Accenture Tata Communications Building Global Local Operating Model

7/28/2019 Accenture Tata Communications Building Global Local Operating Model

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Tata Communications: Building a Global-LocalOperating Model

By Stphane J.G. Girod, Joshua B. Bellin and Robert J. Thomas

November 2009

Case Study


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Tata Communications: Building a Global-Local Operating Model

2 | Accenture Institute for High Performance | Copyright 2009 Accenture. All rights reserved.

Tata Communications fastinternational growth

Tata Communications has changedshape frequently and steadily extendedits global reach since its inception in

1986 as a state monopoly in India forfixed-line international calls. At thetime, the company was called VideshSanchar Nigam Ltd. (VSNL). (SeeTable 1: Tata Communications at aGlance.) In 2002, the Indian government

privatized VSNL as part of a deregula-tion plan, and the Tata Group acquireda 45% stake in it. VSNLs market capi-talization by the close of that year

stood at $1.2 billion.

Two months later, India ended VSNLsmonopoly status, and the companysaw its domestic market share beginto erode. As a result, the companyinitiated a globalization drive fueledby acquisitions and diversification intovalue-added services (such as data).Its goal? To step up its presence andleverage its expertise in emergingmarkets while also consolidating its

leadership in India. Tata Communicationsexecutives see the company as aglobal startup because of its rebirthas an international organization soonafter loss of its monopoly.

A Mumbai-based global startup in the rapidly

changing communication-services industry must

decide how to manage its global footprint and surmount

new industry challengesall while honoring the Indian

cultural values it was founded on. Its solution? Build

a global-local operating model in which hard

components like business processes and performance

metrics support the soft component of leadership

and peopleand manage the challenges that come

with the model.

Operating models in a multi-polar world: Accentures casestudy series

The term multinational used todesignate companies that operatedprimarily from company headquarters,usually based in the United States,Western Europe or Japan. Multinationalsoften sold their first-world goods inother markets, and managed opera-tions in the developing world in orderto take advantage of cheaper labor.Talent often meant, first and fore-most, expatriate employees from thehome market.

But in a multi-polar world, whereeconomic power is diffused around theglobe, much has changed. The

corporate centers role, though asimportant as ever, is shifting frommanaging foreign units dependenceto managing foreign units interde-

pendence. Emerging-market power-houses now sell to customersnot only in other emerging markets,but also in developed markets.Multinationals source talent at alllevels without regard to country.innovation is no longer the sole preserveof the developed world. Technologyadvances facilitate cross-borderintegration, but consumer pressuresand regulations vary widely frommarket to market and force multina-

tionals to craft local strategies.

In this environment, multinationalsneed a more sophisticated globaland local operating model to manage

the complex operations that spancontinents and cultures. To learn moreabout how some multinationals arecreating these new models, we under-

took a series of case studies, with aparticular focus on emerging-marketmultinationals in the telecom andenergy industries. This is the secondcase in the series.


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In 2003, the company set up an inter-national division in Singapore andestablished offices in the United States,United Kingdom and Sri Lanka. In 2005,

VSNL acquired Tyco Global Networkfor $130 million and began providingdata services for global customers.With this move, VSNL joined theranks of the worlds largest providersof submarine cable bandwidth.

In 2006, VSNL acquired TeleglobeInternational Holdings Limited for$238 million. It now counted amongthe worlds top five voice and dataservice providers (in market share).

The year 2007 saw additional expansionand change: VSNL, its internationaldivision and Teleglobe united underthe name Tata Communications.

The company then reorganized itselfsetting up global business units basedin Singapore (data services), in Montreal(voice services) and in India (Internet

broadband). (See Table 2: TataCommunications Business Units.)The companys sales revenues doubledbetween 2006 and 2007.

But it was 2008 that saw the biggestexpansion of Tata Communicationsglobal footprint. Foreign sales made up57.3% of total sales, and the companybecame the worlds VoIP (voice overthe internet protocol) leader. With its200,000 kilometers of cables connect-

ing 200 countries, it also became theworlds largest submarine cable operator.Its market capitalization climbed to$5 billion, and it ranked seventh inearnings-per-share growth among3,000 U.S.-listed peers.

