Globalizing operations: Indian BPOs can draw a page from UPS

26Oct09

Having recently read Mike Brewster and Frederick Dalzell’s book Driving Change: The UPS Approach to Business, one cannot help but think about the lessons it offers for the young Indian BPO industry which too is going through its pangs of globalization.

I am sure there are a number of company case studies to draw from, but the UPS story stands out simply because of the way that the authors have brought out the trials and tribulations of building what is one of America’s most respected brands. It is not a book that indulges in self-promotion – far from it, it narrates several instances where the company faltered and how it recovered from its mistakes.

According to the 2008 Nasscom Everest India BPO study, the Indian BPO industry, which until recently was largely India-centric, has now grown to operate in 25 countries. This is just the beginning – the search for talent and more importantly, cost-effective talent, will drive the industry to deliver from an even wider set of countries. Countries such as Vietnam, and Egypt, which till a few years back did not figure on the radar of many outsourcers, are now emerging as possible outsourcing destinations. But in this rush to globalize operations, BPO companies must take some lessons from companies that have gone down this path beforehand to ensure that their mistakes are not repeated.

Here are some lessons which I believe UPS learnt that can serve as a reference for the globalization of BPO services:

1) Be very sensitive to local culture – West Germany was UPS’s first foray internationally. After much ground research, UPS entered West Germany in the mid-70s. Within a few weeks, they were confronted with a cultural clash. In the US, UPS drivers were recognized in their communities as objects of respect and affection but in West Germany they were seen simply as “truckers.” Therefore, attracting high quality talent was a serious concern. Take another example – UPS had a philosophy of “promotion from within” which backfired in West Germany as employees refused promotions because they didn’t feel comfortable managing their friends or taking on more responsibility. And, in the 1980s, when UPS entered Asia, it again experienced a cultural clash. The Americans in the Singapore office would show up for work every day sweltering in their dark suits, insisting that the local staff do the same in a country eighty miles from the Equator! Similarly, when BPO companies expand into The Philippines, they must be aware that people there are extremely social. So unlike the West, where you do not discuss personal issues early on in an engagement, in The Philippines it is ok, and in fact, helps bond with employees.

2) Emphasis on local leadership – The number of American expatriates at UPS is minimal. UPS’s “talent tenet” is focused on identifying and nurturing local leadership. This is extremely relevant for the BPO industry as it expands into countries outside India. There is no substitute. You need a native to guide the company through the new environment. Having the ability to converse in the native language, understanding cultural nuances, and living the ethos of the country will significantly add to success in that location. Also, on a more practical note, the ability to engage with the local employees (who are your biggest assets) is best done in the local language.

3) Invest in customer delight – During the 1986 holiday season, Lufthansa, which was UPS’s main common carrier for international deliveries, couldn’t provide a plane because it was needed to ship its own cargo. UPS immediately dispatched a DC-8 from its US domestic network and flew it to Cologne on December 23, 1986, in time for Christmas deliveries. Even though the plane’s hold was barely half-full, UPS felt it was important to indicate that its customer service was better. “We did whatever it took to show our European customers that we take our commitments seriously, ” said Wolfgang Flick, the president of UPS Europe. Similarly, Indian BPO companies should invest in creating customer delight. Recognize what’s important for the customer. Ask him “what are you evaluated on?” Then go out and deliver beyond his expectations – make him look good before his colleagues. Do not count pennies all the time thinking about “how much will this cost me.” The customer is smart enough to realize that you have gone out of your way to help him. They will reciprocate.

4) One solution does not fit all – When UPS decided to grow its operational footprint from three countries to 180 it was well aware that it would be able to do so only through a combination of organic and inorganic means. So it grew organically in countries like West Germany, acquired companies in parts of Europe, entered into joint ventures in countries like China, Japan and Korea and forged agent relationships in countries like Turkey. Indian BPO companies need to explore all possible models – build and buy – to ensure success.

5) Don’t underestimate integration challenges –Many of the acquired companies that UPS acquired had vastly different IT systems that couldn’t “talk” to one another, so the company had trouble tracking packages from one European country to another. Customs would often hold packages for days and neither the sender nor the consignee would know where the delivery was – and sometimes UPS wouldn’t either. Post acquisition integration is by far the most important thing that management teams should focus on – but unfortunately once the acquisition is signed, the management teams often move on to their next big fix, leaving the integration to “happen on its own.” Many Indian BPO companies have made acquisitions abroad; they will be well-advised to ensure that the management team focuses on integration otherwise the integration “mess” will lead to value erosion.

6) On big strategic decisions, keep the accountants out – When UPS decided to enter the international business arena, it was a significant strategic decision. In 1986, given the amount of money UPS was pumping into its international operations with limited returns, there was a lot of talk of abandoning international expansion altogether. But the management team remained committed to the decision to go international. In 2008, international operations contributed 25% of its $51 billion revenues but, more importantly, according to its annual report, “the international package delivery market has been growing at a faster rate than that of the U.S.” The boards of directors of Indian BPO companies should encourage their management teams to take bold, big strategic decisions.

The future of the Indian BPO industry is extremely bright and it is not long before India has its first truly multinational BPO company! Hopefully the lessons of other successful globalizers, such as UPS, will show the way.

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Tags: BPO, Business Process Outsourcing, Globalization, Indian BPO