Value Creation Model
Talent and creativity, that is represented by human capital, is at the core of TCS’ value creation engine.
TCS continually enhances its human capital by acquiring the best talent available in each of the markets it operates in, providing a supportive and vibrant workplace to engage that talent, investing in upskilling individuals with the latest technology skills, and giving them career paths matching their aspirations.
A firm belief in organic talent development, and of investing in people, has helped TCS successfully navigate through multiple technology cycles over the last five decades, pivoting and adapting each time to build relevant new capabilities through reskilling of the workforce at scale and helping customers realize the benefits of emerging technologies.
The company’s industry-aligned, customer-centric organization structure has resulted in each business unit acquiring tremendous domain depth, and the account teams within those units building up immense customer-specific contextual knowledge. This domain expertise, contextual knowledge, project management experience and technology expertise gained on the job represents a conversion of human capital into intellectual capital.
TCS applies some of its intellectual capital towards investments in research and innovation (R&I), exploring the creative use of newer technologies to solve business problems across different industry verticals. In addition to its own intellectual capital, TCS also partners with leading technology providers, start-ups and academic researchers to leverage their intellectual capital and build solutions.
Some of the innovative software solutions piloted by R&I, that are assessed to have a material market potential are productized, adding to TCS’ large portfolio of products and platforms. These expand the organization’s intellectual capital; create new revenue streams, adding to the financial capital; and enhance its brand positioning i.e. relationship capital.
TCS uses its intellectual capital and human capital to build impactful, customized technology and business solutions that address the customer’s business problems. Further, its ability to stitch together complex, holistic solutions that address the needs of all stakeholders in the enterprise, along with the high levels of trust engendered in customer relationships, helps it win large transformation deals. These deals bring in high quality revenues, powering industry-leading organic growth and margins, boosting the company’s financial capital.
These solutions create immense value for our customers by helping them embrace new business models, pursue new revenue streams, deliver superior customer experiences or build resilience and efficiency into their operations, and gain competitive differentiation.
The company’s strong service orientation, willingness to invest in the relationship, commitment to deliver impactful outcomes and track record of execution excellence have resulted in consistently high customer satisfaction levels and long, enduring customer relationships. The resultant expansion in relationship capital translates into a very high level of repeat business that lends greater visibility and predictability to the business model.
TCS constantly invests in building newer capabilities and expanding its offerings. By cross-selling and up-selling these new offerings, customer engagements continually expand over the years, covering newer and newer areas of the enterprise’s operations. This further broadens and deepens the contextual knowledge of customers’ business and IT landscapes, further enhancing TCS’ intellectual capital.
Over time, this combination of business knowledge, contextual knowledge, technology depth, and intellectual property has become a steadily deepening moat around the company’s business model and sharpened its differentiated positioning.
Best in class profitability, reduced cost of capital due to a more predictable and resilient business, and high cash conversion on account of superior execution have resulted in a high return on equity. All this and a shareholder-friendly capital allocation policy have boosted the company’s relationship capital with shareholders.
The investments in people, research and innovation, and intellectual property creation are all charged off and not capitalized. The company’s capital expenditure to support its growth – manufacturing capital – towards building campuses, Agile workspaces, innovation centers, and Pace Ports is modest relative to its size.
TCS’ physical operations consume social capital in the form of license to operate in each of the communities, and natural capital in terms of its environmental footprint. TCS enhances its social capital with local communities across the world by investing in areas such as education, skill development, employability, health and wellness, and the environment, mapped to UN Development Goals. On the environmental front, TCS has a systematic program to reduce its carbon and resource consumption footprint – including the use of green IT, green buildings, intelligent energy management using its own IoT-based solution and water and waste recycling.
TCS’ business model and strategy have resulted in deep and enduring customer relationships, a vibrant and engaged workforce, a steady expansion of its addressable market, a strong reputation as a responsible corporate citizen and a proven track record in delivering longer term stakeholder value. All of this has significantly enhanced the company’s brand value, which is a quantifiable measure of its social and relationship capital with stakeholders.
Strategy for Sustainable Growth
Customer-centricity is at the heart of TCS’ strategy, organization structure and investment decisions. TCS’ customer-centric worldview helps spot trends early, embrace business opportunities by making the right investments and mitigating risks while discharging its social and environmental responsibilities.
TCS invests in broadening and deepening customer relationships by continually looking for new areas in their value chain where it can add value, proactively investing in building newer capabilities, reskilling its workforce and launching newer services, solutions, products and platforms. In addition to the IT budgets, TCS is now benefiting from the departmental budgets of other stakeholders within the customers’ organizations – business heads, CMOs, CROs, COOs, CFOs and even CEOs. This has not only embedded TCS deeper into their businesses but has also resulted in higher quality revenues, stronger revenue growth and enhanced share of wallet, as evidenced by the client metrics reported every quarter and every year.
The products and platforms, coupled with business model innovations, represent new, high quality revenue streams that are growing very fast. At an aggregate level, this strategy has resulted in deep and enduring customer relationships, and a steady expansion of the addressable market.