All Posts in Strategy and Tactics

|In: Organizational Design|Last Updated:

What I love about management trends is their predictability. Some consultant or analyst will work with a successful company and latch onto some practice of theirs or other. This, the consultant will solemnly claim, drives their success. And if you would only adopt the same practice, you’d enjoy that success, too.

Fame, riches, and book contracts follow, along with schools of remora-like copy-cat consultants. Always eager for new trends to report, packs of business journalists join the feeding frenzy, and a full-fledged management trend ensues.

A few years, Chapter 11s, migraines and management turnovers later, people sort it all out and discover that once again they’ve found, not a panacea, but a useful idea for some select, carefully chosen circumstances. That’s okay though, because by then another management trend will be brewing.

We’re about ready to turn the corner on the outsourcing trend, and after quite a bit of cogitation and soul-searching, I think I have it figured out.

But first, a word from the Full, Unadulterated Disclosure Department (FUDD): my employer, Perot Systems Corporation, is in the outsourcing business. I’m not exactly a disinterested party.

Okay, on with the show. Let’s start with three outsourcing myths:

Myth #1: Outsourcing is a manifestation of corporate greed. Corporations, of course, feel no emotions – they’re organizations, not people. Corporations try to maximize profits, execute strategy and tactics to succeed in the marketplace, and increase shareholder value. Good management requires obtaining the optimal balance between quality and price in the acquisition of all goods and services. That includes decisions about whether to have employees or contractors provide various corporate functions.

Myth #2: Outsourcing leads to massive layoffs. I’m sure it’s happened. More commonly, workers don’t even change desks – they just change employers and keep on doing what they’d been doing before, although they may lose some of the perks of seniority along with the change. Outsourcing companies can’t afford to keep hundreds of employees on the bench, waiting for the next contract to come along. Big outsourcing contracts lead to massive hiring binges, and it’s a whole lot easier to hire pre-trained employees who already know the systems.

The truth behind Myth #2: quite a few employees wash out the first year. Look around you. Are all of your co-workers really worth keeping around, or are some of them decent people who aren’t bad enough at their jobs to fire? Companies hold outsourcers to a higher standard than employees, and when non-performance can lead to execution of penalty clauses, substandard workers don’t last.

Myth #3: Outsourcing is for non-strategic functions only, or non-core competencies. Companies routinely outsource the strategic function of marketing to advertising agencies, and nobody thinks twice. Core competencies? Misplacement of cause and effect: Why, and for that matter how, could a company outsource what it’s best at and not lose both money and quality?

So when should you outsource?

For the past several weeks I’ve been writing about the difference between internal and external customers, and I think that discussion holds the key. Outsource when you want workers to think of your company and its employees as their customers. Insource when you want workers to make your company’s customers their customers.

When you use a contractor, you are their customer, and they’ll treat you that way. Tell them what to do and they’ll do it. That’s the nature of the relationship. Your employees, on the other hand, should focus on creating value for paying customers, not each other – that’s the quick summary of our long-running critique of the “internal customer” concept.

That leads to an astounding irony – managers who adopt the “internal customer” philosophy lay the groundwork for outsourcing their function. They’re acting like outsourcers, not employees, and that invites a comparison with external service providers.

And you thought somebody else was doing it to you. If I’m right, outsourcing is often a self-inflicted wound.

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|In: Leadership|Last Updated:

The Internet is:

a) A vehicle for completely transforming society.

b) A source of useful information.

c) A new venue for marketing and commerce.

d) On the verge of collapse.

e) Excedrin headache #3.

I’m guessing most readers of this column would choose “e”. That’s too bad, because the Internet can be a great route out of the corporate slums for all of us in Information Systems.

Aren’t you tired of being viewed as a Money Pit? Focus on reducing costs and increasing productivity and that’s where you’ll stay. Like it or not, lots of companies see us as a necessary evil – money they’d rather avoid spending but are stuck with, like payments on a failing car.

No, you want to hook up with Marketing. That’s where the fun is, because that’s where revenue comes from. Revenue gets respect. Revenue gets glamour. Revenue gets … funding!

Right now, companies see the Internet as an intriguing marketing opportunity. Embrace it and get on board. If you need help, this is a great opportunity to flog my new book, Selling on the ‘Net, (National Textbook Company) due out mid-September, co-authored with my friend, father and great guru of direct marketing, Herschell Gordon Lewis.

Marketing has three basic goals: acquiring new customers, reducing customer defections, and increasing volume with current customers. While you’re lunching with your new marketing-director friend hearing details of your company’s plans for accomplishing these goals, point out that while the Internet has a lot of sizzle, several other technologies have much more potential. “What might those be?” he or she is sure to ask.

I’m glad you asked. Of a long list, here are four.

Data Warehousing: Here’s the perfect platform for a killer marketing database. You can use it strategically, to understand who buys what – information you can use for corporate planning.

You can also use this database for tactical marketing. What you know about each current customer’s recent buying habits helps you create tailored offerings to more effectively increase per-customer volume. You can use the same information for targeted marketing to non-customers, selling each one products and services popular with demographically and psychographically similar current customers.

Electronic Mail: Yes, plain, ordinary e-mail can become a powerful marketing weapon, and no, you don’t have to become a spammer. Do you have a customer newsletter? Offer it to customers via e-mail as an alternative to paper. Just set up a list server and make it easy for customers and prospects to subscribe.

Correspondence with subscribers isn’t spamming, it’s service – they’ve already expressed interest. Send them customer satisfaction surveys by e-mail. Use them as informal focus groups for refining ideas about new products and services. Use your imagination. E-mail, because of its immediacy and informality, cements customer relationships far better than any paper alternative.

Computer Telephone Integration (CTI): Here’s a wonderful technology. It has huge potential, but no logical internal sponsor until you came along. Add screen-pop to your call center (that is, automatically display customer records before transferring calls to call center agents). Add intelligent call transfer, where transferring a customer call from one employee to another also transfers the computer screens.

Add data-directed call routing, where information about a caller in your databases (or data warehouse) determines who should receive the call.

The secret to successful CTI: every customer contact must enhance the relationship. Every customer service interaction becomes a (soft) cross-selling opportunity and every sales interaction becomes a customer service opportunity.

Electronic Data Interchange (EDI): EDI, the electronic exchange of formal documents like purchase orders and invoices, has never lived up to its potential due to the extraordinary difficulty of converting EDI transmissions into database updates. Turn this to your advantage: customers who successfully exchange EDI transaction sets with you are unlikely to leave you for a competitor – it will cost them too much.

There are other customer-facing technologies, too. Let someone else maintain the accounts payable system. In this Olympic year, go for the gold.

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