Over time, the in-house strategies evolved and required modification in terms of the type of activities for which the offshore unit was responsible. Management needed to determine how to adapt to these changes in strategy and mandates, and then modify the initial task structure. This led to a period of restructuring, which began in management at the home unit, and focused on determining which tasks could be further disintegrated and relocated to the offshore unit. One of the first modifications was made at the organizational level, where the product lines were merged across the offshore and home units, and each product line was organized vertically. As a result, one manager became responsible for all activities related to a particular product line in India and Denmark. The goals of this restructuring were to leverage synergies between the two units and to relocate more R&D activities to India. After this was accomplished, management also needed to engage with the offshore management in order to determine the extent to which the offshore management was capable of performing its newly assigned tasks, the employees who would be responsible for performing those tasks and which necessary skills were lacking in the offshore unit.
Capability Development in Phase 2
The restructuring led to an evaluation of the skills in the offshore unit and an assessment of how the lacking skills could be introduced. The main goal in this phase was to identify the missing capabilities and the mechanisms through which they could be developed in the offshore unit. Danish management noted that the Indian employees lacked open-ended problem-solving skills in addition to general experience in R&D. A decision was made to simply start relocating R&D activities with the expectation that the relocation of complex activities would lead to the development of the necessary capabilities. However, the transfer of complex R&D activities proved challenging for two reasons. First, the distance between the two units implied that the transfer of such activities required clear and precise communication, which put an additional strain on available resources in Denmark and led to management being unable to provide hands- on interaction before relocating tasks. Second, the increased complexity of tasks resulted in
more need for coordination in order to comprehend specific inputs and deliver outputs. Below are representative quotes on the challenges to developing the capabilities in the Indian unit:
It is difficult when they are 10,000 kilometres away. We have a system like Skype, but it is not the same - Danish manager
It would be nice to have the specialists located here. It [R&D capabilities] can grow without them, but slowly - Indian employee
They are just not there yet. They do not have the background or the knowledge. Some of them – many of them – have never even seen a filter. They have only been to school and made the drawings - Danish manager
Danish management had expected the restructuring of the Indian unit to streamline the lines of communication. The removal of additional layers was meant to aid in the identification of specific capabilities that were lacking and make the training of employees easier by reducing the hierarchical layers. Despite these efforts, the expectation that Indian employees would engage in open-ended problem solving represented a deviation from the previous type of tasks performed in India, and the lack of training and engagement from the Danish management led to failure in this regard. Moreover, the Danish management experienced a high level of dependence from the Indian side. The short-term training and piecemeal knowledge transfer that took place in Phase 1 meant that the Indian employees lacked tacit knowledge related to production and needed to increase their exposure to non-specific, development-related activities. Furthermore, the R&D activities required a more comprehensive understanding of the architecture and commercial applications of products, in addition to participation in open-ended problem-solving activities. The Indian employees were experienced in performing standardized activities, but they lacked the know-how and were unable to identify the steps required to undertake R&D. Employees from both units explain the hindrances to capability development:
We are new to this. We do not have much exposure to completely handling [R&D] here. Maybe we can do that in the near future, but the transition is fine for now - Indian employee
Just because they have been doing the task for 10 years does not mean they are ready to move onto the complex tasks. In my opinion, few people are ready to make the shift. Some people can move beyond the technical, and we have to promote them or move them to a non-standard team - Danish manager
In the restructuring phase, management engaged in ongoing training to gauge the level of capabilities and determine how the unit was coping with the increased pressure of performing R&D. Management realized that simply relocating R&D activities to India without providing adequate training led to failures in the performance of these activities, as well as increased strains on Danish management to provide solutions. It also increased the resistance from the Indian management team, as demands on its already limited resources increased. One initial conclusion from the training period was that the capability development in the Indian unit was neither successful nor fruitful. Therefore, an increased emphasis on training was needed and the Danish management decided to adopt a more hands-on approach. Despite the preliminary conclusion that the level of talent available in Biztek India, was much lower than expected, managers attempted to utilize a number of mechanisms in order to shift the standardized mindset toward a more R&D-based mindset:
It is a challenge because we only have one guy here who is good at fabric filters - Danish manager
For example, a number of training sessions were conducted with specialists flown in from Denmark. Moreover, a handful of Indian employees were sent to Denmark for training purposes. Danish managers also identified a number of employees whom they believed had the requisite skills to perform R&D. These employees received training over a period of approximately two years in different forms, including visits to the unit in Denmark, training courses at the Technical University of Denmark and engineering courses in Chennai.
Throughout the course of this training period, the employees frequented the offices in Denmark, where they worked in conjunction with the specialists. Moreover, these employees were assigned a mentor in Denmark who had experience with R&D and product development. In addition to increasing the capabilities of these employees, the goals were to develop their tacit knowledge base and increase their architectural knowledge in order to produce commercially viable solutions. Employees’ interactions with their mentors on Skype were not formalized, and employees involved in this training enjoyed numerous informal learning and training sessions with their respective mentors in an attempt to replicate the conditions that would have existed if they were co-located. This access to Danish managers led to success in the attempts to upgrade capabilities. The importance of training is reflected in the quotes below:
We have two people doing what we call ‘development work’. We have started a process to bring them up to a higher level … so that we can use them for more than just what they are doing now - Indian employee
When it comes to complex processes, we need more intensive training. We start with some specific people, who must work closely with the Danish specialists for at least one year. First, they only do one part of the complex job, but their responsibilities slowly increase - Indian manager
In this phase, the home unit developed the capabilities needed to: (1) realign the home and offshore units, and (2) streamline processes and communication between the two units. The offshore unit developed: (1) technical capabilities through formal education and training sessions conducted by Danish specialists, and (2) problem-solving and innovation skills through close interaction, observation and engagement with experienced specialists in Denmark. The observations and interactions took place while the Indian employees were visiting Denmark (co-located) and over Skype (distant).