The level of leveraging of GIC (Global Inhouse Center) in India by a multinational company is directly proportional to the level of ‘Purpose-Maturity’ of the GIC. ‘Purpose-Maturity’ indicates the level of strategic thinking of establishing GIC in India by the multinational company – what is the purpose of existence of GIC? The following graphic illustrates the ‘purpose-maturity’ curve of typical GICs.
Most companies start GIC in India for the cost advantage. Low cost arbitrage forces the companies in high cost countries to look at low cost destinations. That is the level 1 purpose.
Then they see talent availability, flexibility, scalability and mature supply ecosystem as the significant advantage. This is level 2 purpose. Many times Level 1 & Level 2 are thought together while considering setting up of GICs.
Leveraging further on the talent pool, some GICs move up the level to harness Innovation from the teams in India GICs. Innovation in solutions/services/processes are still for the global context at this level, Level 3.
Level 4 is where the GICs leverage the market in India. Emerging markets like India demand different innovation – low cost, high quality products/services. For most global companies as maximum growth is happening in emerging markets, the co-location of supply & demand in India provides a great opportunity for innovation. Then such products/services are very valuable in the mature markets as well; companies take it to global markets through Reverse-Innovation. Some of the examples of Level 4 Reverse-Innovations include GE’s portable CT scanner, IBM’s spokenweb, Accenture’s Frugal Engineering, Google’s many products from India etc.
Level 5 is when GICs become truly global; Companies become truly global. There is sufficient Leadership participation and thought-leadership from GICs in the global strategies. This is where the full potential of GIC gets utilized.
Moving up the Purpose-Maturity has significant strategic advantage for companies. It maximizes the value capture of having GICs in India. It leads to attracting better talent and retaining & growing them.
However, most of the GICs have stagnated at Level 2. This is one of the reasons why there is low energy & poor drive in many GICs – refer to the blog on ‘Power of Vision’ for more insights.
There are essentially two main ingredients for moving up the Purpose-Maturity.
1) Local GIC Leaders’ ambition/appetite for growth and ownership of business (creates the pull)
2) Global Leadership’s understanding & vision about leveraging India potential (creates the push)
Without these 2 combinations, GICs cannot move up on value capture and will remain sub-optimal without realizing the full potential of GIC in India.