordable and easy to use. out, we undertook an ambitious And profit margins were in line comparative study on innovation, with expectations. But despite the looking at 18 initiatives in five company’s best efforts—“co-creating” countries: Brazil, China, Ghana, a useful product with local commu- India and Nigeria. nities; using salespeople with local knowledge—the venture failed. We discovered that successful initiatives met three key require- The problem: The product didn’t reach ments for achieving the scale enough new customers at a pace the companies need to thrive. 1. Getting top leadership on board Lack of real or sustained support from the board and top management dooms many new projects. This is true even for a major effort at cial resources and refuse to sanction a large company. But inclusive busi- organizational reforms that would ness initiatives face special hurdles. help better align the venture with the requirements of external partners. Many boards, for example, demand to see sales and even profits quickly Effective IBI leaders, however, apply once they have approved an IBI. Di- several innovative approaches to rectors and senior leaders often fail to overcome these problems. appreciate that shaping purchase be- haviors and winning trust in low-in- come communities requires more time Encourage top leadership to have than middle-class market initiatives a personal stake in the initiative. need. Further, when doubts about an IBI’s potential surface, leaders often When board members and senior withhold the needed talent or finan- leaders are personally committed,40 Outlook 2013, Number 1
  • 39. sponsors and managers sponsors and managers ofwill have enough time to develop inclusive business initiativesthe local connections necessary for must encourage senior leaders toachieving scale. take a longer-term view.In India, for example, Hindustan Consider an initiative by Alibaba Sponsors andUnilever Limited’s CEO fostered Group, China’s largest e-commercehigh-level commitment to IBIs by company. In 2006, a few entrepre- managers of inclusivebuilding a decision-making structure neurial furniture makers in a small business initiativesthat appealed to the board’s entre- town in the eastern Chinese provincepreneurial spirit. After a 15-month of Jiangsu launched online storefronts must encourageexploration process, HUL selectedsix ventures for further investment on Alibaba’s consumer-to-consumer e-commerce platform, Taobao senior leaders to takeover the next three years. To ensure Marketplace (, with a longer-term management’s continued support, the aim of accessing larger markets,the six project managers reported including Beijing and Shanghai.regularly to a newly created ventures Seeing a potential businessdirector and made quarterly progress opportunity, Alibaba’s localreports to the chairman and other managers asked the company’sboard members. board for funds to promote the e-commerce platform to the otherHUL’s board effectively operated as villages in the area and to trainventure capitalists, granting project local entrepreneurs to build onlinemanagers resources in the form storefronts. To get around theof people, money and specialized board’s skepticism about whethercompany expertise. Team leaders the initiative fit with strategicwere also given scalability mile- objectives, managers pitchedstones, and teams were allowed to the project as a corporate socialmove to the next level of venture responsibility initiative, and thefunding only after reaching them. venture was funded on that basis.This competitive environment keptboard members heavily involved in The CSR funds for training localthe inclusive ventures, even though entrepreneurs helped support thethey accounted for only a small rapid expansion in online storefrontspart of the company’s bottom line. based in the small town. By 2008, the number of local online storefrontsOnly two of the six IBIs survived had increased tenfold to more thanthe three-year test period. One was 100; by 2010, more than 2,000 shopsPureit, a water purifier. The other were online, with more than 400was Project Shakti, the landmark owners of online stores participatinginclusive business initiative in in online sales. The town now hostswhich thousands of village women more than 180 furniture factories(and now men) have brought HUL’s and some 20 logistics firms. Perhapsproducts to rural India. most important, its furniture has become a recognizable brand among higher-income consumers in China’sPrevent a short-term focus on large urban markets.the bottom-line. While rural initiatives still have aTo offset top leadership’s natural limited impact on Alibaba’s bottomconcerns about the near-term line, the scalability of these initiativesfinancial impact of a new initiative, has convinced the company’s 41
  • 40. High-Growth Markets leadership of the long-term value of sponsors and managers need to rural-to-urban e-commerce. promote inclusive ventures to the company’s workforce and create incentives that encourage employees Get top leadership to allocate to take on new roles. the right talent. Take Mumbai-headquartered YES With a project as challenging as BANK. The company’s senior man- an inclusive business initiative, agement built a team of top-flight second-tier talent won’t cut it. IBI talent to develop and execute anCompanies in the research sampleTo ensure geographical and cultural diversity in the sample, we selected inclusive business initiatives from five emerging marketsin eight sectors. These initiatives are a core business activity of their parent companies, and each company has annual salesof more than $300 million. Country Company Sector Key infrastructural deficit addressed Key institutional deficit addressed IBI business structure Brazil Vale Mining Created business infrastructure Provided training to small Homegrown for middle- and low-income suppliers entrepreneurs in remote locations from remote locations through organized partnerships Natura Consumer Developed supply chain and Developed systems to link Homegrown products innovation infrastructure to process local knowledge and indigenous indigenous knowledge and materials communities to markets in the goal of creating wealth with low-income communities Itau Banking Collaborated with local vendors to N/A Homegrown provide finance to small entrepreneurs and low-income households UNICA Agricultural N/A Collaborated with sugarcane cutters, Industry products their unions and companies to collaboration create institutions for training cane cutters and identifying suitable job opportunities for them Klabin Agricultural Provided collateral to farmers to help Created new institutions to secure Homegrown products them access credit facilities through better returns on forestry products organized banks produced by farmers China Siemens Medical Built healthcare and diagnostic Developed an extensive program MNC subsidiary China equipment centers across different parts of to train doctors in rural locations rural China Haier Consumer N/A Collaborated with local entrepreneurs Homegrown products to create reliable franchise networks in remote villages SAIC-GM- Automotive Created an affordable transportation N/A Joint venture among Wuling platform for rural farmers and government, a enterprises to engage with urban domestic private- markets sector company and a foreign company Nokia Telecom- Collaborated with local partners Established an extensive sales channel MNC subsidiary munications to develop handset applications in third- and fourth-tier townships connecting low-income populations as well as in rural areas in China with to organized markets the support of local communities42 Outlook 2013, Number 1
  • 41. venture centered on bring- instead would have to feel personallying banking services to low-income committed to the initiative’s vision.communities in India. To attract The board and the project managerteam members, managers defined the also made it clear that failure toproject as a key strategic objective. achieve profitability in the short term would not hurt team members’Backed by the bank’s board, the IBI promotion prospects.manager stipulated that team recruitswould not be allowed simply to With the right people in place, the“meander into” the project but bank has created a variety of new Country Company Sector Key infrastructural deficit addressed Key institutional deficit addressed IBI business structute China Alibaba E-commerce Developed an e-marketplace N/A Homegrown (continued) platform that helped furniture makers overcome poor physical infrastructure and reach urban markets India ITC Agricultural Developed physical and technological N/A Homegrown products infrastructure to aggregate the collection of local agricultural produce and make pricing information readily available to farmers Tata Motors Automotive N/A Created an accessible skilling Homegrown platform for rural youth Hindustan Consumer N/A Created a sustained platform for MNC subsidiary Unilever products training women from remote rural villages to become successful entrepreneurs YES Bank Banking Created technological and business N/A Homegrown infrastructure in collaboration with warehouses and vendors to make financial services accessible to remote and low-­ncome populations i Idea Cellular Telecom- Partnered with local grocery stores Created institutional mechanisms as Homegrown munications to overcome poor sales infrastructure part of its business model to train and in rural markets employ rural graduates Ghana Esoko Agricultural Facilitated agricultural e-commerce N/A Homegrown products through a web-based market information platform Nigeria Promasidor Consumer Created a distribution system N/A Homegrown products to acquire and distribute milk at affordable rates Nestlé Consumer Provided farmers with technical Created courses to train farmers how Homegrown Nigeria products assistance to reduce costs related to increase their income through more to pesticide use effective crop planningSource: Accenture analysis 43
  • 42. High-Growth Markets offerings that benefit low-income a significant amount for a farmer populations. One program provides in northern India. Through partner- low-cost credit, warehouse storage ships, the bank also offers migrant and price supports to honey workers a low-cost way to wire producers. Between 2007 and remittances home from hundreds 2011, more than 2,000 farmers of locations at all hours of the day. borrowed $3.5 million and saved, So far, the program has served on average, hundreds of dollars— 140,000 workers. 2. ollaborate with governments in C strategic partnerships In theory, governments and businesses in high-growth and emerging markets should be aligned in their focus on inclusive growth. But it’s not that simple. Government partners can provide but also for business, and with the resources and local market their small engines—1.6 liters or knowledge required to make smaller—each minivan qualified an inclusive business initiative for a government subsidy of up profitable. However, ineffective to RMB 4,000 ($630). collaboration and the wrong kinds of regulation can also suffocate an The speed with which the govern- IBI, forcing the sponsoring company ment acted to improve the company’s to turn it into a low-priority initiative viability encouraged the firm to or kill it altogether. take on the Guangxi provincial government as a key stakeholder. To make the best use of government The city of Liuzhou, which currently support, successful companies apply owns a 5.9 percent stake in SAIC- the following practices. GM-Wuling, has been instrumental in providing the company with timely access to land, funding and Collaborate to help utility infrastructure, all critical for low-income consumers. the company’s expansion plans. It’s critical for IBI managers to By the end of 2009, SAIC-GM-Wuling match business opportunities with had become the first Chinese auto government goals. SAIC-GM-Wuling, manufacturer in the minicar segment a joint venture of General Motors, to have produced and sold more than SAIC (formerly known as Shanghai 1 million automobiles in a single Automotive Industry Corp.) and calendar year. The company continues Liuzhou Wuling Motors, capitalized to be the segment’s leader today. on the Chinese government’s efforts to reduce carbon emissions and stimulate rural growth. It developed Collaborate to help a series of minivans that sell in the low-income workers. neighborhood of $5,000. These are especially valued in rural China Government regulations can become not only for personal transportation platforms for launching business44 Outlook 2013, Number 1
  • 43. that create value for low- advances and concerns aboutincome communities, for companies environmental damage from theand for governments. UNICA, an fires favored a shift to mechanizedassociation that represents more harvesting. In 2007, the statethan 140 Brazilian sugarcane mills, government of São Paulo signedis a case in point. an agreement with UNICA that would ban the burning of sugar-In Brazil, the sugarcane industry cane fields by 2017—a changehas long relied heavily on laborers that would put thousands of canewho cut cane by hand. Before the cutters out of work.harvest, the fields would be burnedin order to remove sugarcane straw In 2009, sugarcane producers,(the plant’s top and leaves) as well under the umbrella of UNICA andas to drive away snakes, scorpions the cane cutters union, and withand other creatures that might harm the support of companies from thethe cutters. However, technological sugarcane supply chain, launchedScoring the progress of an inclusive business initiativeIn reviewing the academic literature on inclusive innovation, we identified six processes that were common to successful ventures.This table allows the leaders and sponsors of IBIs to evaluate the relative strength of their projects (1 = weakest, 4 = strongest). Scores Processes 1 2 3 4 Top leadership buy-in Top leaders, such as the Top leadership helped Top leaders participated Top leaders participated CEO or board members, conceptualize the IBI but did at a moderate level in actively in the provided no support not take an active interest conceptualization and conceptualization and in implementing it implementation of the IBI helped the IBI achieve scale Organizational Organizational architecture Senior managers adopted Senior, middle and A completely new structure reform was not changed to additional responsibilities junior managers adopted organizational architecture implement the IBI to implement the IBI additional responsibilities to emerged as the IBI evolved implement the IB to successfully scale the initiative Co-generation with No one generated Targeted communities Targeted communities Active participation of targeted communities knowledge, solutions or participated only in the helped conceptualize and targeted communities was or customers programs with targeted execution stage of the IBI execute the IBI essential for enabling the communities IBI to achieve scale Collaboration with Government had no Government provided Government provided The initiative owes its government departments involvement in the IBI support but no resources resources to execute the scalability to support from or agencies or any other direct support IBI or made policy changes government to the initiative to support execution and scaling of the initiative Collaboration with NGOs and small They collaborated but They had a stake in and The initiative owes its NGOs and/or small entrepreneurs had no did not share any risks assumed sufficient risks scalability to collaboration entrepreneurs involvement in the IBI associated with the IBI related to the IBI with NGOs and/or local entrepreneurs Supportive regulatory The formal or informal The regulatory environment The regulatory environment The regulatory environment environment regulatory environment had no impact on execution provided indirect support was directly responsible created barriers to of the IBI for execution of the IBI for execution and scaling execution of the IBI of the IBISource: Accenture analysis 45
  • 44. High-Growth MarketsFor further reading the RenovAção (“Renewal”) program Everyone wins: The government aimed at providing specialized gets reduced pollution; the industry“Inclusive growth: Closing the training for about 3,000 cane becomes more efficient, whilecommitment gap,” Outlook 2011, No. 3: cutters in São Paulo. Many former avoiding non-compliance penalties; cutters were retrained for new jobs and the workers are provided withoutlook/Pages/outlook-journal-2011- at the mills. Others were trained in a safety net in the form of traininginclusive-growth-closing-commitment- skills that would best serve local in new job communities, such as plumbing, horticulture and garment making.For more related content,please visit 3. artnering with local NGOs and P small entrepreneurs In the absence of direct or indirect government sponsorship for an IBI, large businesses must look elsewhere for help, often turning to partnerships with entrepreneurs and NGOs. This approach, too, presents because of the deforestation they challenges. Consider the issue of had caused in the Brazilian reputation. Inclusive innovators rainforest. Accordingly, Natura may collaborate with apparently focused on building relationships well-regarded NGOs and entre- with local NGOs in support of preneurs, only to realize later that environmental preservation. those reputations do not travel well to new, untested markets. But the company soon found Moreover, partners, especially that a lack of organization among those with international scope, these entities would make it may have many clients and thus difficult to achieve the operational lack the needed resources or efficiency necessary to develop focus to effectively drive the a profit-making IBI. So Natura set initiative’s success. up an “eco-relations management” department, which is solely Inclusive innovations that have responsible for managing NGO effectively partnered with such partnerships and training the stakeholders have done so through groups to improve their operational the following means. efficiency. The company has also begun Establish in-house platforms to asking NGO staff members to help partnerships run smoothly. accompany Natura’s own teams of anthropologists and biologists Natura, the large Brazilian cosmetics on visits to local communities. As company, recognized that collabo- one senior executive noted, “The rating effectively with local NGOs company does not send a buyer to would be critical to earning the interact with the community, but trust of indigenous communities and someone who understands the gaining access to their knowledge. social logic.” This approach has Members of such communities were helped the company gain the trust often wary of outside businesses of local communities and develop46 Outlook 2013, Number 1
