One firm that’s kept driving consistent growth above the industry average, despite the cries of “commodotization” and “cannibalization” in the business process management arena, is Genpact. This firm blitzed the offshore-centric BPO industry in the mid 2000’s, with its focus on the “virtual captive”, its obsession with process excellence (emanating from its GE roots) and the willingness of enterprise operations leaders to invest in its energetic culture.
As times evolved and other aggressive outsourcers rolled up their sleeves, Genpact has increased investments in higher-end process and operations management expertise to maintain its early tranche of enterprise customers, while focusing on the next wave. Making a concerted focus on building a Design Thinking competency out of its LEAN roots, while adding skills in AI-enabling and digitizing processes, Genpact has not been afraid to stay ahead of industry disruption. In fact, its process roots have often bolstered the firm’s credibility when driving industry narrative, as it understands the real changes enterprise need to make at the process and cultural level, if they are genuinely serious about a OneOffice Framework.
The one major constant behind these phases of change has been CEO Tiger Tyaragarajan, who’ve I’ve personally known for more than 15 years, when he was the North American market-maker for the firm, before becoming CEO in 2011. Today, Tiger talks a lot about the Instinctive Enterprise, which is very similar to our view of the OneOffice Framework, so I thought it time to reconnect before he joins us at our December FORA Summit in New York…
Phil Fersht, CEO and Chief Analyst, HFS Research: It’s great catching up again, Tiger. We’re looking at a lot of serious tinkering and experimentation with new technologies in the business process management (BPM) space. How has a company like Genpact evolved over the last 18 months, and where do you think things are going in the next couple of years?
Tiger Tyagarajan, President and CEO, Genpact: Phil, thank you for the opportunity to spend some time talking with you.
I like the word you used—evolution—and the period that you applied it to—18 months. In the world we are in, evolution is the way to think about things. I distinguish that from revolution, which is to drop everything that you’re doing and go after something new.
In our business, we think about many of our journeys as evolutions. We’ve always had depth and process; we understand how to bring the science of process to problems and how to generate value. We’ve always looked at process outcomes as important metrics to improve, and we’ve used methodologies like Lean and Six Sigma enough that we’re effective with them.
We’ve added new capabilities that didn’t exist six years, four years, and 18 months ago. Six years ago, we had nothing on digital; four years ago, we started building out our capabilities; 18 months ago we started scaling those capabilities and continue to scale them.
In the last three years, we’ve made nine acquisitions. Of the nine acquisitions, seven were in consulting and digital, and two were in deep domain areas, such as supply chain and insurance. We continue to add domain, but the ratio includes much more digital, analytics, and consulting. That piece of the puzzle is growing at 25% per annum; it’s now 20% of our business. The other 80%, which is operations and managed services and the run side of our business, is now growing at 7% or 8%. The combination is growing at 13% to 15%, outside of our GE (General Electric) business.
We never thought of customer experience in the past; we think a lot about customer experience and user experience now. That’s new language for us, and we’ve added it to our lexicon.
Phil: Market expectations are moving faster and becoming demanding more than ever, but at the same time, the pace of change within many enterprises is slow and painful. That seems to have been creating several pressure points. How is that impacting your business, though, Tiger? How do you find your traditional clients, where finance is still finance and procurement is still procurement, reacting to the pace of change? How are you viewing that whole paradigm?
Tiger: That’s a great question, and the answer has many parts. First of all, we have two kinds of clients and two kinds of engagements. We have managed services and what we call transformation services, which is digital analytics consulting. Managed service contracts are still for about five years, but in many cases, we’re entering into seven-year and ten-year contracts, which is amazing. I think that’s happening because some of those journeys are becoming high profile. Our clients are investing up front in building new technologies – these are not ERP solutions, and therefore don’t cost a billion dollars, but they do cost millions of dollars. We have to recover the costs jointly over a longer period of seven to ten years, and longer contracts work very well.
At the other end of the spectrum, we have quick consulting engagements that typically last four-to-six-weeks. These are “Hey, can you come in, and in six weeks, take a look at my consumer products business,” or, “My pharma business,” or, “My credit card business, and come back and tell me the top five areas that you would pick, to apply AI and machine learning to. Tell me how you came to that conclusion, tell me the pros and cons of your choices, the prioritisation metrics, that then allows me to choose the top two AI/machine learning opportunities that I want to go after.” That’s a four to six week engagement, it’s classic consulting engagements and, strategic assessments that clients sometimes extend, but often not longer than 12 months.
