The business world is being disrupted by the combined effects of growing emerging economies, shifts in global demographics, ubiquity of technology and accountability regulation. Infosys believes that to compete in the flat world, businesses must shift their operational priorities.

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In a Flat World, Operational Excellence is Strategy

by Nandan M. Nilekani

Over the last 25 years, IT has been the prime mover in creating millions of jobs, not just in IT firms but in all the industries and services needed to support it. 

Yet in many ways the next five years are going to be critical for the IT revolution. It is becoming increasingly clear that this is not just about a few back office jobs. The flat world created by the confluence of technology, globalization, demographics and the rising economic power of India and China is making companies fundamentally alter their business assumptions. What and where they produce, whom they sell to, at what price, and how they manage it all – the  fundamental tenets of their business model are being entirely revisited.

This is likely to lead to the most dramatic transformation of firms in every aspect of their business, as significant as the role of mass manufacturing in remaking the industrial revolution in the early 20th century.

In this new environment, companies that are able to increase productivity, use technology intelligently, globalize their talent base and practice financial discipline will derive sustainable competitive advantage.

But achieving this will require from all of us who are in a position to effect change, a strategic view not a tactical response to get through the next quarter. It would require us to question fundamental business assumptions and drive long-term operational changes – for in a flat world, operational excellence is strategy.

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First, happy birthday, Infosys. It's amazing what can spool out of a single room all those years ago. Congratulations on your extraordinary progress to date.

In terms of Nandan Nilekami's blog, while it's true that companies able to increase productivity, use technology intelligently, globalize their talent base and practice financial discipline will derive sustainable competitive advantage, it's worth noting that next year will make the 20th anniversary of the Brundtland Commission report, 'Our Common Future.' For the Commission, 'sustainable' had a broader meaning.

While global markets are increasingly flat, like the top of a birthday cake, billions of people live beyond that happy space, over the edge, where few crumbs yet fall.

So how does Infosys address the needs of these wider constituencies - and report on progress?

IT IS a HIV virus
IT IS a highly infectious virus
at first bloomed and strengthened us
finally bursting into downright madness
all men are techies in the latest census;
youthful blood blocked in hightech bus
and their face sealed in the PC Bus;
conditioning the life mysterious;
paralyzing the race without any fuss;
Tilling land,fresh air ,water all sold to us;
leaving tons of E-waste debris and pus
cutting trees that house the melodious
Dollars, real estate, cars, luxurious
toys embedded deeply in our conscious;
to the misery ahead we are utterly unconscious
Is this life style glorious and gracious ??
Is there any alternate economy in your thesaurus ??

What a terrible waste of time and storage space.

Is that the best thing you could write in your blog. bla h d' blah blah about your company and the tripe you serve your minions. Thats not what we want to read. Its a blog. Don't you know what a blog is?

Don't make this another space for you to serve your corporate bull crap man. Talk of how you can inspire and elevate the youth in your company. How you can stop them from jumbing into Microsoft.

Talk of your life. There should be something interesting. Chill out.

p.s.
No I am not an ex-employee or an aspiring one. I run my own small design firm in Sharjah. But I couldn't just sit by and take this.

True, there are many for whom not even the crumbs yet fall. But their numbers are shrinking. The flat world is creating opportunities and jobs in developing economies at an impressive rate.

Consider these examples: In 1991, India produced less than a million personal vehicles. Today, India is producing over 11 million personal vehicles every year (compared to about 17 million in the US). While only 1 million out of those 11 are cars (the rest are motorcycles), millions more are able to afford their own family vehicle.

In 1991, one had to wait for years for a telephone connection in India. Today, we add close to 2 million connections every month (most of them being cellular).

In 1991, getting a cooking gas connection was a trauma. Today, it has spread into the tiniest villages.

Your own vehicle, your own phone, your own cooking gas, being able to afford education for your kids….not everyone in India has it yet, but many, many more have it today than 15 years ago. And it’s all because we preserved our democracy, opened up our economy, invested in education and leveraged technology in the flat world. It’s an example other poor countries may want to follow.