  • 45. channels that dovetail By 2011, the initiative included franchisees and to use their localwith the communities’ social structure 19,000 farmers, and, according to connections to build a profitableand cultural expectations. company statistics, more than 98 agro-information service based percent of them had seen increased on Esoko’s technology platform. income since joining the program. In It provides franchisees with aPartner with authentic NGOs. per capita terms, they had realized toolkit that contains marketing an average income growth of 49 materials and information aboutTo build a strong network of percent during the preceding eight Esoko’s standardized pricing forNGO partners, inclusive business years. And 153 million seedlings its service. Currently, franchiseesinitiatives must be able to identify had been distributed to farmers over have been authorized in 15 countrieswhich NGOs are authentically local an area covering 87,000 hectares. across Africa.and which are not. Local NGOsunderstand the informal institutions,such as social hierarchies, that Rethink the business model to Large companies are increasinglygovern low-income communities. build scale faster. recognizing the valuable businessAnd they have aligned themselves opportunities that can come withwith local values to gain these Because a for-profit organization developing and executing inclusivecommunities’ trust. may be able to achieve scale faster business initiatives. By creating than a nonprofit initiative—it will innovations for low-incomeIn Brazil, major paper producers, certainly have the incentive to do markets, they can not only helpincluding Votorantim, Klabin and so—IBI leaders may want to rethink consumers enter the middle classSuzano, are engaging Amazonian their NGO relationships. Changing but also fuel profitable new growthcommunities through local NGOs the ownership model is one way for themselves.and using these relationships to of doing so.advance sustainability practices This requires hard work and a grass-roots level. To cite Africa-based Esoko shows how this It may even call for a new mindset—one example, Klabin’s Forestry can be done. Initially established including a willingness to lookIncentive Program, first introduced as Tradenet in 2005, the company beyond an inclusive initiative’sin 1987, aims to increase rural offered an SMS-based service to short-term impact on companypopulations’ incomes by developing gather and disseminate agricultural profits. But the investments cansustainable forests that Klabin can data to customers such as individual pay big dividends, if these newharvest for timber. Initially, the farmers, researchers and traders ventures are approached with bothForestry Incentive Program provided in Africa. speed and with resources andknow-how. However, Klabin found In 2009, the initiative was rebrandedthat even with this support many as Esoko, and the company changed About the authorsfarmers continued to use what its business model in an effort tothey knew best—older and less reach more customers. Although the Raghav Narsalay, who is based insustainable methods. company possessed a sophisticated Mumbai, leads the Accenture Institute technology platform in agro- for High Performance in India.To bring these farmers on board, informatics, it lacked the financial raghav.narsalay@accenture.comKlabin set out in 2005 to inspire a clout and local relationships tochange in behavior by partnering achieve scale on its own. In an Ryan T. Coffey is a senior specialistwith Apremavi (the Association for effort to increase its reach and with the Accenture Institute for Highthe Preservation of the Upper Itajaí guarantee long-term commercial Performance. He is based in Mumbai.Valley), a local NGO. Apremavi had viability, Esoko launched a franchise ryan.t.coffey@accenture.combuilt and maintained long-term model, which aimed to build on itsrelationships with local producers existing relationships.and thus was able to convincethem that sustainable forests Esoko’s model encourageswould help secure their industry’s governments, NGOs and private-long-term viability. sector organizations to become 47
  • 46. ChinaMeet the newChinese consumerBy Jeffrey I. Beg, Tzeh Chyi Chan and Xuyu ChenSuccessful consumer marketing in China is, in many ways, as much art as science. It combinesa sophisticated understanding of local perceptions and preferences with a willingness to embraceunconventional strategies and the best new technology.48 Outlook 2013, Number 1
  • 47. 49
  • 48. China During the past three decades, 1. mbrace a more complex, E profound social, economic and not a simpler, marketing cultural changes in China have channel strategy converged to create a consumer market that is unlike any other. To make informed purchasing Complicating matters is the speed decisions, consumers in China at which the market continues rely on multiple channels, ranging to evolve. from direct-mail campaigns and advertising to the Internet. But it To win the hearts and wallets of is the online channel that customers Chinese consumers, local and turn to most often when looking multinational firms alike need to for product or service information. master a new art that combines In 2012, the proportion of consumers the ability to generate meaningful doing research online topped consumer insights amid unprec- 90 percent. edented change with the agility to act on those insights quickly Like shoppers in other parts of the and proactively. We refer to it world, Chinese consumers tend to as art because it requires not “research online, purchase offline.” simply applying tools and science And this so-called ROPO effect but also sometimes embracing is growing. In 2010, 33 percent unconventional and counter- of Chinese consumers purchased intuitive approaches. products offline after looking online for pricing, product and brand Along with the promise of oppor- information, as well as for customer tunity, these approaches come with reviews. In 2011, that figure jumped a certain amount of risk as well. to nearly 43 percent. Meanwhile, And as with any art, experience the value of ROPO sales during that is both the teacher and the driver one-year period more than doubled, of excellence. Here, then, are five to $90 billion. movements—brushstrokes, if you like—that Accenture believes the Given that the boundaries separating best marketers in China can apply online and offline worlds will to master their art. continue to blur, it’s critical that companies develop a multichannel Counterintuitive marketing strategy in China that Over the past several years, makes it easy for consumers to carry Accenture studied the behavior out online and offline activities. of consumers in China to gain And these multiple channels must a better understanding of the be seamlessly integrated to deliver sales and marketing approaches a consistent experience. that resonate in that countr y. In 2011, we surveyed more than 330 consumers in China to better 2. ell yourself to everyone, S understand their behaviors, attitudes including non-buyers and expectations. In 2012, we conducted a similar survey of 504 While the Internet is the research consumers. The findings reveal five tool of choice for Chinese consumers areas of marketing action—some prior to making their purchases, it is counterintuitive—that companies information from other consumers must pursue and master to extend their reach and sales in China. (Continued on page 52)50 Outlook 2013, Number 1
  • 49. the fundamentalsof China’s consumer marketCompanies looking to improve their art and extend their reach into the vast Chineseconsumer market must, at a minimum, understand the general market conditionsand drivers. However, it is not enough for them to have a passing familiarity withtheir art; they must become masters. Consider the following:China is not yet a consumption economy. The contribution of householdconsumption to China’s GDP was just 38.8 percent in 2010, compared with 71percent in the United States and 50 percent to 60 percent in most Europeanand other BRIC countries. The government is striving to reverse this trend withpolicies aimed at increasing domestic consumption so that it accounts for 45percent of GDP by 2020. How much Chinese consumers will be willing to spendremains to be seen, since they have one of the highest savings rates in the world(38 percent of earnings).Income disparity is alarming. The chronic income disparity between urban andrural residents continues to widen. In 2011, the average disposable income of urbanChinese consumers was 323 percent higher than that of their rural counterparts.While the government has launched a series of social and economic initiativesaimed at increasing incomes for both rural and urban individuals by at least7 percent each year by 2015—resulting in 7 percent of households having annualdisposable incomes of more than $25,000, compared with just 2.4 percentin 2010—we do not expect the gap between urban and rural households tonarrow significantly.Urbanization is accelerating and will continue to drive consumption. Approximately13 million people in China move to cities each year. In 2000, the proportion ofurban dwellers climbed to 36 percent, up from 20 percent in 1980. By 2015, itis expected that 60 percent of the population will reside in urban areas. And by2020, there will be 70 to 100 cities in China with more than one million people.This dramatic urbanization is, and will continue to be, a main driver of China’sdomestic consumption.Profound demographic changes are making the consumer market landscape morecomplex. China’s population is aging. The number of people over the age of 65 willincrease by more than 51 percent from 2010 to 2020 and will account for 14 percentof China’s total population. Thanks to the country’s one-child policy, its workforceis simultaneously shrinking and will actually decrease by 2020. Given that the socialsecurity safety net won’t cover the majority of older residents, younger workers willbe faced with a heavier burden to support the seniors.The rise of online consumers marks a new frontier for growth. The prevalenceof mobile Internet applications and smartphones is accelerating the rate of onlineconsumption. By 2015, the number of Internet users in China will soar to morethan 800 million, up from 538 million as of June 2012. Internet access is growingubiquitous in consumers’ daily lives for shopping and entertainment. Online shoppingaccounted for 3.3 percent of China’s retail sales in 2010 and will increase to 8 percent(with sales volume of more than $360 billion) by 2015. 51
  • 50. China (Continued from page 50) them to enhance their analytics capabilities to identify and monitor that is consistently most important customer-relevant sites and in helping them understand what opportunities, respond to comments products are available and shaping from consumers about their brands, their buying decisions. Social media and continuously assess the social is playing an increasingly critical media presence of competitors. role here. More than 90 percent of Chinese consumers use social media and microblogs (known as 3. evelop and manage D “weibos”) to learn about companies’ a brand “persona” that products or service delivery. customers recognize and likeLess than one-third Nearly a quarter of consumers It is increasingly hard to maintain post their provider experiences consumer loyalty in China. Currently,of Chinese consumers and opinions about a company’s less than one-third of consumersare satisfied with products or services several times are satisfied with their providers, a week. When it comes to valuing which suggests that a huge numbertheir providers, which the opinions of others, 74 percent are willing to switch if the incentivessuggests that a huge of Chinese consumers responding to our most recent survey trust the are right.number are willing comments about companies that China’s shoppers tend to be even are posted by people they know more opinionated and outspokento switch if the (compared with 68 percent in 2011). than their American and Europeanincentives are right. Interestingly, however, it is not just counterparts. Negative experiences the opinions of friends and family can be particularly detrimental to that matter. In 2011, more than a customer relationships. Retailers, third of Chinese consumers based banks and Internet service providers their purchasing decisions, at least are most susceptible to losing partly, on posts made by complete customers due to poor service. strangers. In 2012, that number But no industry is immune from climbed to nearly 44 percent. customer churn. The lure of online opinion sharing With word of mouth and social explains the popularity of sites media playing such dominant roles such as Dianping, on which people in shaping customer preferences, rate restaurants and merchants in one negative experience can approximately 2,300 cities across quickly “go viral” and influence China. By 2012, the website had the purchasing decisions to tens more than 48 million monthly of thousands of consumers. Indeed, active users who had posted some our research revealed that 97 20 million reviews on more than percent of Chinese consumers told 1.5 million member merchants. The others about a bad customer service site reports more than 1.2 billion experience in 2011, and 52 percent monthly page views—60 percent posted comments about the negative of which come from its 40 million experience online. unique mobile users. Loyalty programs can help stem To take full advantage of the social the tide of customer defection media channel, companies need a and negative commentary. Such clear understanding of its potential programs have been effective in for the organization. It also requires persuading Chinese customers to52 Outlook 2013, Number 1
  • 51. their provider relation- that their provider’s loyaltyships across all industries, but programs discouraged them fromare most popular (and successful) switching service.among cell phone companies, banksand Internet service providers. More important, half of our surveyThree-quarters of cell phone respondents noted that loyaltycustomers, for example, reported is driven by factors other thanWho do you trust?When it comes to making a buying decision, Chinese consumers rely on people theyknow more than any marketing or sales channel.Word-of-mouth information from people 93%I know (family, friends, co-workers) 74%In-store information from salespeople 89or displays 48Corporate website (for example, 88the company website or a brand/productwebsite) 49Online information from social media 77sites such as Twitter, Facebook, Pinterestand user forums 39 74Print advertising (newspapers, magazines) 31Online advertising shown when making 72queries on search engines such as Google,Bing or Yahoo 33Online information from sources like expert 70review sites, news sites or product comparisonsites (importance in decision) 44Online advertising through banner ads, 67pop-up ads, ads on Facebook and so on(importance in decision) 23 59Paid advertising on TV or radio 29 50 UsageDirect mail or telemarketing 23 Importance in decisionSource: 2012 Accenture Global Consumer Behavior Survey 53
  • 52. China financial incentives. These include ence that matched the company’s open and honest communications, promise, and reasonable wait the availability of opportunities for times are consistently the most consumers to take part in designing important components of customer or improving products and services, service. Conversely, several factors and the provider’s commitment to contribute to negative customer corporate social responsibility. experiences. Frustration levels are highest among consumers who Companies should take all these have to contact customer service factors into consideration when agents multiple times about the developing customer loyalty same problem or feel they must and retention strategies in China. wait too long to be helped. They should also consider applying predictive retention analytics Naturally, companies want and other forms of analysis to to avoid creating a negative determine the root causes of impression that causes their customer unhappiness. Having consumers to flee. Instead, they such capabilities in place will want to give their customers make it easier not only to protect what they want—and more than their market share but also to they expect—via a differentiated develop strategies and offerings sales and service strategy. that will attract new customers. This can be accomplished in several ways. By building their 4. ocus on the invisible F capabilities in predictive modeling customer expectations as and analytics, companies will find well as the explicit it easier to generate valuable customer insights, recognize Today, it is no longer enough to “moments of truth” that contribute exceed consumers’ expectations; to (or erode) loyalty, and develop you must anticipate them before offerings tailored to meet the needs they are explicitly articulated. of specific consumer segments. This is especially true in China, And by enabling customers through where, according to the Accenture channel integration and automated surveys, consumer expectations self-service features, businesses for better customer service are at will be better positioned to provide an all-time high. a holistic customer experience, reduce their cost to serve, improve So what do Chinese consumers service and distinguish themselves demand of their providers? from the competition. First and foremost, they want to conduct their business with providers in a fast and hassle-free 5. Let the customer help fashion. This means there are basic you create your “palette” service expectations that cannot of offerings be compromised: speed of service, ease of obtaining information and In today’s global economy, what service, and agents’ knowledge matters is not where an idea comes and experience. from but how fast a country’s firms and consumers are willing Digging deeper, we found that polite employees, a service experi- (Continued on page 56)54 Outlook 2013, Number 1