The third example includes digital, RPA, AI, machine learning, and so on. Often these engagements end up being a proof of concept (POC). No customer is going to turn over their entire operation to a machine, so they pick a subset of products, contracts, or retailers, for example, for a POC. If the POC delivers great results, the customer might gradually expand it across wider geographies. I think the most important thing here is to be flexible and not get married to one contract or commercial construct. That would be a dangerous thing to do. We have to be agile enough to construct a contract for each particular case.
Phil: So, how do you become agile enough, Tiger? In the old days, it was all cookie-cutter. You could train 10,000 people to do 10 things, 10 ways, and then multiply those capabilities across as many clients as you could. Now clients ask for so many things in so many different ways and push for more experimentation. This creates huge pressure to acquire skills. Everyone wants the A-team. It’s harder and harder to find people with algorithm capabilities, Python capabilities, and things like that. How do you win, in this market?
Tiger: There are a few things to do. One trick here is to make sharp choices, then drive the organization to buy into those choices. So, no one starts talking to a potential telecom client, for example, because we don’t do telecom. We tell our ecosystem where we operate and where we are strong, and then we stay disciplined about it. The second trick is a combination of building, partnering, and buying. I don’t think any one of those is going to be good enough alone. Historically, this industry, including Genpact, has thrived on building scale for the long term. Those days are over. If you assume that everything that you do has to be built by you, you’re going to miss staying ahead of many key developments.
The last thing is that culture becomes incredibly important. At my team level, I think about culture as a combination of three groups of people. The first group is made of people who have been in the company a long, long time. Another group includes people who have grown through the system and who don’t have that much experience, but bring new thinking because they’ve grown from doing much smaller jobs in the company. The third group includes people who have joined the company from the outside and bring very different thinking. My job is to allow those three groups to work together to create value. I think CEOs across all businesses and industries are challenged with that problem.
Phil: Do you think, Tiger, as we look at the change we’re going through, that this is becoming much more about people, purpose, and planning and less about the next shiny new gadget that’s the flavor of the month? I think we all got a bit obsessed with the gadgets, but it’s really the people, the purpose, and the planning that give us forward momentum, right?
Tiger: You nailed it, as usual, Phil. I’ll start with purpose. I think people underestimate the importance of purpose in an organization. We are approaching purpose at two levels. One is the purpose that can charge up, motivate, and create passion for 80,000 people in our company.
That purpose has to be anchored on three things. First of all, themselves. “What is the value for me?” That value proposition, for us, is all about learning. Genpact is actually a university. You continuously learn, we will provide you with the weapons, the curriculum, the opportunity to learn, but you have to self-learn and self-skill. You have to be curious, which is why curiosity is a big value driver for us. Curiosity is one of our values, and it’s one that I love a lot.
Second, you’ve got to drive business motivation, and business motivation for 80,000 people has to be around value for clients. You can’t make 80,000 people say, “I’m trying to create value for Genpact.” That’s wrong; it won’t work.
Third, you have to find a way to connect value for yourself, for clients, and what you do to a purpose in society. I think millennials want that. They want to be able to go home and say, “The work I do saves patients’ lives. The work I do makes an aircraft run more safely. The work I do allows a customer to quickly get their insurance claim after a major fire.” I think if you don’t have that, you are missing something important in today’s environment.
Phil: We’re starting to see some weird consolidation happening; some of these dinosaur-type businesses are coming together, while others are making more strategic bets – both big and small. And then we have all the insane valuations making M&A almost impossible. How do you see this unfolding? Do you think we are going to have an increase in consolidation in the next 12 months? Do you think that things are markedly different now, and we’re ready for more M&A movements with the market at a peak? Or do you think things are still going to be slow and uncertain for some time to come?
Tiger: I would say both, and they play into each other. I think uncertainty and change are givens. Does that drive consolidation? Yes. Does that drive consolidation driven by commoditization? Yes. Does that drive commoditization that drives a search for scale, because the only way you win in commoditization is scale? Yes. Is that unique to our industry? No.
I think it’s happening in every industry. One part of the journey of change and disruption is that some things are going to become commoditized in every industry. The only way to win is scale. Some people will go after that scale.
Now, there is also a reverse game. Some people are going to say, “Okay. If that’s commoditizing, I want to get out of it. I want to carve this out, and give it to the person who wants to get scale.” In the consumer goods industries, so many companies have split along a very simple dimension. This is a commoditized, high-cash generation, “I want to extract margin” business. Scale is important, and they want to run low-cost operations.
Cisco is an example of a third trend—acquiring for capability. Around 20 years ago, Cisco’s performance was amazing, and it became an acquisition machine. Every one of those acquisitions—100% of them—were capability acquisitions. Some of our much larger peers are going down that path. When we acquire seven or eight digital companies, all of them have about $5 million to $50 million in revenue. We’re continuously bringing in new capabilities and taking them back to our clients.
