'How Indian IT can be recognised globally for innovation' [Strategy] [Times of India]
(Times of India Via Acquire Media NewsEdge) Professor Venkat N Venkatraman's interests lie at the point where strategic management and information technology intersect. The Boston University professor, who was recently recognized as the 22nd most cited scholar in management over the past 25 years, has created a new framework to analyse the impact of IT on business performance, referred to as the Venkatraman Framework.
Venkatraman feels that the time is right for Indian companies to change the way the world sees them. "We are at an interesting point of transition. Indian software companies benefited from the Y2K event and over the last decade have provided immense value to global companies," he says.
The global perception is that Indian companies deliver efficient back-office support to complex businesses but this decade holds the potential for Indian companies to innovate around the five webs. "So far, India has shown its competence at the interface of IT and implementation. What Indian business needs to show is that it can move to be recognised globally at the nexus of IT and innovation especially business model innovation through the five webs," he says. In an interview with Corporate Dossier the learned professor spoke about the five webs and what Globalisation 3.0 will look like. Edited excerpts:
What is the Venkatraman Framework
It's about different aspects of how IT shapes and evolves business models. In the 1980s, I focused on how IT impacts internal processes. That was during the period where most companies saw IT as driving business efficiency. Then, in the 1990s, I focused on how IT allows firms to connect externally with suppliers and customers and change business scope. Then, IT became more strategic and CEOs began to take interest in how IT could become a strategic driver.
As the Internet became more central and important in the early 21st century, I started focusing on the role of the web. Right now, my framework is focused on what I call five webs. These are: mobile web, social web, media web, real-time web and machine web. These are not separate webs but are interconnected. They impact companies all over the world-although their effects may be different. I believe these webs taken together lay the foundation for the emerging digitally connected business infrastructure that could alter the basis of competition in the coming decade.
What are the key learnings for business from the framework
We now have a robust global, digital infrastructure that has given rise to Facebook, Twitter, Google, YouTube, Android and others. Our challenge now is to craft business models that take advantage of these developments. These companies that are born in the digital era offer a new set of management insights that could well apply to companies that are in the midst of transforming their business strategies to take advantage of the developments in IT. We are just getting started.
How can managers use the 'five webs' in their strategy
I start with the machine web and ask managers to think about how they could effectively compete in a world where their products, processes and service delivery would be enabled by pervasive connectivity.
What new opportunities and challenges do they see and how would they respond Then, I shift to how they now connect with their customers through mobile technology. I then ask them to think about their roadmap for connecting with customers using mobile apps given that we already have a billion users with smartphones. And so on with the other webs.
My focus with the five webs is to help managers develop a roadmap of how these webs intersect with their current business models and create opportunities. At the same time, do these webs challenge their current models Do they threaten status quo My fundamental belief is that these webs impact strategies and actions of every firm, although the degree of impact and time horizons may differ.
What will Globalisation 3.0 look like
Paraphrasing Tom Friedman, Globalisation 1.0 was about trade across countries for key resources. We in India know about the British rule and colonisation till the first half of the 20th century. Globalisation 2.0 was (and is) about global trade through brands and supply chains. Coca Cola, McDonald's IBM, Nike are classic examples of globalisation through brands. Multinational corporations locate their factories and marketing centers to cater to the demands all across the world. And, increasingly there is globalisation through supply chains where China and India have become key parts of global company's operations in products and services.
In my view, Globalisation 3.0 is about skills and competencies. This is more than offshoring standard business processes. Human talent supported and enabled by information and communication technology is already redefining the geography of work. And it will continue to be more important in the coming decade. Look at the number of talented engineers and scientists working in labs set up by companies such as Microsoft, Google, IBM and others in India and China. For many companies, India is a big, growing market because of the upward mobility of its middle class. But for many other companies, India is a strategic location for accessing high quality talent-that can be plugged into global work through pervasive connectivity. This is about innovation and new value-creation. So, IBM's market footprint in India may be smaller than its talent footprint. I expect this trend to go beyond software and IT to other areas such as healthcare and energy as well in the future.
How will emerging business models differ from existing ones
Newer business models depend on interconnections between a set of companies rather than a single company. Apple could not have succeeded in the mobile phone space without strong supply chain partners ( Foxconn), key telecom companies (AT&T, O2, Vodafone), app developers and service providers. Defining and orchestrating the business network to shape and execute business models is key. Value is created and distributed in business networks that require complex coordination and IT enables such coordination.
Secondly, newer business models are based on digital technologies-products are getting digital (Nike +, Kindle, plug-in-hybrid cars). Service delivery is through cloud functionality. Revenue models are shifting from direct payment to indirect through advertising. Thinking through the role of digital functionality in business models is key here.
Thirdly, the consumer is an active participant, sometimes co-creating and personalizing the products and other times evangelising for the product in on Facebook and Twitter. Marketing is through permission to observe and analyze customer interactions on massive scale.
Such business models based on global, digital, connected functionality challenge current business models and logics that have been based on the principles of industrial age. So, managers should pay attention, not to competitors they know but those that they do not directly see but could attack from the periphery using new logic and new frames of reference. Advertising agencies are facing competition not from other agencies based on the same logic but from Google and Facebook. Newspapers and magazines are under attack from newer forms of content distribution and blogs.
Why does business model innovation become even more relevant in the current economic landscape
Peter Drucker's concepts of management emerged from the auto industry and studying General Motors. Many business models in the industrial age were extensions of such ideas. Now, we are innovating with business models by looking at companies such as Google, Apple, Facebook, Amazon and others. They are born in the digital era. They do not have linear value-chains. They co-involve customers.
They rely on and analyse massive amounts of data. They do not simply represent new companies in Silicon Valley. They represent new class of business model innovations. We are in the early stages of such innovations. We need to pay attention to those companies, decipher their models but adapt them suit specific conditions. Companies fail because they trap themselves into their old competencies. Without business model innovation, they continue to believe that their old models would work with incremental changes.
Does business need to rethink its approach to IT
IT is the new glue that connects parts of the business. We need to take it away from the basement and back office and elevate it to be part of the business agenda and strategic conversations. We need to shift the language of IT as dealing with technology to framing it as driving business operations and shaping business models.
(c) 2012 Bennett, Coleman & Company Limited
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