CategoryValue Delivery

Infosys creates a new company for a new business model

Infosys is the IT services company from India with revenues of $8.2 billion. For a while its been trying to create a new business focussed on “products” and not services. It didn’t work. The only solution was to create a new company and the products division was spun off. This does not mean it will work but the services business model and the products business model are very different and was hard to run at the same time. This strategy makes sense and should provide some opportunity to succeed.

Infosys hived off its products, platforms and solutions (PPS) business — excluding the Finacle division — into a separate subsidiary earlier this year. The division accounted for about 1.5% of Infosys’s over $8.2 billion revenue.

The IT company’s vision under its Infosys 3.0 strategy has been to raise that to 33%, but more than three years into this strategy, the PPS needle has barely moved. The primary argument for a hive-off is that the culture and compensation structure of a products and platforms business has to be vastly different from that of a services entity. 

Today, Edgeverve is focusing on six areas — digital marketing, commerce, customer service, ecosystem management and procurement. “The whole idea of doing Edgeverve was to take the PPS journey to the next level, make it better for people, customers and engineering. The entire game plan is to ensure depth of talent and not the number of people. We are investing in a sales force that connects into a different buying centre in the customer’s organization ((from what the IT services business is focused on). We sell to the chief procurement officer, chief digital officer, customer service officer,” Purohit said. 

Read more at: Economic Times

 

Prototype > (Pitch + Projection + Plan)

 

NewImage

SK nails the idea. Great pic.

 

How caring brings out the best in you: Seth godin

From Seth:

Instead, the restaurant makes the menu longer instead of figuring out how to make even one dish worth traveling across town for. We add many slides to our presentation before figuring out how to utter a single sentence that will give the people in the room chills or make them think. We confuse variety and range with quality.

Practice is not the answer here. Practice, the 10,000 hours thing, practice alone doesn’t produce work that matters. No, that only comes from caring. From caring enough to leap, to bleed for the art, to go out on the ledge, where it’s dangerous. When we care enough, we raise the bar, not just for ourselves, but for our customer, our audience and our partners.

Scaling Excellence: Interview with Sutton and Rao

I am waiting to read this book. Scaling is a critical aspect of our work. There is no point in innovating something new if you can’t scale it.

 

Who are your scaling heroes and why?

Bob: There are many, but three that stand out for me are Bonny Simi, vice president for talent at JetBlue Airlines, IDEO’s founder and chair David Kelley, and Dr. Louise Liang, who led Kaiser Permanente‘s computerized health records project. What’s compelling is that while they’re all wildly different, they all have something important in common.

All three created, and often discovered, pockets of excellence and then helped spread them to new places—that’s the meat and potatoes of scaling. All three started where they were with what they had. All three made wise early choices to get the ball rolling—to create one or a few early pockets of excellence. And all three never thought of scaling as an abstract or mechanical process.

Rather, they each viewed scaling as a fundamentally human undertaking, one that required constant attention to quirks, histories and motivations of the people they hoped would build and identify a bit of excellence and spread it to others.

– See more here

Why Foreign Retailers Stumble in China: Lack of Empathy

Why did the might Home Depot and other retailers, very successful in the US and Canada, fail in China.

Anil Gupta and Haiyan Wang explain in the Business Week. They suggest four strategic idea. I want to focus in number 3.

Third, go heavy on local adaptation, including in such key areas as store size and format, product mix, and even store branding. The typical Chinese city has far greater population density than the typical American or European city. Also, the typical customer lives in a smaller apartment with a smaller refrigerator and is less likely to own a car. Thus, trying to clone the size and style of the company’s U.S. or European store is unnecessary baggage and would do little to build competitive advantage in China. Home Depot made this mistake in China. A key element of Home Depot’s success in the U.S. and Canada has been designing its stores around the do-it-yourself concept. It took this concept to China. Given the very low labor costs in China, however, Home Depot needed to think in terms of do-it-for-me rather than do-it-yourself.

 

Why co-design

When I have talked about empathy with customers, and understanding what is value to customers, this is great example. You cannot take even one of the most successful business models and transplant it into new contexts. You need to have the humbleness to build empathy and understand the “job to be done” for the customers in their context. A neuroscience researcher once told me that when we build empathy we “break our pattern of thinking”. This is the starting point of innovation. This kind of stuff, as the above graphic tries to suggest, cannot come from data driven analysis. It has to come from getting out of the office and understanding people.

If Home Depot has done that possibly there will be need to have a host of handymen, plumbers, electricians and others on call to support the buying process and adapt to the needs of the customers in China.

