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Saturday, September 11, 2004
Offshoring : Key Building Blocks Of Global Competitiveness by C.K.Prahalad & M.S.Krishnan via optimizemagIn considering total business strategy in a global economy, outsourcing is but a small fragment of the shifting dynamics of innovation and competitiveness. Capitalizing on global resources is a critical element in the process of innovation in a global market. The latest challenge for business-technology managers is coming to terms with a new competitive reality: how to achieve lower costs, high quality, rapid innovation and change, as well as manage complexity while offering customers personalized experiences. These challenges will drive the value-creation process. Global competition will force companies, large and small, to compete differently, and the search for ways to manage in this environment calls for new capabilities—ones embedded primarily in managerial processes, decision analytics, and behaviors.
The Key operational offshore takeaways would be:
A.The speed of reaction of companies that deliver remotely can be staggering.
B.Capacity to scale up or down selectively. Most offshore vendors can recruit and train staff rapidly.
C.The large, well-established outsourcing vendors in India offer world-class skills.
Gaining access to those skills is critical for a large U.S. company intent on competing effectively through managerial innovations.In the past, companies were firmly rooted in the traditional "make and sell" paradigm. They focused on internal efficiencies of design, development, and manufacturing (make), and persuading consumers to buy what they offered (sell). The business model has been shifting to "sense and respond"; companies sense what consumers want and respond rapidly. This approach requires companies to develop business-technology systems for an active and systematic understanding of evolving customer needs and market opportunities. It includes both customer-facing technologies that provide the knowledge of what customers need and internal development and logistics systems to deliver on those needs. In turn, the entire management process must become responsive. Sense-and-respond companies often are models of best practices.Now, businesses are migrating to an even more advantageous position—"anticipate and lead"—requiring yet another overhaul of internal management processes and systems. Anticipate-and-lead businesses focus on innovative, or next, practices. As companies move from a make-and-sell to an anticipate-and-lead model, their pace and rhythm change. The new model puts pressure on traditional systems and processes. For example, in the make-and-sell world, managers focus on products; in a sense-and-respond environment, they increasingly have to deliver a solution that may require the support of multiple companies and a global supply chain. No single business has the full range of world-class capabilities to deliver the entire solution. As we move to the next phase, the real source of competitive advantage will be in creating unique experiences for consumers, one at a time, by leveraging global resources.
It's obvious that outsourcing isn't just about cutting costs; building processes and capabilities for global-resource leverage will emerge as a fundamental managerial innovation. To focus on the cost issue to the exclusion of the managerial innovation potential offshoring provides is a risk no company should take. |
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