  • 53. customersLike customers everywhere, Chinese consumers care most about dealing with employees who are polite andfriendly—and having the service match the promise that the company makes. What bothers consumers the most?Having to repeat themselves. 83%Having employees who are polite and friendly 8%Having the service experience match the 81promise a company makes to me up front 14The amount of time it takes to completely 78resolve my issue or problem 17Having customer service people who know myhistory based on information I have previously 77provided, so I don’t have to repeat myself 20each time I talk to someoneHaving customer service people who can 77deal with my issue without having to referme to another person 18The amount of time I have to wait 75to be served 18Having employees who are knowledgeable 71and well-informed 12Having customer service available at convenient 71times (for example, hours per day per week) 10Being able to access customer service using 68multiple channels (for example, phone,online, in-store) 11The number of choices I have to receive the 65way I want it 14The amount of time it takes to read and 58understand information the company sends me(for example, bills or product instructions) 13Being able to resolve questions/issues on 54 Importancemy own, without speaking to a service agent 14 DissatisfactionSource: 2012 Accenture Global Consumer Behavior Survey 55
  • 54. ChinaFor further reading (Continued from page 54) visit the shops specifically for the chance to try new products.“Shoppers without borders,” Outlook to try it out. Amar Bhidé, an2012, No. 3: economist from Tufts University, According to our research, mostus-en/outlook/Pages/outlook-journal- dubbed this propensity for consumers Chinese customers did not participate2012-shoppers-without-borders- to welcome new products and services in innovation efforts for a companyretail.aspx “venturesome consumption” and in the past two years. This will noted that their willingness to certainly change. With China’s“The last 10 miles,” Outlook 2012, try new products and services young, connected population, theNo. 3: may be an important component potential to engage consumers inus-en/outlook/Pages/outlook-journal- of innovation. technology-enabled innovation2012-last-10-miles-china.aspx programs is significant. This is certainly relevant for“Think you’ve got China figured out? companies operating in China, There are several paths companiesThink again,” Outlook 2012, No. 2: where consumers are in fact can pursue to consistently create surprisingly “venturesome.” In meaningful experiences thatoutlook/Pages/outlook-journal-2012- our 2011 survey, about 30 percent attract more—and more valuable—think-you-got-china-figured-out- of Chinese consumers said they customers. That is, to applythink-again.aspx are very interested in participating their artistic skills to create in innovation efforts for a company, valuable outcomes. SpecificFor more related content, in either online formats such as initiatives will naturally var yplease visit idea portals or offline via focus from one business or sector to groups or product trials. More another, but there are things all than half said they are somewhat companies can do right now to interested in such activities. bolster their likelihood of success in the Chinese marketplace. They are also more than willing to try new things—and this • evelop a customer experience D openness to new experiences blueprint. High-performance busi- can inspire companies to launch nesses know that their customers’ new products and services. Few most satisfying experiences don’t companies have taken better just happen. They are carefully advantage of Chinese consumers’ planned, consistently presented venturesome spirit than KFC. and continually refined to deliver on the brand’s promise across The fast-food company, which channels and throughout the has 4,000 outlets across China, customer lifecycle. distinguished itself in the Chinese market by adapting its menus to A “customer experience blueprint” local tastes. Today, KFC customers can help you deliver memorable in China can order buckets of experiences, maintain relevancy “original recipe chicken” just and reinforce your brand’s value as easily as KFC customers can proposition. To create such a anywhere in the world. But in blueprint, you should first define China, they can also order fried the big picture by establishing dough sticks, egg tarts and a a strategic vision. Next, define what number of new food products “good” looks like on the ground, designed to appeal to regional outlining the ideal customer tastes. The strategy has paid experience blueprint at the tactical off in terms of revenue growth level—making clear for employees and customer loyalty. Nearly a the step-by-step path customers third of KFC customers in China are expected to follow.56 Outlook 2013, Number 1
  • 55.• dopt and/or strengthen a A sales and service programs digital marketing strategy. Most that will, in turn, enable them to marketers in China attempt to acquire, engage and retain more make their product and service customers. Individually, these information available via a broad actions can help businesses create range of channels. Yet some a more engaging and rewarding channels are much more effective experience for their customers. than others. Assess your existing Together, they provide a roadmap multi-pronged marketing strategies for high performance. to ensure they are aligned to the customer experience blueprint, and allocate resources to those About the authors channels that deliver results. That will most likely mean Jeffrey I. Beg leads management rethinking the role that digital consulting for Accenture’s Products marketing and social media group in Asia Pacific. He is based programs can play in taking in Shanghai. advantage of the “research online, purchase offline” phenomenon, producing higher conversion Tzeh Chyi Chan is a managing rates, and building dynamic director in Accenture Analytics. conversations and interactions. He is based in Beijing.• ursue outside-in innovation. P As noted above, customers are Xuyu Chen, a senior marketing eager to share their opinions and manager at Accenture Management are increasingly looking to do Consulting, is based in Beijing. so via imaginative, high-quality experiences. One of the most effective ways to access customers’ insights is by taking advantage of their willingness to participate in innovation programs. At a minimum, create opportunities that encourage consumer involve- ment in product design and testing. You may even want to make innovation an essential part of the customer experience. The potential payoff is enormous in terms of new ideas, meaningful feedback on new products and services, and enthusiastic consumer support and loyalty.By taking the time to understandChinese consumers’ buying pref-erences and behaviors—and thenadopting appropriate strategiesbased on those insights—companieswill be able to create differentiated 57
  • 56. SustainabilityHolistic, inclusive, robustHow end-to-endsustainable systemsdrive business valueBy Peter LacyPlenty of companies have taken significant steps toward becoming more sustainable,but none has turned incremental progress into truly transformational change. That requiresinnovation and collaborative initiatives right across the enterprise—from strategy tooperations to the supply chain.58 Outlook 2013, Number 1
  • 57. Sustainability As anyone who’s ever used a compass 28 percent between 1970 and 2008; knows, mistaking “magnetic the decline rises to 61 percent in north” for “true north” can put you the tropical regions that house our alarmingly off course, very quickly. most species-rich habitats. Moreover, in a globalized economy, sustain- Yet for many companies striving ability is as much about sustainable to become more sustainable, social and economic development navigating via magnetic north— as it is about the environment. making incremental moves toward Yet poverty and inequality persist, cleaner, greener, more socially and are even worsening. responsible business—seems to be the default setting for their Holistic, inclusive, robust journey. That may well be better It isn’t that the world’s businesses than business as usual. But it’s by are collectively ignoring sustain- no means enough. ability. Many companies now routinely report their CO2 emissions, Indeed, there’s a yawning gap for example, and monitor progress between what science is telling us we toward reducing them. Many also need to do to ensure sustainability tell stakeholders about the envi- for people, planet and profits—an ronmental and social impact of orientation we call True North— their products, and incorporate and what most companies consider sustainability metrics into discussions to be progress. In fact, by almost with investors. every objective measure of sus- tainability, most industries and When Accenture and the United companies are already headed Nations Global Compact on in the wrong direction. Perhaps sustainable business practices even more worrisome, many are recently polled chief executives not even aware of the True North from about 800 companies across orientation and, equally important, nearly 100 countries and more that there is money to be made by than 25 industries, almost all of embedding this approach to sus- them (93 percent globally and 98 tainability in their business model. percent in Asia Pacific) told us that sustainability is “important” The stakes couldn’t be higher. or “very important” to their future With one-fifth more carbon in the business success. Additionally, atmosphere than there was in 2000 more than 70 percent are measuring and global emissions still rising, the impact of their activities on year on year, the United Nations such sustainability outcomes as Environment Programme warns carbon emissions, water usage of catastrophic consequences for and even the health and economic the world. Scientists believe that development of local populations. could include floods, droughts and Sixty percent are training managers famine. And the fallout from these to integrate sustainability into increasingly frequent environmental both strategy and operations. disasters—measured in terms of food supply and poverty—can only further These efforts, however, just aren’t destabilize the global economy. achieving sufficient scale fast enough to make a real difference. The World Wildlife Federation’s When, for example, Boston-based Living Planet Index shows that Ceres, a nonprofit coalition of global biodiversity declined by investors, companies and public60 Outlook 2013, Number 1
  • 58. groups, recently examined The plain fact is that too manyhow swiftly 600 US companies were companies are still focused onadopting its code of environmental celebrating marginal improvements—conduct for safe and sustainable and fail to recognize that real progressresource use, few had made more requires much more radical action.than minimal progress. Companies operating out of low- carbon offices or manufacturingWhen viewed through the lens facilities might justifiably claim toof individual industries, the record be making progress toward becominglooks less impressive still. Take the sustainable. But if they remain parttransport industry, which produces of a wider network of consumers,some 15 percent of global green- suppliers and infrastructure thathouse gas emissions. Despite recent continues to degrade the environ-innovations in efficiency across ment, they are not creating thepractically all modes of transport, innovative, sustainable systems—global CO2 emissions from transport holistic, inclusive and robust—thatsoared 45 percent between 1990 (the would make a real difference.base year for UN negotiations onclimate change) and 2007, and are As the deterioration of the globalprojected to continue to increase by environment continues to accelerate,40 percent by 2030. there’s an urgent need to correctThe True North journey to sustainabilityLike mariners navigating via magnetic north, many individual companies are makingprogress on their own journeys toward sustainability. But are we collectively onthe right track? To avoid a steady decline in momentum, businesses must seta sustainability course for True North by closing two key gaps: the execution gap,between ambition and achievement; and the transformation gap, between thebest-case scenario under a business-as-usual approach and the transformationalchange that will be required to create real business value while fostering asustainable economy. True North Transition to a sustainable system Magnetic north Emergence of sustainable business examples Transformation gap Execution gap Current direction Decline until shock or systems collapseSource: Accenture analysis 61
  • 59. Sustainability this compass error, and challenge for true innovators—they are setting the assumption that we are making their own course. These leaders meaningful progress toward a include both small, nimble disruptive sustainable economy. innovators from emerging markets and established companies from Resisting change more developed economies. What The continuing preference for they have in common is that magnetic north rather than True North they are starting to meet the two is to some extent understandable, criteria essential for a True NorthThere is a widespread of course. After all, CEOs have orientation: making the changestendency to view businesses to run, and prioritizing demanded by sustainability science radical systemic change—the essence and creating competitive advantagesmall-scale success as of the True North path—especially for their end in itself—what if it threatens to disrupt daily operations, may look like a bad idea, None can yet claim to be what thewe call “pilot paralysis.” or at least one for the back burner. sustainable development guru John Elkington calls “Zeronauts”—those Sorting out the worst of the fallout companies that create wealth while from the Great Recession may driving adverse environmental, constitute a far more urgent priority social and economic impact toward for many companies, especially zero (or even into positive territory). in Europe and North America, where But some do recognize that this is most of the damage has been done. what’s needed. And in mapping their And in emerging markets, too, journey, a few have set goals that driving economic growth to achieve are ambitious indeed. Witness, for competitive advantage often trumps example, the GreenTouch initiative, sustainability considerations. a global consortium that aims to increase efficiency across communi- With collective global action on cations and data networks by a factor sustainable development a long way of 1,000 from current levels. from reality, there’s little wonder that the tendency to view small-scale The consortium has begun to success as an end in itself—what we develop new approaches that call “pilot paralysis”—is so widespread. contain the seeds of truly trans- formational sustainability for There are many powerful examples business (see chart, page 61). of projects or initiatives within Five new ways of thinking about companies and even industries and innovation for sustainability cities, but surprisingly little at a scale and business results characterize that transforms a business model their True North approach. or local political system. What’s perhaps more dangerous is that these pilots end up being celebrated as 1. ravel light: Decoupling T real progress in and of themselves, growth from natural rather than as stepping stones toward resource use true sustainability. Businesses on the path to True A few leading businesses, however, North sustainability are rethinking are taking a different view. Having their business models as closed recognized the limitations of loop systems that eliminate waste incremental change—and the fact that from the value chain. Although there’s a real business opportunity few if any large players have yet62 Outlook 2013, Number 1
  • 60. their entire business models achieve dramatic reductions in waterinto such closed loops, some use and CO2 emissions. Changzhou-are implementing technological based Trina Solar has become ainnovations that conserve resources leading global supplier of affordableand significantly reduce waste. solar panels for both residential and business use thanks to a verticallyTake Hycrete, a division of New integrated business model that notJersey-based Broadview Tech- only keeps costs down but also usesnologies, whose concrete products fewer resources.contain compounds that render themwaterproof and thus significantly Other pioneering players areless susceptible to corrosion—an reimagining innovation as ainnovation that promises to extend cradle-to-cradle concept, a meansthe lifespan of our buildings. Or of shifting from a product-basedMinnesota-headquartered Ecolab, to a service-based operatingwhose food processing solutions, model that draws the consumercleaning products and laundry equip- into a direct relationship with thement employ sophisticated chemistry company in a joint effort to driveand advanced software applications help its customers consumeconsiderably less water and energy. New Hampshire-based outdoor- clothing specialist Timberland,In China, similarly, textiles maker for example, is “designing forEsquel Group, in partnership with disassembly.” Buyers of its Earth-Danish biotech innovator Novozymes, keepers boots—the soles of whichis using enzymes found in nature to are made from recycled tires Natura: Toward a sustainable value chain Natura Cosméticos is a personal care company with a company on the path to True North innovation for sus- sustainability at the very heart of its brand. tainability (see story). Indeed, at a time of mounting concern over the depletion Natura has trained a direct-sales force of more than 1 million of the Amazon rainforest’s natural resources, the Brazilian “consultants” who have established enduring personal company’s exceptional reputation as a sustainable relationships with customers in Brazil, Argentina, Chile, manufacturer—some 80 percent of its raw materials Peru, Colombia and Mexico as well as in France—building come from renewable native plants—has helped make brand awareness and sustainable behavior by drawing them Natura the country’s biggest cosmetics firm, with 2011 into recycling, social inclusion and self-esteem-building revenues of $3 billion. programs. One such program helped return 235 metric tons of post-consumption packaging for recycling. It’s not just environmentally responsible product sourcing, however, that has made Natura so successful. The company Natura’s distribution model has also helped drive value also leverages a direct-sales approach that both empowers for the company, which boasts one of the industry’s its employees and reinforces the trust of its consumers. lowest levels of employee turnover. Natura’s rate of Coupled with rural supplier partnerships that encourage product penetration has grown significantly as well. And traditional communities to protect Brazil’s biodiversity, thanks to the strength of its brand, Natura can charge this strategy embeds sustainability right across Natura’s a hefty premium over competitors’ comparable products, value chain—and provides an outstanding example of helping grow bottom-line profits significantly. 63