Today, Tata Communications seniorleaders are transforming the companyinto more than just a utility provider:they are committed to challenging

other multinational market leaders.As Vinod Kumar, Tata Communicationschief operating officer, explained:

We want to be a meaningful chal-lenger to the likes of AT&T and Verizonand other business services, becausewe believe that their fairly largemonolithic organizations will havesilos with a lot of organizational andtechnology legacies. But as a newoperator, we are fueled by growth

from emerging markets, so we have[new] capabilities.

To that end, Tata Communicationshas maintained its growth drive. Forexample, in 2009 it expanded into

Table 1: Tata Communications at a glance

Industry communication services

Year founded 1986

Headquarters Mumbai, India

Parent company Tata Group

Workforce (2008-2009) 5,800 (82 percent in India)

Revenues (2008-2009) INR. 99.63 billion (US$ 2.1 billion)

Major business units Voice services (Montral, Canada)

Data services (Singapore)

Internet broadband (Mumbai, India)

Service portfolio and customers provides transmission, IP, converged voice, mobility, managed network connectivity,

hosted data center, communications solutions and business transformation

services to global and Indian enterprises and service providers; also provides

broadband and content services to Indian consumers

Geographic reach offices in 80 cities in 40 countries; 22 data centers in developed countries,

12 in Asian emerging countries

Vision To deliver a new world of communications to advance the reach and leadership

of our customers


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South Africa by acquiring Neotel. Themove gave its broadband businessinternational reach. And the companyis continuing to set up new data centers

in emerging markets (including SouthAfrica). In 2008-2009, the companysinternationalization continued progress-ing as international sales reached60% of total revenues.

A global startup facing newoperating model challenges

As Tata Communications grew in sizeand expanded internationally and

as industry changes were driving newsorts of competitive pressures, thecompanys operating model cameunder increasing pressure. (See Whatsan operating model?) Specifically, thecompany had to make difficult choices

about how to integrate its operationsmore effectively globally whilemaintaining a high level of localresponsiveness. Tata Communications

senior executives had to build anoperating model that would:

Navigate different regulatory

environments in different countries.

Executives realized the need for savvypolitical networking and partneringtowards this end. They therefore asked,What global capabilities do we need toforge local partnerships so we can navi-gate varied regulatory environments?

Integrate acquisitions acrossmarkets characterized by varying

consumer trends and technological

realities. Realizing the benefits ofacting as an integrated corporation,yet worried about diminishing the

companys flexibility in customizinglocal approaches, executives askedthemselves, How do we integrateour international acquisitions?

Attract, retain and extract the most

value from talent locally. Executivesrealized that they needed to exploreways of organizing global talentnetworks to compensate for industry-wide shortage of skilled technologyworkers. Broadly, they asked themselves,How do we create and leverage localtalent globally?

Address new competitors and tech-

nological convergence. Since manycompanies were increasingly underpressure to go from being a one-servicevoice provider to being an end-to-endinformation and communicationtechnologies (ICT) player, executives

Table 2: Tata Communications business units

Unit % Total revenues

(2007-2008)

% Total revenues

(2008-2009)

Services

Global voice solutions 61 58 Provides wholesale domestic andinternational long distance callingservices; serves carriers, mobileoperators, Internet Service providersand content companies

Global Data Solutions 34 40 Provides connectivity and IT infra-structure management (includingmanaged hosting, storage, securityand applications such as TelePresence)

services to corporate customers andother telecom service providers

Retail Broadband Services 5 2 Provides Broadband and dial-upconnectivity and a wide variety ofcontent services to retail and smallbusiness customers

Sources: companys annual reports 2008 and 2009.


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wondered, How do we scale up ourinnovation processes while remaininglocally responsive?

Enhance customers experiencewhile also reducing costs across

international operations. Senior exec-utives realized that the requirements ofcustomers vary from country to country,which led them to ask themselves,How do we enhance our customersexperience locally while controlling costsand achieving efficiencies globally?

In addition to these challenges, businessat home began looking less rosy fol-

lowing deregulation of the industry inIndia in 2002. Voice services rapidlybecame commoditized, and TataCommunications saw its gross revenueper minute shrink from INR. 2.75 in2006 to INR. 1.80 in 2008. Though thecompany still claimed 36% of theIndian market for international fixed-line calls, it faced an increasing threatfrom Bharti, a major domestic rival.

Senior executives knew that to staycompetitive, Tata Communications hadto make some tough choices abouthow it would manage its internationaloperations in the context of a fast-changing industry. But its one thingfor a multinational enterprise torecognize it needs a new operatingmodel. Its quite another to constructone. The process isnt easy, in partbecause senior executives must wres-tle with thorny questions such as:

Are we properly organized andaligned to execute our strategyacross geographic borders?