First things first, Congratulations to Infosys on completing 25 glorious years. Referring to the post (with the little knowledge and experience that I have), I have a firm belief that any strategy that does not lead to any competitive advantage is not proactive but is a reaction to what our competitors are already doing. And history proves this right, American Carmakers started working on Quality when Japanese had browbeaten then to submission and today excellent quality is not a strategy but a given, all major PC companies started selling directly to corporate customers when Dell had eaten then up or was on the prowl, again institutional sales is not an option, it is the norm. In outsourcing/India-China sourcing as well, the companies that have been able to derive any real advantage were the ones that did this back in 80’s and early-to-mid 90’s. Now it’s a pre-requisite to survival because otherwise your competitors would eat you up. Secondly, any strategy that does not give you a competitive advantage for a time period in the excess of 3-4 yrs is not really worth the money invested in it. Because after this is when your competitors start feeling the sun and their existence becomes questionable.
In my view, Operational excellence cannot be strategy because anything that a firm does to improve its efficiency
a) has diminishing returns to investments, so would not have any considerable return after a point. And hence you cannot derive your competitive advantage from them.
b) Until and unless your processes are non-replicable (patents, trade secrets etc.), which I believe operational excellence is not, competitors would replicate it much faster than the time period suggested above thanks to improved global information flow.
So, I firmly believe that operational excellence is a given today and not a strategy to derive long-term sustainable competitive advantage, which I still believe is product and business-model innovation.
I understand that operational excellence referred to in the post is a set consisting of large set of domains, out of which some may lead to sustainable competitive advantage, but most of them don’t.

Dizzied by the speed of change? Ask the new Indian 30-something.

A car at 27. A six-figure salary at 28. A home at 30. And that is unfashionably late by today’s standards. Yet, it took people of my father’s middle-class generation their whole lives to achieve at least one of those personal milestones. My grandfather, in his time, relied on inheritance.

It’s a story you will find mirrored all over India, wherever you may look. And it’s a success story, however cynical your view.

Are we moving too fast? Frankly, I don’t think we have even heard the starting gun. My conviction stems from the promise that is ingrained in the events of our time. In the speed of technology, in the will to prosper, in the drive to train that prosperity into committed acts of positive social change.

Sure, we all suffer our moments of nostalgia – for roads that were not so crowded, for prices that were not so high. I have written about it myself. But those are facets of change we have to live with, or do something about. And we are all secretly aware that nostalgia thrives best when we are safely ensconced in our ivory towers. But even our ivory towers stand on legs of weathered wood – we wince to be reminded of our struggle to reach our high and airy position of vantage.

Look at it this way – these are times when a wire transfer can buy a home in seconds, or provide to a parent the equivalent of a lifetime’s pension, or send a happy child on a school excursion that was the stuff of our childhood dreams.

Santayana said, memorably, that those who cannot remember the past are condemned to repeat it. In that axiom lies a warning to the Luddite, to the cynic, to the naysayer who derides technology.

Closer home, Gandhi said: Be the change you wish to see in the world. Infosys became that change.

A corporation with a heart is a rarity in the exacting world of business. To that, to the ideals enshrined by Infosys and the vision of its founders, our generation owes a lot. India owes a lot. The world owes a lot. There’s no time like now to be an Infoscion. The sense of pride and achievement is infectious.

Infosys inspires respect and awe not simply because its origins lie in troubled times. It is because rather than forget the past, Infosys has enshrined every memory of its uphill struggle. It has built monuments to every success and pressed stars into every milestone. It goaded the sluggish to act, budged the economy into momentum, pressed the government to question its conscience, and inspired its people to emulate its success.

Yes, the speed of change can be dizzying, not unlike a carousel ride. But while those on the painted wooden horses are shrieking for joy, crowding the malls and choking the highways with their SUVs, there are forces of change turning the cogs, oiling the engine, making sure the ride goes on.

Dear Infosys,

Happy Birthday :)

The author's take on Operational Excellence as a must do would like to be disputed.

My points are listed below:
1)Breaking the current norms will not take a business to success. You may be too early for the market and in most of the cases this mismatch between what the market expects and what is being delivered will be the proverbial last straw.
2)I agree to the point of strategic vision rather than quarterly outlook.But at the end of the day,bottomlines are analysed quarterly,and all long term outlooks are broken to quarterly levels, so do we need to forget quarters?

Regards
Nikhil Narayanan
MBA-II Marketing
SIBM
Pune

If NRN becomes the Prime Minister of India,then i will accept that the flattening process has really started.

Hi,
Congratulations Infosys and all the best to Global IT.
Of course , IT has done wonders today and I agree with Mr. Friedmann about most of the things when he says' The World is Flat' and Mr. Nilekani saying' The Playing ground is being levelled'.
But sometimes in my silent mind, I do think how far this is true.
Mr.Nilekani says in this blog ' global talent pool'. But can talent be globalised? Can the World be FLAT in this aspect also?
This is something like dissemination. Isn't it that we can only disseminate information and not the talent or knowledge?
Do have some insight into this aspect of the FLATTENING WORLD.

