MBM 301 QUIZ I

HOW THE GROWTH OUTLIERS DO IT !!

Submitted by : Nandini Chouhan

What Is Growth In Business??

Growth means the potential for higher profits and a stronger position in the market. As revenues grow, so does the value of the enterprise should the owner decide to sell. Finding new customers, new markets, creating new products and doing a better job serving existing customers are all viable growth strategies. Revenue growth is the goal of all businesses.

Introduction to the Case

Steady, predictable growth is what every big company strives for, and what investors prize above all else. McGrath set out to discover how many companies actually deliver. To meet her initial criteria, a company had to have a market capitalization of at least US$1 billion and to have grown by 5% each year over a five-year period. Only 8% of the companies in her sample of 4,793 qualified. When the five-year period was doubled, only 10 companies qualifiedand of those, only five had grown both revenues and net income every year. The success of these growth outliers cant be explained by industry, company age, ownership structure, global location, or economy (emerging versus developed). They do, however, share a lot of practices. For example, they diversify their portfolios with early, small bets; manage major resource allocations centrally; focus attention on culture and shared values; and hold on to their talent. Their practices add up to an intriguing, counterintuitive profile: Although they are nimble and adaptive, their leadership, strategy, and values are extraordinarily stable. The author concludes that this seeming paradox is a feature, not a bug: Stability is what enables these companies to innovate and to maintain steady growth.

Characteristics of Rapid Growth Companies :

1. Taking Risks
Companies that aren't afraid to take calculated risks typically grow quite rapidly. The key is "calculated" risk. These company owners weigh their options, decide on a course of action and implement it, even though there may be risk involved. While this doesn't always pay off, it can have far-reaching rewards. Failing to properly calculate risk is a characteristic of companies that fail. They jump in too fast without paying attention to the potential consequences.

2. Proper Planning
Companies that plan for the future are often around long enough to enjoy it. Pay attention to your marketplace and changing world views and opinions. Plan ahead for potential changes that could impact your market. For example, plumbing businesses may have been riding high on the new housing boom, but when the bottom dropped out of the market, many were left with too many employees and were too invested in new housing. Make exit strategies to implement should something untoward happen that could impact your own industry.

3. High Profit Ratios

Companies that sell products or services with high profit ratios typically experience rapid growth for the simple reason that they can afford it. Setting a profit margin that is too low may make your prices competitive, but if you can't make up low prices with high volume, you are setting your company up for mediocrity. Study the pricing strategies of your competitors and how much your local market will bear. Set a profit margin high enough to help you accomplish your growth goals.

4. Attention to the Marketplace

Paying attention to the economy and the world around you is another key in building a business that can experience and sustain rapid growth. If you are too insulated and focus only on your own current market and your own current product line, your company runs the risk of being stagnant. Seek out new markets, develop new product lines that will appeal both to your current market and the new markets you need to reach.

What are Growth Outliers??

Growth outliers are those companies that do an exorbitant amount of experimentation and innovation: They develop and deploy new technologies, move into new markets, explore new business models, and even open up new industries. They take on acquisitions and aggressively seek input from people and organizations quite unlike their own. They rapidly adjust and readjust their resources and are comfortable moving executives and other employees from one role to another. Unlike their competitors, outliers appear to make fewer big, high risk bets.

FEW EXAMPLES :
Infosys Information Technology
Headquarters

India 1981 $31.9B

Founded

Market Cap

Yahoo Japan Internet Search & Navigation

Headquarters

Japan 1996 $20.3B

Founded

Market Cap

HDFC Bank & Credit Unions

Headquarters

India 1994 $16.5B

Founded

Market Cap

ACS Commercial & Heavy Construction

Headquarters

Spain 1983 $15.5B

Founded

Market Cap

Cognizant Information Technology

Headquarters

U.S. 1994 $13.3B

Founded Market Cap

Characteristics that Outliers Possessed to Enhance Success:

1. Outliers focus on strategic acquisitions to get into new markets. 2. Outliers penetrate fragmented industries. 3. Outliers execute central and well-coordinated decision-making. 4. Outliers favor adaptability over pure efficiency. 5. Outliers tend to be better integrated. 6. Outliers are usually stable, as well as flexible. 7. Outliers pay close attention to values, culture, and alignment of their employees, which turn to reduce turnover and retention of talent. 8. Outliers do not change high level strategies quickly. 9. Outliers have a reliable customer basis. 10. Outliers keep their senior leadership stable.

The Cognizant Difference

Born global, we have an abiding passion to place your business needs first. Our success is your success. To help you achieve your goals, we invest in our people and resources, so that they can help bring new business models and innovative ideas to your business and work environment.

Client-First Mindset: A Client Partner is placed with your team onsite to ensure
seamless alignment. The partner is then paired with a senior Cognizant Delivery Manager nearshore or offshore as part of our "Two-in-a-Box" client engagement model. Born Global: Working with us, you can more effectively virtualize and globalize your business. With U.S. headquarters and initial operations in India, our roots are global and combine the best of the East and the West. We've always been multicultural and tightly networked as a company.This global mindset has eased our expansion on five continents. Talent: Our business sensibility and IT knowledge are unrivaled. Many of our senior people originate from the businesses we serve, so were able to offer deep experience across almost all major industries. Innovation: Built on the latest Web 2.0 technologies, our new Cognizant 2.0 global delivery platform enables our workforce, business partners and clients worldwide to work as one. This enables sharing of expertise and insights and collaborating more in real time to achieve superior results. Uncompromising Standards: Because our culture is values based, you are assured of the highest ethical standards of integrity, transparency and corporate governance. Financial Success, Sound Management: Were a U.S.-based, publicly-traded company recognized by major business media (BusinessWeek, Forbes & Fortune) for sustained industry-leading growth. Our CEO was ranked among the top three in IT services by the Institutional Investor magazine. Integrated Services Portfolio: Our tightly integrated offerings are tailored to each clients requirements and span the services spectrumfrom Application Development/Maintenance and IT Infrastructure Management through Strategic Consulting and industry-oriented Business Process Outsourcing.