  • 61. Sustainability and virgin rubber—can return ship with eBay to other fans of the them to Timberland at the end of company’s brand. If the garments the product’s life, and the company are worn out, Patagonia will take will recycle them so that most of them back and recycle them. their parts can be used for new shoes. California-based Patagonia, in the 2. All hands on deck: same industry, has gone a step Engaging a broad further. The company’s counterin- spectrum of participants in tuitive Common Threads Initiative collaborative initiatives encourages shoppers to buy fewer of its famously durable and high- True North sustainability requires quality products—a revolutionary partnerships—and not just challenge to today’s consumption- with consumers. In order to driven growth paradigm. Along support changes transformational with offering to repair Patagonia enough to qualify for what we clothing that needs it, the company call cross-sector convergence— encourages its customers to reuse or where development and business resell garments they no longer wear, interests merge, both horizontally either by donating them to charity or and vertically—partnerships selling them via Patagonia’s partner- need to straddle traditional Unilever: Partners in sustainability To say that Unilever’s Sustainable Living Plan is an ambitious Hence, for example, the company’s “Partner to Win” programs program would be an understatement. with suppliers, and an open-innovation portal, designed to crowd-source the ideas that will drive transformational change. Within 10 years, Unilever aims to halve its environmental footprint, sustainably sourcing all of its agricultural raw Unilever is also working to improve consumer health through materials and significantly improving the health and hygiene the marketing of Lifebuoy soap—a key brand in developing of more than 1 billion emerging-world consumers—in short, countries. By promoting Lifebuoy’s effectiveness as a germ to make sustainability the business model of the Anglo- killer to new mothers, the company hopes to help reduce Dutch consumer goods giant—all while trying to double the childhood mortality. Lifebuoy hand-washing campaigns, which size of its business. run for a minimum of 21 days, include quizzes, posters and songs designed to encourage repetitive behavior. And since The plan reflects CEO Paul Polman’s conviction that social and economic development help reduce the ignorance “we cannot choose between [economic] growth and and poverty that can lead to unsustainable activities, this sustainability—we must have both.” And it places Unilever program will likely have a positive impact on sustainability. firmly in the forefront of True North pioneers on sustainability (see story). Meanwhile, the company’s partnership, in place since 2007, between its Lipton tea brand and the Rainforest Alliance, But Unilever also recognizes that it will never accomplish an NGO, produces mutual benefits. By committing farmers its goals without the active participation of all of its to continuous improvements in sustainable agriculture stakeholders. Indeed, since the size of its environmental and environmental protection, the partnership helps boost footprint is largely determined by what customers do both their productivity and the prices they get for their tea. with its products and how sustainably its suppliers help Being able to tell consumers that its tea is from sustainable to produce them, Unilever invites those stakeholders to suppliers has helped boost sales of the product, which rose participate in its sustainable innovation initiatives. 10 percent in Italy and Sweden.64 Outlook 2013, Number 1
  • 62. right across the busi- utors right across its value chain,ness value chain. New York-based AeroFarms, for instance, delivers pesticide-freeThat spells significant upheaval food that has been produced infor ownership and governance an energy-efficient way to sixstructures—not to mention a fine urban locations worldwide.balance between collaboration andcompetition. Even so, the notion In Germany, T-Systems—a Deutsche Leading companiesof teamwork is clearly catching Telekom subsidiary specializing inon. Our CEO study with the UN information and communications are asking consumersfound that from 2007 to 2010, the technology—has partnered with what they most valuenumber of companies engaging the city of Friedrichshafen andin multi-stakeholder partnerships the Swiss engineering firm ABB from sustainablearound sustainable developmentrose by nearly 50 percent. And to share the considerable costs of testing and implementing new, products and services.78 percent of the CEOs surveyed greener IT technologies—and, ataffirmed their commitment to the same time, position itself atsuch partnerships. Our own a pivotal point in the renewableexperience with companies and smart-grid value chain.through both our SustainabilityServices business and our not-for-profit arm, Accenture Devel- 3. et your bearings: Resetting Gopment Partnerships, has shown and redefining relationshipsthis to be the case. with stakeholdersConsider, for example, the UK retailer Pleasing stakeholders—especiallyMarks Spencer’s “schwopping” investors—while striving to deliverinitiative, which invites consumers sustainable outcomes that mayto bring used clothing with them take years to materialize canwhen they buy something new. challenge the short-term mindsetThe company works with the typical of many companies. Butcharity Oxfam to resell, reuse or those on the path to True Northrecycle the old clothes. Recycling sustainability are meeting thiscan radically reduce the cost of challenge by coming up with newmanufacturing new merchandise definitions of reducing input costs. Leading companies are askingOr witness such cooperative ventures consumers what they most valueas the Forest Stewardship Council, from sustainable products andwhich is headquartered in Bonn, services, for example. As a result,Germany, or the Marine Stewardship they often unearth the new aspira-Council, which is based in London— tions and emotional connectionscollaborations between industry that will drive demand for productsand NGOs designed to conserve and services in the same way thatprecious (and increasingly scarce) attributes like price, availability andnatural resources. quality traditionally do.Leading companies, similarly, With the help of such innovativeare developing hybrid business sustainable lifestyle platforms asmodels with inclusivity at their Positive Luxury, which aggregatescore. In partnership with retailers, information about environmentallyfood service providers and distrib- and socially sound high-end products 65
  • 63. SustainabilityFor further reading and services and provides its own, of policy makers to drive swift trusted “seal of approval,” concerned decision making and verifiable“A New Era of Sustainability: UN consumers can already make more impact. From our discussions,Global Compact–Accenture CEO Study informed purchasing choices. it is clear that True North leaders2010”: Carrotmob, meanwhile, enables are not blindly against regulation—Pages/insight-new-era-sustainability- groups of sustainability activists particularly when measuressummary.aspx to support businesses that agree to are designed with an informed make improvements they care about. stakeholder approach and theyFor more related content, Case in point: California-based help to create a level playingplease visit Thanksgiving Coffee Company’s field for competition and customer pledge to become the first innovation. organic coffee company to transport its beans in wind-powered vessels. Like all large-scale collective action initiatives, these will, of course, take Some pioneers are actually measuring time to develop. In the meantime, value and impact differently. In however, by successfully managing 2011, for example, Puma, the sporting convergent interests and aspirations, goods maker, became the first a few such projects are making company to report a full environ- some headway. mental PL, allocating a financial value to the impact of its activities The Extractive Industries Transpar- across a range of environmental ency Initiative, for example, brings and social outcomes. together governments, citizens, oil and gas and mining companies, In India, meanwhile, the Tata group and their investors to address is taking the needs of low-income the problem of poor governance consumers as its starting point for preventing the proceeds of natural True North—and working backward. resource extraction from benefiting The company strips its products local populations. By asking down to their bare essentials, and companies to disclose payments rethinks entire production processes and governments to disclose receipts, and business models, through a it sends a clear signal that the process dubbed frugal innovation. initiative’s signatories (37 countries Tata Consultancy Services and and more than 70 companies) are Tata Chemicals, for example, have committed to accountability and developed an affordable, portable, good governance. low-tech water filter that uses rice husk ash—rice husks are a major waste Similarly, the Sustainable Apparel product in India—to purify water, a Coalition commits more than significant benefit in a country where 60 leading apparel and footwear many people die every year as a brands, retailers, suppliers, nonprofits result of drinking contaminated water. and NGOs to improve water use and quality; minimize energy consumption, emissions and waste; 4. now the ropes: Creating K and achieve full transparency powerful public-policy alliances around the social and ethical capable of influencing impact of industry operations. regulations and standards Meanwhile, in southern Holland, Transformational change requires the Dow Chemical Company has transformational scale. That, collaborated with the Dutch gov- in turn, demands the cooperation ernment and local and regional66 Outlook 2013, Number 1
  • 64. companies and suppliers to the size of Unilever’s business new sources of sustainable valuereuse more than 2.6 million gallons while halving its environmental creation through innovation andof domestic wastewater daily—water impact (see sidebar, page 64). For collaboration—and showing the waypreviously discharged into the its part, Natura, a Brazilian maker to True North.North Sea—in both the manufac- of organic skin- and hair-careturing plants and cooling towers products, has employed moreof what is the company’s second- than 1 million sales agents in a About the authorlargest facility. remarkable network of sustainable product development and delivery Peter Lacy leads Accenture’sReusing municipal household (see sidebar, page 63). Sustainability Services in the Asiawastewater instead of using seawater— Pacific region, including Greaterwhich would have to be desalinated— These examples demonstrate that China, India, ASEAN, Japan, Southhas cut energy use at the Dow pioneers at both ends of the size Korea and Australasia. He is basedfacility by 65 percent, the equivalent spectrum are engaging stakeholders in Shanghai.of lowering CO 2 emissions by so successfully in their sustainability peter.lacy@accenture.com5,000 tons annually. In addition, efforts that they are starting tothe innovative process—the largest transform the very notion of industry The author would like to thankmunicipal wastewater reuse project and business leadership. Bruno Berthon, David Abood, Justinever undertaken in the chemical Keeble, Robert Hayward, Guanghai Li,industry—means fewer chemicals Melissa Barrett and Oliver Benzecryare needed for water treatment. It’s important to recognize that from Accenture, as well as Toby WebbAlthough this project is relatively these innovators are still taking from Ethical Corporation and Micksmall, it has the potential to have only small steps in the right direc- Blowfield from Oxford Universitysignificant impact if scaled. tion. Others are long on strategy Smith School, for their contributions but short on execution. All still to this article. have a long way to go before they5. ead by example: Creating L can boast waste-free business change through new models, or value chains so sustain- leadership that goes beyond able that neither the production traditional corporate nor consumption of their products boundaries contributes to further destruction of the global ecosystem.True North sustainability clearlyhas to be a collective enterprise, not Nonetheless, their commitment toleast when it comes to leadership. a coherent and detailed plan forCompanies—and, in particular, top transformational innovation inexecutives—need to find ways of sustainability offers a compellingleading from the bottom as well narrative about why change is soas from the top, drawing in all of necessary and why it must involvetheir stakeholders. This requires everyone. Moreover, as rising re-new organizational and individual source costs cause more and morecapabilities; new knowledge, skills companies to rethink their opera-and attitudes to drive innovation; tions and reconfigure their supplyand engagement that benefits chains, the example set by thesesustainability and delivers real pioneers can serve as a blueprintbusiness results. for others striving to drive change at scale.Two cases in point: The consumergoods giant Unilever, led by CEO Indeed, by aligning market forcesPaul Polman, is asking consumers, with sustainable development out-employees and suppliers to help comes, pioneering business leaderslead a 10-year effort to double are revealing real opportunities for 67
  • 65. Supply Chain ManagementWhen product complexityhurts true profitabilityBy Johan Sjöström Bayer, Mikael Hilding, Antal Kamps, Gustaf Sahlén and Robin Sparrefors68 Outlook 2013, Number 1
  • 66. To meet the challenges inherent in today’s volatile global marketplace, companiesneed the right analytical lens to clarify the incremental profit generated by offeringmore innovative and differentiated products. 69
  • 67. Supply Chain Management These days, the typical US super- issues is to use a six-step product market’s shelves strain to hold complexity management frame- between 30,000 and 50,000 unique work, which systematically products, up from about 15,000 establishes a product’s “true in 1991. Yet roughly a quarter of profitability.” The framework’s those products sell less than one power comes from its intense focus unit per month. on identifying which products to keep and then improving the Similar product proliferation trends profitability of those products. are evident everywhere, from car Deeper analyses at the product manufacturing to the food industry. and component levels enable the However, as more products are organization to identify, evaluate created, per-unit revenues (and and measure product complexity associated profitability) can drop: and the potential for improvement. One sports drink maker increased The framework also examines its number of flavors three-fold a company’s sales efforts and but saw sales per flavor decline ultimately helps companies nearly 60 percent due to massive develop and sustain truly profit- cannibalization. able products. A differentiated product strategy can pay big dividends if companies Understand true product have the right analytics in place to profitability truly understand profitability. But many firms struggle to achieve this How can you tell whether your level of transparency. In the mad current assortment of products is global dash to be everywhere, all ideal? You could examine product the time, companies often lack the complexity in technical terms, analytical horsepower to determine tracking the number of categories, which products actually make variants and custom products, money, and that can be a huge for example, or analyze sales downdraft on shareholder value margins. But these approaches do (see chart, opposite). not typically reveal a product’s actual direct and indirect costs— Seductive they don’t capture all of the Make no mistake: Complexity is here costs related to its development, to stay—no one is going back to the procurement and sale. As a result, Ford Model T era of a universal companies are discovering too product—and for good reason. At its late that they are unwittingly core, complexity fosters growth, and destroying shareholder value. that’s part of its seductive power. Making more products attuned to The product complexity manage- the needs of more customer segments ment framework provides a path generates growth. Problems can teams can use to understand occur, however, when companies all of the direct and indirect lose control of product complexity, costs generated when a product which in today’s fast-moving, global, is developed, produced and sold. competitive environment has become These include direct labor and an all-too-common occurrence. materials costs, administrative and sales expenses, rebates, One proven way leaders can cut discounts, supplier overpayments, through complexity’s knottier an allocated portion of the company’s70 Outlook 2013, Number 1
