This article contains an excerpt from Atul Vashistha’s latest book, Globalization Wisdom: The 7 Secrets of Successful Globalizers.

Continual technological, social and economic advancements propel us further into a global business world in which executives in Boise can teleconference with executives in Beijing. Entire departments now work remotely from home offices. And with the advent of freelance online employment markets, the ability to globalize is growing more accessible to businesses of all sizes.
    
The initial wave of globalization in the late 1990s and early 2000s was about taking advantage of lower labor costs in offshore destinations. With the advent of rapid, inexpensive transmission of data, businesses could leverage the time zone difference with India to achieve 24-hour workdays. But those opportunities were only the beginning. Today's successful globalizers embrace a number of additional advantages to globalization which other not-so-successful leaders do not.

Successfully implemented, globalization can shore up competitive advantage. Organizations can take advantage not only of lower labor costs, but also diverse intellectual capabilities, growth and quality enhancement opportunities, and the ability to get products to market more quickly. Successful globalizers are constantly looking for opportunities to improve—whether those opportunities present themselves in Michigan, Mexico, Malaysia, or anywhere in between. Much more than bottom-line labor costs and longer workdays, successful globalization means a more successful business, period.

Some organizations and leaders have leveraged these opportunities successfully. Many have not. Not surprisingly, successful globalizers engage in similar practices—key practices that other companies can emulate. In my two decades of consulting with major corporations, I have noticed a set of seven best practices shared by firms which have succeeded in service globalization. What follows is an excerpt from my upcoming book on this topic, Globalization Wisdom: The 7 Secrets of Great Globalizers. Two secrets are detailed below. You can discover the remaining secrets at www.globalizationtoday.com.

By understanding the paths other organizations have taken to become successful globalizers, the learning curve on your own path will hopefully be shorter.

Secret #1: Embrace Globalization

Successful globalizers understand that services globalization has come a long way from offshore outsourcing, and that it continues to evolve every day. As services globalization evolves, new opportunities arise. The reality, as Applied Materials GVP and CIO Ron Kifer sees it, is that a company can embrace, leverage and be a part of that globalization—or it can become its victim.

“It’s greatly important that global organizations understand we’re moving to a globalized economy and they have to have the flexibility to be able to do the work wherever the work is more cost-effectively done, and wherever the work is high-touch to the customer. That’s why we’re pushing globalization as a key strategic initiative in our organization,” Kifer explains.

Flexibility—being open to new opportunities—leads to the first secret of successful globalizers: Embrace Globalization. Successful globalizers welcome services globalization into their organizations with open arms. They are constantly learning and constantly open to the new opportunities—and challenges—that the evolution of services globalization presents. Embracing globalization means looking at the big picture—considering every corner of the world as a potential sourcing destination, and thinking about the unique advantages and opportunities that each location offers.

Model for Embracing Globalization

The basic model for embracing globalization has four components:

1. Embrace globalization across the business.
2. Ask which processes could be performed better elsewhere.
3. Mandate the globalization of processes that can be performed better elsewhere.
4. Keep an eye on the future.

When the offshore outsourcing trend first caught hold in U.S. businesses, most firms saw it as an opportunity to reduce costs through labor arbitrage. But as the movement has evolved—as offshore outsourcing has become services globalization—companies have looked beyond cost considerations.

In fact, flexibility is even more important than cost in services globalization.

“If cost is your primary consideration, I think you’re going to fall short of meeting the real objectives,” Kifer says. “The real objective of a sound globalization strategy is to have a flexible workforce and global model and to realize that the markets, customers and competitive environment are going to change, which will require a company to maintain competitiveness to be able to do work in a different model in a different place over time."

And that’s why successful globalizers embrace it across the business.

Bill Gates once said, “If we are not realistic about what we’re good at, then there is a chance of going backwards in the face of further competition.” In asking why each process cannot be done elsewhere, an organization must be realistic about which processes are core competencies and performed most efficiently in-house.

There’s no room for egoism in this process. To survive, a business must be willing to strip itself bare, down to only those processes which are true core competencies. Every business function should be on the table for globalization until it’s clear a given function can be performed most efficiently in-house and domestically.

