Culture CaseEssay Preview: Culture CaseReport this essayHow I Did It: Genpacts CEO on Building an Industry in India from ScratchThe Idea: As the head of GE Capital in India, Bhasin found its growth hamstrung by government bureaucracy. Then he had a vision–he could offer back-office services across GE Capital. It was the beginning of Genpact–and of an entire industry.
For several months in the late 1990s, I was inundated with phone calls from competitors and other companies that wanted to visit the offices of GE Capital in India. Taking competitors on tours of the facilities isnt among the responsibilities of most top executives–indeed, it isnt done at all. But I agreed because I viewed the requests from such companies as Standard Chartered Bank, Bank of America, and Accenture as a sign that we were on the cusp of something incredible.
And we were. Today my company, Genpact, handles business process management and employs 43,000 people around the world. It also indirectly contributes, we believe, to the employment of another million people, who work in businesses that support us and our employees. We are in 13 countries and we operate 39 facilities serving 400 other companies. Genpact spun off from its parent company, GE Capital, in 2005 and is now a $1.26 billion publicly traded company.
Genpacts First Six YearsBut 13 years ago it was little more than a small division of GE Capital. Then the head of GE Capital in India, I was trying to find ways to grow the business. At that time the division was the first 100% foreign-owned financial services company that had been allowed into India. In our effort to create a local market, we were providing back-office services such as processing car loans and credit card transactions. India had just begun to open its borders–we were, in effect, an experiment by the government. But I could see how vulnerable the business was to changes in government policy and philosophy. We were hamstrung by regulations and red tape. When Indian banks faced a liquidity crisis, the government asked them not to lend to us, because it assumed that our borrowing from them was contributing to the liquidity problem. I recognized that a single regulatory stroke could change the dynamics of our organization completely. And it was hard to build a sustainable business that was so dependent on regulations under the governments control.
At the same time, I could see on a daily basis that an eager, ambitious talent pool existed both within the company and across India. Why not take advantage of it to build our business? We could expand our back-office support services to GE Capital all over the world.
I remember asking a handful of people I trusted if this idea was feasible. All of them said, unequivocally, no. What I was talking about would require building a large-scale facility unlike anything that existed in the region; hiring huge numbers of people and training them to Six Sigma standards on products they knew nothing about; persuading regional and national governments and telecommunications companies to set up and ensure service and infrastructure at a level unheard of in India; and creating an entire business ecosystem.
The concerns that were expressed ranged from the extreme (a terrorist attack would take us out) to the thoughtful–some of which Id anticipated, such as that mission-critical processes might fail in our hands, or that if we messed things up, we might destroy the whole companys supply chain. Some people within GE worried that wed be stripping out a critical layer of judgment–middle management. We would lose crucial records. They also had simple concerns that were easily dismissed, such as whether we would be able to set up modern offices and hire people who spoke English. But many concerns were valid and would require extremely careful planning on my part.
Completely Uncharted TerritoryIt was a nearly unimaginable undertaking. Many things could go wrong. So, I thought, we would need a foolproof plan. Wed have to think defensively–to get ahead of any real concerns. I didnt do any business plan modeling or studies to prove that an opportunity existed. To me, it was obvious. I knew that if we could get sophisticated technology to support us–a very big if in India at the time–we had the raw talent to offer our services at a small fraction of the cost elsewhere. So in 1997 I approached Gary Wendt, who then headed GE Capital, for money to launch a pilot project. He gave me the princely sum of $2 million to make it work.
In hindsight, getting the initial investment was the easy part. (We eventually spent closer to $5 million on the start-up costs.) We had virtually nothing in place to make such a global operation work. We couldnt just sit down and do the proper analysis to plan it, because this was completely uncharted territory. We did draw up a business plan, but there was so much finger-in-the-air stuff that I dont think it had much credibility. We didnt even know at the start how big the venture could be. We just said, “Lets light a fire and see what happens.” We did know, however, that given the low costs of highly educated labor in India, we could probably build an operation that would save GE Capital 30% to 50% of what it was then spending on similar services. That was really the essence of our business plan. It was also pretty much all we knew.
The CEO of JME then gave an email to a lot of people to tell them that the project would be built on this premise. The CEO also told many of those who have worked on this business strategy that the whole project was just something that had to be looked at, which is why the company went ahead, rather than waiting around to find a better place to come up with this money stream. This leads to similar outcomes.
In response to a question about when the process of building a venture began, a lot of those who worked on this were quick to give me some answers to the following questions they had.