  • 68. of capital, and whatever of its products and markets onother charges and expenditures a continuous basis.the company makes related to theproduct. This assessment createsa picture of the product’s true Eliminate low-profit contributorsprofitability and can then helpleaders determine a roadmap for As leaders try to gain clarityreconfiguring both their portfolio regarding the profitability ofas well as individual products their products, the first obvious(see chart, page 74). question concerns the company’s portfolio of offerings: Are thereOne consumer goods company products or product features wewanted to develop an activity- should think about cutting thatbased costing system, which won’t affect growth?assigns indirect costs to productsmore accurately than traditional However, reliably answeringmethods, and used the product this question requires the cross-profitability approach to calculate functional teams to perform moreits product, channel and customer detailed analyses that complementprofitability. Doing so enabled it their existing profitability map the cost base to the activities They need to collect additionalperformed. With this increased product and market informationtransparency, the company to verify each product’s strategiccould optimize the profitability importance and incremental salesShareholder value at riskProduct complexity challenges in a number of areas—including marketing and sales, RD and purchasing—can havea negative impact on shareholder value. Companies need to have the right analytics in place to truly understand howeach factor affects profitability.Marketing and sales Research and Increase time to Decrease market and reduce• Sales efforts development service levels revenue focused on • Resources tied up products with for designing low low profitability contributors Increase direct Increase Decrease• High degree material and • Reinventing the COGS profitability labor costs of product wheel for each cannibalization new introduction• Customer-driven Increase supplier • Over-specified Increase sales with products management and Reduce SGA standard pricing sales/promotion costs shareholder routines value Increase inventory Impair and capital working equipment costs capital Impair Purchasing capital • Scale disadvantage due to low-volume productivity Reduce asset products and limited standardization Decrease utilization and RoA • Low degree of component consistency performance across productsSource: Accenture analysis 71
  • 69. Supply Chain Management contribution. For example, companies within two to three years. But far might be wise to keep an SKU from a quick fix, such an effort with low sales if it covers a need requires strong senior management otherwise not fulfilled (say, high support to guarantee the full incremental sales). commitment of experts from RD, sales and sourcing. This analysis shows a product’s incremental value, enabling Cross-functional teams can defineIf firms hope to companies to determine which and evaluate a product’s direct cost products are truly profitable, either structure. They can also identify theimprove a product’s as standalone items or parts of sources of complexity, which will a cross-selling strategy; which help them set priorities when findingprofitability, the cost have sufficient potential for improved and executing improvements usingof goods sold is where profitability; and which are strate- the following techniques. gically important even if theyto start, an effort that are not as profitable as desired. • tandardization and modular- Srequires strong senior For all other products, the team ization: Teams employ these should establish and rigorously approaches to achieve “good”management support. implement phase-out plans. (that is, profitable) complexity levels in a more cost-effective A large European food producer way, which also requires that they conducted an incremental understand the best incremental margin, sales and product ratio- price points to support these levels nalization analysis using this of complexity. approach. The project enabled it to cut its product portfolio by • roduct reengineering: P 34 percent, which led to signifi- Reengineering enables teams cant reductions in the company’s to introduce value engineering product changeover costs—those and product simplification ideas costs associated with switching to cut a product’s cost without production from one product compromising quality. to another—as well as in labor, logistics, and sales, general and • upplier relationship and S administrative (SGA) costs, all category management: Involving without reducing revenues. suppliers can throw new ideas, capabilities and innovations into the mix. Category management Improve true product can help teams break down profitability functional silos and challenge the status quo in areas such Accenture analysis reveals that as supplier selection and cost- most blue-chip companies have competitive sourcing. about 65 percent of their revenues tied up in their cost of goods A global industrial equipment sold (COGS). Of that, more than manufacturer used this approach 80 percent is for direct material to improve its operating margins. costs. Clearly, if firms hope to The company established a cross- improve a product’s profitability, functional collaboration that COGS is where to start. Experience involved engineering, sales and shows that best-practice initiatives category management, and integrated can produce 10 percent to 15 percent this team into its existing operating improvements in a company’s COGS model to identify and implement72 Outlook 2013, Number 1
  • 70., low-cost country additional cars, realized a cost-to-sourcing and value engineering contribution ratio of 1 to 12 andopportunities. As a result, the firm boosted its contribution margin byrealized a 12 percent COGS savings €254 million. What’s more, it recoupedon addressable spending. the cost of developing and implement- ing the program in just eight months.Focus sales efforts on trueprofit contributors Develop truly profitable productsIn the past, sales organizationsfocused on margin contribution—the Companies working through arevenue generated by each product complexity reduction transformationsold minus its variable cost—to guide usually focus on reducing today’stheir performance improvement complexity. Doing so can help themstrategies. However, this approach achieve greater product profitabilityoften falls short of delivering in their current product portfolios—expected results because it fails to but only for the short term. Ifoffer insights into the real profit- organizations hope to sustainability of products by leaving out their improvements, they need tosuch items as SGA expenses and manage tomorrow’s complexityfinancing costs. By striving for as well. This need is especiallygreater product profit transparency, relevant now, because mostfirms can begin to change the way industries are seeing increasinglythey allocate resources and incentives shorter product sales efforts, ensuring that thesales force is focused on the products A sustainable complexity manage-that are most profitable. ment transformation ensures that RD does not launch new productsDoing so can be especially effective based on sales insights only butif organizations align their sales also considers what’s possible fromstrategy and tactics with their new a technological perspective. To thatunderstanding of product profitability. end, RD must be empowered toWhile they should base their new challenge sales managers on the needsales force monitoring and steering for designing upgrades or adding newmechanisms on a data-driven foun- products and features. Doing so willdation, they also need to introduce require an understanding of the rootnew incentive plans that reinforce the causes and drivers of complexity anddesired sales force behavior. product profitability. Armed with these insights, RD managers canA global maker of premium auto- actively engage in developing themobiles introduced a sales force business case for new products,effectiveness program to boost enabling complexity managementsales at its dealerships. The approach to become an integral part ofidentified best practices among the decision gates* in the producttop-performing dealers and then development process.shared them across the dealer net-work. Through this joint effort, the The ability to manage complexityautomaker sold more than 20,000 effectively also plays an important* A lso known as stage gates, decision gates represent critical decision points in the development and launch of a product where leaders determine whether quality, cost and timing targets are being achieved, and what to do if they are not. At each decision gate, “gatekeepers” can decide whether to proceed with a project, hold it or kill it. 73
  • 71. Supply Chain Management role in the later stages of product ization and design-for-assembly. By development. RD often increases focusing more intently on reducing product complexity because non-value-added product complexity engineers may find it easier (and within RD, companies can often personally preferable) to create reduce development times, invest- new designs rather than expand ments and unit costs. They also existing product platforms, modules typically gain scale and efficiency and and designs. reduce their time-to-market results. To combat tomorrow’s complexity, Some industries are already taking companies can apply a number the lead in this area. After decades of of effective techniques, including rampant product proliferation in the platform-based product development, automotive and industrial equipment component commonality, modular- industries, for example, currentWinners and losersThe Accenture Product Complexity Framework creates a Product A would typically be eliminated as both the truepicture of the product’s true profitability and can then help margin contribution and the sales volume are low. However,leaders determine a roadmap for reconfiguring both their if the product is strategically important—such as a legacyportfolio and their individual products. In the example below, product—or has development potential, that has to be takenProduct A is a typical underperforming product, with high into costs. Even though the indirect costs are fairly low,Assessed products A600400200 0 Gross Rebates Net price Direct Direct Gross Cost of Cost of Other costs True profit sales price materials labor costs margin sales administration costs800 B600400200 0 Gross Rebates Net price Direct Direct Gross Cost of Cost of Other costs True profit sales price materials labor costs margin sales administration costs800 N600400200 0 Gross Rebates Net price Direct Direct Gross Cost of Cost of Other costs True profit sales price materials labor costs margin sales administration costs74 Outlook 2013, Number 1
  • 72. suggest manufacturers are model that included a set of principlesconsolidating their product platforms to ensure a focus on complexityby as much as 30 percent. This will management. With the new process,likely triple expected per-platform the company was able to deliver moreproduct production by 2020 and products for less RD investment:have a positive impact on both It cut RD costs by approximatelyCOGS and SGA (through reduced 30 percent while increasing newengineering time). product output by about 10 percent.Consider one global automotivecompany that wanted to increase Sustain true product profitabilityits product development efficiency. Tothat end, it defined and implemented Determining a company’s truea new product development operating product profitability and the roleProduct B is a typical high performer. Direct costs are low, Product N is a typical representative for true profitabilityand even though indirect costs are fairly high, the true profit improvement potential; generally this type of productmargin is still high. The product’s sales volume is above accounts for a large portion of a company’s product portfolio.average but not as high as you would want with a high true The true profit margin is rather low, but sales volume isprofit product. This means that Product B is a good candidate high. The product could benefit from product reengineeringfor a more focused sales effort. and design-for-assembly to minimize the direct materials and labor costs. B True profitability contribution % True product-profitability landscape N Focus for reconfiguring A VolumeSource: Accenture analysis 75
  • 73. Supply Chain ManagementFor further reading complexity plays can be an intense a central role with a mandate to and exhausting exercise in itself. manage the portfolio and weed“Why a sustainable supply chain is Unfortunately, after doing all that out complexity while balancinggood business,” Outlook 2012, No. 3: hard work, too many companies top-down complexity management fail to complete the circle, over- against a bottom-up approachoutlook/Pages/outlook-journal- looking the need to weave all that focuses on individual product2012-why-sustainable-supply-chain- that they’ve learned together via complexity analysis in the productis-good-business.aspx a cross-functional governance development, sales, sourcing and model into their everyday ways product maintenance functions.“Preparing for the unpredictable,” of working. The irony is that thisOutlook 2012, No. 1: is usually the easiest part of a • ays of working: The governance W product complexity management model should also integrateoutlook/Pages/outlook-journal-2012- transformation. product complexity managementpreparing-for-unpredictable.aspx as a repeatable process in the To do this, companies need to regular work routines of RD,For more related content, create a complexity governance sales and sourcing. Leaders canplease visit model that has four elements. accomplish this by introducing complexity assessment forms and • ecision-making forums: D checklists that teams can use to Organizations need to establish evaluate and score a product’s a cross-functional decision- impact on complexity through- making structure to address out its lifecycle. Companies can product complexity management. provide incentives that emphasize The forums can help companies complexity drivers and product ensure that these decisions happen costs to teams. at the right levels within the organization, and for that reason, • PIs and monitoring: Finally, K they need to involve RD, sales and organizations should introduce sourcing. Companies can achieve a set of key performance indicators this level of cross-functionality to track product portfolio in numerous ways—by making it complexity and ensure that it part of RD decision gate meetings, becomes visible in both upstream for example. Other possible and downstream functions. These venues include a product category KPIs should be able to measure management council, product complexity on both the demand portfolio meetings, or market and and supply sides of the business, brand strategy meetings. and pinpoint specific complexity drivers. Leaders in product • oles and responsibilities: To make R complexity management often key complexity-related decisions, develop a complexity dashboard companies need to assign capable that enables top managers to people to the right roles with the make decisions that involve appropriate mandates and responsi- complexity on a continuous basis. bilities. Given today’s fast-moving business environment, firms should One consumer goods company consider assigning a “complexity decided to pursue the full manager” responsible for complexity management journey, coordinating the entire product starting with understanding complexity management process true product profitability and and ensuring that the costs and continuing through sustaining impact of complexity are appro- results over the long term. To priately managed. This should be maintain the positive effects and76 Outlook 2013, Number 1
  • 74. having complexity reappear, About the authorsthe company tightly incorporatedcomplexity management into its Johan Sjöström Bayer is a seniorgovernance model. manager in Accenture Management Consulting Products Strategy Trans-For instance, it introduced a formation. He is based in Stockholm.complexity management process johan.sjostrom.bayer@accenture.comin day-to-day work practices,formed cross-functional decision Mikael Hilding, a senior managerforums that made periodic strategic in Accenture Managementand tactical complexity reviews, Consulting Operations, leadsand defined appropriate KPIs. Sourcing Procurement in Sweden.Within a year, the initiative had He is based in Gothenburg.significantly reduced the company’s mikael.davidsson@accenture.comcomplexity costs and played amajor role in enabling it to intro- Antal Kamps is a manager induce better products to market Accenture Management Consultingquicker, improving the firm’s Products Strategy Transformation.competitive position. He is based in Stockholm. antal.kamps@accenture.comLeaders will find it hard to tame Gustaf Sahlén, a senior manager incomplexity using conventional Accenture Management Consultingproduct portfolio optimization tech- Operations, leads Innovation Productniques because it requires a holistic, Development in the Nordic region.cross-functional approach. They He is based in Stockholm.need to cultivate an understanding gustaf.sahlen@accenture.comof true product profitability andensure their decision-making and Robin Sparrefors, a consultant ingovernance models reach across Accenture Management ConsultingRD, sales and sourcing. Operations, is part of Innovation Product Development. He is basedWhile this is certainly a challenge, in Stockholm.the potential rewards are signifi- robin.sparrefors@accenture.comcant. Companies that have focusedrelentlessly on managing complexityby improving their products’ trueprofitability have seen savings of10 percent to 15 percent on theircost of goods sold. What’s more,product complexity improvementswill also have a positive residualimpact on the rest of a firm’s valuechain, strengthening its competitivestance and positioning it forlong-term profitable growth.
