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Sustainability and Innovation

July 28th 2017 - Friday

Sustainability And Innovation For The Global Business Services

It is reported that the Global Business Services sector is worth about USD 87.5 billion worldwide and I believe this is quite a conservative figure. It has replaced the inefficiencies of disparate and fragmented outsourcing efforts of the past and the silo-related operations of shared services.

Many enterprises recognise the significance of this and see the rationale of having a corporate strategy that drives global business services strategies. Improvements in compliance, implementation of governance and performance management, and standardisation of processes, have been the measures deployed to drive this change. The mantra of cost savings which used to be the overriding factor in outsourcing and shared services is today supplanted by the enablement of value.

 

Digging Deeper Into The Concept Of Sustainability

Let me turn to sustainability. Sustainability is a buzzword you see in many newspapers and business journals. Too often this is interpreted as environmental sustainability or green sustainability. Protection of our natural resources and environment is just one important part of sustainability.

Sustainability furthermore extends to dealing with global trends like climate change and urbanisation. As the world changes, we too need to be able to deal with change to survive as a species. That is where social and economic sustainability are just as important as environmental sustainability. This is what is commonly termed the “triple bottom line”. Malaysia recently adopted the UN’s Sustainable Development Goals, which now sets the framework for sustainability with 17 goals and 169 targets to be achieved by 2030.

But let us explore the concept of business and economic sustainability. Businesses can be like organisms with a predicted shelf-life. Many are around for a while and then disappear. What is the secret of making business sustainable?

What do we mean by this? How can we extend the longevity of companies so that they can ride the waves of environmental and social trends as well as the markets they serve. These, by the way, are not mutually exclusive. Customers are affected by social and environmental concerns as people become better informed through means like social media.

For that matter, let us look at how business sustainability is related to dealing with change. Every enterprise executive spends sleepless nights worrying over things like war for talent (recruiting and retaining the best), how to improve margins and drive operating costs down, withstanding the downturns in economic cycles and price fluctuations, even climate change if it affects his or her business or supply chains and, yes, we worry about innovation.

How do we keep up to date with technological development? Innovation is like the holy grail for companies. What will be the next killer app? What is the silver bullet coming around the corner? What is the next market disruptor? Business as usual is not an option any more. As the late Steve Jobs said, “[Innovation] is about putting a dent in the universe.”

 

Outsourcing Innovation

When in-house resources are limited or constrained by business pressures, some enterprises have taken the outsourcing route - by outsourcing innovation. This is now a common model. Large enterprises find it more cost-effective and beneficial to contract out the generation of ideas to others.

For instance, Dell, Motorola and Philips contract out product design to a network of innovators. Pharmaceutical giants like GlaxoSmithKline and Eli Lilly outsource their drug designs to Asian biotech companies. Even Boeing works with HCL Tech, a Chinese company, in the design of the company’s aeronautical engines.

This works out well as enterprises can get on with what they do best. But how does this tie in with global services? These enterprises are forming strategic networks of innovation partners aligned to their corporate strategies and goals, much like global services business models. So we are heading in the right direction. So far so good. Henry Ford once said, “If we rely on the same old ways of creating innovation, instead of cars, we would have faster horses.”

There is a revolution coming, in fact it is most likely here. It is called the Fourth Industrial Revolution. In his delivery at the World Economic Forum, Klaus Schwab, engineer and economist, described the fourth revolution as the one coming after the first (water and steam to drive the engines), the second (electricity and mass production) and the third (electronics and information technology to automate production).

The fourth revolution is the “fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.” We are seeing the emergence of disruptive technologies like artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing. Talent is now the driving factor for production, not just capital. Small start-ups are able to challenge the existing world order through these technologies.

If this is the case, then this plays neatly in the global business services sector, as service providers not only have the talent and access to all these technologies (like cloud computing, leveraging global talent and data analytics) but should be able to extract more value for enterprises with a leaner footprint. Outsourced services and shared services not only get better through innovation but more sustainable through better use of resources, less waste, a lower carbon footprint and leaving a greener and kinder legacy to the planet.

This in turn helps business sustainability through process agility (riding the economic cycles by switching technologies and workflow processes), keeping enterprise jobs and careers focused on the core business and at the same time making them challenging and interesting, thereby retaining staff and enhancing employer branding.

 The enterprise becomes more resilient to coming changes like leveraging ageing workforces and their knowledge as well as managing Gen-Y expectations in the workplace. The symbiosis between enterprises and global business services has never had a better opportunity to reinvent itself and emerge stronger and better.

The message I wish to leave you with is that the global business services sector is on the cusp of a wave to be part of an industrial revolution and that innovation, which is inculcated in the global business sector, is going to take a turn of events. Innovation is going to make us sustainable, and sustainability is the new face of global services business - old news but to a new audience.

 

by: Dr Thomas S.K. Tang is currently the Sustainability Director for AECOM Asia.

 

 

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