Thursday, March 12, 2009

Crossing the cost-value chasm: Niagara Falls metaphor

I have spent half a decade 20miles from Niagara Falls in the city of Buffalo during my graduate studies. Those were the times when we had family, friends, friends of family and family of friends visit our studio apartment for stay-over on their way to Niagara Falls. We were happy to have them and in spite of countless visits to Niagara Falls it never became boring. The falls can be seen from two sides: the American side and the Canadian side. Mostly we would watch it from the American side (Neither us nor the visitors would typically have the Canadian visa). Now, you can go at different times of the day and night and see different shades of the beauty. You can also take a binocular and perhaps see a newer side of the falls. However, none of these would give you any glimpse of the view you get from the Canadian side. It is spectacular and it is different!

In many ways, cost-value chasm is similar to watching Niagara Falls. For the last decade IT offshoring companies have been on the cost side. They have mastered various processes: ISO, CMM, Six-sigma, lean process like SCRUM in delivering what is specified. They have mastered how to manage bench and utilization. However, if anyone gets an impression that now they are ready to create “value” for the customer, it would be like saying, “I have watched Niagara Falls from the American side a hundred times and hence I know how it looks from the Canadian side too”.

Understanding what will give your customer a durable competitive advantage or in Buffett’s words “enduring moat” is a different competency. It needs deeper understanding of both customer’s business and the enablers such as technology. It also means thinking about win-win business models like the IBM-Bharti deal. It almost always means sharing customer’s business risk (and ideally rewards too). It would not consider “increase in headcount” as the only means of “growth”.

I don’t think crossing the cost-value chasm is difficult. It certainly needs a different mindset.

No comments:

Post a Comment