Innovation
Since its inception, Cognizants been focused on customer-centric innovation; constantly searching for new and different ways to solve client problems and build stronger businesses. That culture continues to thrive, permeating the company from the top down and setting it apart from competitors focused solely on execution of repetitive back-office processes and IT-enabled services. At Cognizant, we nurture Innovation, for ourselves and especially for our clients. As Cognizant CIO Sukumar Rajagopal says, innovation is the engine that powers our performance.

To keep that engine in perpetual motion, we follow a simple strategic plan for developing innovative solutions. Its called doing things, and the following stories provide a glimpse of what weve been up to lately. Every day, through social networks and blogs, consumers are expressing their opinions about products, services and brands. While accessing this content may be easy, analyzing it is a more daunting task. Due to the data's unstructured format, manual processing is both costly and time-consuming.

Cognizants Value Creation Framework

By leveraging our Cognizant Value Creation Frameworkwhich includes proprietary planning tools and methodologieswe architect solutions for near-term cost savings and long-term business transformation. The frameworkcreated through a rigorous two-year collaboration with leading global companieshelps guide clients along the transformational journey to achieve breakthrough levels of performance.

Some Business News.

Cognizant zips past Infosys in June'12 revenue, expects momentum to continue

MUMBAI: Cognizant's June'12 quarter performance is stellar enough to wane away clouds of worries over the outsourcing demand scenario. The company, which is listed on Nasdaq, reported a strong sequential revenue growth for the quarter and said to keep the tempo high for the rest of the year. Cognizant reported much faster growth in the topline compared with its Indian peers, TCS, Infosys, Wipro, and HCL Technologies on a sequential as well as year-on-year basis. This reflects the successful implementation of Cognizant's strategy to reinvest a chunk of its operating

profit back in the business thereby intentionally keeping profitability at a relatively lower level. Cognizant's sales rose by 4.9% to $1,795 million in the June 2012 quarter. In comparison, revenues of TCS and HCL Tech rose by over 3% each whereas those of Infosys and Wipro fell by 1.1% and 1.4% respectively. In addition, Cognizant reported growth across each of its major verticals unlike Wipro which recorded sluggish offtake across its business segments. For Cognziant, revenue from the finance vertical grew by 6.1%, manufacturing, sales of retail and logistics rose by 7.1%, and Healthcare revenue rose by 3.6%. The company's September 2012 quarter guidance reflects strong momentum. It expects to grow revenue by 4.5% to $1,875 million. Its closest peer Infosys stayed away from giving any guidance for the quarter. With the latest results, Cognizant has marched past its closet peer Infosys in terms of quarterly revenue. Infosys reported $1,752 million in revenue for the June quarter. On the trailing 12 months basis, Cognizant's revenue of $6,771.1 million still lags the revenue of $7,075 million reported by Infosys. But, considering the strong traction in Cognizant's performance and the slack in Infosys's business momentum, it could just be a matter of few quarters before Cognizant surpasses Infosys in terms of annual income.

Cognizant Technology Solutions

by Robert G. Eccles, David Lane, Prabakar Pk Kothandaraman Source: Harvard Business School 21 pages. Publication date: Jan 17, 2008. Prod. #: 408099-PDF-ENG

In the highly competitive information technology outsourcing industry, Cognizant Technology Solutions has developed a strategy to differentiate itself by emphasizing building very close client relationships through its "Two-in-a-box" (TIB) model. This model is based on having two people share complete responsibility for the client. In the U.S. or Europe, the "on-site" person, along with his or her relationship management team, is responsible for understanding the client's needs, obtaining projects and properly scoping out the work. The "offshore" person in India or elsewhere, along with his or her delivery team, is responsible for completing the project in a high quality and timely way. The same top- and bottom-line metrics are used to evaluate the performance of both the on-site and offshore managers. This strategy (as opposed to ones based on things like low cost and innovation used by Cognizant's competitors) is intended to build deep and strong client relationships that will maximize Cognizant's "share of wallet." One interesting aspect of TIB is Cognizant Business Consulting, a 1,700-person group which advises clients in the context of helping them develop IT solutions for their business challenges. More recently, and as the next evolution of the TIB model, Cognizant is developing what it calls "Cognizant

2.0" or C2. C2 is a delivery platform based on Web 2.0 technology that enables Cognizant to subdivide work into tasks that can be allocated wherever in the world the best resources within Cognizant exist based on cost, expertise and availability while at the same time maintaining collaboration and integration to ensure timely and high quality delivery.

Conclusion
Steady, predictable growth is what every big company strives for, and what investors prize above all else. McGrath set out to discover how many companies actually deliver. To meet her initial criteria, a company had to have a market capitalization of at least US$1 billion and to have grown by 5% each year over a five-year period. Only 8% of the companies in her sample of 4,793 qualified. When the five-year period was doubled, only 10 companies qualifiedand of those, only five had grown both revenues and net income every year. The success of these growth outliers cant be explained by industry, company age, ownership structure, global location, or economy (emerging versus developed). They do, however, share a lot of practices. For example, they diversify their portfolios with early, small bets; manage major resource allocations centrally; focus attention on culture and shared values; and hold on to their talent. Their practices add up to an intriguing, counterintuitive profile: Although they are nimble and adaptive, their leadership, strategy, and values are extraordinarily stable. The author concludes that this seeming paradox is a feature, not a bug: Stability is what enables these companies to innovate and to maintain steady growth.