Marc Vollenweider is the CEO of Evalueserve, a company that offers innovative and disruptive solutions to their clients’ problems and offers them organizational innovation tips. Marc has a genuinely unique perspective on the changes taking place in various industries and offers a lot of advice, for leaders as well as those working for more traditional and regulated firms, on how they can successfully navigate through these disruptive waters.
Organizational Innovation with Marc Vollenweider
Welcome to the Innovation Ecosystem, with me today is Marc Vollenweider, who is the CEO and cofounder of Evalueserve here to talk about organizational innovation. Welcome to the show, Marc.
Thank you, Mark, and thanks very much for having me.
You were at McKinsey for over a decade and I’m curious, what led you to leave and to go out on your own to become an entrepreneur in this field of organizational innovation?
Yes, thank you. McKinsey has always been quite entrepreneurial in nature so, in 1999, I went to India together with McKinsey and, amongst other things, was also in charge of what is called the McKinsey Knowledge Center, which is a back office research operation of McKinsey Worldwide, and I had the chance to start this when it was like only five FTEs or five people in a hotel room in the Taj Palace Hotel in Delhi. We grew it to about 120 people by the year 2000, at which point, I saw that there was potentially a business opportunity to create something like Evalueserve and I’ve always had this idea of setting up a company, doing a startup myself, and this is when I took the plunge because I said, “It’s now or never,” and that’s how I got going.
So, Evalueserve, how does it work? What’s special about it?
Evalueserve started out as a based on geographic cost arbitrage as a company that provides research and analytic in a customized – completely customized – fashion to end users around the world – for example, banks, consulting firms, and corporates. A head of strategy would say, “I need competitive profiles of the top 20 players in my field and my industry,” and we would put everything together and deliver. These days, of course, and the solutions have become much more complex and it’s globalized and has much more technology, but the fundamental idea is to provide customized research and analytics.
This was taking advantage of the significant differences in labor rates. How has that marketplace developed over the last 15 years?
Correct. I mean, the first pre-existing models in the whole field were captives like GE Capital, American Express, or TRS. They had already started providing some analytics from India to the rest of the world but it was still captive in the sense that they did it for internal purposes and they used Indian teams to run the work. We were the first ones to provide this as a third-party service to companies in our field, that there is organizational innovation.
Now, how has it evolved? Initially, it was really based purely on geographic cost arbitrage. An employee in India just had lower salaries. The salaries were maybe 20 to 25 percent of what they are in the West. But then, over the years, things changed rather quickly and dramatically, the business globalized. So it was no longer only-India. It became China, it became for Asian work, it became Chile, for the Western time zone, for the Californian time zones, American time zones, in general. Then we went on shore, closer to our clients with offices in Raleigh-Durham, North Carolina or Cluji-Napoca, Romania, because clients increasingly wanted to have capacity closer to their businesses and, ultimately, even on site. Our people are providing the analytic service inside the client’s office locations.
The engagement model morphed a lot. That was one evolution step in terms of organizational innovation that we went through. Another organizational innovation move was that the type of work we did became more and more complex. It developed from pure market research or simple secondary business research, more and more into analyzing financial processes such as advanced equity research, including the valuation models, or supporting investment banks in various processes around corporate finance, trading, risk and spin data analytics. Things went more in the direction of big data, Internet of Things, these kinds of services. So there was an explosion of types of service and use cases, as we call them these days.
It is very clear now that geographic cost arbitrage will not be there forever. It is still there, but the Indian salaries have increased rather quickly and will continue to do so. Therefore, it became very clear that automation and process reengineering had to be a very significant part of our work. So we started redefining the company’s business model to reflect what we really do – Evalueserve is powered by mind machine™ , which basically gives the story of increasing amounts of automation, making the processes faster, better, freeing up time our analysts can send on higher-level work, and finally, enabling clients to do new things that they couldn’t do before – complete organizational innovation. The business has morphed very considerably during the last 15 years.
We’ll come back to that organizational innovation mind machine™ strategy in a minute. Clearly, there was a huge amount of change on that journey. Two or three fundamental shifts in the economics and the business model and the client delivery model and, at the same time, you were advising clients, many of whom are senior leaders responsible for developing strategies to deal with disruption to continue to out-innovate the competition. I’m curious, how did you manage working with clients to help them meet those needs, which have become more extreme over time, as a result of changes in technology the same trends that are facing your business, staying ahead on the organizational innovation front and, at the same time, manage the growth of your business from 1 employee to 3,200 employees?
