The Nyenrode/Wall Street Journal Global Sourcing and Innovation seminar

Welcome
In his welcome, Nyenrode President Hermann Bruggink deliberates that the Dutch are famous asopen-minded traders and for their borderless thinking. However, that rising protectionism and fear of the unknown are giving rise to some concern. “At Nyenrode we are aware of the changing situation,but we do our best to create and stimulate open minds and the spirit of free enterprise among our students.”

Sharing
Bruggink says he will call on special guest Dr. Abdul Kalam to help open people’s minds, and hequotes his recent book India 2020: ‘A nation’s progress depends on how its people think; it is thoughts that are transformed into actions’. “This is true for India, true for the Netherlands, and true forbusiness. Borderless thinking and respect for one another’s views are the basis for today’s globalvillage. This day will be for sharing these views and perspectives.”

Happier
Moderator for the day is Chazia Mourali, a Dutch TV personality with her own link to Nyenrode: “Justbeing here is a dream-come-true,” she enthuses. “I was brought up in this area and I yearned to bepart of this magical castle and the people who studied in it.” This day, she says, will be one thatenables its participants to make friends, learn from one another, and leave in a happier frame of mind.”

Mission
Accepting the baton, Professor Bert de Groot, Dean of Nyenrode, informs that today’s theme lies at the heart of Nyenrode’s mission and what it instills into the hearts of future business leaders. “The reason for our success lies in the strong ties we have with the business community. It’s important to provide a bridge between what the business world needs and what we have to offer.”

Why, and why now?
Today, says De Groot, we will share the experiences and ideas of revered thought leaders from all walks of business life. But why this theme and why now? In 2005, research by Nyenrode associate professor Désirée van Gorp revealed that relatively little was known about global sourcing. Her findings, however, did show that it is no longer done as a cost cutting tool for relocating non-core activities to so-called low wage countries, but for long-term competitive advantage. “Today we will take the thinking on global sourcing and innovation to the next level.”

Special address by Eric Niehe, Former Ambassador of the Netherlands to India

Unstoppable elephant
Eric Niehe says the very fact that he is standing in for Frank Heemskerk, the Netherlands’ Minister for Foreign Trade, who is heading a 100-strong trade delegation to India, proves the importance of global sourcing. He tells the floor not to expect answers to global sourcing issues from him, but, rather, the benefit of his experience in three ambassadorial postings in Ireland, Hungary and India. “In Ireland I saw the emergence of call centers, in Hungary shipbuilding, and in India it was global sourcing.” Not so much an Asian Tiger, he dubs India the ‘Indian Elephant’, now stirred and unstoppable: “It started modestly with production facilities, but now companies run complete R&D centers there.”

Special address by Dr. Abdul Kalam, Former President of India

Creativity
In the first of two addresses, Dr. Abdul Kalam opens by explaining that successful global sourcing calls for creative minds. In a knowledge society innovations come through creativity, which comes from beautiful minds. “Creativity is seeing the same as everybody else but thinking something different.”

Mindset
Humanity, continues Dr. Kalam, faces several challenges, such as a clean environment, abundant energy and water, education, healthcare and the global employability of human resources. “The right mindset looks beyond profit as a motive and sees global sourcing as a means of creating knowledge workers and leaders, and as a way of combining core competences of organizations and nations to solve global problems.”

Knowledge society
Knowledge is the main driver of prosperity. India’s economic growth is tied to transformation in the knowledge products and service sectors, which, in turn, will strengthen agriculture and manufacturing. India’s movement towards its ‘Developed India 2020’ objective will see it generate revenue from raw materials, agriculture and industry, and through becoming a vibrant information and knowledge society.

Pooling
Dr.Kalam cites two examples of what can be achieved through the international pooling of core competences. The first is the BRAHMOS supersonic cruise missile, designed, developed and produced by an Indo-Russian joint venture. The second is a pan African e-network connecting 53 African countries, and involving communication, education and healthcare.

World Knowledge Platform
He appeals for the creation of what he calls a ‘World Knowledge Platform’ to meet the needs of many nations. Something he has lobbied many academic, industrial and political bodies for, including the Indian and European parliaments, this platform will address global issues in areas such as energy, water, healthcare, food, knowledge products, media, and in the aerospace, shipbuilding and automotive industries.

Creative leadership
He concludes by saying that the most important ingredient for global innovation is creative leadership.“A leader must have vision, the courage to take decisions and tread unexplored paths, the ability to manage both success and failure, nobility in management, and total transparency. The emergence of such leaders will facilitate global competitiveness and help transform nations into knowledge societies.”