Phil: Things are changing—10 to 20 years ago, businesses wanted fresh new ideas on how to change business models. Now I think most enterprises understand their digital needs very well and understand where the competition is coming from. They want someone to come and translate what they need into a solution. They don’t need the next crazy new idea. If the client understands what they need now, they need somebody who can understand automation, applications, and processes. If anything, the strategy piece is dissipating into more of a “bringing it together.”
If we look at the last 30 years of industry, we can see two parts of the business that digital connectivity has transformed. First, the back office transitioned from nearshoring and shared services to outsourcing and offshoring and then to basic digital. The front office transitioned from e-commerce models and e-digital marketplaces to where we are today. But, how do you bring those two together?
It’s not just responding to needs as they happen; you have to anticipate your clients’ needs before they happen. That’s why it’s so important to understand your supply chains and those in related industries. How do you understand how to leverage intelligent cognitive assistants better? How do you know how to take in macroeconomic information, predictive market data—all these external inputs—and bring them into the company? I think where this is challenging companies now… This dramatic convergence of business, ideas, and forward thinking, and I think we need a bit more patience and pragmatism as we take things forward.
Something else I’ve seen that is dramatically different is this desire to embrace millennials and Gen Z-ers—these kids behind millennials that are about 14 to 22 years old—because they’re bringing a whole different mindset into the game. They’ve only ever lived in this digital world that we’re in today.
I heard something interesting the other day: there’s a big drop-off in Gen Z-ers learning to drive – they just use Uber and Lyft, and that’s why Uber is going crazy trying to figure out the self-driving car. What’s going to happen to the automotive industry, if the young generation doesn’t want to drive cars anymore, as they’re just too expensive to own. I think the habits of the younger generation—the big spending generation of the future—are changing dramatically, and that’s going to impact some industries beyond recognition.
Tiger: That’s a great example, Phil. My son is 25. He has been working as a consultant for three years since he graduated from college. He doesn’t have a driver’s license, and he never wanted one. He doesn’t know how to drive. Can you imagine life as a consultant in the US without knowing how to drive?
He said, “Why do I need to know? I can hail an Uber any time!” He produced an Excel spreadsheet that convinced my wife and me that it’s a wiser decision financially. He proved to us that car depreciation plus gas, insurance, and maintenance was higher than him having to use Uber everywhere he went every day. He has a bunch of friends that also don’t know how to drive and don’t have driver’s licenses.
To get us back to how the front and back offices are changing, I think the piece we are missing is the middle – it just hasn’t received as much attention. One good example is finance. On the front end, finance organizations partner with businesses to understand their problems. Then finance brings all the analytics and insights from the back office and helps businesses understand what kind of predictive analytics will be useful—then makes sure the back office creates them. The toughest jobs today in finance are the business partner finance groups.
You can find that scenario in many similar functions—where the middle isn’t strong enough.
They should run as end-to-end processes—you call it a OneOffice process, we call it an end-to-end process—and these processes must have owners. Businesses also must map customer and user journeys so that they can improve experiences. I think that’s finally playing out with digital.
Phil: Well, I think in the interest of time, Tiger, I’ll ask you just one more question. You’ve been running Genpact for many years now, and you were one of their top salesmen back in the day, I seem to remember. So, what keeps you going, and what do you think you’ll be doing in five years’ time?
Tiger: I think what keeps me going, Phil, is everything that we just talked about. It’s all so new. I often feel as though I am in the first year of my job. I’m not talking about 2011, when I took over as the CEO. I’m talking about 1999, when we first set up this business.
I’m learning new things after 20 years in the business. I look at them and think, “Wow. What a great opportunity!”
After being in the same business for 20 years—in the last 24 months, I know what R and Python is and how it works. I know how in-memory databases work now, and I didn’t know the meaning of in-memory databases two years ago. I’ve learned how you scale a cloud-based workflow platform.
Our acquisition (in Tel Aviv) of PNMsoft, which we now call SeQuence, has taught me a lot. We had to scale it from being able to manage 300,000 transactions in every instance per year to 9 billion transactions per year for a client. “I’m learning, and I’m going back, actually, to my engineering days—it’s very interesting.
At the same time, I am transforming our culture. I thought I’d done enough cultural transformation in the company over the last 20 years. I now realize I’m in one more cultural wave, and it never really stops. All of a sudden, after 20 years thinking I’ll be working with the same people, I’m dealing with a whole set of new people. So, what keeps me going? Just the fact that I can learn so much every day. I also try and keep myself fit so that I have the energy to learn and run at 100 miles per hour.
Phil: Well, that’s fantastic, Tiger. So good to hear about all the new developments at Genpact and how much you’re enjoying it! We look forward to hosting you at the HFS FORA Summit in New York this December.
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