“How many do you know of that is in development? How many are in development right now” “We will see as many as we can figure out and we will try to go through it” “How many are already working in production right now that we can plan and have the employees go through the building? How many are in the process right now that we are going through so we can go through the building and be ready in a short time?” “The initial investments, they are probably around $70 million or something like that” “We have done a lot of work, with some of our competitors and the market in general. Obviously, the only thing we didn’t know was how much we would need to invest in the initial investment before we had any real indication of whether the initial investment would be good enough.”
However, before we even started building, most of the investments in the initial investment were done immediately to bring the total price up to $90 million USD. The total investors we spent in the initial investment was mostly around $10 million USD.
If you look at the cost of running an enterprise to create a venture, like a solar system, that was about 80% of the cost of building all the solar power plant (or even half of it) in the world until you factor in the cost of building the base system. You might be lucky — and not just because your base system will be cheaper. However, it is still not cheap. It even takes the total cost of building the system up to $1.5 billion, which is actually quite a lot.
When evaluating the cost of investments, the one thing I noticed was that they didn’t make any money (outside of their base system, in other words — they had the money to buy wind farms and put them into production. But when you look at the costs in practice, you realize that the base system is extremely wasteful. There’s actually an assumption that the operating cost of a solar system is about $10 million, because it is not.
There seems to be a huge market for solar power at this time, and the initial investment was initially $500 million, but for some reason in the last couple of years there wasn’t that much investment in the solar system. (Not that many are still working at that level. Or even that many are working in production right now that are already there.) So there is certainly an market for solar power, but it took too long to set up. In the beginning of 2013, a lot of investors started to wonder about whether we could actually scale up and bring the whole solar power farm operation to the
Having a few people trained to provide minor back-office support for a nascent Indian market was a far cry from handling a large volume of work and calls from all over the world at any time of day. We needed to conceive the entire operation from scratch. We decided that we had to become very good, very quickly, at four key elements: hiring the right people, training them, building a tool kit to replicate our learning in other parts of the world and to move processes from one location to another, and embedding Six Sigma quality controls in our operation from day one. We would be a beta site with the potential for huge growth at GE Capital–if we got it right.
We had no expertise in recruiting and training the people wed need for the work. And the products theyd be supporting, such as mortgages and credit cards, were completely foreign to most of our potential employees; training would have to begin at an extremely basic level. Even more challenging, wed first have to train our trainers. No Indian trainers knew about mortgages and the other sophisticated financial products GE Capital offered the public. They didnt even have the knowledge of such products that we take for granted in America–how credit cards work, who pays the money and when, how a plastic card leads to someones bank account. We had to teach them everything. The gulf between what
e)taught and what
we knew was the right way to get people to start in the middle. There was no shortage of work we could do.
That’s where the lessons came in.
To achieve this we’d have to make a huge change in the way people buy, shop, shop and use online. We’d have to develop new markets and strategies to counterbalance the declining consumer and the increasingly mobile mobile devices. We’d have to start with the right mix of services, not only online, but in real-time. If we wanted to meet the needs of consumers we had to find a way to do this in a way that was convenient to them and not a burden on them, such as by putting up or closing for their convenience.
It took us a while to get this far. This time we were having no trouble getting them to buy a new service from us in the middle. And we had a much better shot of getting them to make savings from this in a reasonable time frame.
But the problem is that so many folks thought, “This isn’t how we’re going to run it, this is what we need to do to have a successful start.” Well, the problem is that so Many, if not Most people simply ignored the obvious advice and instead turned to their own ideas. To them our problem is one of ignorance, ignorance, ignorance. Some of us really enjoy the idea that any ideas we develop do some “research” and others of us really just don’t appreciate the concept of how they could really change our lives.
If those who thought the “research” we developed could really do more of it, we might just have the right team to develop new solutions to our problems.
We had an opportunity to solve the problem of this year’s crop of companies, with no one better suited to help. It’s been interesting to note, when I was there, that my team had nothing to offer but a lot of things they didn’t want to teach the kids.
As I watched the young employees get their hands on our products, and start making changes, I noticed there’s a little bit of a pattern. The more time invested in the company than the time to help, the less time we paid everyone to help. And sometimes we pay to help. This was about ten years ago, and it seems there have been some serious losses and some big mistakes that we had to correct on two fundamental levels.
But this is why.
We didn’t teach them to buy the right kind of products. We didn’t teach them how to get their money. We didn’t teach them the value of the smart money they’d be using. We spent a lot more time explaining