You can imagine that we went through the usual pains of growth during this time. But, it was, of course, double as tricky because we had to morph in a market that was hit also by crisis. The financial crisis of 2008, was clearly driving a lot of need for innovation at the client’s end. Initially, we just performed work that was given to us, almost like work packages and we tried to do things efficiently, of course, and deliver it back. But increasingly, clients expected us to come up with innovation for them to be using. So, these days, any governance call with our clients requires us to bring a list of ideas for new capabilities that the client can use in order to differentiate in their marketplace, not just how we could do the work better.
Can you give an example, without naming specific clients, for our listeners, many of whom, might be in the more mature industrialized, slower moving, long life cycle industries that, perhaps, are heavily regulated. Any examples of how you would approach, let’s say, a new client in the financial services industry?
Yes, in the financial services industry, let’s look at M&A, the typical bankers and their back end processes. They need pitch books that they bring to any meeting with the CEO. They have them on the table for about an hour and after having gone through the actual pitch and the ideas – they leave it behind.
That requires a lot of analytics. For example, valuation comparable has to do with a lot of profiles of potential targets. A lot of work goes into such a pitch book. Typically, these are up to 100 page documents and, on average, duty bankers spend nights and nights on these.
So, what would we do there? We bring a whole reengineering sweep of productivity tools to the table where tasks get sped up quite massively. Up to 50% of the total workload can now be semi-automated. Just a small example that is almost embarrassingly simple, but has a very recall value amongst executives: We’ve created a database of 40,000 clean logos that are repaired by a graphics designer so that they look transparent and they don’t create these ugly, white boxes in the background. So, we created a logo database and some macros that pull out these logos in seconds and paste them into the right places in these pitch book documents. Believe it or not, an average investment bank spends about 6,000 hours each year on copying and pasting such logos. Now, we eliminated 95% of that time by having a very simple asset of logos that we use everywhere.
This is just one of about 50 different functionalities that, the banking suite of our productivity has in it. We bring these ideas to the table and the banks want these ideas. We need to propose a constant flow of new ideas which, of course, puts us under a lot of pressure. Our employees, have idea generation sessions whenever we see these needs emerging, based on that we build functionalities that we deliver to the client via platforms,.
It’s a dynamic race for the latest functionalities. And this brings us challenge that we automate away a lot of the human work, which is actually the mainstay of our revenue. So, we are kind of cannibalizing our own revenue in order to grow, which means it’s a double whammy, right? On the one hand, you’re automating away your own work. On the other hand, you need to grow, which basically means in order to achieve a 10% growth or a 15% growth every year, we actually need to grow by about 20% because, otherwise, we cannot overcompensate for the automation aspect of the work. That has been the race for the last few years and I think it’s going to continue for quite a while.
This is fascinating. Let’s come back to the leadership challenge that places on you as the founder of the company in a minute. As I think about your clients, you served you meet with hundreds of decision makers and you provide your services to all sorts of industries and verticals around the world. As you meet with the leaders of these companies, in industries, many of which are under attack from new entrants, from new technology, from changes in demand or consumer demand or tastes. What are you seeing in terms of how the best leaders or the most effective leaders in these organizations are thinking about these changes versus, perhaps, those that are being left behind because they’re not necessarily being agile enough. Are there any big things that you recognize in terms of the characteristics or the behaviors of the leaders who really got their minds around this and are taking their organizations forward in this environment?
Yes, indeed, there are approaches that will probably work better than others. The first one is clearly establishing the need to change. That is where, I see many differences even within the same industry for example, the banking industry or professional services. Especially in the industries where there is a big regulatory thrust like currently in financial services, lots of things are changing simultaneously. One CEO told us in a group speech that their bank was faced with 88,000 regulatory changes last year. Even if every employee of their bank took one of these regulatory changes, they would still not have been able to comply with all the changes.
We’ve seen that especially in these industries where the external regulatory pressure is high, there is a need. Professional services for example – are less subject to regulatory changes and there’s a huge difference between the leaders who put everything openly on the table and then say, “We need to change.” The consulting model has been the same forever, zero organizational innovation there. The delivery of the product, ultimately, is still a presentation in PowerPoint. Now, disruptors are coming along, giving completely different ways of delivery. For example, big data projects are being delivered through dashboards, or platforms, and no longer through PowerPoint. The big consulting firms need to adapt to that. Are they doing it? Well, some do, some don’t. So I think that’s one point.
