Three key points about learning from Asian companies: 1. Many Asian companies have a history of managing with limited resources which has led them to focus on cost-cutting, waste reduction, and productivity. They utilize tactics like outsourcing, contracting with Asian vendors, and sending Asian headquarters staff on projects. 2. Asian companies also engage in "reverse innovation" - developing solutions originally created for emerging markets and bringing them to industrialized nations at a lower cost. Examples include low-cost health innovations from India. 3. Western companies can learn from Asian competitors' focus on continuous improvement, removing unnecessary costs, and engaging employees to solve problems and boost productivity in order to better compete globally.

1. 5 | 2011
®
The Magazine of WorldatWork©
what
Many Asian-owned
companies make do
with few resources,
find creative solutions
you can
and cut waste.
learn
Globalization and the current
recession in the United States have
driven a sharper focus on improving
productivity and reducing costs in
all industries. Of interest in these
from
circumstances: some Asian-owned
companies, which have a long history
of managing with limited resources.
Many originate in poorer countries,
which has given them an inherent
asian
perspective of cutting costs and
boosting productivity through contin-
uous improvement. Furthermore, they
have expanded organically or through
acquisitions in the West, making them
companies
increasingly significant competitors.
Success of Asian-
Owned Companies
Many companies owned by Asian
owners or managed by Asian boards,
particularly those in poorer countries
in Asia like India, have grown in
an environment of few resources,
which has led them to tactics and
strategies that permeate the entire
organization’s thinking — making do,
finding creative solutions and cutting
waste. Of particular note is how
employees at these companies view
their work. The average employee
in many parts of Asia feels lucky to
have a job and is willing to work
long hours. As Thomas Friedman’s
opinion piece pithily points out in
The New York Times, “France already
discovered that a 35-hour workweek
was impossible in a world where
By Rajiv Burman
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2. Indian engineers work a 35-hour services, albeit with poorer-quality research and development laboratory
day.” Forty-hour workweeks are outcomes. Hence it is common for work are being transferred to Asian
common in many parts of Asia, and the well-known Indian outsourcers, head offices. This provides the benefit
coupled with an expectation to work for example, to themselves outsource of large-scale work, but more impor-
late, the average employee in these their own work. tantly has the advantage of shifting
companies puts in 55 to 60 hours Building on those cost advantages, work to low-cost sites. To illustrate the
every week. (The Western norm is a many Asian companies will use some of benefits, consider the Asian-owned
35-hour workweek.) The concept of the following tactics to achieve success: chemicals manufacturer that used
work-life balance and the accompa- ❙ Outsource technology to provide access to its
nying angst is a relatively unknown ❙ Contract with Asian head office business analytics team,
phenomenon in many parts of Asia. branches of vendors weekly sales, operations and manu-
In addition to the differential in ❙ Send Asian headquarters’ staff facturing production data of its U.S.
work hours, the wage gap provides on project assignments plants. The head office analytics team
a cost advantage for many Asian ❙ Use the Jugaad management was able to develop a much-needed
employers. Although Asian salaries style — an improvisational style sales and operations plan at one-third
have grown rapidly in the past of innovation driven by scarce of the cost quoted by its U.S. subsid-
decade, the gap is still large at middle resources and attention to a iary. And by throwing more low-cost
management and below. For example, customer’s immediate needs resources at the project, the delivery
a data entry operator’s fully loaded ❙ Use reverse innovation. timeline was shortened to three weeks
salary in India is $4,000 annually compared to the planned 12 weeks.
compared to a similar role in the Outsource Figure 1 shows labor arbitrage
United States at $30,000 annually. Upon acquiring Western companies, (difference in labor costs) generally
For specialized roles like a computer many Asian owners will rapidly ranges from 50 percent (through a
programmer the cost differential is assess work that can be centralized supplier given a tightly negotiated
approximately 10 times. Many Asian at the head office. Work that is not contract) to 65 percent (through a
companies will aggressively increase required to be done physically in captive operation). Savings are lower
this cost gap by outsourcing their the West such as payroll, HR and if the operation that is offshore was
own project-based work to bottom- finance administration, accounts originally located in a low-cost region
feeder companies in Asia — these are payable/receivable, customer service like Canada or the U.S. Midwest.
