Ready with the innovation edge

Global capability centres will drive innovation for the global enterprise

Delighting customers across the globe, a leading luxury car manufacturer recently introduced gesture control integrated with voice — a game changer for how drivers interact with the car.What is amazing is that it was powered entirely by Indian engineers from its Bengaluru innovation centre.

In a completely different sector, a global pharma major scaled R&D operation to 8000+ associates with India being their second largest centre globally from drug development perspective.

As the “Digital” & “Artificial Intelligence (AI)” wave reshapes businesses around the world and challenges status-quo, global leaders are betting on Indian GCCs (global capability centres) to provide the innovation edge and reimagine the future.

A new breed of GCCs in India: the digital think tank

Last few years have witnessed an entirely new set of enterprises setting up centres in India while traditional firms across sectors revamp their strategy to reimagine their future in the digital age.

A recent industry study shows that unicorn engineering, research and development (ER&D) centres have tripled between 2014 and 2018. Tech giants and new age companies have significantly expanded their presence. Companies from non-traditional geographies such as the Middle East, Japan, Latin America, China and Korea are also establishing centres. Last year alone saw 40+ R&D centres being setup in India.

GCC strategic pivot on digital: Opportunity or crisis

As traditional firms make the digital pivot, they are betting on their GCC to provide the innovation edge which in turn is leading GCCs to ask a critical question – “How do I transform my operating model to enable digital innovation”. A study conducted by EY with 35+ GCC leaders identified a 5-pronged approach adopted by those who successfully made the pivot.

1. Incubate digital capabilities

Majority of GCCs have made critical bets on core digital technologies — while some have developed capability across technologies, others focused on select technologies that could disrupt their business in the future.According to Nasscom, there are more than 200+ digital centre of excellences (COEs) focused on robotic process automation, AI, internet of things and other technologies with 125+ COEs housed out of GCCs. With significant proportion of next generation thinking and development being driven from India, GCC leadership team is now playing a central role in charting out the global enterprise strategy centred on digital.

2. Lead and own businessoutcomes

A new breed of GCC leaders has emergedwith global roles and pivotal role in driving the firm’s strategic priorities. Last five years have seen GCC of a software product firm mature from reporting service level agreements (SLAs) to owing 80%+ of the strategic roadmap of key products. The discussion with the board on owing revenue for key markets has also begun.The conversation has fundamentally changed from technology centricto a business centric one centred on enhancement torevenue or working capital instead of SLAs/cost.

3. Onboard digital specialists: Hire, reskill and upskill

GCCs are also revamping their talent pool with new roles such as data scientists, IoT specialists, blockchain experts etc — many of them are recruited from Tier 1 institutes such as IITs/NITs/IIMs. Day 1 in a premier institute saw multiple GCCs competing to attract digitally skilled students with whooping salaries — sometimes three times the median salary.

Hiring for digital will outstrip other roles for at-least the next three years, however, the focus is likely to be on SMEs who can seed new capabilities. Reskilling and upskilling existing workers is also an urgent priority with 52 per cent organisations running programs designed to deliver a tight integration of three competencies: technical, functional & critical thinking.

4. Collaborate for innovation: Service providers, start-ups, academia

GCC of a global healthcare company filed multiple patents in 2018 and aims to file 10+ patents in 2019. Several R&D centres have leveraged India to design products/services for global markets e.g. developing low cost minimalistic handsets to engineering fuel efficient compact cars.

Astute leaders have realised that they can no longer innovate on their own and instead leverage their eco-system i.e. vendors, academia, alliances and start-ups. Start-up accelerators have found favour with India being home to the third-largest start-up base globally, 1200+ advanced technology start-ups and 190+ active incubators. The power of this innovation cluster has been instrumental to getting GCC leaders a seat at the global innovation board.

5. Enable operational excellence through robotics

RPA is a potent tool widely adopted by GCCs to enhance operational efficiency.A global FMCG major setup a world class automation centre driving digital initiatives across 20+ global markets. The centre has been instrumental in saving 3 million hours by automating 600+ processes.

Road Ahead

As GCCs take big strides centred on digital, we expect to see continued optimism and investment from global organisations. GCCs who successfully embed digital in their DNA and apply domain context to generate competitive advantage for the enterprise will thrive. They must continuously position themselves as the harbingers of change and chart out a unique proposition which generates competitive advantage for the enterprise.

The author is partner, advisory services, EY India

Views expressed are personal