The second point that once they know what to do, the disruption has to come, from within and it’s always tricky to innovate inside an existing system. The entrepreneurial setup is important. In our case, we chose to do was to put InsightBee and it’s entire development completely outside of the existing structure. We did not use the internal IT. All IT was done – surprise, surprise – in Switzerland and not in India. We didn’t go for price; we went for quick delivery in the fastest possible way to the right specifications. The user interface design was done by a professional services firm in London called Every Interaction. We completely changed the model, because we saw that inside the existing model, such an approach would simply not work. Also, there might have been the fear of the cannibalization. It was minimal, but nonetheless, it was there.
So, say, entrepreneurial setups where people have very clear accountability on a use case by use case basis. One person responsible for one use case. I think that’s key. Sort of this fuzzy, “let’s innovate” approach and then, maybe, have a big R&D center and a totally functional approach to these businesses where you put the innovation into the R&D center and you put sales into the general sales function and then marketing into the general marketing function,I haven’t seen work very well. However, if there is an integrated accountability for such initiatives, it will work.
That’s also a very big difference. The key third differentiator is that these people learned a lot from their experiences with each of these use cases. There is sharing of best practices across the whole platform of innovation so that other entrepreneurs would not make the same mistakes again. For point 1 and point 2, they could use the same infrastructure of external vendors, and the methodologies developed to just latch on the next innovation much more quickly and, thereby, not trying to reinvent the wheel all the time.
These are, maybe at a generic level, the three key differentiators between the more innovative companies and more successful approaches of leaders compared to the ones that are a little more slower in their approach to knowledge.
As you talk, what’s clear to me is that there’s a lot of people who are either working to get their MBAs with an eye on joining a big consulting firm or they go to Wall Street and yet you’re talking about the disruption that’s undergoing these two industries. Most of the first couple of years of a new associate in one of these big investment banks is probably developing those pitch books in the first place. So, what would you say to either people considering those kind of organizations or those kind of industries as a career, or for people who are, in the moment, in these companies, how would you advise them to think about their careers, given these changes, given the need to be entrepreneurial to be in front of these changes, if you like? Any thoughts or observations as to how people right in the firing line of these disruptions, should be thinking about it. I don’t think the answer is necessarily go off and join a Fintech startup. I don’t think that’s necessarily the answer, is it?
Yes, correct. But it is true that we have seen a dramatic change in the labor market during the last few years and we notice this because many of our clients are subject to them. Just to give you an example: an American chief administration officer of one of the global investment banks told me that they have lost 70% of the first year MBA class in their junior banking class in 2015.
To where? Do you know where they’ve gone to?
Yes, they have gone to all these startups, the Ubers of this world, the Unicorns, as you could say. Or simply for lifestyle reasons, they have decided to join another type of companies consulting firms or normal corporates in the marketing department or elsewhere because, I think especially the Millennials start becoming more aware of this organizational innovation, and it’s very interesting that, these days some of the investment banks even go to campus jointly with us and then say that they’re working with Evalueserve to create the tool set that will allow the junior bankers to do more interesting work rather than to create pitch books.
I was just talking to the COO of a bank in China – not a Chinese bank; a Western bank – and they had an attrition of 60% in the front office in 2015. I think the pressure for these organizations to keep highly motivated and highly trained individuals is definitely increasing.
If a PhD in operations research, financial mathematics or any of these more quantitative areas, I think it is definitely a very good time now to stay with these banks or to stay with the consulting firms, because there will be lots of opportunities to grow where, just running after the wave of startups might not necessarily be working all the time in the future, especially when evaluations come down. But I think this is going to be a very interesting field in the financial services industry and professional services where such changes are happening.
The second point is clearly that they should be looking for companies that already have organizational innovation, that go for such changes and develop new models. Because if you go for a consulting firm that is still very stale in its approach, the likelihood that you will get a leadership opportunity, a small P&L or a small internal trust or kind of internal startup at a young age is very limited. Therefore, selecting the players that are more dynamic in nature is probably critical and there are very, very good examples of such firms that are driving this innovation and others that are not. That’s how I, as a 25-year-old or 27-year-old MBA, would pick these opportunities.
Because it’s personal interest: the husband of one of my goddaughters, is currently going exactly such a situation. He works for an industrial conglomerate. Even there, you have fantastic opportunities now with the Internet of Things with Industry 4.0, and companies such as GE or similar elevators creating a huge amount of opportunities for driving intro startups. From that perspective, this would be the recommendation: get into something that really gets your growth going and where you get exposure as general managers early on and where you can lead internal startups.