Mandating the globalization of processes that currently cannot be done elsewhere is an important part of stripping an organization bare. Within a company, some people will resist globalization. Successful globalizers neither back down from that resistance nor tolerate it. Effective change management that secures top-level commitment and addresses points of resistance is a critical part of a successful globalization initiative.

Companies must be constantly vigilant and always prepared to scrap the old way of doing business to take advantage of new opportunities. It used to be that this sort of flexibility made companies leaders. Today it is a business imperative. As Thomas Friedman wrote in The World is Flat, “If you want to grow and flourish in a flat world, you better learn how to change and align yourself with it.”

Companies that have embraced globalization, including GE, Aviva, Texas Instruments, Google and Proctor & Gamble, have found large pools of productive labor in offshore destinations. But they have found something more as well: top engineering talent, attention to detail and quality, sophisticated mid-level and senior-level management, and even a level of brand identity and loyalty that rivals that of their domestic employees.

The most successful globalizers are companies who have visionary leaders at their helms. Steve Bandrowczak, former Lenovo & Nortel CIO, says trying to succeed in globalization without visionary leaders is like trying to bake a delicious cake with stale ingredients. “I don’t care how you mix it,” he explains, “you’re going to come out with a bad cake.”

Visionary leaders—the pioneers of globalization—saw the big picture as it emerged: how the playing field expanded from the U.S. and Western Europe to encompass India, the Philippines, China, Ireland, Poland, Chile, Brazil, Russia, South Africa, and more. These leaders understood, even in the early days of globalization, that global sourcing would become a key competitive advantage. They saw that global sourcing could not only allow them to reduce their costs, but also grow more quickly, cut time to market, and even improve efficiency and raise quality levels.

Embracing globalization is the first secret of successful globalizers, not because it is necessarily the most important, but because it lays the foundation for the six secrets that follow.

Secret #2: Welcome Globalization as a Transformation Lever

Business transformation is one way that great globalizers leverage services globalization to create competitive advantage. Services globalization should now constitute an important part of the strategic plan of any firm. As I have said before, if your three-year or even one-year business plan doesn’t include the globalization of services, throw it out and rewrite it. That may sound harsh, but in today’s competitive business world services globalization is no longer an option for a few elite companies; it is a business imperative for any company that wishes to survive and flourish, especially in this economy.

As discussed in Secret #1, services globalization is much more than offshore outsourcing. It is the complete embracing of cross-border operations as a means to reduce costs, improve quality, and enable business growth. It is also a means for business transformation.

And that’s the second secret of successful globalizers: Welcome Globalization as a Transformation Lever. Companies that welcome globalization in this way see it as an opportunity to do business differently. They use it to change everything from the way they keep in touch with their customers and launch new products to the way they treat their employees.

Successful globalizers ask themselves: What can globalization do for my business in addition to reducing costs? How can I leverage it to build competitive advantage? And once they figure out the answer, they act quickly.

There are six steps to leveraging transformation opportunities in services globalization:

o Generate solid leadership commitment. A successful business transformation—especially one as highly visible and potentially disruptive as globalization—requires the cooperation, buy-in and commitment of an organization’s employees, from the top to the bottom.

o Develop a new organizational design and structure. Specifically, the organization must define the new roles for the global delivery centers and redefine the roles for existing centers—developing new operating models that account for new jobs and work structures, performance management systems and governance teams.

oCollaboratively map out and execute change management. Here, change management involves helping existing team members become resilient, transfer knowledge, engage resource planning and communicate.

o Communicate effectively. Effective communication involves planning for the human impact of the change and identifying potential points of resistance, as well as developing a plan to accommodate the impact and deal with the resistance.

o Educate and develop new competencies. The education process should begin with the identification of training needs and development of a training curriculum for both the existing onshore and the new global organizations.
oRedesign business processes to include automation, new onshore/offshore interactions, knowledge management, and other support systems. Sometimes process redesign involves thinking about business practices in an entirely new way.