companies that aggressively strip out centers, call centers and IT support
costs in terms of real estate, training, are obvious candidates. As many of Contract with Asian
technology and employee benefits the Asian labor markets have matured Branches of Vendors
and offer only project-based pay. and technology has improved, more Some of the large costs businesses
Operating with razor-thin margins, intelligent tasks like regulatory filings, incur are for management informa-
these companies offer low-cost legal analysis, business analytics, and tion systems. By contracting for
these systems at the vendors’ Asian
branches, some Asian companies
Figure 1 | Savings Achieved Across 24 Offshore Case Studies shave off up to 75 percent of the cost.
This figure shows the percentage of cost savings achieved by 24 offshore cases in 2004 after The vendors are able to provide these
accounting for all direct and indirect costs including implementation.
cost savings since they are competing
in markets that need a lower price
10 level, and their labor costs are signifi-
cantly lower than what their own
Western head offices can afford.
7
Send Asian HQ Staff on
Project Assignments
Given the abundant supply of educated
3 3 candidates and the lower wages, it is
easier for some Asian companies to
1 send their home-country headquarters’
20-29 30-39 40-49 50-59 60+ staff on short- or long-duration project
assignments. In the short-duration
Source: Everest survey of 25 leading suppliers. assignments of up to 12 months, the
employees continue to be paid in
30 | workspan may 2011

3. using the their home countries at the low salary
levels while staying economically in
Use Reverse Innovation
According to an October 2009 article
groups at company-rented apartments. in the Harvard Business Review, Asian
inherent Such employees come on visitor- or
business-meeting visas to the United
companies engage in the practice of
translating innovations created for the
Jugaad style, States, Canada and Europe.
For assignments longer than a year,
developing world to the industrialized
world, dubbed “reverse innovation” by
some Asian companies apply for General Electric CEO Jeffrey Immelt.
employees nonimmigrant visas even if similarly
skilled talent is available locally.
To illustrate, consider the inexorable
rise in Western health-care costs and
actively They get employees who are used to
thinking and operating in a low-cost
its negative impact on employees,
companies and government expen-
methodology, working longer hours, ditures. At a macro level, this sector
look for and who have fewer demands on
work-life balance and compensa-
provides tremendous opportunities
for reverse innovation. In May 2009,
opportunities tion issues, provide HQ insight into
the subsidiaries operations and are
General Electric announced that
during the next six years it would
deeply obliged to the employer for spend $3 billion to create at least 100
to cut corners the opportunity to work in the West
and the future potential to grow and
health-care innovations that would
substantially lower costs, increase
on time return to their home country. access and improve quality. Two prod-
ucts it highlighted at the time — a
Follow Jugaad $1,000 handheld electrocardiogram
and cost in Management Style
The Hindi term Jugaad roughly trans-
(ECG) device and a portable PC-based
ultrasound machine that sells for as
every project lates as “overcoming harsh constraints
by improvising an effective solution
little as $15,000 — are revolutionary,
and not just because of their small
using limited resources.” Writing in size and low price. They’re also
implementation the Harvard Business Review, authors
Navi Radjou, Jaideep Prabhu and
extraordinary because they origi-
nally were developed for markets in
and task Simone Ahuja note that this spirit
is alive and kicking in fast-growing
emerging economies (the ECG device
for rural India and the ultrasound
emerging economies like India, China, machine for rural China) and are
execution. Brazil and South Africa.
Using the inherent Jugaad style,
now being sold in the United States.
A January 2011 Globe & Mail
employees actively look for oppor- article discussed the opportunity
tunities to cut corners on time and to learn from the developing world
cost in every project implementa- to decrease health costs in the
tion and task execution, improving developed world. This benefit was
productivity at their plants and in highlighted by Princeton University
their office operations. With what economist Uwe Reinhardt and former
can be viewed as lax internal and British National Health Service CEO
external enforcement of regulations in Nigel Crisp. For example, during the
some parts of Asia, cutting corners in past 20 years, Aravind Eye Hospital
practice contrary to the documented in India has performed more than
process is easy. For example, it is 3 million cataract surgeries. It has a
not uncommon for IT departments in staff of 3,000, with 200 eye surgeons
India to replace employee computers each performing 2,500 procedures a
only when they fail and not based on year. Aravind developed an inexpen-
their documented policy of a three- sive ocular lens for the procedure,
year replacement. (Sometimes there is and surgeons can go from patient
an audit, ethical, long-term health and to patient much quicker because
safety or environmental downside to those patients have been prepared
these actions, but such a discussion for surgery by other team members.
