The "High-Low Strategy" - how to out-source successfully without paying $200/hr for every minute

I call it the “High-Low Strategy”.

This is what I’ve been using to drive cost-efficient business improvement initiatives, and general operations.

See the problem is, most businesses looking to improve their business in some area look at the following options.

1. Do it themselves.

Obvious downsides, but people do it anyway. Usually as a last resort, because the other options are so unappealing.

2. Get their staff to do it.

Staff are great. I love staff. Business would suck without staff. HOWEVER, in my experience, staff are typically only great (maybe good, or let’s be honest, barely passable) at running a process, not designing it. They lack the expertise, cross-business experience and external perspective required to do more than incrementally improve something. This is even moreso the case when talking about technology-fuelled automation potential - a whole separate domain most business people are unaware of.

3. Offshore it.

Sorry, might work (*might*) for routine, highly proceduralised low-level work. Even then, the communication overhead, rework and brand damage can often make it a net negative.

4. Hire a cheap contractor

Well, you know what they say about you get what you pay for... This might work, but it typically takes a long time. The contractor doesn't have the experience to know what works already, so they spend ages fumbling around. Maybe they have more skills in this specific domain than your internal staff, but it doesn't mean they actually generate a RESULT from their work, or get there in an efficient amount of time.

5. Hire a local professional services firm

This is better, but the problem with it, especially in Australia, is everything costs $150-200+/hr. This work is typically much better than any of the above options, but it still suffers from two critical problems:

a) Do these "professionals" know what works, or are they experimenting on your dime?

b) How long does the process take, and how much cash do you have to sink into it? And what is the opportunity cost of that.

Most business owners I know understand two things:

a) They should focus on what they're great at and out-source the rest (to professional firms)

b) But they don't have the margins to do that.

Rock, meet hard place.

Enter the "High-Low Strategy".

But first, we need to highlight the difference between an Expert and a Professional.

An Expert:

• Typically knows what to do, and how, based on your circumstances already
• Operates at a strategic level
• Focuses on results, not effort
• Provides CLARITY, significantly reducing the amount of "work" required to get the result

A Professional:

• Typically knows the tactics, the tools, the processes - but 
• Operates at a tactical level
• Focuses on effort, not results
• Tries really hard, leads you down many paths, but often increases, rather than decreases work

When it comes to business improvement initiatives, Professionals typically fail. Either by not knowing what to do, or by being too expensive in doing it to generate a sufficiently positive ROI.

Some professionals are experts, but sorry to say, most aren't. Especially if they do everything for everyone - there's just no way to build up the problem and domain expertise to reach expert level by doing so many different things.

Our education system breeds professionals, not experts.

Anyway, back to the High-Low Strategy. This is a way of having your cake and eating it too. See the problem with just out-sourcing to a $200/hour firm is:

1. They're professionals, not experts
2. Most of the work gets shunted to a junior on $60-$80K anyway, that you could have hired internally
3. They don't really give a s**t
4. Their engagement models are typically all about effort, not results
5. You can't afford it - there's too much work to do, and the costs of delegating away your non-core competencies are typically ongoing

Enter the alternatives. You might lump it onto staff - if they have some spare capacity, this may even look like a good idea. But we all know about opportunity cost - they will be WAY less efficient than the out-sourced option. So it might look free, but it isn't - it's robbing you of opportunity. Having tried this and been around this, this option typically takes FOREVER, if it even works.

Maybe you'll hire dedicated staff - but does your work volume align perfectly with a full-time job (typically not)? Will the right level of employee want to work for you in what's usually a solo job with no team? You can't hire a Director-level person, then give them no team... they won't join you, will try to create a fiefdom, or will leave. (Or simply not know/remember how to roll their sleeves up and execute).

Same for you doing it - the whole "If I want it done properly, I'll do it myself". Well that works, if you're a freelancer, or have maybe 7 staff, max. But if you want to scale, create a true B (Rob Kiyosaki ESBI-style) business, then you need to let go. But if you let go without defined systems and processes, then you end up with the above.

And what is the opportunity cost of you doing that? Almost certainly more than the out-sourced firm. Which means you're sitting in limbo spending time instead of money, because you don't have money, and don't have time... that's a recipe for staying at exactly the level you're at, and not levelling up.

Or, you can implement the High-Low strategy. Simple put, High-Low is pairing an Expert, with cheap internal employee, contractor or even offshore labour.

Combined, the result is FAR cheaper than just out-sourcing everything, and usually results in far better outcomes as well.

The High part is the Expert - you get the Expert to develop the strategy; design the system - to drive the improvement. The Low part is you then get someone internally, a cheap contractor, or even a skilled VA, to run the new normal.

Yes, it's better to go Expert + Professional, but it costs a lot more. If you're stuck between a rock and a hard place, maybe Expert + Cheap / Internal is what you need, to get you unstuck.