DISRUPTION IS NOT INTERRUPTION

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1 WHITE PAPER DISRUPTION IS NOT INTERRUPTION April 29, 2018 Written by Sumit Taneja Vice President, EXL Utilities

2 DISRUPTION IS NOT INTERRUPTION It s a forgone conclusion that every industry, every business would be disrupted with advancements in innovative technologies, business models or a combination of the two. However, everyone seems to have a different understanding and definition of disruption innovation. The term has quickly become a new fad in the industry with newer companies like Uber, Airbnb, Bitcoin and others. A disruptive environment forces companies to question legacy approaches to operating models. - Andrew Cosgrove, Global Lead Analyst for Consumer Products at Ernst & Young What Does Disruptive Innovation Really Mean? It is an innovation which creates a new way to capture value for customers and shareholders. Essentially it changes the way you do business so that you can break the established pattern and provide a differentiated experience to the customers. Disruptive innovation is not new, and many successful companies have already used this model to either enter a market or continuously re-invent themselves to be relevant. In the disruptive environment that is the brand new order, disrupting entrenched ways of thinking, making the right strategic choices and ruthlessly executing are critical to create value for the consumers, capture value for the company and deliver value for the shareholders. ~Ernst & Young Still, most companies are scared of disrupting their business with innovative business models, face a huge amount of inertia against embracing change or don t even recognize the need for change. There are two questions that companies need to answer before choosing a path suitable for their business. These two questions are: Q1. Should they attempt to change their wellestablished business model or wait for newer business models to stabilize instead? A number of companies ignored the rise of new business models. As they were too late in realizing the need for change, they suffered extinction. While there has to be a right time to leverage a disruptive business model, it is often not easy to predict when you will be left behind using a legacy business model. Create a parallel organization leveraging advanced analytics and digital to create value for the new age customer. It is important for companies to recognize technological advancements and changing industry dynamics. One such increasingly used approach to resolve this challenge is creating a parallel company with a disruptive business model designed to keep in mind the potential value creation for new age or millennial customers. This is made EXLSERVICE.COM 2

3 Traditional Businesses New Age Businesses Brick & Mortar Mobile Call / Brochures / Media Social Augmented Reality On-request Rigid Design Manual Experiential Minimal Automation Design Thinking Digital Analytics Robotics On-demand Customer Outcome possible either by leveraging a supplier network or buying startups that can provide value differentiation. While the parent company using the legacy business model continues to provide working capital, the parallel company is able to build a future customer base by sometimes cannibalizing customers from their legacy business model. These companies understand that it s not easy to adopt the culture required to move into the new world, and hence take the route of creating a parallel company. One example of this strategy is Amazon introducing its e-book model with Kindle while it continuing to sell traditional printed copies. Q2. Do they create a newer disruptive path for themselves? Creating a new value creation path every few years is perhaps one of the most successfully used strategies. Understanding the present and future need of the customer helps companies to look at ways in which they can continuously transform and create value by evolving their companies. Create an incremental disruptive path by leveraging advanced analytics and digital, to get all the customers on a new path. EXLSERVICE.COM 3

4 Evolving Businesses On-demand Augmented Reality Mobile Social Call / Brochures / Media Digital + Analytics + Robotics + Design Thinking On-request Brick & Mortar Customer Outcome While there are many examples of this strategy, one prime example is Starbucks. From delivering commodities to services to staging experiences, Starbucks has continuously evolved to deliver an enriched customer experience. The company s main innovation is their Mobile Order & Pay app. This is fundamentally a customer-first strategy, as it addresses the basic wants of the consumer: convenience, line avoidance and speed. Coupled with their extensive loyalty program, the app gives Starbucks the perfect venue to up-sell and market to consumers. Furthermore, the app funnels back massive amounts of user data to the company, allowing them to better understand their customers habits and desires. Both problems can be solved using an As-a-Service model wherein they can use their trusted suppliers to help them drive change, move into newer disruptive models and keep challenging the status quo. Companies no longer need to acquire new infrastructure or capabilities. They can opt for asset thin, cloud-based infrastructure and partner-supported capabilities that give them speed and agility to respond to evolving business and customer needs. EXLSERVICE.COM 4

5 The benefits of using As-a-Service versus traditional models include: Asset-light pay per use - no need for capital investments Expertise of the supplier in advanced analytics, digital, cloud, social, etc. Domain/industry expertise Cross-industry best practice sharing Ease of manageability Minimal risk Conclusion Disruption in business models is imminent. Companies have to embrace disruptions to keep themselves relevant. They need to put customers at the center while responding to disruptive forces to ensure value is created for the customers, which will in turn create value for the organizations. Disruption is not interruption, it is a means to create value for customers and to keep organizations relevant. No need for elaborate change management EXLSERVICE.COM 5

6 EXL (NASDAQ: EXLS) is a leading operations management and analytics company that designs and enables agile, customer-centric operating models to help clients improve their revenue growth and profitability. Our delivery model provides market-leading business outcomes using EXL s proprietary Business EXLerator Framework, cutting-edge analytics, digital transformation and domain expertise. At EXL, we look deeper to help companies improve global operations, enhance data-driven insights, increase customer satisfaction, and manage risk and compliance. EXL serves the insurance, healthcare, banking and financial services, utilities, travel, transportation and logistics industries. Headquartered in New York, New York, EXL has more than 27,000 professionals in locations throughout the United States, Europe, Asia (primarily India and Philippines), South America, Australia and South Africa ExlService Holdings, Inc. All Rights Reserved. For more information, see GLOBAL HEADQUARTERS 280 Park Avenue, 38th Floor New York, New York T F United States United Kingdom Czech Republic Romania Bulgaria India Philippines Colombia South Africa EXLSERVICE.COM lookdeeper@exlservice.com