How To Design Outsourcing That Is Fit For Purpose

Are you a “fly by the seat of your pants” sort of person, or are your methodical to the point where you have a plan for everything, even for planning?

There is nothing wrong with either of these choices, in fact both can serve you very well. Because in business today, you do need to be agile and nimble to adapt to disruptive change. However, you also need to be strategic in the direction you want to be taking, otherwise you will not achieve your overall goals or mission.

That is why it is important, particularly in this age of disruption, when it comes to considering outsourcing for your business, to have a picture as to what your business looks like when pursuing these objectives. What does it look like today? How will your business evolve? What does it look like in the future?

We call this “Envision The Future” this is the second practice of The Seven Practices Of Highly Effective Outsourcing (TM)

Envision The Future is where you methodically design your business so that it is “fit for purpose” and in a way that allows you to set up, to scale and sustain your business into the future.

You see most businesses that get established, are focused around the founder’s passion. Whether this be using the latest technology to solve community challenges – may be like transport and Uber for example, or wanting to create some sort of lifestyle benefits, fulfilment, or independence from having a job.

While a lot of time, is spent by founders in clarifying the type of business they want to be in, less time is invested in “designing the actual business”. Worse, when this is ignored altogether. 

We believe designing your business is essential if you want to be successful in outsourcing. To do this, there are three things you need to cover off on, when you Envision The Future.

When you do all three well, you will be in a much better position to grow, while also can respond to both internal and external needs.

In other words, you can still fly by the seat of your pants, but perhaps a little more restrained OK! So, what are these three things? Let’s check them out now…

MAP & BUSINESS BLUE PRINT

One of the things we have found over the years working with startups right through to some of the largest global corporations, was for the business to be able to fully define itself in terms of structure. Of course, the larger the entity, some form or organising framework was a necessity due to the need to assign resources and managing it in an orderly way. Hence the names like Frederick Winslow Taylor (1856-1915), Henry Ford (1863-1947), Peter Drucker (1909-2005) and others, are synonymous in this area.

However, the world as we know it today has changed and for startups, small to medium sized business (SMB’s) and small to medium sized enterprises (SME’s), we need to look at this in a different way because typically the boundaries between these organising frameworks that made sense in traditional business or larger companies, are no longer valid in the same way as they were before. Furthermore, the impact of technology, automation and robotics is changing the rules.

That is why we have created a map and business blue print, that is suitable for today’s businesses and we call this map The Five Imperatives Of Highly Successful Businesses (TM).

The First Imperative

If you have this in place, with the right focus and with the right balance, it will ensure your personal motivations for setting up a business are aligned to the overall business direction.

Of course, we are talking about strategy, or to strategise. Strategising is about being clear on your “why”. Strategising is also about defining your niche. Who you want as your ideal client, your client avatar and the solutions that you will provide to solve your client’s problems.

The Second Imperative

Strategising alone will not build a business. You also need something else. When you have this, your offerings, products and services will be accessible to your desired clients.

What we are referring to here is about the business’s ability to sell, or marketing and sales. This is about defining the channels that you communicate to your desired clients. It is about generating interest, not just passive, but creating overwhelming curiosity and having the intel or information to measure your impact.

The Third Imperative

Without this next imperative means you do not have a business. This imperative is so powerful in that, when you have it, your business will be able to scale-up as your impact or revenue grows – nor will not be that tension between sales and the ability to service growth.

This imperative is about is your business’s capacity to serve. This is where you create, produce, manufacture, supply and service your ideal clients. It is about leveraging the latest technologies the best operating models… whenever, where ever.

The Fourth Imperative

This imperative is often overlooked in startups and SMB / SME’s and when it is, it is to the detriment.

What we are referring to is support. This is where you take a commercial view and that you have the right approach and financial acumen in place. You are connecting with the right people through partnerships. And you are embracing ongoing learning so that you are continually stepping up to the next level.

The Fifth Imperative

Lastly, as equally important as the preceding four, this imperative is about sustaining your business into the future and leaving a legacy.

This imperative is to systemise. Systemising to scan for trends, opportunities and threats. Systemising to take you from where you are now to where you want to be. Systemising to propel your business forward with momentum. If you do not systemise your business, then it may be that your business will not be sustainable. 

What The Five Imperatives Of Highly Successful Businesses (TM) allow is that you can organise your business functions, processes and technologies around a set of principles. So, when you want to make decisions around investing in technology and automation, or areas of your business to outsource, you can do it in a way that is logical. For example, we discussed in Practice I – Explore The Big Picture, The Three C’s or drivers, of why you would consider outsourcing (the three C’s being “cost”, “capability” and “capacity”).

So in summary, if your focus is primarily on capacity, you can quickly bundle functions, processes and technologies in a way were you can address that challenge. Equally so with the other two drivers of cost and capability.

Once you start defining your business under these five imperatives, you can also start to align your needs to both internal and external demands. Even if you are just starting out as a business of just one person, “you”, this map will be the foundation that will enable you to build your legacy on.

MIX & DESIGN PRINCIPLES

The next thing you need to do is to define, or at least be cognisant of, the various decisions you need to make when it comes to outsourcing. We call these our mix and design principles of which there are five.

The level of focus you apply to each individual mix and design principle basically comes down to the size of your business. If you are a small startup, some will be less relevant than say if you are a large established business with multiple functional departments or divisions, as we defined in The Five Imperatives Of Highly Successful Businesses (TM).

Consider these mix and design principles like a “dial” that your turn up or turn down, dependant on your own specific needs. Let’s elaborate on how this works by walking through each of the five mix and design principles… 

Principle One: Sourcing Equity - Classic ‘Make versus Buy’

The first mix and design principle being considered, sourcing equity, is the historic view of sourcing that addresses the make-versus-buy question of which we introduced in Practice I. The principle involves procuring resources required by the business. Where the business’s own resources are used, the process is generally referred to as ‘internal sourcing’; when suppliers external to the business are used, the process is regarded as ‘outsourcing’.

On the left-hand side of the scale is the decision to make in-house, and on the right-hand side, the decision to buy externally or to outsource. In between are variations including joint ventures and partnerships. 

Principle Two: Location

The second principle, sourcing location of which we also touched on in Practice I, is concerned with where a business receives the required services from. Like the previous principle, sourcing location can be explained as a scale.

In this case, on the left-hand side, the services are performed onsite or in-house. The right-hand side refers to offshore. In between, sit the hybrid sourcing location strategies, including ‘right-shore’ and ‘best- shore’. 

Principle Three: Governance

The principle of sourcing governance refers to how the services are managed (governed). In some businesses, a central department is established to manage sourcing relationships; this can be described as a ‘centralised’ governance model. In others, the business functional area owns the relationship; this model can be described as ‘decentralised’ or autonomous. 

Principle Four: Portfolio Demand Management

The fourth principle is portfolio demand management and, in this context, refers to the origin of the ‘demand’ for services within the firm, and how these services are bundled together based on common criteria. For example, customer service touching services, back-office administration, corporate finance, HR and payroll, and technology and product development are all services that may be bundled into discrete portfolios. In the technology functions, the ‘design’, ‘build’ and ‘run’ functions could be bundled separately and differing sourcing strategies applied—for example, the ‘design’ and ‘build’ functions could be retained in-house while the ‘run’ phase could be outsourced.

Principle Five: Partner Management

The final principle is partner management and considers the supply side of sourcing about leveraging single versus multi-suppliers. This is depicted as a linear scale, with single supply at the opposing end to multiple supply, and iterations in between.  

Now for some, seeing all these terms and principles can be overwhelming - after all you just want to outsource don’t you! Just remember, that these are all logical considerations when you are making decisions and it is highly likely that you are making them right now – you just may not be doing it as formally as they are presented here.

The important thing is to consider all this in terms of your overall business objective

When you do this, you will be in a much better position to ensure you are implementing outsourcing for the right reasons - for today and for the future.

MEASURES & SELECTION CRITERIA

Now that you have clarity on your MAP & Business Blue Print, formulated your MIX & Design Principles, the last thing you need to do when you Envision The Future is to be very clear as to what your MEASURES & Selection Criteria will be when it comes to finding an outsourcing partner.

For traditional outsourcing, or what we call “old world”, the criteria was relatively simple, however in this age of strategic outsourcing, or “new world”, there are additional factors to be considered.

To help you with this, we have defined ten criteria that you should use. The weightings of each will of course vary, depending upon your priorities, however we do recommend you incorporating them all in some way.

