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Thursday, September 20, 2007

Innovative Models In Value Creation In IT Services

Not many know about the way the india headquartered companies manage to grow so fast and yet remain so consistent in their execution. Ramalinga Raju, Founder & Chairman of Satyam computer services has this to say on this topic in an interview published in the Mckinsey Quarterly. Excerpts :

The development of an innovative business model early on played a vital role in the company’s success. Among other benefits, the framework helped sustain an entrepreneurial spirit, distributed leadership roles throughout the organization, and created an environment focused on “delighting” stakeholders. Traditional hierarchical models will not be effective in a knowledge industry. Rather than focusing the whole business on delivering value in one way,at Satyam value was being delivered in many different ways, depending on the services our clients needed. To cater to these differences, we created an organizational design that distributed leadership more uniformly. Ownership of results shifted to leaders who were closest to the relevant stakeholders, which could be their colleagues, investors, clients, or even society generally. The rest of the organization supported these leaders from behind the scenes, helping to create a “One-Satyam” experience for the stakeholder. This design also sought to bring the correct balance between building the right soft assets that have lasting value and delivering reliable results for stakeholders.

He adds that the most distinctive aspect of the business model that you have adopted is that value creation follows a similar structure irrespective of industry, type of function, or level within an organization. that sense it is analogous to fractals in science and mathematics. Not to get too esoteric; fractals are self-replicating constructs that become increasingly small, like the sections of a seashell or the buds in a stalk of broccoli. While they are similar, they are not necessarily identical. You can look at a business in the same way and try to find a pattern for value creation, an essential DNA that repeats itself in every area and at every level. So we started looking for the smallest reasonable construct in our business that repeats itself. This construct had to deliver value to someone—a client, an internal customer, some other stakeholder—but it also had to be large enough to stand alone. In theory you can take the idea of fractals to the extreme, but in business if this construct gets too small, it consumes more organizational resources to manage than would be justified by the value it creates. We consider ourselves in the business of building leaders. The most effective way of realizing our goals and objectives is to grow leaders faster than the competition.

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