By: Zach Miller

Generating value is a challenge that many small and medium-sized enterprises face. Once a business model generates profits, many executives fall into “if it ain’t broke, don’t fix it” mode. While the urge is understandable, it can lead to stagnation — a problem many profitable staffing companies face. They generate profits but cannot take their company to the next level. 

Primentor CEO Phaneesh Murthy specializes in business transformation. Through Primentor, he mentors senior executives at small and medium-sized enterprises, enabling them to achieve exponential growth in their businesses. 

He shared some insights at the ITServe Alliance Synergy event, where he gave the keynote speech. Noticing that many attendees ran IT staffing companies, Murthy spoke about how they could generate strategic value by offering strategic solutions and services.

What Is a Staffing Company?

The role of a staffing company can simply be defined as external human resources. While it’s an excellent place to start, it’s just that: a starting point. 

“That, in the financial model, would be considered as the lowest quality of revenue,” said Murthy. “While it’s great for cash flow, it’s not great for what you call strategic value. And the only way to progress through the pyramid is to expand on your offerings.” 

According to Phaneesh Murthy, progressing through the services value chain requires companies to ensure that employees generate significant value. This isn’t meant in the sense of overworking your staff, but more in the benefit the company’s clients get from their work. 

Staffing is at the bottom rung. The next step for a staffing company is to transition into a project management company. These firms get instructions from their clients and simply execute those instructions. Once an enterprise has mastered this model, they can consider moving to the next model, specialized services companies. These companies differentiate themselves from the masses because they don’t need the client’s instructions. They know precisely how to get stuff done. Yet, they’re still not in the top spot. That spot is reserved for advisory services. These businesses are notable because not only do they tell their clients what needs to be done, they also tell them how to do it. By this point, you’ve reached maximum value generation per employee.

“If you want better valuations, effectively, you have to start figuring out a way to go up from the bottommost layer,” Murthy summed up.

Phaneesh Murthy: ‘Fear, Uncertainty, Doubt’

One thing Murthy learned during his three-decade career and running a mentoring program is that most executives know what needs to be done. They know that a pyramid exists, and their job is to move up it. But they can’t quite cut the mustard—why?

“I think it’s really the FUD factor: the fear, uncertainty, doubt in our own heads about our own abilities to do that transformation,” Phaneesh Murthy said. 

This fear of transformation is the single thing that stuns executives and, eventually, their employees and their company into inertia. Murthy noted that a transformation isn’t possible until executives change their behavior. People can’t expect to bring about the change that they aren’t willing to go through themselves.

Understandably, at least part of this fear of change can be driven by cost concerns. Moving up the pyramid requires significant investment. In addition, executives have to spend time building a culture to sustain that transformation and establish organizational frameworks. All of this can feel like reinventing the wheel — which it very well might be. You are, after all, transitioning from one business model to a completely new one. However, the promise of exponential growth makes it a worthy endeavor.

“Great services companies have been created because of discontinuities in the marketplace,” Phaneesh Murthy pointed out. 

Embracing Change

The interesting thing about change is that it’ll be forced upon you when you’re not ready for it if you don’t embrace it. What distinguishes Fortune 500 from Fortune 1000 companies is that those top 1,000 embraced the discontinuities in the marketplace, embraced the change, and evolved. In many ways, this is a race. Phaneesh Murthy illustrates the dilemma through a simple metaphor. 

“Every morning, a gazelle wakes up, and it knows that it must outrun the fastest lion for it to survive that day. And every morning, the lion wakes up, and it knows it must outrun the gazelle for it to survive that day. So, it doesn’t matter where you are on the food chain; when you wake up in the morning, you’d better be running,” he said.

These periods of transformation can be stagnating. Profits may dip, and uncertainty may set in. But it is all worth it in the end. “Many times, we almost have to go a little slow to go faster so you can put together the right strategy for the future,” shared Murthy.

Phaneesh Murthy’s relentless advocacy for embracing change and pursuing innovation is backed by years of experience. When he started working for Infosys, the executives confronted him, unsure how an MBA with no background in coding could benefit the company. Most of all, they were afraid of the changes. But they put their fears behind them and put their faith in the process, and together, they built the Global Delivery Model.

It put Infosys on the map. 

This was only possible because of Phaneesh Murthy’s innovation. He embraced the visionary role, leaving an indelible mark on the business world. He urges executives at staffing companies to do the same.

Published by: Martin De Juan