Do we have the right mix of globalscale and local responsiveness?

What should be global, regionaland local? Who decides, and onwhat basis?

Which business processes, tech-nologies, organizational structuresand performance measurementsshould we standardize? And

to what degree should we stan-dardize them?

How do we stay true to what madeus successful in each foreign countryin the first place?

Even long-established multinationalenterprises based in developed economiesfind these questions difficult to answer.In fact, one recent Accenture surveyrevealed that 95% of senior executivesin multinationals headquartered in

developed markets are worried thattheir companies dont have the rightrecipe for managing (or extending)their global footprint.

Tata Communications globaland local operating model:four principles

In response to these pressures andto achieve its new operating modelobjectives, Tata Communicationsstarted a complete operating modeloverhaul in 2007, with the goal ofconstructing a global-local model. Fourprinciples underpin the configurationthat is currently taking shape:

Maintaining the Tata soft touchapproach

Harmonization of processes and tech-nology rather than standardization

Global-local talent management Distributed leadership

Below, we take a close look at theseprinciples. We examine how the

company has applied them and whatchanges executives have had to maketo surmount the potential pitfallsassociated with these principles.

Principle 1: Maintaining the

Tata soft touch

In thinking about how to configure

the companys operating model, TataCommunications senior executiveshave chosen to capitalize on the Tatasoft touch legacy that has given thecompany strong leadership and peoplecapabilities and to support thesecapabilities with new or changed man-agement processes, management tech-nologies, organization structure andperformance measures. According toAlan Rosling, former Tata GroupsInternational President, Tata companies

can succeed better in todays businessarena by favoring the traditional Tataapproach. This approach emphasizesentrepreneurial leadership, a networkingculture and empowered talentsup-ported by relevant processes rather thanthe rigid hierarchies and standardizationthat characterizes many big Westernmultinationals.

Puneet Chopra, industry expert atAccenture, described the uniquenessof the companys Indian heritage andits basis in operating flexibility andcustomer-centricity:

Typically, Indian managers or leadersare quite flexible in their approach.Thats the way business is run in India. [They are] accommodating, flexible,very caring about customer needs[and] about others needs. They gothe extra mile to meet the business

demands or the customers demands.

To deliver on this customer-drivenprinciple, the Tata soft touch is alsocharacterized by a desire to develop


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The core elements of an operating model

A multinational enterprises operating model represents

the sum total of the choices it makes regarding how to

execute on its international strategy.

A core requirement of an operating model is that it enables

multinational executives to (1) coordinate operations

between the corporate center and the geographic business

units and (2) to form an end-to-end strategic value chain.

Four organizational elements underpin these capabilities.

One element (leadership and people) is more intangible

or soft. The other three elements (processes, technologies,

and organizational structure) are more formalor hard.

Performance measures formally tie all aspects of the

operating model together.

Leadership and people. Leadership consists of the senior

team that substantially influences the organization, and

serves as an example for how it should operate. Of particu-

lar importance to an operating model are an organizations

leadership style, its degree of diversity and the way leaders

make decisions. As for people, the key aspects are the

companys approach to talent management, its emphasis

on employee engagement and the way it fosters networking.

Also included is the cultural dimension of the organization

the beliefs and shared values that bind its members together.

Processes. This element consists of the clusters of activities

that produce measurable outputs. It includes all the man-

agement processes that help coordinate input-output

activities in the value chain across geographic units. Some

examples of processes are strategic planning, resource

allocation, knowledge management, innovation management,

customer relationship management and supply chain

management.

Technologies. This includes the physical equipment, software

and tools that underpin the processes. For example, enterprise-

resource-planning software and intranet portals can helpeffect financial control, knowledge management and

innovation processes.

Organizational structure. Within this element is the way in

which responsibility, reporting and accountabilities are defined.

It includes the structural and control mechanisms used

both to integrate and to differentiate units and businesses.

Taken together, the content and the relative importance

given to each organizational element characterise the

operating model configuration. Each element may be

thought of as a dial that can be set at different levels; the

configuration is the unique combination of these dial

settings. To achieve high performance, the organizational

elements need to work together in a good internal fit.