  • 75. Information TechnologyIT governance:Spinning into controlBy Saideep Raj, Jack Sepple and Leslie WillcocksFor today’s IT executive, the job has never been more difficult. The solution?Mastering a new set of capabilities focused on areas that are generallynot part of traditional IT governance.78 Outlook 2013, Number 1
  • 76. Information Technology Is enterprise IT spinning out of control by somehow harnessing control? It would be an exaggeration that energy while also avoiding to say so. But it’s certainly true a descent into chaos. that the days are long gone when a central IT department was able to The centrifugal forces pushing control all aspects of its company’s IT capabilities out to the business systems, applications, platforms are fueled in large measure by and devices. two major IT trends: the consum- erization of technology in the Indeed, the locus for decision workplace and the growth of making about business applications cloud computing. is shifting inexorably to line executives. That can be a good In 2011, the Accenture Institute thing from the standpoint of speed for High Performance surveyed to market and becoming more more than 4,000 employees in 16 agile in responding to opportunities. countries and found that more than But from the standpoint of half (52 percent) are using personal traditional IT governance, it’s consumer devices for work-related a bit overwhelming. activities. An almost equal num- ber (50 percent) are taking it upon Ensuring compatibility and inte- themselves to create technology- gration and avoiding redundancy based solutions to meet particular are now harder than ever. And it business needs. becomes difficult even to identify and manage IT spending. Requests Wait for the IT department alone and IT capabilities are now buried to make things happen? Not likely. in different budgets all over Forty-three percent of employees in the organization, not in a central the study feel comfortable mak- IT budget. ing their own technology choices for use on the job. They appreciate As a result, IT executives are having the prospect of getting work done a harder time than ever delivering on whenever and wherever they want their traditional charge: maximizing through devices and applications the return on technology investment of their own choosing. That’s a big and controlling spending, while change for organizations in just a providing the global enterprise with few years in terms of the amount of a coherent, integrated IT architecture influence employees and the busi- and management structure and also ness are exercising over their use securing the company’s (as well as of devices and applications to meet its customers’) data. enterprisewide goals. Culture shock And then there is cloud computing The battle continues, nonetheless, and software-as-a service, which between centripetal and centrifugal give business or line personnel the forces: IT executives want to ability to bypass the IT department retain some sense of standardized and go directly to service providers and centralized control. At the for the applications they need. The same time, almost unstoppable implications of this trend can some- forces are spinning IT capabilities times be exaggerated—for example, out toward the farthest reaches of that it’s now easy to tell a provider the business. What’s needed is a how many software licenses are way to keep things spinning into needed, download an application80 Outlook 2013, Number 1
  • 77. get to work. Or that it’s com- rather than from the IT functionmon for business managers to pull itself (see chart, below).out their credit cards and purchasea few hours of server time from an New complexityinfrastructure cloud provider. The advent of the cloud signals significant changes in functions andThe reality is that it would roles for internal IT. For two decades,probably be career-limiting for IT has been evolving from a back-of-a business manager to make a fice technical function into a service-major IT purchase without the oriented provider that delivers criticalsanction or knowledge of the IT business capabilities and is managedgroup. However, it is undeniable by business and technology leadersthat the ready availability of as a strategic business resource. Aapplications and infrastructure much-touted purpose of outsourcing,on request has made the business and now of the cloud, has been tomore involved than ever in building accelerate this process, freeing upIT functionality. Indeed, a recent internal IT resources for moreEverest Group study found that business-focused and strategic tasks.64 percent of buyers of cloudsolutions were business or line But how can this complex environ-function managers and executives ment be more effectively managed?Holding the powerThe centrifugal force of cloud computing is pushing greater IT power out to theentire business. Accordingly, more and more non-IT groups within an organizationare now involved in IT purchasing decisions. According to a 2012 Everest Groupstudy, 64 percent of stakeholders involved in cloud-solution purchases were fromoutside the IT function.Stakeholder involvement in cloud-solution purchasesBuyer responses, N=185 64% 36% 28 21 15 IT function C-level executives Business units Finance functionSource: “Evaluating Cloud Service Providers,” Everest Group, 2012 81
  • 78. Information Technology Cloud computing and the consum- But given these new governance erization of IT have the potential to requirements, where will the create great value for organizations required skills come from? in every industry. Employees can work from anywhere and can meet Research from the London School customer demands or respond to of Economics and Accenture—based operational needs as if they were on a survey of 414 business and at the office. Businesses can reduce IT executives—found that about costs, create more agile IT capabilities, three-fourths of business executives simplify procurement and accelerate intend to rely on their in-house the delivery of IT functionality on staff for IT services. But those same behalf of the business. executives also expect to make much more use of external servicesThe move to IT as a At the same time, organizations as reliance on the cloud grows. now need to think in new waysfunction that delivers about how to manage IT in IT executives are looking, perhapsbusiness services—and a coherent, comprehensive and not surprisingly, primarily for cost-effective way, making tech- technical support. About 50 percentnot just application nology, application and business of them recognize the benefits ofcreation and support— services choices with a clearer eye on business value. external providers for technical assistance—things like IT configura-has many concerned tion and integration, data security Increasing the power and data management. But aboutabout whether they So what’s needed to more effec- half of the business executiveshave the skills internally tively manage this new and more surveyed see a broader role for complex IT reality? The very term external providers to drive activityto make that happen. IT “governance” may be outdated. in areas such as business process Note that in an automobile engine, transformation, change management, a “governor” is something that communications, and IT maintenance exists to limit the power and and support. speed of the machine. It’s about control. What’s really needed today In short, the move to IT as a function is a way to increase speed, not that delivers business services— throttle it, to manage IT toward and not just application creation greater efficiency in its new role and support—has many concerned as a service delivery function. about whether they have the skills internally to make that happen. Our And that requires a set of capabilities research shows that CIOs and other focused on areas that are generally IT professionals often lack the deep not part of traditional IT governance. knowledge and experience to move decisively into cloud computing. • alue: An office that is tracking V In practice, this knowledge gap business goals related to IT appears to be a major reason for organizational delays in moving • rchitecture: A capability A to the cloud. charged with maintaining a consistent and effective business What retained capabilities will and IT architecture be needed to run the technology function? How does the changing • elivery: A group overseeing D and expanding role of external the delivery of the ultimate IT providers play into the mix? What functionality specific management capability82 Outlook 2013, Number 1
  • 79. are coming to the fore In the following sections, wewith cloud deployment and a will look at the new picture of ITplethora of new consumer devices management, with a focus on thein the workplace? And how can skills organizations need to executethese be dealt with? these functions more effectively.An office for value creationEssential skills: Business innovation; business systemsthinking; relationship buildingA value creation function— fast enough with the impact of awhich in some cases is an actual release on the normal functioningresponsibility, akin to a program of the business. This firm recentlymanagement office—works in activated one piece of functionalityconcert with the business to assess within its SaaS platform—function-and realize value from an IT ality that had been available forinitiative, drive innovation and a couple of years—and foundprovide an enhanced level of it to be highly valuable. Butinsight for stakeholders. the situation also represented a missed opportunity (or delayedTo have such a value creation value) because the situation madefunction means there is a part of it clear that the IT function didthe IT organization that is proactive not have people tasked with beingfrom an innovation perspective, on the lookout for the most impor-providing ideas back to the business. tant value creation opportunitiesIt also means that function is in new releases of the software.working closely with the businesson pilots and proofs of concepts. IT Business innovation. Turningorganizations in general struggle to the essential skills needed toto develop such a capability—in successfully develop and run apart because of capacity issues but value creation office, “businessalso because many of them are innovation,” not surprisingly, isnot adept at the kind of strategic at the top of just about every ITthinking needed to really drive executive’s agenda. The changingthis function consistently. role of the CIO is one thing to be taken into account here. TheRapid technology change and impact of the cloud is likely tothe almost continuous release split the CIO’s responsibilitiesof application updates are other with regard to innovation: a rolefactors constraining the ultimate focused on business innovations,creation of business value in partner- and a more technical role lookingship with IT. In some cases, a SaaS for innovations in architecture,platform may release dozens of infrastructure and delivery.enhancements every quarter. The business innovator role isOne high-tech firm has ended especially important in an envi-up, like many companies, opting ronment where external providers,out of most software releases other vendors and the in-housebecause it simply cannot cope IT function need to work together. 83
  • 80. Information Technology Collaborative, dynamic innovation process and technology. Our cloud is one key success factor identified research emphasizes that business by our research when it comes systems thinkers need to be to both IT outsourcing and BPO. deployed on cloud projects, So an important responsibility where they can act as conduits of the business innovator is to between business demands and maintain the organizational the technical architects. commitment to collaboration necessary to leverage the cloud’s Relationship building. Another full business potential. important capability is relation- ship building, which facilitates Business systems thinking. the wider dialogue and establishes All of our research respondents understanding, trust and coopera- stressed that cloud management tion among business users and requires a high degree of other technology/cloud specialists. business-facing skills. One such Relationship builders develop users’ skill is what we call “business understanding of technology and systems thinking.” Business systems the cloud, as well as the potential thinkers focus especially on the cloud holds for their lines aligning strategy, structure, people, of business. Business architecture Essential skills: Architecture planning and design; making IT and process work The architecture of IT solutions design more agile solutions that designed to deliver business services can accommodate technology in an effective and efficient change. By developing this manner will increasingly involve flexible and anticipatory capabil- hybrid environments of both ity, the organization can more legacy and cloud. But even that consistently operate based on an does not capture the full com- effective and efficient technology plexity as, in reality, an effective platform, without needing large, solution now may need to include ongoing investments in major various flavors of cloud: private migration efforts. cloud, managed cloud, virtual private cloud and public cloud. Architecture planning and design. Both visionaries and the To meet this solution design architects themselves are essential challenge, a business architecture to the business architecture. capability is required—one that Planners shape the technology pools resources and provides architecture and infrastructure expertise across key business by developing and maintaining functions and delivery needs. the overall vision of an appro- The principal challenge with this priate technical platform. They capability is to translate insights also create policies that ensure into technology, suppliers and the necessar y integration and business directions that help f lexibility in technology and the IT function and the business cloud services.84 Outlook 2013, Number 1
  • 81., when it comes to the the coherent blueprint to managecloud, our respondents suggest the ongoing IT journey.that the architect capability isespecially important. The cloud Making IT and process work. Anarchitect has to be an enterprise important skill for those in thearchitect, a service-oriented business architecture function is Instead of employingarchitecture (SOA) designer (because the ability to make IT and processmost cloud-based solutions use work. This isn’t as self-evident multiple people toa services architecture) and a as it might sound. Technology oversee storage,cloud technologist. “fixers” are needed to troubleshoot problems and identify how to networking andDavid Linthicum, CTO and address business needs thatfounder of Blue Mountain Labs, cannot be satisfied adequately by virtualization,recently addressed this range of standard technical approaches. companies mightskills required on his InfoWorld These fixers understand theblog: “The cloud architect needs idiosyncrasies of the inherited hire one person whoseto be an expert in the existing infrastructure and business skills span all threecloud computing technology: public, applications, enabling them toprivate and hybrid, including make adjustments rapidly. cloud competencies.Infrastructure-as-a-Service,Platform-as-a-Service and Soft- In outsourced environments,ware-as-a-Service. You can’t build these skilled resources alsosomething unless you understand assess and challenge third-partythe tools and raw materials that suppliers’ claims about technicalare available, and the same goes problems and proposed solutions.for bringing cloud computing Technical staff need a deepertechnology into the enterprise to understanding of their traditionalform [business] solutions.” core competencies and also a wider skill set to overcome traditionalYet it is the structure itself—the IT silos and address the fact thatarchitectural framework that is the cloud encompasses more thanflexible and yet provides guidance one technology.over the long term—that is essentialas the internal IT function interacts Senior executives suggested toas a customer with a cloud supplier. us, for example, that instead ofAs another IT executive put it, employing multiple people tothe technology managed by the oversee storage, networking andcloud supplier is only part of virtualization environments,the solution: “You have to have companies might hire one persona standard operating procedure whose skills span all three cloudthat is well documented and that competencies. As one CIO noted,people are trained to operate. the cloud means that “the traditionalThat has got to come from the operational roles will shrink incustomer.” number, move increasingly to the supplier and cover more scale,By tracking technology trends, and though there will always be athen by understanding the business need for a bit of what you calland the technical configuration ‘technical fixing’—for example,required to optimize operations, dealing with the joints betweenthe business architecture capability different provider services andties together cloud strategy and technologies, and having know-howexisting technology, and develops of in-house systems.” 85