Regards,
Munish Gupta

What all can you execute in lower cost economies is the question? A growing list of things is the answer. And it includes a variety of non-IT stuff like Health Tourism with 15,000+ people from US, Europe coming to India for speciality surgery, or Film post production processing in India from places like Hollywood, or even Mathematics tuitions delivered in London from India. The world is indeed getting flat and IT is playing a big role. And those who see IT as a department are @ risk.

well, infosys , indeed great sucess for india may be. operations are being more expensive in india becase of high energy cost and ulimatly west will make it in there home countries and will take human capital of india to there country. india needs stratgy to keep there human capital and marketing stratgy to keep there people in there country then operations will work

Congrats
Wish u a happy birthday to Infy and All the best to continue their Service and be a major IT "Player" in this "Ground".
IN(arayanaMurthy,eliakani)FOSYS

Thank You
M.Muniyappan

Congratulations Infosys!! I am proud and happy to be an ex-Infoscion because the knowledge I gained at my work in Infosys still helps me. I am eagerly waiting for Infosys to be a world leader in IT with its highly talented intellectual capital.

Hats off to Infoscions!!!

All the best.
Vasant

Agree with the point on you make saying "The flat world created by the confluence of technology, globalization, demographics and the rising economic power of India and China is making companies fundamentally alter their business assumptions."

However, the title "Operational Excellence is Strategy" makes one ponder about businesses and leaders In [the eternal] Search of Excellence.

Excellence in executing Globalization [strategies] in a flatter world is just a journey...not THE goal?!

India - We were ruled by the Brits for 200 years. We succumbed to their education, administration, military systems. We virtually caved in and surrendered to their "cultural" imperialism more than the direct imperialism. We gave up on our vernacular languages and learnt and mastered their language. Today, that is 50 years after India’s independence from British rule, India's English speaking skills is something that has become her unique selling proposition in a Services dominated global market place. All the IT hullabaloo in India boils down to the fact that we speak English - a foreign language, a language that belonged to someone who ruled us, a language that was thrust upon us and we succumbed to it with open arms.
Bottomline – Our weakness of the past is something that we are cashing upon. There is nothing that we have developed indigenously that’s helping us. Clearly it was our cultural surrender of our past that we are trying to cash upon today.

China – Despite being ravaged by different western and eastern powers in the past the Chinese did not culturally surrender themselves. They retained their language, their culture and in all these years have proved that they can do it without surrendering their languages and heir cultural identities. They proved it in the manufacturing business.
Bottomline – They have worked hard and have developed and learnt skills to succeed in manufacturing. They have not cashed upon their weaknesses. With the same attitude they are learning English to hone their skills.

End Point – China can easily outperform India even in the services area. They are not cashing upon their weaknesses of the past but are building their strengths.

First of all, Happy Birthday, Infosys! You have become a role model for young entrepreneurs!

The playing field is being leveled. But in developing countries like India, the flat platform is made at thousands feet high, leaving the rest of the population in the democracy in their own hillocks. Hopefully we will be able to reduce the divide and converge with the ground reality soon, which helps us serve our social responsibilities better.

Global corporations need to revisit their business model to strengthen their operations in the flat world, true. At the same time it is a matter of utmost important to revisit company's backbone - the value system - to accommodate the borderless flattened playing field, where many people play the same game regardless of nationality, culture & tradition, sex, religion and traits & behavior. In the offshoring model or Infosys's Global Delivery Model (GDM), the players are operating in their own comfortable flat levels with just the communication channels connecting the customer location and the offshore location. But in the new flat world, everyone play in the same field, so a strengthened value system is needed. Break down of which may lead to the break down of the company as well. This will help companies operate in various regional locations and various countries seemlessly.

All players are proud of their nationality; of course they should be! It is extreme important to take care of any national interests or conflicts even though the leveled playing field is supposed to be borderless.