So, let’s put you back in the picture here a little bit, Marc. When you, as you said at the beginning, you set up a business last year, which is essentially cannibalizing your core business and you’ve got 3,200 people in the core business, I think, and a much smaller number in InsightBee. How, as a leader and I guess you got, in that workforce, quite a lot of Millennials as well. So, what has this demanded of you, as leader, as you’ve taken your organization through this organizational innovation change and I’m assuming you’ve done the things you’ve recommended, which is establish the need for change, building the organizational structure, this rapid learning, which you talked about earlier on but what’s this demanded of you, as a leader, as you’ve taken your company through this transformation?
Yeah, the transformation is far from being finished. We are still in the middle of it. But I would maybe de-emphasize the cannibalization a little bit, because by now we have actually seen that there is a huge amount of synergy between the two. That’s a very interesting side effect, which we initially didn’t realize, but now, we are transforming the whole business and not just the startup. So it’s very interesting.
Is that because you’ve managed to use more machine and less mind in your core business?
Well, let me give you an example. InsightBee was initially thought to be a cloud platform or pay-as-you-go market intelligence. Very simple, right? You have a request, you get it answered, it’s cloud-based, it’s fully knowledge managed, it’s mobile.
It’s great, I should say. As I said, I’ve used it a couple times and it’s a brilliant service.
Thank you. The idea is to reach about 1 million people out there who are not having this kind of support that a McKinsey or a BCG gives to its consultants. That was the vision and it seems to work quite well; it’s growing nicely.
But then we saw that InsightBee had platform capability. So, we are now launching a whole series of products on it that are actually also transforming the core business, staying on top of our organizational innovation practices. For example, sales intelligence on InsightBee, which is focused on supporting key account sales forces by giving them sales opportunities and tracking specific qualified and relevant sales opportunities. The next product that’s going to be launched is procurement intelligence, which is targeted at indirect procurement managers.
We can now launch at the fraction of the cost of what it costs us to launch InsightBee. We can add new products on a pay-as-you-go basis. Suddenly we realized that our core clients, for example, the industrial conglomerates who have, of course, large — or banks who have a large indirect procurement departments, jump on this platform. Or we see sales forces in large corporates use this platform. Why? It’s a new model, it’s cloud-based, it’s much faster, it has zero front cost and it’s a completely new economic model in you’re getting it up and running in a few minutes as opposed to several month of implementation projects before, talk about organizational innovation.
The point is that we started out with a nice idea and a patent application, and we got it going. And then we started realizing that this can actually transform the core business as well. Now, the question is how do we run all of it? We’ve chosen the approach of saying one product is one gold nugget. So procurement intelligence, is one such gold nugget and it has a leader – a single leader – with full accountability at the PnL level. Every new product that we’re going to launch on this cloud platform InsightBee is going to have such a P&L and a leader, and this organizational innovation is how we’re going to run it in the future.
This platform approach enables us to have far more innovation much more rapidly, and we limit the probability of failure for each of these additional products because all the rest of the infrastructure is already there: the commercial engine is there, the knowledge management is there, the IT platform is there, the apps are there. All you need to do is you focus on your new product. That was the surprise that we had when we started introducing InsightBee.
Now, when it comes to the organizational challenge, it’s true, initially, we had to do a lot of convincing and it was Marc’s pet project. Everybody smiled at it a little bit and I knew that so I noticed it with the necessary amount of humor. But we put the right budgets in place, we gave the right responsibility to people and I think that was important we took out the best people from the current organization to run this.
The guy running the InsightBee is Manoj Madhusudanan. He managed 800 people before, and became the employee number one of InsightBee and started it. So, taking the best people from your existing organization, putting them onto it, possibly also injecting some external skill and an external or a new approach for agile development. That, I think, is the key for such organizational innovation.
Excellent. I mean, the amazing thing is you talk is that you’re seeing, on a daily basis, in the core business, how large companies are managing these kinds of organizational innovation activities. So, you’ve got a unique perspective that you can bring back into your organization and experiment with, which is quite unique, I think.
Correct. We work for about 200 Forbes 1,000 companies, so it’s very important for us to capture the generic needs that clients have. Of course, we cannot capture any client confidential materials or so. But we understand the generic needs that people have, and then we can address these generic needs with our specific platforms.
The sales intelligence platform on InsightBee is a very specific response to a very specific use case of a client need. And for procurement intelligence, we’re now launching a health economics product – on InsightBee via our live sciences practice because, again, that’s the need.