Support Services

Design, Sell

and Market

Transact, Service

and Collect

Buy, Make

and Distribute

Execution Elements

Leadership

& PeopleProcesses Technologies Structure

Abroad

OrganizationalInfluences

Soft Element Hard Element

Enterprise Direction

Operating Model

Strategic Capability MapHome

Discontinuities

Business Model

Customer

Earnings Product

Route-to-Market

ValueLevers

Performance Measurements

Operating model according to Accenture


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a learning organization. Executives wantto get knowledge flowing in multipledirectionsnot just from India toother parts of the world but in reverse

directions as well. This priority isparticularly visible in the companysrecent acquisitions. As Michel Guyot,brought to Tata Communications withthe Teleglobe acquisition and nowleading the Global Voice Solutionsdivision, explained:

Tata Communications was reallylistening to what [Teleglobe] thoughtwas good and not good. I was alittle amazed [by] that because it was

the first time I had a direct relationwith the Indian culture. Many peopledidnt know the Indian culture, but itwas quite refreshing seeing that theywere really listening and letting thepeople do their own integration.

Executives desire to honor the Tatasoft touch reveals the importance theyassign to the quality of the companysleadership and its peoplea key globaloperating model element. Indeed,Michel Guyot lauded the commitmentof Tata Communications executivesto maintaining a visible presence ineach of the companys diverse geo-graphic markets:

You want to be present in all yourmarkets and set key directions. Youwant to show you are there, thatyoure supporting each of your overseasmarkets in the same way you do in your

own home-country market. Its verydemanding for the leadership team.

Principle 2: Harmonization

Harmonization is Tata Communicationsdistinct way of integrating its operation

globally while remaining locallyresponsive. It is characterized by a smallnumber of rules that help determinewhich processes, technologies, struc-tures and performance measurementsshould be made standard across TataCommunications geographic locationsand acquired companiesand whichshould be allowed to vary locally.

Harmonization reflects the companysdesire to avoid not only excessive

standardization but also insufficientstandardization. Consequently, harmo-nization implies that corporate seniorexecutives avoid hasty top-downstandardizing decisions. As HarishAbhichandani, vice president offinance, explained, I wouldnt use theword standardize; I would use theword harmonize.Its not a questionof force fitting and saying: This iswhat youve got to do. Period.

Harmonization doesnt necessarilymean that the retained rules or stan-dards are based on home-countrypractices and dictated to the businessunits and acquired companies bycorporate leaders. These rules aboutprocesses, technologies and perfor-mance measurements standards canalso emerge from Tatas network ofinternational operations and fromits acquired companies. Indeed, the

companys senior executives considerthis the best way to create commonknowledge, extend employees net-works and engage foreign operationsin defining and achieving commonstrategic objectives.

Tata Communications actively consoli-dates management processes, structureand technologies across its globaloperations with harmonization.

According to R. Nanda, senior vicepresident of human resources:

Whatever can be harmonized, we willharmonize. But whatever is best leftwith certain modifications required atthe regional level and that is moreeffective for the organization, wewould prefer to leave it that way.

So, for example, while the companyhas a standardized framework for its

credit policy, within that framework,different regions or countries or newlyacquired companies can develop localprocesses related to debt and financing,provided these processes are approvedby the global comptroller.

Big rules of harmonization

One intent underpinning harmonizationat Tata Communications is to balanceeconomic efficiency with customerproximity and responsiveness. Thus,when deciding which processes willbe global and which local, executivesdistinguish between back-officeprocesses and customer-facingprocesses. Back-office processes areoften associated with shared functionsor with standard processes based ata global centerin India, where thecompany can benefit from Indiascompetitive cost base. Customer-facingprocesses, by contrast, are customized

according to customers needs at spe-cific geographic locations. As SrinivasaAddepalli, senior vice president ofcorporate strategy, explained:


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The broad philosophy is that infra-structure or capabilities that arecommon to or that can be leveragedacross business units should be shared

and are centralized. But whicheveractivities or decisions are closer to thecustomerthey could be commercialfunctions, direct customer servicefunctions, or sales and marketingtheyshould be closer to the business units.

When the company is forced to weighcost advantages against customerproximity, the company prioritizesthe latter: leaders have decided thatif India does not guarantee the best

customer service, the company willrelocate the function elsewhereevenif the new location is more expensive.According to Srinivasa Addepalli:

We also make sure that we haveenough people closer to the customer.And therefore its not that back-officeor all functions have to be done out ofIndia. And if we need to locate someoperations people or customer service[people] in a high-cost location closeto the customer, we will put themthere We will put enough [of our]people in the markets where thecustomers are, and therefore get theability to speak to customers faster,sell [to] them faster, sell [to] themlocally in the languages locally. Thatalso creates agility in [our] responseto customers.