  • 82. Information TechnologyFor further reading Delivery of services“A new era of collaboration,” Essential skills: Service integration; informed buying; contractOutlook 2011, No. 3: facilitation; contract monitoring; vendor development Service deliver y is where the and outsourcing providers, an2011-new-era-collaboration- nitty-gritty of traditional IT informed buying capability is development and management Informed buyers analyze and happens: infrastructure design, regularly benchmark the external“Has the cloud made outsourcing configuration and development, market for IT and cloud services;obsolete?” Outlook 2011, No. 1: release management, testing, support select the five- to 10-year sourcing and much more. In essence, this strategy to meet business needsoutlook/Pages/outlook-journal- function is responsible for the actual and technology issues; and lead the2011-has-cloud-made-outsourcing- delivery of business services via the tendering, contracting and serviceobsolete.aspx IT platform and then for supporting management processes. that platform as it evolves.For more related content, The cloud also requires the abilityplease visit The service delivery environment to source different technologies today is highly complex in part and services from a multi-supplier because, as noted, the architectural base, on a more dynamic basis— environment is more complex—a one that is frequently on a hybrid of legacy and cloud tech- pay-for-use and pay-as-you-go nologies. Delivery will also most basis—as well as on more traditional likely be a mix of multiple resources outsourcing contracts, and shaping both internal and external. In the integration of multiple services response to that complexity, there for the business unit customer. is a growing need for management In a world that gets increasingly skills outside the traditional sweet outsourced and cloud-sourced, we spot of IT managers. find that client organizations still under-resource their informed Service integration. With IT focused buying capability. more today and in the future on delivering business services rather Contract facilitation. This action- than as a function that delivers oriented capability is crucial for applications and server management, creating a smooth relationship an unprecedented degree of business between suppliers and business sophistication is now required from users, in part by ensuring that IT. This business knowledge, problems and conflicts are resolved combined with systems integration fairly and promptly within what capabilities, results in a new function are usually long-term relationships. providing end-to-end management In many of the companies we have and integration of the business studied, the need for this role is service or set of services in a not spotted soon enough, especially multi-vendor, cloud environment. when it comes to IT outsourcing. Service integration combines into Instead, the capability tends to a new capability several traditional grow in response to ongoing issues: functions including service transition, Users may be highly demanding, service operations and continuous which incurs additional charges service improvement. from a provider; multiple supplier services need coordinating; or Informed buying. For organizations easier monitoring of usage and that rely heavily on external vendors services is required.86 Outlook 2013, Number 1
  • 83. monitoring. This involves of the highly skilled group needed About the authorsmaking inputs to the development to manage cloud-based servicesand maintenance of a robust contract effectively. The other is evolving Saideep Raj leads Accenture’s globalas the basis for sound overall these management skills to support SaaS (Software-as-a-Service) The role then leads to the expected increases in cloud He is based in Philadelphia.holding suppliers accountable for deployment and external sourcing saideep.raj@accenture.comboth existing service contracts and over time.the evolving performance standards Jack Sepple is the managing directorof the services market. Once technical reliability is estab- of Accenture’s cloud business. He is lished, the retained function needs based in Denver.Although all the organizations we to become more business-focused john.s.sepple@accenture.comhave studied recognize the impor- and better able to source externally.tance of contract monitoring—the This makes relationship-building Leslie Willcocks is a professor ofmonitoring role is routinely staffed at and business systems thinking work, technology and globalizationthe beginning of an IT outsourcing capabilities especially important. at the London School of Economics.arrangement—they too frequently Also, scaling up on external cloud- willcockslp@aol.comassign this role to people with inad- sourcing will usually necessitateequate knowledge and experience, increased investments in informedunderestimating the magnitude of buying, contract monitoring andthe task. The cloud brings a new vendor development capabilities.dynamism to the monitoring rolebecause there are more (and morediverse) contracts, more instant and Whatever the emerging patterntransparent information (including of take-up and speed of cloudfrom suppliers), new standards computing, it is clear that tech-of service and a need for faster nology continues to be both aresponse times. challenge and a significant oppor- tunity for organizations. MakingVendor development. This compe- the new IT environment successfultency is concerned with leveraging requires a new set of managementthe long-term potential for suppliers add value, creating mutuallybeneficial situations in which the One paradox is that the challengessupplier increases its revenues by of technology have often blindedproviding services that drive greater people to the real purpose of thebusiness benefits. Given the high technology function. The cloud offerscosts of switching providers, it is a path forward. The more thatgenerally in the client company’s specific technologies get moved outinterest to maximize the contribution of the way—into the cloud, to thefrom existing suppliers. This is likely supplier and to the business itself—to remain the case in a cloud envi- the more the technology functionronment, especially as such contracts can focus on its real job, which is togrow larger and more complex. exploit the capability that IT makes available for business. Primarily, thatManagement challenges job will lie in service, informationOur research points to two major management, business analytics andchallenges in developing the skills IT-enabled business innovation.and functions needed to managean IT environment in which the Organizations must ensure theybusiness itself—and employees— have the management capabilitieshas a greater share of voice. One in place to reap the full value ofis the recruitment and retention today’s IT. 87
  • 84. Business Process Outsourcing | Talent Organization
  • 85. Masters of the mixBy Michael J. Salvino, Walter G. Gossage and Mary LacityThe benefits of effective change management in BPO are measured at both an individualand organizational level. Companies that are attentive to transition issues and tosupporting the retained workforce can drive topline benefits from a more effectivefunctional organization. 89
  • 86. Business Process Outsourcing | Talent Organization Imagine your chagrin: You bought and over the course of the longer a sophisticated new audio system change journey; helping people from for your home, and all the elec- both the retained and outsourced tronics retailer did was deliver it, workforces understand the impact plug it in and leave. of the structural and performance changes caused by BPO; communi- Given what you had hoped the cating broadly and powerfully to all system would provide—to say nothing affected parties; and, finally, being of what you paid for it—you had attentive to using change in a posi- assumed that an expert would help tive manner to improve the impacts you set up the equipment and explain of the BPO relationship over time. how to position the components properly for an optimal experience, Nearly 90 percent of companies how to operate the system, how to involved in a high-performance troubleshoot problems and so forth. BPO relationship regard change After all, the system is meant to management as an important capa- change the way you listen to music, bility; by contrast, only 62 percent and if the retailer fails to help you of typical performers share that achieve that change, it’s unlikely attitude. Yet BPO clients also know you will understand the system or that, ultimately, it’s about execution, use even a small percentage of its not just good intentions: 77 percent overall functionality. of high performers characterize themselves as successful at executing In much the same way, today’s change management plans, some- buyers of outsourcing services have thing claimed by just 34 percent expectations for their BPO partners of typical performers. and suppliers that go well beyond just setting up the function or pro- So what’s change management all cess and meeting basic service levels. about in a BPO context? They expect the BPO relationship to deliver better overall performance First, it’s about managing both the and positive strategic outcomes. short-term and long-terms effects of change. Effective BPO relationships Wide-ranging change are attentive to the organizational What are the critical components challenges encountered during the of high-performance BPO? One of initial transition period and are the more striking findings from good at optimizing the performance Accenture’s research (see sidebar, of both the outsourced organization page 96) is that the most successful and the retained workforce—that BPO relationships—those that is, the employees who transition to produce the greatest business the provider and those who remain value—are founded on the skills with the client. of the provider to manage the wide-ranging human and structural Second, successful BPO relationships effects of BPO on the organization as are characterized by the highly a whole. To manage both the music skilled management of the longer- system and the music, as it were. term change effort, striving for greater business impacts over the This covers a lot of territory: course of the longer BPO journey and managing organizational change becoming more “change capable”— effectively both through the short- more adaptive and agile in the face term transition to outsourcing of new business demands.90 Outlook 2013, Number 1
  • 87. transition: A solid methodologyAccording to our research, a At a finance and accountingBPO provider’s experience, backed outsourcing engagement weby proven transition methodologies, studied at a global manufacturer,is critical to effective change the pressure was on both clientmanagement. A global procurement and provider because it was theprocess manager for a fragrance client’s first outsourcing engage-and flavors company made this ment; progress and performancepoint directly: “During imple- were being watched very closelymentation, the first element we by top management. According tohave really benefited from is our the company’s European corporateservice provider’s methodology finance director, the credibilityfor doing the transfer. We have of the entire transition processpeople from our provider who depended on delivering to thehad experience with this type of pre-announced timelines; that, One key to successfullyproject before. They came with in turn, required the day-to-daya solid methodology for planning involvement of senior managers managing the transitionand managing the project.” who could make rapid decisions period: an “all hands and bulldoze obstacles out ofThe importance of a service the way when required. on deck” approach.provider with a proven methodologyand with people experienced As the finance director summarizedin the relevant functions and it, key success factors includedtechnologies was corroborated “effective expectations managementby our analysis of multiple high- and communication across allperformance BPO relationships. levels, sustained managementAlso important were the provider’s focus, and having leaders fromdeep and extensive knowledge of both our company and our providerboth the outsourced function and willing to hold themselves and theirthe client’s business processes. teams accountable and responsible for the engagement.”How is that process knowledgeacquired? It sounds obvious, but it Many outsourcing arrangementsinvolves the careful and exhaustive involve coordinating work acrossdocumentation of the processes large geographic areas, whichwith the participation of both underscores the need for continuous,client and provider. on-the-ground information about the diverse regional business needs.The procurement manager quotedabove highlighted the importance During the transition period at oneof creating in-depth descriptions learning BPO program we studied,of each process before kicking an executive from the provideroff the transition period, which, and one from the client traveledin the case of his company, enabled together around the region everyboth parties to “understand clearly six months and visited key leadershow operations really worked, from in different areas. That enabledthe requisitions to the purchase different parts of the organizationto the purchase order.” A final to understand the dynamickey to successfully managing the requirements of the business andtransition period: an “all hands then use that knowledge to helpon deck” approach. the BPO team perform better. 91
  • 88. Business Process Outsourcing | Talent Organization Outsourcing demands that a great look after the organization’s larger deal of attention be paid to the needs. While a user tends to consume details of the newly outsourced resources with little thought to function. Frequently forgotten costs, an educated customer makes during the transition period is informed choices about service part of the client organization that levels, functionality and costs. remains working for the company: the retained workforce and the This shift empowers client executives portion of a business process to more meaningfully contribute remaining in-house after the to business objectives. Rather than outsourcing begins. responding to a “user’s” request with, “Sorry, that’s not in my budget,” Without effectively managing the client executive works with the changes experienced by the the “customer” of the outsourcing retained workforce, a dangerous services to weigh the business value disconnect can arise. If only the of the request versus its cost. outsourced portion of the business function undergoes real change, a potentially significant source Transforming provider of value creation is lost from the relationships from “them” outsourcing arrangement: the to “us” synergies of efficient transaction processing and the creativity of Another striking finding from our people better able to think beyond research into high-performance transactional service delivery. BPO was the importance of having outsourcing clients take a partnering, Our research confirmed the collaborative attitude toward the importance of focusing on change in arrangement. Nearly 85 percent of both the structure and performance high performers consider their BPO of the retained organization. For provider to be a strategic partner; example, half of high performers by contrast, only 41 percent of have modified their retained typical performers operate according organization to optimize the to that mindset. Clearly, in a BPO operating model of their BPO arrangement, there is no “them”— arrangement, compared with only everyone is “us.” 29 percent of typical performers. One high-performance BPO Three transformations of the relationship we studied serves as retained organization are especially an exemplar for integrating the important. provider into the client organization. The client executive instructed his own leadership to include Transforming clients from the provider’s remotely located “users” to “customers” staff in everyday operations in a meaningful way, reminding his One of the critical organizational team that the provider’s offshore changes that must occur in out- staff was an integral part of the sourcing—critical because it is end-to-end delivery group, just necessary to achieve better cost as the retained staff was. The control—is for the “users” of business client established monthly meetings services to become educated “customers” who know how to (Continued on page 94)92 Outlook 2013, Number 1
  • 89. diamonds are a BPO relationship’sbest friendMany companies with world-class outsourced business services have radicallyredesigned their retained organizations. One common approach identifiedfrom our research is changing the retained organization from a “pyramid”to a “diamond” model.With a pyramid structure, most employees reside at the bottom of thepyramid. Such a structure is not without its benefits. For example, employeescontinually build valuable, client-specific experience as they are promotedhigher up the pyramid.However, the cost of expertise in the pyramid model is high because it isapplied only internally. By contrast, a provider can spread experts—and thecost of those experts—across multiple clients.Diamond-shaped retained organizations replace the heavy bottom of thepyramid with BPO providers. Many transactional activities that were onceperformed by employees are now performed by providers, typically in alower-cost location. There are fewer middle managers but more subject-matterexperts and project leads.The benefits of the diamond-shaped retained organization are reducedcosts, access to BPO providers with best-of-breed skills, and greaterflexibility because providers can more easily adapt to increases or decreasesin service volumes. From To Leadership Leadership Quality/ governance Middle managers Subject-matter experts/ project leads Internal Onsite employees Internal employees contractors BPO BPO Back-office doers Front-office service coordinators Disconnected users Connected customers Provider as “them” Provider as “us”Source: “Mastering High Performance BPO: Transformation of the retained organization,” Accenture 2012 (Adapted from Jim Lammers and Sandy Ogg) 93 From To
