Global produktutveckling – Framgångsfaktorer för offshoring som en hållbar strategi

Petra Edoff, Mälardalens högskola

Ett forskningsprojekt

●  “Effective outsourcing/offshoring of research, development and engineering”

●  3-årigt forskningsprojekt finansierat av KK-stiftelsen, ABB & Ericsson

●  Petra Edoff, Jayakanth Srinivasan (Mdh/MIT) & Christer Norström (SICS/Mdh)

Vad krävs för att lyckas med “offshoring”?

●  Att fatta beslutet ●  Förankring av beslutet ●  Organisering av kunskapsöverföring ●  Strategi ●  Utmaningar med Indien & Kina

Outsourcing has emerged as the principal strategy globally. ●  2010 ORN data* shows ●  Initial decision to offshore is driven by need to overcome internal

resistance

●  Over time, firms realize that ● managing various tasks and processes offshore is not their core

competence ●  labor arbitrage effect has diminished.

●  Relocation of a delivery model from a third party provider offshore back to a company captive or back to home country is a rare occasion.

Yet, our project partners have chosen a different strategy!

*See: Lewin, A. Y., Perm-Ajchariyawong, N., & Russell, J. (2011). Taking offshoring to the next level. 2009 offshoring research network corporate client survey report. Durham: Duke University CIBER/The Conference Board.

Beslutsfasen

●  Varför skickar företag produktansvar utomlands? ●  Lägre kostnad ●  Behov av kompetens ●  Närhet till marknad

●  Vad tar man hänsyn till när beslutet fattas? ●  Lokal kontext (infrastruktur, tillgång till kompetens) ●  Behålla kärnkompetensen internt ●  Beroenden (roller, arkitektur) ●  Risker

Förankring

●  Motivation ●  Koppling till befintlig strategi ●  Resurser och tid

“What you can see is that it works well for those who see activities as opportunity. ./.. Interact with India, use it to do the things they want to do. Some case people have tried to avoid things to be done in India, then the opposite effect, much longer time. Buy in of people extremely important.”

“Get the feeling that they have a hidden agenda, get bonus for Headquarters to put work in low cost countries. I don´t think managers understand how much time it takes. How much knowledge it takes to transfer. “

Kunskapsöverföring

●  Checklista för att säkra kunskapsöverföring ●  Planering av transferprojekt ●  Dokumentation av produkt ●  Dokumentation av produktutvecklingsprocesser ●  Resursplanering - Mentorer ●  Utbyte av personal ●  Mätetal & uppföljning

Långsiktig hållbarhet

●  Vad händer sedan? ●  Den operativa verkligheten slår till ●  Break even?

●  En global strategi krävs för att alla organisationens delar ska sträva åt samma håll ●  Kompetensområden ●  Resursfördelning ●  Tidsperspektiv och trygghet för medarbetarna

Förutsättningar i Indien och Kina

●  Kultur ●  Nationell kultur ●  Organisationskultur ●  Kontext

●  Lokala förutsättningar i respektive branch ●  Hot spots ●  Infrastruktur ●  Regelverk ●  Språk

Tack!

●  Frågor? petra.edoff@mdh.se

Organizational capabilities in the offshoring process

ENTERPRISE

SITE

Global distribution

of work

Governance

Context

Operations

Transfer

Dependencies

Technological expertise: domain in which the product is embedded, the variety of skills required to develop the product, product knowledge (e.g. the product platform or product family).

Processes and tools are required to seamlessly jack into the work of the sending organization

Management of the relationship: trust and leadership skills, awareness of differences in culture

Knowledge management: strategies to secure that the knowledge remains within the organization, regardless of its geographical distribution.

Need a simple framework to guide managers! ●  Managers in today’s competitive environment are

engaged in offshoring experiments and corporate restructurings without guidance of appropriate theory or empirical findings*

●  Looking across the five rounds of field work, we see a set of consistent patterns emerging ●  Account for strategy ●  Explicitly address the transfer process ●  Connect strategy to operations

The STECO had requested the development of a checklist to guide globally distributed development!

*See: Lewin, A. & Volberda, H.W. (2011). Co-evolution of global sourcing: The need to understand the underlying mechanisms of firm-decisions to offshore. International Business Review, 20, 241-251.

Framework Components

●  Strategy ●  Shared Vision ●  Aligned Leadership ●  Human Capital

●  Operations ●  Transfer Management ●  Operational Governance ●  Capability Development

Establishing a Vision for Globally Distributed Development

●  To truly understand global sourcing, we have to account for ●  Managerial Intentionality ●  Path Dependence ●  Knowledge Accumulation in the Firm

Is there an articulated vision and shared strategy for globally distributed development?

Impact of Leadership Alignment to Vision ●  Significant variation in scope and nature of globally

distributed projects (even within the same business unit)

●  Establishes culture at team and group level

Are leaders across the organization aware of and aligned to the vision?

“Started with suspicion, frustration with keeping people. Quite unclear what strategy we had. Now we have a strategy but have not communicated it yet. Outsourcing to China added to the suspicion.”

“One way of getting around it … pushing tasks until they say stop. Tons of assignments, they should not have time for anything else. “

Human Capital Availability and Growth

●  Working with locations such as India and China requires ●  culture change

● National ● Organizational ● Prior Work

●  attrition management/consultant management

●  career growth ● 10 yrs in a single role versus

promotion every two

Are the three key components of the human capital strategy addressed?

You have a project mindset – primarily when I am sitting in the engineering center, my primary job is to complete the project, and you know, I need to ensure that my revenues come in, and my focus is how do I control my costs. How do I get the project out, how do I get customer acceptance.

…

When you are sitting in the product organization, the mindset is that you have to release the product with the best quality. As soon as you get it out on the market, there are 100s of projects that are going to use your product.

Transfer Management

●  Transfer process varies as a function of ●  Product complexity ●  Resource availability ●  Transfer criticality ●  Currency of codified knowledge ●  Variance in Ways-of-Working

●  Need a standard process to ●  Define explicit communication touch points ●  Establish transfer governance ●  Grow local competence ●  Track progress towards operations

Is there a standard transfer management process?Is it implemented consistently across the various projects?

Operational Governance

●  Partitioning of decision rights across global locations

●  Create shared governance teams and establishes operational rhythm for progress tracking

●  Shared metrics and KPIs that can be used to track progress on globally distributed work

Has a global governance framework been established?Are there shared metrics and KPIs across all locations?

“We don´t have any formal method or metrics to measure efficiency, we are trying to meet customer deadline. That´s the measure”

Capability Development

●  Establish the core competencies of the organization

●  Develop pathways to support both: ●  Process innovation ●  Product innovation

●  Translate individual capabilities and competencies into organizational capabilities

What are the core competencies of the organization?Are there pathways to support innovation both locally and globally?

Discussion

●  What additional aspects need to accounted for to support senior managers?

●  Is there additional granularity that we need to account for?

Path Forward

Next Steps

●  ABB Workshops – Dates TBD

●  INCRC Site Visit – April/May

●  TCS Visit

●  MERA?