Resolving harmonization pitfalls

Harmonization can create globalefficiencies through standardizationwhile also allowing for local respon-

siveness. But deciding what to stan-dardize and what to leave local canalso consume more time than seniorexecutives may want to spend. Yet TataCommunications senior executives arewilling to be patient; they dont wishto impose standard processes toohastily, because doing so could backfireif the quick solution turns out notto be the best. It would also backfireif the actual users resist standardsunilaterally imposed on them. Such

resistance would increase costs byraising the need for centralized con-trol. This in turn would contradict thecompanys empowerment policy. Thus,as Harish Abhichandani also put it,[Harmonization] takes time. Andmaybe it has a little extra cost to it.But in the end, the result is far moresustainable.

There are limits to how much time ittakes to integrate foreign operations andacquisitions, however. Harmonizationalso hinges on easy, speedy communi-cation across employees and borders,as senior executives are finding out.With an eye toward ease and speed,the company is creating a commonintranet for all its employees aroundthe world, so they can readily exchangebest practices.

Tata Communications is also consoli-

dating its two ERP planning systems(SAP and Oracle) into one platform.Fragmentation of these platformsoften resulting from acquisitionshasmade it difficult for shared servicesto coordinate their work, has createdcostly inefficiencies and has eroded

the companys flexibility. This consoli-dation will address these problemsas well as enable the company toaccelerate integration of its financial

and non-financial performance mea-surements across borders. Eventually,the company will also rationalize thenumber of metrics it uses.

Thus, paradoxically, one way to avoidover-standardization is to heavilystandardize information and commu-nication technologies. The sooner amultinational manages this trade-off,the sooner harmonization will deliverits positive effects towards the inte-

gration of acquisitions.

Principle 3: Global-local talent

management

Tata Communications global-localtalent management principle followsdirectly from its harmonization princi-ple. Through this principle, the companyis working to create a global networkof local talent. It is standardizing a setof common values and the structureof talent management by establishingcorresponding processes, technologies,structures and measurements. But itleaves the content of talent manage-ment for example, specific hiringguidelines and compensation decisionsto local leaders.

Standardizing values to create unity

and empower people

With the help of Tata Communicationscentral human resource function inIndia, senior executives have begundisseminating globally a common set


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of values to bind organizational membersacross business units and geographiclocations. Inherited from the TataGroup, these values promote a profes-

sional, global and competitive culturewhich contrasts sharply with thebureaucratic and nonmerit-basedculture that had characterized VSNLbefore the Tata Group became its parent.According to Srinivasa Addepalli:

The Tata Group value system [isabout] respect for individuals, respectfor business, respect for society, doingthings in an ethical and a moral manner[and] not placing results over our

responsibility. I think the Tata Groupvalue system and the culture of theparent organization lends itself topeople wanting to work closely. I thinkthe respect that the Tata brand andculture bring to an organization andthe respect that [the company] offersto people helps in attracting goodpeople and then making them bondvery well.

According to Vinod Kumar, new talentis recruited on the basis of these com-mon values. Executives view the valuesas essential for executing TataCommunications ambitious strategyto become an emerging-marketmultinational that can compete withbig Western players. The promotion offuture leaders is also based on thesevalues, which perpetuate the Tatasoft touch. Leaders know that whenemployees share common values,

they trust one another to do the right

thing. Trust in turn makes a command-and-control leadership style unneces-sary. And when executives steer clearof command-and-control, autonomy

and empowerment emerge at lowerlevels of the hierarchy.

Standardizing talent management

processes and policies

Tata Communications standardizescertain international human resourceprocesses and policies. First, toenhance employee engagement acrossits many locations, it has created anew global policy of employee rotationacross locations (provided this satisfies

the customer-proximity rule) and acrossbusiness units. This rotation policycreates new career tracks for employeesand is open to all employees, not

just to few Indian expatriates. It aimsto facilitate leadership and expertisedevelopment and to reward talent.Potential leaders can be rotated toimprove their skills; more generally,rotated employees develop newtask-related and cross-cultural skills.This process also expands employeesformal and informal networks, furtherreducing the risk of silos. As VinodKumar put it, Weve been an orga-nization that leverages talent whereit is found.

