Friday, 4 August 2017

Innovation Is Mandatory For Today's IT Services Companies

The robots are taking over…and not in the way we see them in science fiction movies. Globally, the fear that automation is going to claim jobs is on an increase. A study conducted by Ball State University shows that over 5 million factory jobs have been claimed by automation since circa 2000. The IT sector too has witnessed an increased automation adoption and almost 40% of jobs in the United States are at risk according to a report by PwC. Technical advancements in automation such as AI and robotics threaten almost 30% jobs in the United Kingdom, 35% in Germany and 21% in Japan. The story, unfortunately, is not so different for India. A report from McKinsey estimates that approximately 3.9 million employees of IT services companies are likely to become irrelevant over the next four years owing to automation. News of mass layoffs in large IT companies such as Wipro, Infosys, Cognizant etc. have been in the news for a while now. According to a NASSCOM report, we could see sharply lower growth in India’s $155-billion IT industry in 2017 itself going down to 6.3% from 8.7% in 2016. Given these, Indian IT services companies may have a lot to worry about.
While technological disruption has opened up new business avenues, one of the greatest impacts it has had is on employee productivity. Today we have adopted technology to automate repeatable manual processes to ensure faster turn-around time. This has completely changed the IT landscape. Consider that traditionally companies used to charge for human effort and how that dynamic has been disrupted with automation. With automation, a task that used to take a huge amount of effort and consumed a lot of time can now be done with significantly less effort. Automation has made software development faster, less effort-intensive, and easier. Keeping this in mind, how can low-cost geographies such as India still remain relevant in the competitive market space, considering that their one most powerful tool, the labour force is now being replaced by the march of the machines? How can Indian IT services companies continue their dominance and have favourable profit margins when they can no longer stay tied to human effort for their revenues? The answer lies in one of the most overused words of this decade - ‘Innovation’.
Not many will argue that over the years the ability of companies to innovate in services has been a key contributor to their business success. It is also true that innovation in IT services is a complex task owing to the heterogeneous nature of activities. Change in organization models, modalities of serving markets, varied inputs, co-terminality between production and consumption and the information based and intangible nature of services, service variability etc. are some reasons that make innovation a little more complicated. Clearly, the challenges are many but the truth remains that innovation is not only essential for profitability but is now crucial to remain relevant. Innovation thus is no longer a ‘nice to have’ but is a critical component of staying in the game.
Robert Shelton, managing director of the Growth and Innovation practice in PwC’s PRTM Management Consulting Group, says “Innovation is growth these days.” It is only an emphasis on innovation that can generate higher revenues, increase profitability, and increase market share. In order to pump up the innovation quotient, IT services organizations have to take a step away from tradition and identify means to weave innovation into the very fabric of the organizational structure.
Is there a magic recipe for innovation? No, there isn’t. However, what is evident is that a linear approach is not the answer. Innovation is not a one-man game. It is a team sport. Taking cross-departmental approaches that encourage collaboration and are grounded in market considerations are the order of the day. Having well-defined operational processes that help in identifying new business opportunities, identifying areas that are wanting most in innovation,and encouraging employees to become proponents of innovation by putting creative thinking to profitable use can have a deep impact on the Innovation IQ of a company. Some factors that can help organizations become more productive in their innovation efforts and get more value out of their innovation focus are:
  • Looking at customer collaboration
  • Identifying the right talent
  • Looking at partner investments
  • Identifying business areas that can transform themselves with technology adoption and become more agile
  • Creating processes and structures that allow employees to experiment with new ideas and get more value out of the innovation dollars.
If we take a look around us, companies such as Apple, Google, Facebook, Netflix etc. have achieved a cult status of being some of the most innovative companies in the world. They are highly valued by their customers and investors alike. These companies have a few things in common – they are open, they have a culture of collaboration and they are focused on developing forward-thinking strategies by having active listening mechanisms to gather customer feedback.
It is abundantly clear that technology disruptionwill always be a factor in the IT business. While there are certain challenges that arise from this, there also lies immense scope and opportunity for those willing to adopt evolution and be the protagonists of change by adopting an innovative mindset. For those who do, the world is their oyster. Literally.

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