  • 90. Business Process Outsourcing | Talent Organization (Continued from page 92) to give people the knowledge and skills they need to work in new with the remotely located provider ways. In other words, managing employees to encourage and reward change for the retained workforce— their contributions to operational and for the provider workforce, innovations and improvements. as well—involves ensuring that the workforce can perform in the new ways required, and ensuring Changing the mindsets of that they want to perform in employees from “back-office” those ways. doers to “front-office” service coordinators Here are some keys to success along both those dimensions. In a business services organization that has been restructured to run • nnovative programs for I on an outsourced basis (see sidebar, training, collaboration and page 93), far fewer employees knowledge sharing. Today’s perform transactional activities innovative learning solutions and many more coordinate service can be especially powerful when delivery with BPO providers and it comes to enabling change. internal clients. This means that Performance simulations—learning most middle managers—many of environments that replicate the whom rose in their positions because actual tasks to be performed by of their functional skills—must now workers—help move people from learn better relationship skills. knowledge to action. As one provider executive put it, Web-based environments can “The reality is that relationship provide training experiences that managers in the client’s retained are both richer and more timely. organization need a vastly different Social learning and collaboration skill set. Just taking your best platforms offer access to real-time accountants and putting them in expertise and learning, and also the role of relationship manager provide a supportive environment doesn’t work well.” that encourages understanding and change. An executive with a medical devices company offered advice • ultural assessments. These C about how to more effectively can help determine where mis- prepare middle managers for aligned attitudes and mindsets their new roles: “Get your people interfere with the workforce’s to the provider’s delivery centers ability to succeed in the new early on. Meeting the delivery work environment. Social media center people and understanding applications can help by enabling what they do opens the eyes of both clients and providers to take the managers to their new roles.” the pulse of a change program much more directly than by But changes in roles and mindsets administering and analyzing an ripple through all levels of the online survey. workforce, not just middle man- agement. Efforts must be made to • edesigned work processes. R overcome the natural resistance Process reengineering is part to change, and at the same time of the transformation of the94 Outlook 2013, Number 1
  • 91. retained workforce, but helping force as new structures and ways the employees actually perform of working are designed and those new processes is just as implemented. People are naturally essential. It is often important more accepting of and engaged to use technologies that embed in changes to which they have new ways of working into the had some input. The outsourcing applications used by the work- operating model is a new world. force. This goes beyond telling But the transformation can be people about change and helps extremely positive when people them perform in new ways. are engaged from the start in the design of that new world,Ultimately, it is important to coexisting and prospering withcollaborate with leaders and an outsourcing partner.members of the retained work-Long-term journey, long-term valueHigh-performance BPO arrangements program in finance and accounting,are dynamic both in their goals the company and its supplier createdand in how they are managed. a dedicated change management/They constantly seek to align their portfolio management program towork with the wider needs and ensure the success of more thanaspirations of the client’s business. 200 events associated with theLeaders from both client and development of the outsourcingprovider find ways to leverage program. A combined client-providertheir management structures, team created global, functional andprocesses and relationships to deal subsidiary-specific communicationwith this dynamism. plans to engage with the various audiences affected by the change.According to our research, nearly85 percent of high-performance Local leaders were assigned theBPO relationships proactively responsibility of managing therefine their objectives as the work readiness of Microsoft’s people,proceeds, compared with just which signaled to the subsidiary that40 percent of typical performers. change was close to home. Assigning subsidiary leaders to the team alsoThis means that the most successful gave people within the subsidiariesBPO relationships are attentive to confidence that one of their own—managing the longer-term journey rather than someone flown inof change, often over the course from headquarters—was providingof a multiyear contract. They also input and direction to the solution.know how to manage multiplestreams of work and multiple portfo- As this example suggests, it islios of change—a balancing act that important to bear in mind theis increasingly a characteristic of difference between managing atoday’s business environment. short-term change program (such as the initial transition capabilitiesAt Microsoft, for example, which already discussed) and the longer-has successfully delivered a long- term journey of an outsourcingterm, transformational outsourcing relationship. 95
  • 92. Business Process Outsourcing | Talent OrganizationFor further reading Because they are so collaborative views of business drivers and all at the core, high-performance BPO will face different pressures. It is“Partners in high performance,” relationships often enjoy an advan- important to reach consensus onOutlook 2012, No. 2: tage in this area. When the client approaches and to understand the involves the provider in strategic exact nature of shared problemsoutlook/Pages/outlook-journal- discussions, the two can work and challenges. Failure to achieve2012-partners-in-high-performance- together to more effectively identify common resolve can put the overalloutsourcing-bpo.aspx risks and avoid problems. Different BPO change journey off course stakeholders may have contrasting downstream.“Achieving high performancein BPO,” Accenture, 2012: A vision for the future:For more related content, Managing opportunitiesplease visit Managing for the long term is also toward longer-term value. According about managing opportunities, to the executive, “The provider however, not just avoiding risks. regularly sends their category This is another characteristic of managers to interview our major effective BPO relationships. Both stakeholders at the vice president client and provider look for oppor- level. The stakeholders talk about tunities to broaden the impact of the projects coming up for the year arrangement. They work together to ahead and what services they will define a compelling vision for the be needing. That heads–up allows future, identify where the gaps the provider’s team to go back and are and then create a longer-term say, ‘All right, there’s a big project roadmap to realize the opportunities. coming up at one of the facilities. We need to have an expert go out The vice president of operations for and talk to the client VP of facilities a high-tech manufacturer that has to understand their needs.’ ” outsourced its procurement function described an emerging practice Putting processes in place to assess that has helped the company drive progress along the journey is also Change management and BPO: A research perspective Accenture’s high-performance BPO research was based on a quantitative survey of 263 buyer executives, in-depth interviews, and input from more than 250 academic research studies. Among the findings: The gap between BPO high performers and typical performers is large when it comes to executing a robust change management program. More than three-quarters (77 percent) of high performers characterize themselves as successful at executing change management plans—43 percentage points higher than typical performers.96 Outlook 2013, Number 1
  • 93. Of course, every out- organization—whether that issourcing program has a project or HR, finance, IT, procurement orprogram management office tasked something else. Then, that functionalwith monitoring and reporting. organization can continue toHowever, as individual projects drive measurable improvements inget rolled up into a larger portfolio business value, whether that isof programs over the course of the defined by sales, cost, productivity,BPO relationship, it becomes more retention or other significant metrics.challenging to track, measure andmanage the integration points. It’s a little like that home audioA key to successful management, system—which, if carefully installedtherefore, is moving beyond tradi- and periodically updated as thetional project management so that technology evolves, will providemultiple strands of work can be years of satisfaction.coordinated effectively.For example, an ongoing steering About the authorscommittee (which some call a“Journey Management Office”) can Michael J. Salvino is the group chiefcheck the progress of multiple parts executive of Accenture’s Businessof the overall change portfolio as Process Outsourcing growth platform.well as the impact each part has on He is based in Charlotte, NC.the others. The Journey Management michael.j.salvino@accenture.comOffice assesses the status of thejourney against previously defined Walter G. Gossage is the managingend-state targets and periodically director responsible for changereassesses those targets in light of management offerings and capabilitiesmarket shifts and changing business within Accenture Talent Organization.priorities. It also monitors business He is based in Dallas.outcomes, not just the achievement walter.g.gossage@accenture.comof intermediate project goals. Thiscan keep the program on track Mary Lacity is Curators’ Professor ofthrough leadership shifts and information systems at the Universitymarketplace change. of Missouri-St. Louis. mary.lacity@umsl.eduAdded up, these attitudes andbehaviors create a BPO relationshipthat is more change capable—a moreagile organization that recognizeschange as a constant presence andactively seeks it out rather thanavoiding it.The benefits of effective changemanagement in BPO are measuredat both an individual and organi-zational level. Companies thatare attentive to transition issuesand to supporting the retainedworkforce can drive topline benefitsfrom a more effective functional 97
  • 94. Company IndexThe following companies and organizations are referenced in this issue.ABB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Google . . . . . . . . . . . . . . . . . . . 7, 9–10, 11, 37 Pocari Sweat . . . . . . . . . . . . . . . . . . . . . . . 36AeroFarms . . . . . . . . . . . . . . . . . . . . . . . . . 65 GreenTouch . . . . . . . . . . . . . . . . . . . . . . . . 62 Promasidor . . . . . . . . . . . . . . . . . . . . . . . . 43Afrique Initiatives . . . . . . . . . . . . . . . . . . 28 Guadalajara, government of . . . . . . . . . . . 19 Puma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66Alcatel-Lucent . . . . . . . . . . . . . . . . . . . . . . 28 Guangxi, government of . . . . . . . . . . . . . 44 Rainforest Alliance . . . . . . . . . . . . . . . . . . 64Alibaba Group . . . . . . . . . . . . . . . . 41–42, 43 Haier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SAIC (formerly ShanghaiAlliander . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Health and Human Services [NYC] . . . 15–16 Automotive Industry Corp.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 9, 11 Hindustan Unilever Limited (HUL) . . 41, 43 SAIC-GM-Wuling . . . . . . . . . . . . . . . . 42, 44Amsterdam Airport Schiphol . . . . . . . . . . 18 Hulu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 São Paulo, government of . . . . . . . . . . . . 45Amsterdam, city of . . . . . . . . . . . . . . . . . . 26 Hycrete . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Save the Children . . . . . . . . . . . . . . . . . . . 20Amsterdam Innovation Motor (AIM) . . . . 26 Idea Cellular . . . . . . . . . . . . . . . . . . . . . . . 43 Service Canada . . . . . . . . . . . . . . . . . . . . . 21Amsterdam Smart City . . . . . . . . . . . . . . . 29 India, government of . . . . . . . . . . . . . . . . 17 Siemens China . . . . . . . . . . . . . . . . . . . . . 42Apple . . . . . . . . . . . . . . . . . . . . . . . . 9, 10, 24 International Federation of Singapore, government of . . . . . . . . . . . . 21Apremavi (the Association Red Cross and Red Crescent Societies . . . 20 South Korea, government of . . . . . . . . . . . 21for the Preservation of the Istituto Nazionale della Spotify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Upper Itajaí Valley, Brazil) . . . . . . . . . . . . 47 Previdenza Sociale . . . . . . . . . . . . . . . . . . 15 Starbucks Corp. . . . . . . . . . . . . . . . . . . . . . 36Arqiva . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Itau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Sustainable Apparel Coalition . . . . . . . . . 66BBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 11 ITC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Suzano . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Better Place . . . . . . . . . . . . . . . . . . . . . . . . 26 ITV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Sweden, government of . . . . . . . . . . . . . . 21Blue Mountain Labs . . . . . . . . . . . . . . . . . 85 Junior Achievement . . . . . . . . . . . . . . . . . 20 T-Systems . . . . . . . . . . . . . . . . . . . . . . . . . 65Bravo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Kafo Yeredeme . . . . . . . . . . . . . . . . . . . . . 28 TalkTalk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8British Sky Broadcasting . . . . . . . . . . . . . 11 KFC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Tameer Microfinance Bank . . . . . . . . . . . 27Broadview Technologies . . . . . . . . . . . . . . 63 Klabin . . . . . . . . . . . . . . . . . . . . . . . . . 42, 47 Tata Chemicals . . . . . . . . . . . . . . . . . . . . . 66BT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 11 KPN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Tata Consultancy Services . . . . . . . . . . . . 66Canada Pension Plan . . . . . . . . . . . . . . . . 21 Liuzhou, city of . . . . . . . . . . . . . . . . . . . . . 44 Tata group . . . . . . . . . . . . . . . . . . . . . . . . . 66Canberra, government of . . . . . . . . . . . . . 16 Liuzhou Wuling Motors . . . . . . . . . . . . . . 44 Tata Motors . . . . . . . . . . . . . . . . . . . . . . . . 43Ceres . . . . . . . . . . . . . . . . . . . . . . . . . . 60–61 Maharashtra, government of . . . . . . . . . . 16 Telenor Pakistan . . . . . . . . . . . . . . . . . . . . 27Channel 4 [UK] . . . . . . . . . . . . . . . . . . . . . . 8 Marine Stewardship Council . . . . . . . . . . 65 Thanksgiving Coffee Company . . . . . . . . 66Channel 5 [UK] . . . . . . . . . . . . . . . . . . . . . . 8 Marks Spencer . . . . . . . . . . . . . . . . . . . . 65 Timberland . . . . . . . . . . . . . . . . . . . . . 63–64China, government of . . . . . . . . . . . . . . . . 51 Medicament Export (Medex) . . . . . . . . . . 28 Trina Solar . . . . . . . . . . . . . . . . . . . . . . . . 63Citibank . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Microsoft . . . . . . . . . . . . . . . . . . . . . . . 34, 95 TripAdvisor . . . . . . . . . . . . . . . . . . . . . . . . 34Deutsche Telekom . . . . . . . . . . . . . . . . . . . 65 Ministry of Health [Mali] . . . . . . . . . . . . . 28 Tufts University . . . . . . . . . . . . . . . . . . . . 56Dow Chemical Company . . . . . . . . . . . 66–67 Natura Cosméticos . . . . . . 42, 46–47, 63, 67 UNICA . . . . . . . . . . . . . . . . . . . . . . 42, 45–46Dún Laoghaire-Rathdown Nestlé Nigeria . . . . . . . . . . . . . . . . . . . . . . 43 Unilever . . . . . . . . . . . . . . . . . . . . . . . . 64, 67County Council . . . . . . . . . . . . . . . . . . . . . 20 Netflix . . . . . . . . . . . . . . . . . . . . . . 6, 7, 9, 10 United Nations Environment Programme . . 60eBay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Netherlands, government of . . . . . . . . 66–67 University of Washington . . . . . . . . . . . . 32Ecolab . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 New Zealand, government of . . . . . . . . . . 21 Vale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Employment Insurance [Canada] . . . . . . . 21 Nike . . . . . . . . . . . . . . . . . . . . . . 32–33, 36–37 Volkswagen Group . . . . . . . . . . . . . . . . . . 32Esoko . . . . . . . . . . . . . . . . . . . . . . . . . . 43, 47 Nokia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Votorantim . . . . . . . . . . . . . . . . . . . . . . . . 47Esquel Group . . . . . . . . . . . . . . . . . . . . . . . 63 Norway, government of . . . . . . . . . . . . . . 20 YES BANK . . . . . . . . . . . . . . . . . . . . . . 42–44Europol . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Novozymes . . . . . . . . . . . . . . . . . . . . . . . . 63 Youth Business International . . . . . . . . . . 20Extractive Industries OECD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Transparency Initiative . . . . . . . . . . . . . . 66 YouTube . . . . . . . . . . . . . . . . . . . . . . . 7, 9, 10 Old Age Security [Canada] . . . . . . . . . . . . 21 YouView . . . . . . . . . . . . . . . . . . . . . . . . 8, 11Fondation Orange Mali . . . . . . . . . . . . . . . 28 Opower . . . . . . . . . . . . . . . . . . . . . . . . . . . 36Forest Stewardship Council . . . . . . . . . . . 65 Oxfam . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Fredericia Kommune . . . . . . . . . . . . . . . . . 17 Pandora . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Friedrichshafen, city of . . . . . . . . . . . . . . 65 Paris-Charles de Gaulle Airport . . . . . . . . 26Gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Patagonia . . . . . . . . . . . . . . . . . . . . . . . . . . 64General Motors . . . . . . . . . . . . . . . . . . . . . 44 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Geomatic . . . . . . . . . . . . . . . . . . . . . . . . . . 2098 Outlook 2013, Number 1
  • 95. OutlookVol. XXV2013, No. 1Copyright © 2013 AccentureAll rights reserved.Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture.