The Hindu Business Line : `High investment, innovation key to growth'

Growth strategy
The company kept investing to deliver higher profits in the long run. As a result, Cognizant has been the fastest growing IT company with 5-10 per cent higher growth rate than any other company in the industry. Short-term profitability is important. However, the key is long-term growth.

Chennai , March 21

Higher investment, a differentiation in business model, innovation, people and customers are some of the major issues that companies need to emphasis for exponential growth, said Mr Lakshmi Narayanan, CEO, Cognizant Technology Solutions.

Delivering the keynote address on `The Road to Exponential Growth' at Growth Summit 2006 organised by the Confederation of Indian Industry on Monday, Mr Narayanan said greater investment leads to stronger growth.

Cognizant decided to keep investment at a higher level without worrying about the returns in the short term. In the late 1990s, when top IT vendors were having 25-30 per cent operating margins, Cognizant decided to have 19-20 per cent. The company kept investing to deliver higher profits in the long run. As a result, Cognizant has been the fastest growing IT company with 5-10 per cent higher growth rate than any other company in the industry. Short-term profitability is important. However, the key is long-term growth. Greater investment will lead to greater profit, he said. Companies need to have a differentiation business model. Cognizant looked at the US for its huge IT services market, and used India for sourcing IT. This model worked well. The company also built a customer-centric model, and allowed customers to apply and use technology for their competitive advantage. According to Mr Narayanan, innovation is a key driver for a company's growth. A few years ago, everybody said Apple Computers would be out of the market. However, its iPod made a difference, and the company is showing exponential growth.