Feb 12, 2013

Missing woods (and jungles) for trees - the ever-raging debate on innovation in outsourcing and GBS

February 12, 2013 - Deborah Kops, one of the most refreshingly controversial voices in our space, recently wrote a blog titled “Is innovation in outsourcing insanity?” The discourse around innovation in this space doesn't seem to have evolved much in the last 7-8 years...since the time when talking outsourcing itself was the big innovation. Even Phil Fersht, always ready to rock a boat that in his opinion got too boring, is ready to throw the towel on it (link to source).

Insanity is that even the best of us are still trapped in thinking of innovation in outsourcing as a category of innovation, as well as “innovation in shared services” (or GBS?), or “innovation in sourcing". We have become so self-referential. We even call outsourcing “an industry”, whereas it is an operations business practice, perhaps part of IT-enabled (professional) services. We then get bogged down in truisms about incentives, capacity, capabilities…and we stay there.

What about instead of focusing on the delivery model we looked at real enterprise innovation, that can be built on top of better-run, more intelligent operations…and just derive how outsourcing, shared services and “sourcing” in general help with that? Because there is plenty of that needed – and it isn’t all about saving a bit of money here and there.

Extreme market volatility has prompted companies across industries to build more effective business operations. From pharmaceutical companies’ quest for agility to banks’ struggles with regulation and capital controls, from consumer products manufacturers’ exposure to supply and market fluctuations, to industrial and high-tech manufacturers’ outreaches into emerging economies – cost structures and effectiveness of decisions, both macro and micro, are severely tested in these volatile times.

Leading innovators such as Apple, Amazon, GE, HSBC or PayPal among others have addressed those challenges by harvesting the value of information– at scale - by harnessing the art of the possible in their business operations. And they, comparatively speaking, thrive in these volatile times.

That is innovation. And yes, they outsource, delegate, centralize, orchestrate…but that isn’t where they started. It is where they arrived.

This prize doesn’t come by itself. Jeff Bezos, named #2 best-performing CEO by Harvard Business Review (actually #1 of the ones still alive), is a “boring” operations freak – at least that is what he says. And those who are familiar with Apple’s obsession with “a perfect customer experience” do know how twisted the arm of an otherwise inelastic giant – AT&T – into changing client-facing ops.

Innovation in and through operations require more executive focus on areas where traditionally “no news is good news”; where leaders aren’t praised for creative spark; and where connections with R&D and Sales & Marketing are built at best to deliver, not to design, innovation.

Strategically embracing the art of the possible is first and foremost a challenge for CEOs and their teams – not just for the operations’ middle management.

Looking at innovation from that perspective, there is indeed more than a ray of hope. For some more off-the-chorus-line views you may want to check a recent webinar (featuring Phil quasi uncut), or many perspectives from a blog and whitepaper.

I don’t think we are ready to write this one off…

About the author

Gianni Giacomelli

Gianni Giacomelli

Chief Innovation Leader

Gianni serves as Chief Innovation Leader where he drives and sponsors Genpact’s strategic initiatives aimed at sustaining clients’ transformation into digitally-enabled companies. He also co-leads the Massachusetts Institute of Technology (MIT) efforts to set up a Collective Intelligence Design Lab.