Strengths and weaknesses
A question from the floor probes for the strengths and weaknesses of the Netherlands. “Innovation and creativity are the two great drivers of the Dutch nation,” says Dr. Kalam, “while a weakness could be a reluctance to risk failure.” Former ambassador Niehe muses that Dr. Kalam might just be too diplomatic to say that the main weakness is complacency.

Uniting
At the end of the lively and, at times, humorous exchange between the audience and Dr. Kalam, moderator Chazia Mourali concludes by saying that Rudyard Kipling might have been mistaken when he uttered the words ‘East is East and West is West, and never the twain shall meet’. “Dr. Kalam,” she insists, “has done an admirable job of uniting the two today.”

Academic introduction by Désirée van Gorp, Director of the Nyenrode Institute for Competition

Follow-up research
Professor Désirée van Gorp is pleased to have the opportunity to present the findings of the follow-up to her original 2005 research on offshoring. Her new research focuses on services because this is where the center of gravity currently lies. “The economy of the Netherlands, for example, is nearly 75 percent dependent on services.”

Dominant
Some 25 percent of respondents in her latest research said they were either active or intended to be active in the area of global sourcing within the next 12 months. Captive offshoring (done under direct control) was the dominant form of firms’ relocation of business activities, particularly amongst the more experienced players. Firms with less experience tended to opt for offshore outsourcing, involving a third party.

Reasons
The main reason for firms to relocate their business activities remains one of cost savings, but it was noticeable that for firms planning to do so in future, entering new markets was quoted as the most important objective. Other leading reasons included improving or maintaining competitiveness and increasing flexibility.

Barriers
But there are barriers too. The main one that service firms perceive is one of management issues. Captive offshoring firms rate cultural differences and unfavorable government policies in their top three obstacles, while for third-party offshoring firms it was the language barrier and inadequate quality of service. Advances in information technology have accelerated the internationalization of services more than manufacturing.

Book
Supported by pie charts, bar charts and graphs, Van Gorp demonstrates the trends, preferences, demographics, international rankings, objectives, benefits and the leaders and followers in the area of offshoring. A copy of her book: Offshoring by Service Firms, Global Sourcing and Innovation: Reality or Myth is available to participants after her presentation.

Business forum: innovation by global sourcing — reality or myth

Time methodology
Girish Ramachandran, CEO, Europe Tata Consultancy Services, says that innovation always starts with a business problem and ends with a solution. He illustrates this with a recent example. “Our partner, the Ferrari Formula 1 team, had a problem with the reliability of its car. With less than two weeks to fix it before the next race, we approached the problem with time methodology. Over the course of the next five days, teams in two centers of excellence, one in India and one in Italy, changed the car’s configuration and put it back into production. Problem solved.”

Two-way street
Peter Mous, Board Member, IBM Nederland, says that thanks to IT and communications technologies opportunities present themselves in different ways, and that offshoring is perhaps no longer the operative word. “In India, for example, IBM has about 60,000 employees and we use their skills for R&D that we apply all over the world. It’s a two way street.” According to the OESO, about a billion people in the world now earn at least US$10,000 a year and it’s expected that this will rise to two billion people within five years, Most of this growth will be in China, India and Eastern Europe, which represents a huge market.”

Challenges
Peter-Paul Tonen, Direct Marketing Manager, at Cap Gemini, agrees that IT is the facilitator of offshoring, and informs that Cap Gemini will grow to 100,000 employees by 2010, of which 40,000 will be in India. “We entered India for cost reasons, and – as the Dutch seem to have fallen out of love with IT – the availability of human resources. There are challenges however: mainly that of people themselves and the diversity of cultures. Ignore these challenges and you’ll find that one and one could make zero; approach them correctly and one and one can make three.”

Strategic intent
Ton Heijmen, senior adviser of international think tank, The Conference Board, says that strategicintent is a prerequisite for offshoring, yet only four percent of companies have an offshoring strategy. “A few years ago, Symantec saw an opportunity to grow its business exponentially in China. Rather than expand at home, its strategy was to increase their local presence. In 2004, they recruited six engineers from a Beijing university campus; today, 600 engineers conduct R&D activities in two locations in China. And the time difference between California and China also gives them the bonus of
24/7 R&D development.”

Beer and management
Derk Haank is CEO of Springer, the publisher of some 1,800 journals and 4,000 books a year. “As atruly global company we use the best from all over the world, which is why we drink German Beer and have Dutch management. To spread the risk, we produce half of our two million pages per year in a self-owned Indian company, and the other half is done in the Philippines. Our motivation was partly cost but mostly because we couldn’t find the people here. Finally, I see the debate on whether to outsource core or non-core business as a non-starter; if a non-core activity doesn’t run smoothly, it becomes very core.”