A few years ago, Electronic Arts (EA) began to realize that they needed innovation from outside the U.S. to address increasingly large client bases in Asian and European markets. They asked: How do we grow our business in Asia where the typical U.S. PC console model doesn’t work? Globalization, for them, was about addressing the market in a whole new way. Now they have facilities in China and India and leverage partners in Ukraine, Vietnam, China, India, Russia and other such locations.

Plantronics CEO Ken Kannappan told me how he looks for the unique advantages that each potential location will offer. “Europe, for example, is at the forefront of Bluetooth® technology, so that’s where we develop those products. China is a far more cost-effective location for some processes, compared to California, so we have functions done there, too. It’s natural to get those competency centers where you can get a rich trove of talent for the most cost-effective process.” I heard similar stories from Yahoo, Oracle and Google engineering executives.

Genpact, formerly Gecis, succeeded in its global business transformation initiatives in part because of the solid leadership commitment and buy-in that started with CEO Jack Welch. Gecis began in India as a small operation and became one of the largest offshore operations in the world. Early on, top-level managers created a governance team with clearly defined strategic and tactical objectives. Eventually the governance team, still fully supported by top-level management, expanded its focus to include increasing the company’s operational complexity. It was that type of enduring commitment—combined with the leadership mandate handed down from the top—that allowed Gecis to leverage services globalization as a business transformation agent.

HSBC Holdings plc (HSBC) is a good example of an organization that developed a new organizational design and structure in order to facilitate its global business transformation. Six years after opening its first offshore operating centers in China, HSBC had established offshore operations in ten Asian countries. This globalization was coordinated by a group called the Global Processing Team, which evolved from a small team reporting to the company’s UK Senior Manager for Personal Financial Services, to a strategic division of its own that reports directly to the Group CEO.

Effective communication is the fourth critical step to successful business transformation. As P&G undertook global sourcing and transformation, they not only focused on effective knowledge transfer but also worked to ensure that 99.5% of their affected staff were placed with the outsourcers or alternate employers. Other firms such as Schneider Electric made sure that cultural training was done at both ends to enhance mutual understanding and collaboration.

E-Loan found that by communicating openly and honestly, it built trust relationships with its clients and educated them on the benefits of services globalization. In turn, this allowed the company to reap the cost savings and other benefits it had envisioned for its global business transformation.

In many cases, globalization provides a transformative opportunity to focus on core competencies. Group VP and CIO Ron Kifer explains that globalization allowed Applied Materials to transform his organization into one focused on core competencies and competitive value.

“Services globalization provides us with the opportunity to take all those me-too capabilities that don’t add any value to the business and move them where they can be most effectively supplied, where we can take advantage of the more mature processes, metrics and capabilities of our strategic partners and refocus our entire internal team on real value-added core competencies,” he says.

Because globalization increases the complexity of an organization’s business networks, it is vital that those networks be optimally managed. Otherwise, the potential benefits of a global business transformation can easily be eroded by new inefficiencies.

Through these six critical steps, many companies have undertaken successful business transformations through services globalization. What began as a purely cost-saving proposition has now proven itself to be a fully transformative lever—provided that organizations use it as such.

If an organization goes into a globalization initiative with only cost savings in mind and does not take the six steps highlighted here, the company may or may not achieve significant cost savings, and likely will not see the other benefits of a full-scale business transformation.

Successful globalizers, in contrast, take on a globalization initiative with cost savings and other benefits—perhaps improved efficiency, increased capacity and quality of service delivery—in mind. They expect globalization to be transformational.

In the words of Andrew Grove, Former CEO & Chairman of Intel, “A corporation is a living organism; it has to continue to shed its skin. Methods have to change. Focus has to change. Values have to change. The sum total of those changes is transformation.”


Atul Vashistha is Founder & Chairman of Neo Advisory (formerly neoIT), a leading management consultancy focused on independent, objective and actionable advice to enterprises seeking to transform their organizations through globalization. He is also Founder of NeoGroup, a firm focused on providing outsourced management of revenue and supply relationships and governance. His latest venture is BestOutsourcingJobs.com, an online job portal focused on outsourcing careers.