What we are trying to do is we serve multiple clients already in the background. We understand their processes and their needs since we are doing about 6 million hours of research and analytics every year, and then we try to find out clusters of needs, which we can then address with a point solution for a specific use case and this will be put on InsightBee.
It’s a nice outcome of having such a large initial business, because it gives you all of the knowledge and market access. On the other hand, through InsightBee, we get lots of needs for more customized work and they will be played back to the enterprise version of Evalueserve. So it’s kind of a give and take from both sides.
A virtual circle, yeah. So, just beginning to wrap this up on organizational innovation, to where we need to close this down in a couple of minutes but I wanted to touch on your book, which is going to be talking about mind and machine. Now, what is the need that you’ve seen in the marketplace and how is the book going to meet that need, Marc?
Yes, the book. It was actually Wiley and Sons that proposed to me to write this book for the purpose of a mainstream segment of what I call the non-specialists or the anti-nerds. This is not for the data scientists with a PhD in operations research or finite math. This is for the general manager who is simply overwhelmed by all the marketing collaterals of vendors proposing big data and data lakes and the likes.
It’s really about explaining analytics and mind machine™ . And in this context, to explain how these things work, what are the choices that are available, and what are, the questions that such manager should be asking if an internal theme suggests to set up large data analytics teams centrally, with huge running budgets and massive amounts of data and tools.
How can they simplify this whole area of analytics to get exactly what they need. We’re proposing a organizational innovation methodology that we’re currently using at Evalueserve to help people go through these decision trees. One of the biggest findings is that is the analytics use case framework. It’s centred around single analytic use cases, with very clear scope and responsibilities, which usually gets things done and generates the desired impact. They bring the payload to the moon, so there is really some return on investment and that’s really the key.
Analytics, as such, is not just analytics. It’s very about how to get the right content at the right time at the right level of synthesis or the right insight to the right person in the right format. Reaching the end user, or the last mile, is really the key so that they can act on the intelligence that they receive as opposed to receiving a 50-page PowerPoint document with no “so what?”. This is what I focus on in the book.
Yeah, and that last mile concept is a lovely one because it resonates so well in the context of some of the challenges that your clients and a lot of the listeners are facing in terms of organizational innovation. The book’s going to be out in what? Towards the end of the year, Marc?
Okay, well, we’ll be sure to let our listeners know about it when it’s ready. So, let’s just go to the last question, which I sent out to you in advance. Three questions here, Marc. Firstly, what are your morning rituals?
Yes, I had to laugh when you sent me these questions, but I think they’re very insightful so I tried to sit down and think about them. The first morning ritual is. I do some yoga when I get up to get my back ready for the day. The second morning ritual is that I make my wife the first compliment of my three daily compliments of the day, so that’s important in the morning. Of course, when you make compliments to your wife, you have to make sure that you really mean it, but I try to achieve that.
Excellent. Okay, second question. What have you changed your mind about recently?
It is about my own role in the company, Evalueserve, and where I can have the most value. So far, I felt that I had to be completely on top of every operational detail, and had to spend a lot of time with everyone, understanding the specifics of their problems globally, which meant tons of calls around the clock with everybody because we run Evalueserve as a virtual business.
Now, I made the decision to focus on three things. Focus on the book, of course, focus on innovation – coming up with the innovation, but then also implementing it and getting it into the market – and then, of course, key client meetings – so, spending time with the most important clients. But not just the most important ones, also the most interesting ones because even a very small company can be far more interesting and far more relevant for innovation than, a big tank. These are the three areas and this is where I had to change my approach entirely. I have completely restructured my agenda during the last two to three months.
Great, and final question. What advice would you have for your 25 year old self?
I became an entrepreneur at the age of 35. I spent 10 years at McKinseys, so between 25 and 35, I became a partner at McKinsey, which was a great time, but I would probably start my entrepreneurial career earlier, maybe at the age of 30. Of course, that means you have to have the right idea but waiting until everybody’s 35, takes a lot of time. Younger people, I would recommend to take an entrepreneurial opportunity in an environment where you don’t have the full force of a fully fledged startup yet, but you can learn and then afterwards, you can do a full external startup, maybe at the age of 33.
Excellent. So, where can people get in touch with you, Marc?
So, Marc, it’s been a great pleasure having you on the show today to talk about organizational innovation. I’m sure our audience enjoyed it as much as I did and thank you very much for your time.
And thank you very much for the opportunity, Mark.
Thanks again for this discussion on organizational innovation.
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