falls outside the scope of this article.) At a total of 300,000 cataracts a year,
may 2011 workspan | 31

4. Aravind performs about as many ❙ Challenge your vendors to find
cataract surgeries as are done in all solutions to reduce costs. Go to
of Canada, at a cost of $80 compared the market to find alternate options
to $700 in Canada. In a comparison Avoid so you can negotiate better. And
with Britain, Aravind’s costs were remember, the market is global just
1 percent of the total British costs knee-jerk like your competition is global.
for cataract surgery, and its clinical
outcomes were comparable or better. reactions of Conclusion
Other examples of game-changing In a global business world, the Asian
innovations from India include a layoff and hiring, competition is next door. Learning
psoriasis treatment (price reduction: what helps these employers succeed
from $20,000 to $100), the Jaipur which typify will help you prepare your company
prosthetic foot (from $12,000 to $28) to compete. To paraphrase Sun
and the hepatitis vaccine (from $20 a boom-bust Tzu, Know Your Competition. Many
to less than $1). Asian companies have a hunger for
cycle, erode growth and their acquisition spree
Taking Action at Your Company in recent times shows that they have
How can your business improve and employee loyalty the resources to fulfill their dreams.
better compete against some of the Western expectations of work-life
distinct advantages and approaches and impact balance, pay, benefits and work
highlighted above? A number of environment reflect our aspirations for
companies headquartered in the the quality a better life, but we should not lose
West have already implemented sight of the need to compete globally.
some of these approaches, such as of products Trade and brand barriers are not long-
outsourcing and off shoring their term solutions. Western companies can
transactional work and instead and customer continue to build on their strengths
focusing on cutting-edge technology of innovation in new products,
and innovating new products/ service. processes and technologies, produc-
processes in the West. In addition, tivity improvement and removing
HR leaders can help create and foster unnecessary costs. In all these areas,
a culture focused on winning by HR leaders have the opportunity to
taking the following actions: ❙ Keep costs competitive by building initiate, enable and support through
❙ Educate the workforce on global a structured and fair pay and their practices and programs and
competition and its impact on the benefits programs. In examining become true business partners.
company’s future. Encourage greater compensation costs, look at your
focus on improving productivity national and global competition and Rajiv Burman is a senior strategic HR consul-
through higher performance in the impact of labor costs on your tant and has more than 20 years experience in
all HR programs: hiring, training, company’s products and profitability. HR leadership roles in a number of global multi-
pay, incentives and recognition. ❙ Sustain the company by building nationals in North America and Asia. He can be
Create a sense of urgency. a long-term focus, loyalty to the reached at burman7@yahoo.ca.
❙ Implement programs such as Kaizen, company and its mission. Avoid
Total Quality, Continuous Improve- knee-jerk reactions of layoff and Web Extra For more information about
ment, Lean Manufacturing and Six hiring, which typify a boom-bust the Jugaad management style, log on to
Sigma. Engage the entire work- cycle, erode employee loyalty www.worldatwork.org/workspan and click
force, rather than the management and impact the quality of prod- on Web Extra.
group alone, in solving problems, ucts and customer service.
reducing costs and improving ❙ Eliminate waste in processes
productivity. Celebrate employee and inefficiencies. Revise the resources plus
engagement and teamwork. focus from wealth creation for For more information, books and
❙ Improve retention by involving a few to building a sustainable education related to this topic, log
on to www.worldatwork.org and
employees through clarity on company and community. use any or all of these keywords:
the company’s mission, vision ❙ Engage with the government to ❙❙ Global + competition
and values, supporting informal identify skill upgrade programs ❙❙ Productivity
relationships and investing in and incentives for research and ❙❙ Cost reduction.
their long-term careers. development and training.
32 | workspan may 2011