The New Age of Innovation

According to CK Prahalad and MS Krishnan, ICICI’s capabilities are built on three core capabilities: (i) Business process flexibility to reflect evolving business models; (ii) Synchronization of strategy, business process, and ICT architecture; and (iii) Senior management leadership in shaping social infrastructure and culture. This post will look at the capability 1.

Senior managers at ICICI consider their capability to enable flexible business processes that support organic growth coupled with a flexible social structure to execute their strategies as a major asset. This flexibility allows constant experimentation on new products and services. Resilience in their business processes is reflected in their capacity to adapt credit assessment systems in retail banking, to connect directly with thousands of dealers around the country, and to scale up with microfinancing to self-help groups in rural banking with adaptive pricing. More important, all these initiatives begin as low-cost and low-risk experiments that take only a three-to four-month period to prove viable. Scaling of such successful experiments is a continuous process at ICICI. This flexibility in business processes does not mean that there is a lack of process definition at any given time. All of the processes and their output metrics are well defined and monitored.

ICICI has balanced the tension between well-defined business processes and the capacity to alter business processes to seize new opportunities. In 2004, ICICI identified opportunities to compete with Internet-only banks such as ING Direct in some developed markets. Since this did not require opening branch offices and success was largely defined by the flow of information and improvements in business processes, it was a viable opportunity. For example, ICICI manages the entire operations of direct banking to its customers in Canada from India.

The bank adheres to all the regulatory norms as set by Canadian authorities, and it offers 1 to 2.5 percentage points more in interest than other Canadian banks. The efficiency of its business process and ICT backbone fused with its base in India allows it to create a surplus (compared to its Canadian competitors) and share it with its customers. It is not surprising that the bank has been adding 2,000 customers per week in Canada (as of June 2006) and has over 500,000 international customers (as of that time). A study by a major consulting firm revealed that the ratio of operational costs in salary terms between ICICI and other Internet banks in Canada was 1:7 while IT costs per customer was 1:15. One senior manager at ICICI argued, “While large MNC banks are trying to push their back-office operations to India to leverage resources here, our entire operation is in India, and hence, we are well positioned to offer competitive services in the international market.” They call this reverse business process outsourcing (or reverse BPO).

by C.K. Prahalad and M.S. Krishnan, Via The New Age of Innovation: Driving Cocreated Value Through Global Networks (2008)