Second, to further enhance engage-ment, the company links the variablepay of its top 50 leaders to two per-formance measurements: their ownlevel of engagement, and their

employees satisfaction. This practiceenhances leaders visibility in theorganization and encourages them tostrengthen their communication skills.To measure engagement and satisfac-tion, the company uses the Gallupengagement index.

Third, Tata Communications hasalso recently launched a mentoringprogram designed to systematicallyfill its global leadership pipeline.

As Michel Guyot explained:

Through the mentoring program,[we want to] identify future leaders.One of the most important qualitiesof a leader is to prepare employeesto take over the company eventually[to grow] into the company.

This mentoring program is supple-mented by an individual growth anddevelopment management process.

According to Milind Kulkarni, GeneralManager IT:

We have a strong performancemanagement system wherein we tryto capture the strengths and develop-ment areas for each individual andtake into account how they want toact, where they want to grow. Andthat is one of the strong processes,which is reviewed every six months.

Last, the company has created a com-mon induction platform for new hiresthat emphasizes Tata Communicationscore values, internal communicationsystems and the common appraisalprocess from which performanceevaluation and rewards can be cus-tomized locally.


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Localizing specific talent manage-

ment content

While Tata Communications has stan-dardized some talent management

processes and policies, it allows localleaders to determine the contentof their talent management. This isconsistent with the harmonizationprinciple.

For example, Tata Communicationshas standardized the performanceappraisal process. But it allows localleaders to set performance goals fortheir people and to determine whatvarious incentives and rewards will

consist of.

Resolving global-local talent

management pitfalls

Applying global-local talent manage-ment has proved challenging. Forexample, its taking time for the globalmindset the company is striving tocultivate to become a reality at lowerlevels of the corporate hierarchy.Sandeep Mathur, President ofCorporate Affairs, describes thesituation as follows:

If you ask any person in the organiza-tion how his or her activities relateto the companys goals and objectives,some [but not all] would be able to dothat today. How do we make sure thateveryone is aligned toward workingfor the company goals? I think mostsenior level leaders are aligned to thecompany strategy. But for us to be a

world-class company, weve got to haveeveryone pulling in the same direction.

In addition, many employees at themiddle management level are findingit difficult to work in global virtualteams, often owing to lack of experi-

ence with this kind of work. For VinodKumar, a recurrent question for middlemanagers is: How do you manage aperson who youve never seen andwho you only talk to on the phone oron e-mail?

Executives have begun putting solu-tions in place. With the new coachingand mentoring program, senior leadersspend a lot of time showing lower-levelemployees how their work makes a

difference to the company overallthat is, how their work helps the com-pany achieve its mission and strategicobjectives. To help middle managersgain experience and comfort withoverseeing virtual teams, senior exec-utives also involve them in do-or dieinitiatives. By participating in suchinitiatives, middle managers canobserve how senior managers operatewithin the global organization, andcan learn from those observations.

Principle 4: Distributed leadership

The fourth principle of TataCommunications operating modelresults from the companys effortto distribute its leadership acrosshierarchical levels, geographies andfunctions. To support this principle,Tata Communications defined a new

organizational structure in 2007, inwhich no distinction is made betweenthe companys Indian and non-Indianparts. Rather, the company is structuredaround global business units. Manyof our customers are global in nature,Srinivasa Addepalli said, therefore ourstructure is global in nature.

Distributed leadership supports bothglobal integration and local respon-sivenesskey elements of the compa-nys strategy. Its defining characteristics

include being geographically agnosticand de-emphasizing corporateheadquarters.

Being geographically agnostic

In the companys new structure, leadersof key shared-service functions arebased in India, where the bulk of theback-office workforce is located. Butthe heads of the two main SBUs andtheir teams are based in Singaporeand Montral, and they have global

responsibilities. The global teams theycoordinate are spread throughoutmost regions of the world and workvirtually. So, the heads of the variousoffering lines are distributed aroundthe world and have authority overlocal decision-makers. Thus, distributedleadership requires both broadempowerment and extensive cross-geographic team work.

As a result of this configuration, aperception has developed in TataCommunications that leaders do nothave to be physically present in India.In Alan Roslings words:

Both key businesses are international,and the people who operate them areinternationally organized. Both arebacked up by as much legal and coreservices as we can [provide] in India.I think telecommunications is a good

example of a business which is geo-graphically agnostic.


