One of the decisions that Infosys took when embarking on a broader range of services was to set up Infosys Consulting, in 2004, to offer IT-related advice to business executives, as opposed to technical services for IT executives. Its offering included developing detailed specifications for major investments in new IT systems, recount Vijay Govindarajan and Chris Trimble in ‘The Other Side of Innovation: Solving the execution challenge’ (Harvard).
New metrics
Steve Pratt, who was hired from Deloitte to head the new unit, tailored a scorecard to his unique business, rather than relying on Infosys’ established metrics and standards, one learns. “For example, throughout its history, Infosys had closely monitored the fraction of its work that took place in India instead of at the client site. The target was at least 75 per cent. But consulting teams needed more face-to-face interaction, so Infosys Consulting set a lower target.”
Pratt needed to sell to the same clients, and he needed to closely coordinate service delivery where Infosys and Infosys Consulting were executing related projects, but there was a pushback from Infosys’ client leads (the senior leaders responsible for all activities at a particular client), as the book chronicles.
Why were they resisting the new consulting services? Because time was scarce, and selling a new service was harder than selling one that had a proven track record. And some client leads, who had nearly all of their professional reputation tied to success with a single client, worried that Infosys Consulting might disappoint the client. “Some also found Infosys Consulting’s involvement threatening because the new unit needed to build relationships at higher levels in client organisations.”
Altered incentives
What made the difference was the recognition by the company’s senior leaders that patronage of the consulting wing had to be explicit. Beyond direct advocacy, they altered the incentives, the authors narrate. “For example, the company set specific revenue targets for both the core business and Infosys Consulting at every client. Further, when the partners collaborated on a sale, both sides were rewarded. Both units accrued revenues on internal scorecards and client leads in both units earned compensation.”
How were the responsibilities divided between the ‘dedicated team’ and the ‘performance engine’ (which drives for repeatability and predictability)? While a general guideline was that the consulting unit worked on business problems and the established unit focused on technical problems, there was plenty of room for interpretation, the authors note. “Therefore, the company deliberately overstaffed the handoffs to ensure that they were smooth. Also, the company’s senior leaders practised a philosophy of mutual accountability. If anything went wrong at the transition, both sides were held responsible.”
Organisations are not designed for innovation; they are designed for ongoing operations, educates the intro. The pressure for reliable profits, each and every quarter, is the force that shapes and moulds companies as they grow and mature into ‘performance engines,’ the authors elucidate. Strong and healthy companies have strong and healthy performance engines, they add. “At the same time, the stronger the performance engine gets, the more difficult innovation becomes. The first rule of innovation is simple: Innovation and ongoing operations are always and inevitably in conflict.”
Supportive partnership
Having grown from ‘a seven-person company in 1983’ to a headcount of one-lakh-plus over the next twenty-five years, N. R. Narayana Murthy looks back and says that the most difficult element in growth is the establishing of an honest and supportive partnership between the old and the new. “Senior management attention on this facet is crucial, as is a series of relentless experiments to learn more about the new business model and where customers want it to go. In a new product or service space, even a small change in strategy can have a big impact on the probability of success,” he writes in the foreword to the book.
Drawing inspiration from ‘tamasoma jyotir gamaya’ (that is, ‘lead me from darkness to light,’ in Sanskrit), Murthy urges managers to move from prejudice to fact. “For a company, it is precisely the power of clear hypotheses, clever experimentation, and honest discussion that can act as a tonic both against the instabilities of corporate youth and the infirmities of corporate old age.” While ‘eternal happiness’ may not ensue as a result, perhaps stable and increasing revenues, profit, and employment may be adequate motivation for all, he assures.
Thomson story
A similar story of ‘dedicated team’ is from Thomson, a strong player in online case law database. If you wonder how lawyers benefit from online research, the answer is that ‘wide swaths of law are rooted only in case law – the precedents of past legal decisions.’ Only a fraction of laws in the US are encoded in statutes passed by legislative bodies or regulations passed by appointed agencies, the authors inform. “In many states, for example, property laws and contract laws exist only in case law. Every legal decision becomes part of the accumulating body of past precedent. During the appeals process, in fact, almost all argumentation focuses on which precedents are most relevant to the judgment at hand.”
Going beyond meeting the needs of attorneys as they argued cases, Thomson wanted to offer a product that would help managing partners run their law firms more effectively, such as market intelligence or competitive benchmarking. And this led to ‘Peer Monitor,’ an Internet-based product aimed at collecting data from law-firm accounting systems (with strict confidentiality understandings), aggregating the data, and creating benchmarking reports that would enable a managing partner to compare his firm’s profit margins to those of similar law firms.
Dedicated team
It is here that Thomson felt the need for a dedicated team. The company realised that its ‘performance engine’ lacked two critical skills at the individual level, the authors write. “The first was selling to high-level executives. Thomson sold to law firm librarians or law firm IT leaders, not to managing partners. The second was developing new software applications. Thomson was skilled at enhancing and maintaining its massive case law database, not developing unrelated applications from scratch.”
Moreover, as Govindarajan and Trimble explain, the most powerful individuals in the company’s product development team were experts in case law, whereas for the new initiative software development expertise and familiarity with the business of running law firms were much more important. “The company knew it would be extremely difficult to hire the level of talent needed into a publishing firm – and impossible without going well above Thomson’s typical salary ranges. As a result, Thomson chose to hire a lead software architect on a temporary consulting contract and to outsource much of the work to outside software firms…”
Common myths
In the concluding chapter, the authors debunk ten ‘most common myths’ such as that innovation is all about ideas, everyone can be an innovator, innovation can happen only in skunk works, and so on. Of relevance to established enterprises is the myth that innovation can be embedded inside the organisation.
Some forms of innovation can be embedded, the authors agree. “The ‘innovation = ideas + motivation’ model is sufficient for continuous process improvement, and the ‘innovation = ideas + process’ model works well for new product development, so long as each product is sufficiently similar to past products. But if you are at all interested in breaking out beyond the restrictive limitations of these two models, then you also need custom approaches for specific initiatives.”
The final myth in the chapter is that only start-ups can innovate. But the reality is that many innovation challenges can be tackled only by large and established corporations, say Govindarajan and Trimble. They believe that large corporations have the most to offer in solving the biggest, most complex problems facing humanity – from global warming to the scarcity of clean water to the depletion of natural resources.
“Corporations have mammoth assets at their disposal, assets that entrepreneurial firms can only dream of, from established brands to established networks of relationships to deep expertise in technology.” The authors wrap up by wishing for a day when CEOs are judged not just by profits, but also by the extent to which those profits resulted from innovations that contributed to solving the world’s most pressing problems.
Recommended study as a journey into the secrets of innovation.
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Tailpiece
“After much hesitation, we included the CEO’s time pie-chart in the corporate performance dashboard, only to find…”
“That the results were proportionate to the time spent by the CEO in the business?”
“Yes, and inversely!”
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