Method and madness
Professor Ramnath Narayanswamy of the Indian Institute of Management, Bangalore, advises foreign companies entering a country to quickly build communication and trust by using people capable of interpreting the prevailing culture. Trust is the key to good business. In terms of cultural diversity, compared to the Netherlands India is a sub-continent with the equivalent of a different country every 100 miles. “India has a different sense of order; there is some method in its madness, but it takes a long time to understand the method.”

Cultural differences
The imagination of the panel and audience is caught by cultural differences. Ton Heijmen says the biggest barriers to successful outsourcing and offshoring are always internal and organizational.Several people offer trust as the most important element, a Nyenrode alumni and entrepreneur states that his startup is trying to close a sizable gap between civil engineering in the Netherlands and in India. Meanwhile, panelist Derk Haank warns that there’s also a danger of overstating cultural differences. “Be aware of the obvious do’s and don’ts, but otherwise stay yourself, be friendly and open.”

IPR
On the protection of intellectual property rights (IPR) both Derk Haank and Ton Heijmen think it a nonissue – no more a problem in India than in the US or Europe, for example. A lawyer in the house concurs and points out that good agreements are needed.

Anti-offshoring
Peter-Paul Tonen swings the debate around to why protectionism is playing a greater role. “As a company we are often severely curtailed in our freedom to offshore.” A nodding Ton Heijmen says that 35 US states have prohibitive anti-offshoring legislation on the table. Peter Mous declares that the Dutch government is loosening up on restrictive practices, because of a shortage of skills. “But the further south you go in Europe, the more protective it gets.”

Global partnerships for innovation: a case in point; successes and failures, what can we learn
from them?

Respect
Jan Baan, CEO of Cordys, kicks off the afternoon's panel discussion by admitting his first incursion into offshoring in India was an accident; he went in search of an export market but found resourcing opportunities instead. Baan warns that in offshoring there should never be what he calls a 'masterslave' relationship, and that mutual trust and respect — particularly respect — are crucial. There are cultural differences but this does not necessarily mean that the Netherlands, for example, is more advanced. “Don't go for cheap labor," he implores, "go for the best, try to motivate, place more emphasis on quality than quantity, and remember that productivity can be increased faster than wages."

Fusion
Jeroen Tas, Vice President Global Operations EDS, Vice Chairman MphasiS, sees global fusion where others might see innovation. A fan of fusion in many of its guises, he's an advocate of bringing together the best of everything, from all over the world. Quoting The Economist, he says emerging countries represent 30 percent of global GDP and 50 percent of purchasing parity, but they are growing four times faster than developed countries. “Think about it, especially where the world will be in ten years time!"

Innovations
Tas predicts that the most significant green energy innovations will come from China and India during the coming years. India has substantial energy requirements and they will innovate to meet them. They will also redefine the automotive industry. Just like Toyota displaced GM and Ford, players like Tata will probably one day develop an inexpensive and environmentally friendly car. He draws an interesting parallel between periods of great innovation, such as Dutch trade in the 17th century and Silicon Valley today. "Both were characterized by being open, multi-disciplinary, and global. There's also private equity, money flowing to risk, which is very important, and there’s IP protection, which is a fundamental need."

Advancement
Subroto Bagchi, Co-founder and CEO MindTree Consulting, confides that he was born in a small village in India four months before the world's first satellite, Sputnik, was launched. His point is obvious: "Without satellite technology we wouldn't be here today." Using anecdotal evidence he illustrates just how far his homeland has progressed. "In 1990, a US executive told me he didn't even know where India was. If he said that today he'd be sacked."

Inclusion
Bagchi feels it's time to shift the mindset from return on investment to return on knowledge. But you won't get return on knowledge without inclusion and without inclusion there’s no innovation. "On a New York street, for example, you'll see six different nationalities in 60 seconds. Inclusion leads to diversity and diversity leads to innovation.”

Entertainment
Soumo Ganguly, Co-founder and CEO of Chivach Media, uses the film The Chronicles of Narnia to illustrate how the entertainment industry is location independent and lends itself to global sourcing and innovation. “This film was written by English scriptwriters, shot by an American crew in New Zealand, the soundtrack was done in Paris, and it was edited in LA and Singapore by Indian operators.”

