NASSCOM GIC Conclave 2013: Session 2: Value Addition - Mc Kinsey


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NASSCOM GIC Conclave 2013: Session 2: Value Addition - Mc Kinsey

  1. 1. Accelerating ValueAddition from GIC’sApril 05, 2013CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibitedNASSCOM GIC Conclave
  2. 2. McKinsey & Company | 1SOURCE: Harvard Business Review; McKinsey analysisOur findings are based on extensive researchHarvard Business Review BlogMarch 13th 2013Our research is based on8 FinancialServices GICs(Value addition Wave 2)Detailedinputs from15+ GICs(including 10 FinancialServices GICs) in 2012-13Detailedinputs from15+ GICs(Value Addition Wave 1)200+onshore stake-holder responsesto value additionassessment survey
  3. 3. McKinsey & Company | 2Key messagesCurrent statusGICs have struggled to institutionalize value addition due to factors that are deeprooted and require iconoclastic leadership▪ Misalignment on priorities between GIC’s and onshore leaders; further gaps onshore whereCXOs expectations are not in sync with intent at the next level▪ Structural constraints (end-to-end ownership for 2 out of 10 processes) and weakunderlying practices (e.g., business outcome based incentives in 1 out of 4 GIC’s)▪ Culture that is deep rooted in incremental improvements; insufficient number ofentrepreneurial leaders who have vision, courage and tenacity to drive breakthroughinnovationCall for actionRight time for GICs to make the transition from ‘mature delivery partners’ to leadingwith value addition; a clear road map and ‘program like’ approach required to drivevalue addition at scaleThe prizeValue addition continues to be a significant opportunity for GIC’s and could drivebenefits in the range of $50 Bn over the next 5 years▪ Impact visible in pockets (observed in 1 out of 5 processes) through continuousimprovements in operational efficiency, high expertise processes and customer experience▪ Onshore expectations rising fast; GIC’s expected to own and show leadership on alldimensions112233
  4. 4. McKinsey & Company | 31158560400100Benefitsfrom labourarbitrage4XTotalbenefitsOperationalefficiencyHigh-skillcapabilities40TotalcustomerexperienceRevenueimpactValue addition continues to be a significant opportunity,can add value in excess of 3-5X of labor arbitrageSOURCE: McKinsey analysisImproved costandproductivity by15-20%resulting inefficiencies of~USD 4 mnImprovementin services tosales conver-sions from 2%to 4% throughbest practiceimplementationIncreasedcustomer baseand wallet sizeto enhancerevenues by~6% throughend-to-endownershipImprovedeffectivenessof marketingcampaignsthrough salesforce analyticsEstimated value at stake (indexed to 100))1
  5. 5. McKinsey & Company | 4Value addition visible in pockets through continuousimprovements in operational efficiency and customer experienceSOURCE: Onshore and offshore stakeholders in Value Addition Assessment SurveyRevenueimpactTotalcustomerexperienceHigh-skillcapabilityOperationalefficiencyLevel 2 – Ownership Level 3 – LeadershipLevel 1 – ExecutionLevels of impactTransformation –fundamentally alteredprocessesRevenue impactthrough leakagepreventionDeliver high expertiseprocesses end to endExpand to upstreamsegments on coreprocessesLabor arbitragebenefits at scale withcontinuousimprovementsRevenue contributionfrom existingservices delivered tonew segmentsAdapt processes toaddress customerneedsMeasure customerexperienceReengineeredprocesses exportedto the enterpriseDevelop newcapabilities for theenterprise which didnot existsInnovation foremerging markets andgloballyTransform customerexperience and takeaccountabilityNo impactFew instances of impactMultiple instances of high impact1
  6. 6. McKinsey & Company | 5CXO expectations not in sync with intent at the next level2 Ranking of priorities# Top two priorities2431GICstakeholders231Onshorefunctionalstakeholders(CXO – 1/2)4Onshorebusinessstakeholders(CXO)1432Revenue upliftCustomerexperienceHigh-skillcapabilitiesOperationalefficiencies▪ Onshore stake-holders expect theGIC to play a supportrole with limitedstrategic intent▪ Deep rooted cultureat captives focusedon meetingoperational SLAs▪ Limited incentives or‘hunger’ at GIC’s todrive breakthroughchangeSOURCE: Onshore and offshore stakeholders in Value Addition Assessment Survey