After reading Tom's book i can't help but anticipate the reaction of the world when it will realise that we need to insert the 'K' to complete the BRIC_(Brazil.Russia,India and China).This "K" is Kenya. All the BRIC nations are rapidly growing in technology adapting their citizens to FLAT THINKING.
We in Kenya have just woken up from an economicaly degenerative stupor and are now ready to take on the world. The economic pundits have always related kenya to Safaris, wild game and Masai warriors but have not sat down to figure out that we may have the largest population of Certified IT Engineers in Africa, we also do not have to struggle with French, German,RP(British) or American English accents like the Russians and Indians. Sometime next year we will have laid out the fibre optic connection with Asia. The average college graduate speaks perfect non-accented English and one other foreign language.Where else would a potential call centre investor set base if not Nairobi. Let the world know that Kenyans started THINKING FLAT a long time ago.
2nd August 2006

Few Indian companies have intellectualized and articulated a strategy that is beyond the immediacy of the business model. Be it the value focus or all the down-memory laning (as we saw in the celebration speeches) where the grand vision over-rode the short-term there seems to be an unmissable sense of purpose. The spirit of Infosys seems to so consciously lie in its ability to see beyond the here and now. "The flat world" is clearly an inevitable universality that many others are afraid to admit. The derring-do to say it, and will to show how to leverage it. I wish Infy the very best. Let me call it a form of “adaptive consciousness” moving to the point of “reciprocal propositioning”… (big words!)... one where the company chooses to take a stance on something that is a future-reality proposition, adapts to see how best to leverage it and then moves to a more practical plane of charting value to its customers saying “we see it coming, and we will let you see it too. And so we will together win”... The partnering in transformation story. Cool! Keep riding the wave. Enjoy the tide.

"Happy Birthday" infosys
New Meaning for "INFOSYS"
I-intellectual
N-("Narayana Murthy""Neelakani)
F-Focus
O-Opportunities
S-Smart
Y-Youthness
S-simple

Dont think we lost everthing,we have our "Future"(Infosys) in our hand...

Thanks,
Prabhakaran.S

While the consequence of what Infy is doing is 'flattening of the world' we should have a better word to describe this process. Flattening carries a somewhat negative connotation of levelling down; what companies like Infy are doing is really levelling up; the world is flatter- true but at a higher level. That is how the contributions of Infy's of the world need to be viewed.. they have really pushed the masses up to make the world flatter..which is better for the overall well being.

Hey there
First of all my hearty congratulations to all those who are and have ever been associated with the great company called Infosys on the occassion of her 25th birthday.Its actually hard to believe what started in a room with a nimble capital of Rs 10000 has carved so many great careers and has created so much wealth.
I am sure no matter what critics of globalization say both in India and around the world the legacy of this company would continue to inspire the young blood around the world to make this planet a better place to live.
Smiles
Yash

Salaam Infosys
My hearty congratulations to the Indian IT giant Infosys for completing 25 yrs. of pride and glory. Its a time when every individual who is related to Infy feels proud to be a part of the organisation. All the very best for all your future endeavours.

Sushmit

@John

It is true that there is a huge set of people who cannot participate in the Flat World -- lack of access to education, health, markets, etc, all keep them out. Nevertheless the Flat World is really the best opportunity to eliminate poverty as it drives economic growth in India and China, and creates jobs that will generate livelihoods and pull people out of poverty.

Sustainability is another issue altogether. It is clear that the world cannot have every person with the lifestyle of an SUV owner. The environmental stress and the energy cost of that will be unviable. Hence in a broader view of the Flat World, environmental sustainability and energy efficiency will be just as critical. The good news is that this is on the radar screen of companies like Infosys.

For example, through our Ozone initiative, Infosys sets specific targets for reduction in water or paper consumption. Through initiatives such as these, companies can themselves promote sustainability and encourage their employees to do the same.

Dear Nandan

Whats your take on the view that this flattening of world (with significant parts of mission critical business of major American and European companies already shifted to offices in India and the percentage is bound to go up) predominantly choreographed by companies like Infosys and TCS,who have become pioneers in cross border teamwork and collaboration,would act as a potential war deterrent for India....

Regards
Yash

Operational Excellence an interesting term especially when Michal Porter has mentioned Operational Effectiveness by itself does not give organization sustainable competitive advantage . The difference between these two terms is that Operational Effectiveness looks at a improving individual operations in unrelated process while operational excellence looks at improving operations within a process ie end to end. The point here is in Flat world where organizations have to create value for clients,Geographies does not matter . One has to look at places where best resources are available and leverage the same . The challenge is now to manage these operations that is getting executed globally . Again comming back to Porter statement one has to create fit across the organization process to have competitive advantage and operational excellence focuses just on that.

