Friday, January 02, 2009

The New Innovation: N=1, R=G

I read C K Prahalad's interview on Indian Management, the monthly journal of All India Management Association, where he talks about his upcoming book and the new idea, N=1, R=G, and various other issues. I found this particular idea particularly intriguing and decided to write about it.

The underlying idea is simple, and actually quite obvious. Dr. Prahalad's idea is that today's business needs to offer individualised, personal solutions to customers [N=1] by finding best resources globally [R=G]. While this may seem obvious, most of our consumer market business models are built on standardized demand across market segments being met by allocated resources in a given geography.

In fact, the Business-to-Business world is possibly more used to Dr. Prahalad's formulation, where vendors scour the world to find the most appropriate resources to serve each of their clients. The conventional wisdom is that such customization is possible for high value, repeat clients, whereas the mass market 'consumer' has to remain satisfied with the standardized offering that companies lay out to them.

Dr. Prahalad says the boundaries between B2B and B2C are fast disappearing. This is true, not just because the individual customers have started demanding custom products and services [laptops in different colours, TV package mixes, iGoogle are some examples], but also because the B2B market today is being dominated by small businesses [more than 80% of UK businesses, for example].

And, N=1 isn't just going to be a premium proposition; with a vast amount of information at their disposal, and with falling costs of switching loyalties, customers will desert the provider who does not understand their requirements and care for their preferences, at the first possible opportunity. Technology has been the primary enabler for such demand patterns - as it made information ubiquitous and instant comparisons possible. It is also the solution the companies will turn to - to collate information on aggregate and individual demand in real time.

On the other hand, R=G is a strategic imperative driven by the quest of efficiency and lower cost facilitated by the arrival of developing country suppliers in the party. The proposition simply is - if you don't source globally, someone else will. The technology comes as an enabler here too, as do the gradual easing of global tariff barriers and establishment of common markets in different parts of the world.

Today's innovation imperative, then, is to move the businesses to a truly integrated value chain, which narrows down to N=1 at the customer end but extends the scope of supply chain to R=G. To achieve this, the various roles, of the CEO, CIO, CFO etc, have to be re-thought. IT has to be given its due weight on the strategic agenda and customer data analysis need to be integrated, closely, with strategic planning. Global sourcing skills and infrastructure will be key to business success, as will be global talent and intercultural understanding.

My takeaway: a comment by CKP, "You don't need satisfied employees in your business, you need excited employees".

2 comments:

Anonymous said...

very nice...

Can you reflect some positive and negative effects of the development towards N=1 and R=G??

Supriyo Chaudhuri said...

Well, we see these upsides and downsides all around us. We enjoy the fruits of personalization, the recommendations, the filtered search and all that, but this means an intrusive information gathering which may make us very uncomfortable. The global resourcing, while making lives better for many and enabling a slightly better wealth distribution globally (not to mention the dispersion of skills), is also subverting social structures and cultural norms in the countries and creating a consumer class which are as alien to these countries as any other. We indeed live in the fault lines of the great global integration, but this will anyway happen.

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