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Distributed leadership also means thathigh-level leaders do not all originatefrom India. As Vinod Kumar explained:

If you take the top 50 people in thebusiness, theyre distributed acrosstwelve cities so we can be as close toour customers and markets as possible.When we look at the top 50 peopleagain, less than one-third of them areIndian. Its not necessarily a practicethat even some of the other telecom-munication companies have managedto pull off. We hold onto this passion-ately because we believe that the mixof the people and the location of the

people need to reflect our thinking.

Being geographically agnostic doesnot mean that geography is absentfrom the organizational structure.Customer-facing employees are orga-nized by geography for the purposeof achieving local responsiveness andcustomer intimacy on a global scale.As Michel Guyot described it, geogra-phy is contained within each globalbusiness unit:

We are also structured by region inthe sense that we have some regionalmanaging directors in each continentor region. Europe, Asia/PAC and India(being one region itself because itsso important for us). [Other regionsinclude] Latin America, North Americaand Middle East and Africa. Regionalmanaging directors meet on a regularbasis to set objectives on a regional

basis, and [to] measure and monitorthe results on a regional basis.

De-emphasizing corporate head-

quarters

In traditionally structured companies,headquarters are principally in charge

of the home country and secondarilyin charge of international operationsan arrangement that typically limitslateral exchanges between businessunits. This isnt the case at TataCommunications. The companybelieves that the traditional role ofheadquarters does not support its dis-tributed leadership principle, that itcontradicts the view of the companyas a global startup and that it con-strains networking among far-flung

managers and employees. We dontwant a headquarters, Vinod Kumarsaid. We want to have twelve locations,twelve centers of gravity. So we shunthe word headquarters.

Consequently, the global managementcommitteewhich often meets virtu-ally owing to the physical distancebetween its membersis consideredmore important than the corporateheadquarters. This committee is alsorenowned for its agility and speed.As Michel Guyot observed:

Even though we are a large companywith people around the globe, theleadership team acts very fast. [It is] asmall team that can get together withten minutes notice, can get on thephone wherever we are, and we arethere to take decisions.

Resolving distributed leadershippitfalls

Distributed leadership can succeed onlyif empowerment becomes a widespreadreality within the companywithdecision-making confidence andauthority extending down throughall employee levels. But changingthe entrenched hierarchical structureof the former VSNL has turned

out to be difficult for the newTata Communications. For example,employees still sometimes feel com-pelled to report small decisions to top

management, and the threshold forcapital-expenditure approvals remainslow. Sandeep Mathur, for example,explained:

We perhaps need a little more flexi-bility in our organization And itsprobably also got to do a little bitwith our culture. I dont think weempower enough yet. Its much betterthan what it was four years ago, butits still not enough. So a person who

is closest to the customer perhapsdoesnt have the requisite authorityto take decisions which he ought to.And if [decisions] get pushed up, partic-ularly [if] theyve got to go to anothercontinent for a decision, we donthave good flexibility.

Owing to this constrained empower-ment, tactical and operational decisionstake more time than they mightotherwise. Delays could jeopardizecustomer intimacy, since lower-levelemployees are not able to make thequick decisions customers are expect-ing. Lack of generalized empowermentcan also put off entrepreneurialemployees, depriving the company ofthe fresh thinking and innovationssuch employees bring.

Aware of these drawbacks, seniormanagers are working to define roles

and responsibilities more clearly at thelower levels of the hierarchy, so peoplewill feel more confident about making

judgment calls themselves. For example,executives have begun specifying


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whom a global shared-services processowner should deal with at the locallevel and whether a particular processis a business units responsibility, a

regional managing directors responsi-bility or a shared-service teamsresponsibility.

While the new structure has onlybeen put in place for eighteen months,a key learning for senior executivesis the urgency of removing any ambi-guity in the new structure.

Key lessons

What key lessons can be drawnfrom Tata Communications operatingmodel journey? In just a few years,the company has achieved importantmilestones in creating a global-localoperating model that fits the newchallenges arising in its industry. Ithas pioneered several organizationalinnovations based on this assumption:hard components such as organiza-tional structure, management processes,and management technologies matterwhen a company is integrating opera-tions and businesses across bordersand increasing its global scale. AsSunil Joshi, president, India, explained,

Focussing on people alone places a limitto what you can achieve in terms ofgrowth and performance. Structure andprocesses play an important role too.