What is the learning: Whether you are starting off new or have one of the most successful business models in the world, when your context changes and customers change you need to go back to understanding the whole thing from the start. Get some insight into customers as a first step.

 

Is the Age of Efficiency over?

The new year always brings in new thoughts and new plans for me. What about you? What are you thinking about changing in this new year? And, Happy New Year to you.

Victor Hwang writes in Forbes about the underlying spirit behind the start up movement around the world.

The Startup Movement is like a reboot of the human spirit.  Gary Whitehill, who has launched a series of Entrepreneur Weeks around the world, calls the era we are leaving behind the “Age of Efficiency.”  I think he’s right.  We are moving from an economic model that treats individuals as replaceable cogs in an anonymous yet efficient system, to one that recognizes that individuals are the only ones who can make the system better through their innovations, inventions, and creations.

The truth is efficiency or doing things faster, cheaper, better in solving social problems can’t work. We have examples of that everywhere. In the developed world, the child protection challenges, indigenous people’s standard of life, ageing challenges are growing by the day. In the developing world, basic water, electricity, education, primary health are missing. These are challenges that cannot be solved by doing what we are doing faster, cheaper, better. To be effective, we need a different way of solving these problems. That is innovation.

The age of efficiency is clearly over. Part of the work for innovators like you is to sell the need for innovation, the need for effectiveness vs efficiency.

One challenge that you will clearly face straight away is the discussion around cost. One of the assumptions behind efficiency is about driving down costs. But, who says innovation is not about driving down cost? If you look at what IKEA, the global furniture company, includes in its scope for any new product – price of the final product on the shelf. The designer needs to think about raw materials, manufacturing, production, marketing and other costs when creating the product. Cost is a design constraint. That is the best way to think about it. It is part of the innovation output.

So, go ahead, lets make innovation the key focus in 2014 to make the world a better place.

Why business models trump technology?

Karan Girotra, who  is a professor at Insead in Fontainebleau, France and  Serguei Netessine, who is the Timken Chaired Professor of Global Technology and Innovation at Insead writing in HBR about Drip Irrigation and why it did’nt catch on for a long time until a business model innovation:

The reason is a problem common to almost all new technology adoptions. The developer of the new technology has the best information on the performance of the technology and on the benefits it could deliver to the adopter. But the incentives of the adopter and the technology developer are typically not aligned: while the technology developer has all the incentive to sell as many units as possible, the adopter would only like to make investments with the highest rates of return.

To achieve this alignment and to reduce risks for the farmers, Netafim started providing a new offering, called IrriWise Crop Management System. IrriWise was an integrated proposition that included the system design, all the required hardware, installation and regular service of the system. Most importantly, farmers often did not have to buy the system. The system would be installed at Netafim’s expense (essentially costs would be reallocated to Netafim), but Netafim would get a further payment tied directly to the increase in crop yields.

With more skin in the crop-yields game, Netafim was now incentivized to modify service, adapt and maintain the equipment, to get the best possible outcome. Netafim went so far as to change into mission statement from “making the best drip irrigation equipment for customers” to “helping the world grow more with less”, an objective far more aligned with the objectives of its customers, the farmers. This allowed it to dramatically grow revenues, increasing its market share, all while making a life-changing impact on some of the most impoverished of the world’s citizens.

 

Business model Innovation at large organisations

HBR on why large organisations struggle at business model innovation:

Lack of top management support and attention 

Unlike other innovations, implementing a business model innovation often requires changes that affect multiple parts of the organizations. And while the R&D department can sponsor and push through a new product or technology, rolling out a business model innovation requires direct support from the top management.

Reluctance to experiment

Even the most brilliant business model innovation idea is just that: an idea.  It relies on a lot of assumptions and judgments, and in the absence of a crystal ball, the best tool we have is experiments. But established companies are surprisingly bad at experimenting.

Failure to pivot

Even when the company experiments with a new business model, it often fails to interpret the result of the test correctly and adjust an implementation plan accordingly. What may seem like a failed experiment might carry the message that an adjustment in the planned rollout of business model innovation is needed. And what looks like a successful test might not be really testing the most critical aspect of the business model.

Understanding and inventing business models for social change

Tremendous amount of work is being undertaken in understanding business models in the corporate world. At the same time to invent new ones. Invention comes from understanding what’s currently out there.

The question for me is “what about the social sector?”. Where are places where we know the business models of the top organisations in this space? I am not talking of “funding models” here. How they raise revenue? That is only part of the business model. How do they create value? How do they create change? What has worked? Are they specific delivery mechanisms that can work in this space?

A dream for me would be to document the business models of various organisations all over the world and understand them. Then describe them and then we can start inventing new ones.

 

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