I still do not believe that any Indian company has really mastered operational excellence.If it is true,why can't Infosys invent an OS better than Microsoft or Linux?.Just watch any executive's desk in infosys or wipro or TCS etc.You won't find a single product made in India.Even most of the lunch boxes are from KFC or McDonalds with Coke/Pepsi.Our mindset should change from end user to manufacturer.We have to abandon religion to create a really flat world.

I will apriciate your 'operational excellence' strategy. dont you think its the defencive one I see this one as a strategy to eat your own lunch. i am expecting a strategy to eat the competetors lunch too. hope you can give few hints in the coming posts

Well I would like to first comment on Alamsha statement that why Infosys does not build its own OS or for that matter extend it further to other Indian IT companies too . We should first appreciate that there are different offering space that a company operates .
Indian IT companies - The big ones are operating in services delivery and to a extend we are in Consulting arena too (ie Trying to eat the lunch of our Competitor as Mr Siva was questioning ).
Microsoft or Sun are operating in Product space , Intel , AMD work in Computer chip , HP , DEll work in Computer Hardware etc and to make things further clear each of these space are distinct of each other ( mutually exclusive) but collectively provide the solution to Business.
Also from Organization strategic intent should be to explore new areas based on core capabilities and not just jump into any area ( ie Product Offering ). To that extent Infosys has Banking Product "Finnacle" that builds on its capabilities of service delivery.
Indian IT has grown to a 30 Billion $ industry especially after we have opened to global environment only after 1990 . So with this point of view we have seen a good growth . But with globalization getting intensed one needs to ask can we continue the success story , my view is a Big "NO" . Indian IT companies now need to be changing attitudes ie be more experimental , learn new aspects, Invest in Management and Service innovation and be Risk takers . Unless this happens at strategic level , well our IT honey moon is over .

If the world were becoming flat...

why aren't the best innovative software coming out of India.

why aren't IT services companies are still caught-up with selling services as commodities.

The point here is in Flat world where organizations have to create value for clients, geography does not matter. One has to look at places where best resources are available and leverage the same. The challenge is now to manage these operations that is getting executed globally .

'This comment is posted two years since the posting of the blog from Nandan. Therefore i have the benefit of hindsight and the bias of how the world has adopted the "Flat World" concept. Nandan has given a lot of credibility to the tipping point started by Thomas Friedman.

Yes we are in a manner of speaking living in a flat world. But the dimensions and contours have evolved since the time we started to think flat world.

We are living in a "interconnected flat yet matrixed world and this has far more profound impact than living in a plain flat world.

The interconnectivities are akin to the neural networks and some of the networks are congnitive and self learning and healing. The synapse connecting the many nodal networks carry a lot of vital information content which impact lives of the individuals in far flung remote locations.

Few examples :

* Sensitivity trigger to the oil barrel price points in today's time more than ever before shoots the inflation point several notches northwards and determines fortunes of the ruling governments of several hundred countries.

Why ? Inspite of the decoupling efforts of the economists and politicos , economies are connected with several flat micro matrixed synapses. Resulting in ripple effect which even the most astute investment banker cannot predict.

Second, evolving a political consensus or dividing political mandates or electing a new president for the world's most powerful economy are all in a way influenced and triggered by the individual clicking the mouse sitting at a corner table.

Hillary Clinton and Barak Obama with Facebook fought their contest as much as they did in the speeches , debates as they did leveraging the citizen right clicking their view sitting at home. An edge which Obama benefited greatly by the support from Facebook.

The news and impact of bird flu in a far flung remote village in china impacted poultry prices in the down town market in India as people buzzed the panic button rampantly.

Closer to home , the Bollywood industry's films fate is sealed on the weekend release effectively by the deft penning of reviews by the critics both media, print and online.

As for the Indian IT Sector , we have thus far done reasonably well to absorb the shocks of the flattening. It time now to create and control the flat neural networks with micro synapses which can propel out 50 billion plus India IT revenue to a trillion dollar mark.

Yes today more than ever before we are living in a MATRIXED NEURAL NETWORK COMPRISING OF MICRO SYNAPSES albeit a FLAT WORLD.

Lets see if future has more dimensions being added to the once Spherical Globe. From my end i am signing off on a very upbeat and optimistic note.

I think now we need low cost software development model. A low cost services model is doing well across industries. If IT organizations mature in a way where the developers can stay home and do delivery, costs can be optimized in commuting, real estate and utlities.

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