  7. 7. McKinsey & Company | 6Knowledgedevelopment andinsight generationCustomer data usageto drive processredesignLearning codificationwith IP and capabilitydevelopmentDrive expansion inscope of operations(e.g., new services,geographies)Opportunity identificationfor upstream processmovementAdditional valuemeasurement andincentivization to drivevalue additionMaturity of underlying value addition practices at GICs remainsweakStakeholder assessmentSOURCE: Onshore stakeholders in the Value Addition Assessment SurveyLow degreeof maturityProcess covers basicswith potential to improveMature practice2GIC practice maturity scorecard
  8. 8. McKinsey & Company | 7Culture that is deep rooted in incremental improvements;lack of iconoclastic leaders who can question status-quo2A long-termvisionHunger tosucceed“Leaders can succeed when they’re willing to move away from thestatus-quo i.e., make any changes required to succeed. Not just theminor changes”– SVP, Commercial Banking OrganizationBusinessunderstanding“Leaders can succeed when they’re truly knowledgeable about thebusiness and hence can play the role of a business partner”– MD, Financial Services OrganizationCourage andtenacity“Leaders have to be both courageous and tenacious. They have to bewilling to take the risk if required. Take multiple hits if required;only then will success be possible”– SVP, Financial services organizationEvidence from interviewsGIC leadershipneeds– Director, Retail and Corporate Banking“Leaders need to have an idea of what we need not only tomorrowbut 3-4 yrs. in the future as well. I don’t need to know what we cando to improve our SLAs – rather what we can do to improve ourbusiness”SOURCE: Interviews with onshore and offshore stakeholders
  9. 9. McKinsey & Company | 8GICs now at the cusp of moving from delivering efficiently andeffectively to driving value additionSOURCE: Discussions with onshore GIC leaders3The “Startup”phase where theadvantages ofoperating in lowcost countrieswere demonstratedto the enterpriseThe “Maturedelivery” phasewhere GICsdelivered costefficiency andeffectivenessadvantages to theenterpriseThe “ValueAddition” phasewhere the GICmoves beyondlabor arbitrage andimpacts customerexperience,revenue andinvests in high-skillcapabilitiesThe “Innovator”phase where GICsare a source ofcompetitiveadvantage andpart of networkorganizationProve the rightto existDeliver efficientlyand effectivelyDrive valueaddition (beyondarbitrage)Leadbreakthroughinnovation
  10. 10. McKinsey & Company | 9SOURCE: Discussions with GIC leaders; onshore stakeholders in the Value Addition Assessment survey; Team analysisPerformance record and rising expectations makethis the right time to drive value addition30% 18%Focus onhigherend skills6% 22%Globalservicefactory46%18%Low costdeliverycenter14%76%Manageprocessesend-to-endGIC hasmaintainedor increasedproductivity92%GIC hasmaintainedor reducedcost86%GICs have delivered strongperformance on both cost andproductivityOnshore stakeholders currently perceive the GIC as alow cost delivery center or service factory but expect itto play a greater role in the futureFuture roleCurrent rolePerformance on cost andproductivityCurrent and future role of the GICLicense and time to act
  11. 11. McKinsey & Company | 10Value addition at scale will require GICs to builda clear road map and ‘program-like’ approachSOURCE: McKinsey analysis3Boldaspirationthat excitesCXO’s andGIC leadersAspire Suitableareas withexpertiseand proofof conceptsFocus Changeleadersaccountableandincentivizedon ValueadditionLead Improveunderlyingpracticesespeciallyperformancemanage-mentInvest Internalpromotersandnetworksfor ideasandpositivebuzzExtendBalanceLocalownershipvs.businessintegrationAmplifyMakesuccessesgo viralMobilizeInnovationandinitiativetakingcultureacrossemployeesat all levels
  12. 12. McKinsey & Company | 1111Alexander Edlich,Director, McKinsey & CompanyNew YorkEmail: alexander_edlich@mckinsey.comSameer KhetarpalPrincipal, McKinsey & CompanyDelhiEmail: sameer_khetarpal@mckinsey.comAbhishek ShiraliSenior Analyst, McKinsey & CompanyDelhiEmail: abhishek_shirali@mckinsey.comShailesh KekrePrincipal, McKinsey & CompanyBangaloreEmail: shailesh_kekre@mckinsey.comPuneet ChandokAssociate Principal, McKinsey & CompanyDelhiEmail: puneet_chandok@mckinsey.comFor more details contact: