It is on Fortune’s World’s Most Admired List. It is on Forbes Fast 25 Tech list. Its revenues grew 2.5 times through the deep recession. Things are peachy.
So why has CEO Francisco D’Souza been tinkering with the company over the last couple of years using the Three Horizons framework he outlined in the 2011 shareholder letter?
It is to apply to his own business the advice he is providing his clients. You have to keep running better, but that’s not enough. You also have to run different.
I had a chance to listen to him and other executives present at the company’s BPS Connections event. I also had a chance to sit down with him one on one and also spend time with Alan Alper from Corporate Marketing during the day. Notes from each:
a) The formal portion of the day revolved around Cognizant services in four vertical markets – life sciences, insurance, healthcare and banking. Cognizant chose to not aggressively pursue horizontal BPO services in the last decade – accounts payable, hr, call centers etc, but it has been offering a number of clients vertical BPO services to support activities such as pharma R&D analytics, insurance claims processing, healthcare enrolment and investment banking operations.
Additionally given the regulatory and globalization pressures and technological opportunities in each of these verticals, Cognizant has been positioning consulting and advisory services to help envision the “run different” opportunities. So the day presented “to be” examples of smart auto insurance providers using telematics to reach out to owners when the car reports a mishap and smart health care scenarios where sufferers of allergies get proactively alerted about predictions of high pollen days. It also gave the opportunity to showcase unique IP and tools Cognizant has been developing for these markets.
Two really interesting sessions during the day focused on evolving commercial models and a customer panel. Cognizant has been experimenting with a number of non-headcount, outcome based pricing models and mechanisms like JVs to monetize unique vertical IP to benefit both the clients and themselves. The customer panel had 5 executives from these verticals (several big names from each, but Cognizant requested their names not be publicized) and fielded a wide range of questions that ranged from their reaction to non-FTE based pricing, to IP and governance challenges of sharing unique vertical expertise with an outsourcer and in turn, their competitors. I asked the panel what they thought about Cognizant going after several verticals. One of them said there were benefits from learning from adjacent industries like banking and insurance. Another said they were glad Cognizant was not chasing after every industry like some of its competitors. (Cognizant is stronger in services verticals like financial services, healthcare and media) No clear trends but the answers were honest and reflect a remarkable maturation of the outsourcing market beyond back office and IT infrastructure.
b) The one on one with Francisco was fascinating as it brought up names like Scient, Viant, Sapient and other firms which were prominent during the eBiz boom of the late 90s. It had shaken up the systems integration market back then, and Francisco has been worrying about new entrants in the new world of SMAC (Social, Mobile, Analytics and Cloud) for a while now. He was clearly prepared to discuss several new players I have written about in this note. I learned Cognizant is the agency of record for some of his pharma clients (seriously an IT services firm as a digital agency?). He told me about couple of large global brands which are using its Assetserv tool to manage large digital marketing libraries and as their “brand book”. He talked about the advantage Cognizant has with back end integration skills and deep vertical knowledge in building mobile apps. He mentioned their TRUZIGN tool which facilitates mobile payments by scanning a QR code and sharing necessary payment data with the merchant ìn real time. He talked about how Cognizant competes with specialists like Mu Sigma for advanced analytics and Big Data projects. He talked about their Cloud360 tool which helps in provisioning, managing, and monitoring heterogeneous. (Separately, Cognizant’s Chief Innovation Officer has been helping reinvent many internal processes as he described in this guest post)
Most of these new engagements are “Third Horizon” activities Francisco has personally taken leadership for. He says it’s his way of tackling the “Innovator’s Dilemma” that could afflict Cognizant. “Any time a market is in transition, newer projects tend to be smaller and need more unique skills. The Cognizant field would likely have ignored smaller mobile or social opportunities”. That is a significant point - Cognizant has only 800 customers which average $ 10 million each in projected 2013 revenues so the field is more aligned with larger, more defined opportunities.
He said it has led to other transformations – many of his staff are behaving entrepreneurial. The idea for the TRUZIGN tool above came from two Amsterdam based consultants. In turn this is putting pressure on their managers to also pay more attention to Horizon 3 opportunities in their verticals/geographies. Francisco said there is now healthy competition internally between his Horizon 3 and efforts and those being adopted by field. Which suits him fine – that is the ideal way to fight the Innovator’s Dilemma when the incumbent organization itself learns to innovate. To punctuate the point I heard his acronym EBA (emerging business accelerator) repeated by others several times during the day.
c) I sat through most of the day’s presentations with Alan Alper and got to see his reaction to the vertical messages that were being presented. He also talked about a number of thought leadership activities the corporate marketing group are working on and how Cognizant client proposals and presentations are becoming much more interactive (like the “to be” vision videos his group is helping many of the verticals craft) and differentiated from the long RFP responses and hundreds of Powerpoint slides so common in the industry.
I came to learn about how Cognizant helps clients “run different”. I walked away with as much on how Cognizant itself is running different.