Winning combination
According to Ganguly, the industry offers several big opportunities for offshoring and global sourcing. These include animation graphics, where India is second only to Lucas Films in Singapore, media services, in which all types of content is digitized and cataloged, and uplinking, the transferring of programming content to a satellite. "It's not just about lower costs," he echoed, "it's the winning combination of low costs, high quality and cutting edge creativity."

Job losses
The panel opens to the floor and the discussion gravitates towards fears of job losses. "Agility, the ability of companies to swiftly retrain displaced employees, is very important," offers Désirée van Gorp. Jeroen Tas throws in a few statistics: "In the US, five million jobs are destroyed and created every month, and seven out of ten of the most popular jobs there didn't exist ten years ago. It’s difficult to train people for jobs that have yet to be created.” Ton Heijmen, now in the audience, stresses that research has irrefutably proven that offshoring leads to increased employment in both the
commissioning and receiving countries.

Offshoring in the Netherlands
An official from the Dutch Ministry of Economic Affairs turns the table and asks what would make the Netherlands an attractive offshoring destination, particularly now that cost is less of an issue. "When will its labor laws become more flexible?" shoots Jeroen Tas. Soumo Ganguly says he once checked out Italian, German and French suppliers to carry out a documentary project before successfully engaging a Dutch production company. “It wasn’t cheap but the quality was good." Jeroen Tas concludes the forum discussion by saying the Netherlands has tremendous opportunities in terms of creativity, design, logistics, and distribution. But there’s complacency and it lacks a sense of urgency.”

Presentation of the winner of the Global Sourcing and Innovation Award
Former Ambassador Eric Niehe again takes to the floor, this time to present the Global sourcing and Innovation award to student Amit Kapoor. For his thesis: ‘The What Where and How of Innovative Outsourcing’, he wins a globe inscribed with his name, a check for €10,000 and an internship with Tata. Commenting on his success, Amit Kapoor says: "When I started I wondered how I would manage to write 8,000 words on this subject. As it turned out, the biggest challenge was compressing it all into 8,000!"

The conferral of an Honorary Doctorate on Dr. Abdul Kalam
Before inviting Dr. Abdul Kalam to the podium, Dean Bert de Groot expounds some of the qualities and achievements that make Dr. Kalam such a deserving recipient of an honorary doctorate. "A scientist, poet, professor and Former President of India, Dr. Kalam played a leading role in developing his country's satellite and space programs and its defense initiatives. He also gained global recognition for India as a technologically advanced nation, giving it the place on the world stage that it deserves." The rapturous applause that greets the actual conferral of the doctorate indicates that the audience is in complete agreement.

Keynote address by Dr. Abdul Kalam on National Prosperity and Energy Independence

National Prosperity Index
Very rarely in its history, begins Dr. Kalam, has India enjoyed a period of simultaneous economic growth, stability and global recognition of its technical competency. However, economic growth must be reflected by the quality of life of all its people, so India has evolved a 'National Prosperity Index (NPI), covering growth rate, quality of life and the adoption of a value system. One of its aims is to get the number of people living in poverty to almost zero by 2020. "As a measuring tool, the NPI could be used by many of the world's nations."

2020 vision
Dr. Kalam has a distinct vision of his country by 2020. The urban-rural divide will be barely
discernable, there will be adequate access to energy and clean water, agriculture, industry and service will work hand-in-hand, education will not be denied on the grounds of societal or economic discrimination, healthcare will be available to all, and governance will be transparent and responsive.

Energy Independence
Moving on to energy independence, Dr. Kalam informs that The World Energy Forum is predicting the depletion of fossil fuels within 100 years. “Because energy is a vital prerequisite for development, energy independence is India's highest priority, which it intends to realize by 2030. It will be attained through Hydel, nuclear power and renewable energy sources, particularly solar power.”

Fueling the economy
Solar energy has massive potential for large-scale, economical application in agriculture. And shifting from photovoltaic to carbon nano-tube solar cells will boost efficiency from less than 30 to about 50 percent. Transport accounts for about 90 percent of India’s oil consumption, and to reduce its dependence on oil, India will look to hydrogen and bio fuels. The target is for bio-diesel and ethanol to provide 20 percent of anticipated oil consumption requirements by 2030.

Mutual advantage
In conclusion, Dr. Kalam stresses that if negative forces, like inequality and a lack of values, are not neutralized by positive forces, development and peace will elude the world. “Management and education systems for the sustainability of the world, beyond classical borders, must be evolved,” he pleads. “Nationalism and globalism can coexist for mutual advantage, if the betterment and prosperity of humankind as a whole becomes a vision.” A fine note on which to finish a fascinating and highly
engaging day.