But the hard elements in the companysoperating model support, rather thantake precedence over, leadership and

talent capabilities. Only then can theenterprise achieve local responsiveness.Sanjay Mathur, head of the ManagementAssurance Group, expressed this line

of thought as follows:

I would say that even the best processesin the world will not help you if yourmanagement is not visionary.

In addition, Tata Communications hashonored but also scaled up the Tatasoft touch management philosophy.This approach has enabled the companyto balance standardization of manage-ment processes and performance mea-

surements through harmonization, tobegin leveraging talent globally and tostart balancing hierarchical reportingstructures with wide empowermentthrough distributed leadership andvirtual headquarters.

The result? Tata Communications ismanaged like a global startup. Inthe words of Madhusudhan Mysore,chief officer of Customer Servicesand Operations,

Our global company is running likea startup. That means the flexibilityand (to an extent) the communicationgoes vertical as well as horizontal.Coordination is much tighter and easier.

But Tata Communications experiencesso far in building a global-local operat-ing demonstrate that the process isnteasy. Balancing the five components

of an operating model takes carefulthought, and the choices made arentalways ideal. They inevitably presentfrustrating trade-offs.

For example, distributed leadershipcan help executives and managersforge close relationships with partnersand customers in far-flung locations.

But it can also make it harder forthem to present one face to partnersand customers. Distributed leadershipcannot work without clearly definedroles and responsibilities. The interfacebetween global process owners andimplementers at the local level needsto be sharply defined.

Harmonization can create global effi-ciencies through standardization whilealso allowing for local responsiveness.

But deciding what to standardize andwhat to leave local can also consumemore time than executives may wantto spend. To get the most value fromharmonization, a company muststandardize ICT that facilitate internalnetworking. Paradoxically, standardiza-tion on this front reduces the risk ofdeploying the other operating modelcomponents in an over-standardizedor over-centralized way.

There is a final lesson. Being globaland local means being in flux. Thisflux can take the form of big, radicalchanges (such as Tata Communications2007 complete operating model over-haul) that are required to execute newstrategies. And it can manifest itselfas continuous fine-tuning on a smallerscale to resolve the tensions resultingfrom the trade-offs to improve businessresults. Thus, a global-local operating

model will always be a work in progress,not a finished product that, once built,stays in place indefinitely.


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References

In addition to one-hour face-to-faceinterviews with eleven Tata

Communications top executives, wecollected the following secondaryinformation:

Company annual reports and

corporate presentations

Credit Suisse, Tata Communications,29 January 2009

Columbine Capital Services, Tata

Communications Ltd , December 5,2008

Datamonitor, Tata CommunicationsLtd: Company Profile , September 8,2008

HSBC, Tata Communications,September 4, 2008

Asit C. Mehta, Tata CommunicationsLtd: Company report, August 26, 2008

Religare, Tata Communications,June 23, 2008

HSBC, Tata Communications:Company Report, May 2, 2008

BNP Paribas, Tata Communications,April 22, 2008

About the authors

Stphane J.G. Girod, Ph.D.

([email protected]) is a

research fellow with the AccentureInstitute for High Performance. He isbased in London. He was the study leadin the telecom and energy industries.

Joshua B. Bellin, MSc.

([email protected]) is asenior research associate with theAccenture Institute for HighPerformance. He is based in Boston.

Robert J. Thomas, Ph.D.

([email protected]) isthe executive director of theAccenture Institute for HighPerformance. He is based in Boston.

About Accenture

Accenture is a global managementconsulting, technology services andoutsourcing company. Combiningunparalleled experience, comprehen-sive capabilities across all industriesand business functions, and extensiveresearch on the worlds most success-ful companies, Accenture collaborateswith clients to help them become high-performance businesses and govern-ments. With approximately 177,000people serving clients in more than120 countries, the company generatednet revenues of US$21.58 billion forthe fiscal year ended Aug. 31, 2009.

Its home page is www.accenture.com.

About the Accenture Institutefor High Performance

The Accenture Institute for High

Performance creates strategic insightsinto key management issues andmacroeconomic and political trendsthrough original research and analysis.Its management researchers combineworld-class reputations with Accenturesextensive consulting, technology andoutsourcing experience to conductinnovative research and analysis intohow organizations become and remainhigh-performance businesses.

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Accenture Tata Communications Building Global Local Operating Model