To use the phrase from our Six Sigma colleagues: “what gets measured gets done”, we believe that if you adopt this approach as inputs into your future outsourcing decisions, then you will be more likely to be successful.

Let’s now go through each of the ten selection criteria… 

Capability, Capacity & Cost

As we have already introduced these three criteria in Practice I as The 3 C’s or drivers, they are also obviously selection criteria and sit with typical old world outsourcing.

It’s what we consider as hygiene factors today – “can you do this, at this time, at this cost?”, is the typical question old world outsourcing wanted answered and of course still remains essential today – it is a foundation to outsourcing because this should align back to our overall business strategy. 

Credible & Commercial

The 3 C’s are followed by a further two old world criteria being – “give us some client references (credible) and now let’s do a deal (commercial)”.

Now it is probably no surprise, that most outsourcing is still based on those old world selection criteria – traditional outsourcing. But of course, as we have already discussed, we are living in an age of unprecedented disruption across technology, across markets and across borders, so that is why Strategic Outsourcing is key and why we developed additional selection criteria to support today’s demands on business and the global entrepreneur... 

Collaborate, Consult & Controls

You must move beyond a transaction approach to outsourcing and find a partner where collaboration is the focus. You must ask questions with potential partners on how they plan to collaborate with you – what is their way of working, what is their vision when it comes to working with you? This question alone will elicit a range or responses – you just need to move towards the answers which provide a true partnership – not just lip service to the term. 

You also must expect from your outsourcing partner ongoing insights and thought leadership – it is though they consult on how they see the world and your business from their perspective. While they are not necessarily expected to be an expert on your specific business, they do know outsourcing and they have a broader perspective that you need to leverage. So, you need to understand how they can do this for you as well. From our experience this question alone and the answers you receive from it, will automatically discount potential outsourcers, because unfortunately not only are clients of outsourcing still living in the old world, so to are many outsourcing firms as well.

We are great supporters and advocates for the freelancer phenomena - however, we do have concerns with it

While platforms like Fiver, Freelancer and Upwork play an important role, our concerns are around the level of due diligence that business may be prepared to forgo by using such platforms.

What this means is that client intellectual property is being distributed to non-controlled environments, in which these are typically not supported by the appropriate levels of controls that include data security, privacy, business continuity and disaster recovery practices.

So, to alleviate this inherent risk, an essential selection criteria must be around how the prospective outsourcing partner manages these risks and has implemented the required controls to protect your business from any of these threats.  

Culture & Community

The last two criteria that we believe are key to selecting the best outsourcing partner for your business is around things that are hard to measure, but nevertheless will be the make or break of the relationship.

To provide context, you need to remember always that your outsourcing partner is an extension of your business. They should have the visibility to your goals and aspirations so that then they can best support you. A way to best explain this that your outsourcing partner’s team members will be dedicated and loyal to their company, but they also need to be passionate about your business – they need to have your back, regardless of whether they are working on front office type tasks or back office non-customer facing tasks.

This approach or attitude is very special, it is not common but is possible and we call this the culture of the outsourcing partner that you need to consider as essential criteria when selecting a possible partner.

How do you find out about your partner’s culture… well check out their web sites, their social media, find out if they are blogging, ask their current clients and ask your potential outsourcing partner to explain how they do this? All of this will give you indicators as to how it might play out in your business.

Our last selection criteria is about you discovering a little more beyond your potential outsourcing partner’s capabilities. You want to discover are they a good community steward. Do they consider this important in business today?

We ask this question because for too long now, there has been a degree of ignorance by business to the many social challenges that exist within the communities that their outsourcing belongs to.

On April 24th, 2013 there was a fire in the Rana Plaza building in Bangladesh. This building was the location of a textile factory that provided very low cost material to high end USA, Australian and European fashion labels. All up, over 1,134 people perished in this fire. Upon investigation, it became well known that the factory owner made numerous short cuts leading to safety breaches that ultimately led to this tragedy.

While this is an extreme case, at The Startup Business we belief we all have a role to prevent these types of incidents from ever occurring again, that people get paid the correct rates and they are treated with dignity and respect. We call this “ethical supply chains” and we encourage you to have these types of conversations with your prospective outsourcers because ignorance today cannot be an excuse.

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