How Outsourcing Made One Business Disappear For Good

Dr Ross McKenzie The Startup Business Outsourcing

Did you hear the story of the business that outsourced everything and then found they had nothing left of their business?

Well hopefully that has not happened to you, but it can happen nevertheless…

You see, industry research tells us that most outsourcing relationships are marginal at best with only 20% of outsourcing, considered to be high performing?

Now, that is quite a statement, particularly when the main reason why you go into outsourcing is so that you can perform more effectively and create more value for your business, isn’t it?

Inefficiencies, gaps, overlaps, mis-communication, no ownership, low skills, lack of capacity, spiralling costs, lack of customer satisfaction, and poorly aligned culture, are all symptoms of outsourcing struggling to get the basics right – the transactions. As a result, outsourcers do not earn the ticket to talk to you about collaboration and innovation until these basics are fixed, and for many this conversation never happens.

In fact, some research goes further and suggests that all value in outsourcing can be lost.

What is going on here? How could you even consider outsourcing as a strategy when most businesses are failing at it?

For over the last 25 years, I have worked in the outsourcing industry and have seen this first-hand. I have signed off on multi-million dollar deals as a client, but also on the other side as the outsourcing provider. I have even worked as an advisor to very large established companies and to very small businesses and startups, to help them in their outsourcing.

I have also observed what it takes to be in this high performing 20% exclusive club. These are the businesses doing outsourcing the right way, particularly in these disruptive times that we are living in. They have figured it out and chosen a different path. They are making outsourcing work for them and are reaping the benefits.

However, the business models and strategies that have served us well until now, are no longer suitable for today. We can see this with companies like Uber, AirBNB and Alibaba in what we call the “sharing economy”, but there are also smaller, more nimble businesses, smashing the old paradigm of how business is done.

So, amongst all this disruption, we really need to think differently, if we are to get outsourcing right.

You see the old way, which we refer to as Traditional Sourcing, over time, leads eventually to decreasing value. The outsourcer is viewed as a supplier providing just transactions and there is no partnership where both parties have “skin in the game”.

The new way, is what we refer to here as Strategic Outsourcing, which leads to increasing value because the business has learned that climbing the outsourcing capability maturity curve must be an imperative. They also see the outsourcer not as a supplier, but as a strategic collaboration partner and they work together to drive value year on year on year.

It is this strategic collaboration partnership, that is at the core of a road map that I have created for businesses to climb the maturity & value curve and implement outsourcing the right way.

I call this road map The Seven Practices Of Highly Effective OutsourcingTM.

Each of these seven practices provide the necessary building blocks that you need to implement into your business.

If you are just starting out for the first time in outsourcing, then the very first practice is obviously key.

However, even if you have been outsourcing for some time, you still need to start at that same first practice, because you need to master all seven if you want to ensure you implement outsourcing the right way.

EXPLORE The Big Picture

This is about what you need to do when starting out; “the big picture”, and being clear about your reasons for outsourcing in the first place.

ENVISION The Future

Next is how you should go about selecting what to outsource in your business. Is it technology, or is it customer support for example?

Create An ESPRIT De Corps

Then find the best outsourcing partner where there is a win-win for both parties and there is alignment or cultural fit and they get your business!

EMBARK On The Journey

How you should go about transitioning your business to outsourcing. There are risks. You need to ensure you have covered these off in your plan.

EXECUTE With Discipline & Passion

How you can build a strong foundation, so that your business is significantly better with outsourcing, than it was when you weren’t outsourcing.

EXCEED The Standard Others Look To

How you should go about building future capability across your strategic outsourcing partnership. Your needs will change!

EXPAND Your Global Mindset

Finally, I realised we need to also take in a broader perspective and start building a strategic outsourcing partnership that is sustainable and aligns to your business vision for the long term.

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