By guest author Tony Scott
Silos Are Out, Specialization Is In
Tony: I’ve done a lot of work with service business, and they are typically either aligned around geography or around a service solution, and there’s always some matrix of the two; you can’t get away from that. But if you’re doing innovation-related work in the digital domain, location becomes a little less critical than it would be if you’re doing something that requires making something with your hands.
You’re able to organize it without reference to geography as a primary driver. Many companies could organize to de-emphasize geography as their primary driver, but don’t. They still have the traditional mindset of “We have flags all over the map” and build a total replication of each location around the globe . . .
Peter: Each of which runs its own P&L.
Peter: They may buy services from people in their other locations, but they don’t have to if they don’t want to.
Tony: Exactly. There’s a lot of dysfunction that goes on in professional services businesses because most of them operate in silos, and people are compensated on how well their little silo does – regardless of whether it is best for the company overall. Avoiding that kind of dysfunction is hard, but it is clearly possible if you have the right organization structure, incentives, and most important, the right leadership.
So, if you look three to five years from now, what’s going to make GlobalLogic continue to be successful from a leadership perspective? What kinds of skill sets and cultural approaches do you believe that will be necessary at the top two or three levels of the organization that can filter down to the other levels to help encourage or discourage right and wrong behaviors among all of your organization? Do you think that there will be some different skill sets that will be prominent in your leadership team, say, three to five years from now compared to what you have today?
Peter: It’s very hard to know. Honestly, I’m mentoring people through what is for me uncharted territory. The largest company I’ve ever been with is the company I’m with now. My previous company had gotten to about where we are now when I left, so I don’t really know very much what lies ahead. I can speculate, but I don’t really know.
I want to believe that the outcomes are not materially different, that’s it’s just a matter of scale at this point. How do you run geographically dispersed teams in an information technology business where you have to inspire people at a distance and you have to collaborate? To do it right, you can’t dictate to people what they have to do. You’ve got smart, passionate, driven but opinionated people and you’ve to corral them all, and get them to move in the same direction.
Those challenges are very common among my peers. I don’t honestly see those changing a whole lot as we grow. Probably there will be a bit more emphasis on the challenges that will come with M&A because up to today, any M&A we’ve done has been relatively small and contained, but I would imagine that will change. I think we will naturally go public along the way, and with that there will be the typical governance stuff wherein we have to be just that much more thorough about never doing anything that we don’t document to the nth degree.
Tony: Like making sure that expense reports are absolutely correct if you are the CEO, to use a recent example.
Peter: [Laughter.] Exactly, goodness gracious. We will also need to make sure that we have people around the world who aren’t, shall we say, too personally “entrepreneurial” rather than doing what is right for the company.
Tony: That can be a big challenge in certain geographies! The concept is a little fuzzy in some developing economies.
Peter: That’s right. But overall, I don’t see a tremendous difference between how we manage now and how we will manage as we continue to grow over the next few years. Honestly it’s hard to know, but I don’t see a huge difference.
Tony: Looking to the future at who you think will be your customers, I’m betting that there are emerging companies coming from China, from India, from Eastern Europe, and from Latin America that will have great business ideas, but will find it difficult to build everything themselves. Do you believe that the services that you provide – innovation on demand, R&D on demand, and more of the context and some of the core – will help enable those kinds of business to grow? Do you see that as an opportunity for you if you compare that to more established technology companies, the Microsofts, Yahoos!, and Amazons of the world?
Peter: Oh, I do, and I think that this idea that somehow only the big companies will find what we provide attractive isn’t true at all. We certainly see opportunity with multinational companies here, but we’ve seen it equally with smaller companies in India. I think it’s immensely attractive for them to say, “Why do I want the headache of managing a bunch of IT people? If I’ve got a business problem, I want to own the product management, I want to own the marketing, and I want to own the part of the market and the channel – not IT.”
Tony: Whatever is core.
Peter: They’ll define what’s core, and will say to us, “You guys know how to build stuff – go do it.” We already have a number of clients working that way today, and the truth is it’s probably a little more expensive for them, but they’re more likely to get the product to market on time.
Tony: And the actual results are probably much more predictable.
Peter: The quality is better, and they can tap into the special skills on demand when they need them, so the end value is far greater.
Tony: That’s what I think venture investors haven’t necessarily completely gotten their heads around yet; they are still thinking about the concept of putting a development team in India or Russia or wherever because it is cheaper than building a team in the U.S. They have not necessarily considered the possibility that by doing R&D through a company like GlobalLogic, it actually will improve the probability of success. Not everybody knows how to manage a team of engineers – or wants to. It’s not easy to manage R&D.
Peter: Right. It’s easy to mismanage.
Tony: From my perspective, what GlobalLogic is doing is clearly in the crucible and at the forefront of the new economy, of the truly global economy. The value of specialization, which is a core economic concept that has been proven over the centuries, ultimately pushes all economic activity to move toward your kind of specialist approach.
Peter, I really appreciate your time. It’s been a fascinating discussion.
Peter: Thank you.