Uncertain demand, changing socio-economic demographics, high attrition rates, evolving technology, and rising competition are just some of the factors driving the BPO industry’s changing client dynamics today. To sustain growth in this environment (and perhaps even accelerate it), we need to redefine our business models. The traditional “revenue per employee” model has worked well for the outsourcing industry in the past, but it is now under severe pressure.
So, how do we deploy a unique approach to create an innovative business model based on non-linear growth drivers in our industry, which can answer some of the basic questions like:
- How do we delink revenue from headcount to drive non-linear growth?
- How should we manage and integrate a global workforce which will continue to provide value additions or value propositions, without increasing the headcount or the overall spend for our clients?
- Is it possible to create or adopt a total cost of ownership (TCO) or an outcome-based business model to increase the “stickiness” quotient of our client relationships?
- How do we improve cross-pollination of best practices across several lines of business to provide clients with unique functionality and experience?
- Can we build an overall delivery strategy, which will be cost effective for the client, and does not put pressure on your business profitability? Can it be based on a “right shore” model, tier 3-4 city expansions, making investments ahead of demand, platform play, tool based deployment or a series of low cost automations?
- Will redefining technology components help us move from enabling to changing the game for the industry?
||Building non-linear growth models
NON-LINEAR BPO GROWTH: A STRATEGIC BUSINESS NEED?
With the many challenging uncertainties that our clients face, non-linear growth is the game-changing holy grail that is inducing BPO companies to reinvent themselves and redefine their business models. The question is what are the drivers of non-linear growth? Where can we look for them?
- An innovative product: To stay competitive, outsourcing service providers will need to look beyond traditional frameworks and embrace sources of innovation (e.g., products such as Minacs’ TradeFreeTM portal that enables 85 Japanese banks and their back office providers process letters of credit and trade financing documentation for their corporate clients)
- A niche specialist service: BPO service providers need to move from a generalist mindset to a specialist one. I see a tremendous need to build a reserve of expert skills and talent (e.g. our integrated multi-channel Service Marketing program that supports the specific needs of 4000 dealers of top U.S. automotive companies, or our extremely successful Medical Records Optimization work on behalf of an insurance claims processor being performed by doctors, dentists, pharmacologists.)
- A novel operational model: As businesses move away from the traditional FTE approach, there is a need for evolved operational models—including sophisticated and innovative pricing, based on an “effort plus outcome” approach. (An example is Minacs’ Connect India Model, a robust customer service platform designed to meet the specific needs of the telecom industry)
- An alliance umbrella and a collaborative venture: It is becoming increasingly difficult for our clients to build capabilities internally in a cost-effective manner. To help them build competitiveness, business process outsourcing providers need to create a network of specialized partners. (e.g., Minacs’ partnership with Sybase to satisfy increasing needs of mobile commerce. Another example is our service delivery partnerships in Middle East, China, Japan and Korea. We also recently partnered with Salesforce Radian6 with a view to bring social customer service on top of traditional customer care offering to clients.)
BUILDING A NON-LINEAR OPERATING MODEL: WHAT ARE THE CAPABILITIES REQUIRED?
Our view in Minacs is that in the face of a weak economy, enterprises the world over are revisiting what they consider “core”. Increasingly high value processes are now being outsourced to specialized partners. For such business solutions, outsourcing companies charge a premium (e.g., the demography of the millennials with their extended use of social media is driving businesses globally to make investments in technology to drive analytics and better understand the VoC (Voice of the Customer
), to enable better and more cost-effective customer service). These additional investments should act incrementally and deliver breakthrough non-linear growth.
Definitely, the need is a paradigm shift in mindset, from being SLA driven to facilitating our clients’ business transformation through innovative solutions. A few steps BPO companies have taken to bring in this transformation and drive business results for clients are:
- Build domain knowledge and “Intellectual Property (IP)”: Keep costs low by investing in building domain knowledge, core capabilities and IP can help you accelerate your clients’ transformation interventions, speed-to-market or other objectives, and also fetch a premium price for your services!
- Be first to adopt the “new”: Identify what is the “New Normal” in the marketplace. Platform BPO, cloud computing, SaaS, social media—only those who are the first ones to deploy these techniques to create differentiated/value-added solutions for their clients will find non-linear growth!
- Adopt a non-linear pricing strategy: To break the traditional effort-based pricing model, outsourcing service providers will need to price their services based on the value of service delivered.
If you are willing to bundle the above into a comprehensive business solution and offer value proposition to your clients, you will need to move away from the FTE based mindset of traditional BPO service providers. This also means you have to think SMART and be willing to deliver business results for your client.
The adaptability quotient is forcing all companies to try out new business models and innovate across multiple fronts including products, services, delivery models, pricing and branding. I believe, this recession is helping us to change the meaning of BPO from Business Process Outsourcing to “Business Process Optimization”!
Creating, exploring and inventing non-linear growth models has been and will continue to be a key focus area for executives in the short term. Outsourcing companies on their part will also need to stay ahead of the curve by co-creating innovative products, platforms and services that can help their clients achieve their business goals.
How critical is it for the industry to think of non linear growth models? How successfully have we moved beyond the FTE based pricing models?