Transition to outsourcing

Author: Jane Lind
Publisher:
Publish Date: 2006-08-01
Features: Outsourcing is not a new concept, but transformation outsourcing is. This book focuses on how to use outsourcing to transform a company and achieve fundamental strategic shifts. It describes how managers can leverage it to launch new ventures, drive company growth, solidify competitive positions, and execute remarkable strategic transformations, providing practical guidance for your company's successful transformation. The book is prefaced by Thomas H. Davenport, author of Optimizing and The Attention Economy. In the preface, he states: "This is an important book. Not only because of the methods it describes, but also because of the larger significance implied by those methods. For years, many business theorists have proven that a company's identity is largely determined by its core capabilities. But what does it mean for identity and culture if a company's core capabilities are provided by another company? Lind's research begins to explain how creative and coordinated collaboration with external suppliers may be more important than any single institutional effort within an organization." If you are considering injecting fresh blood essential for your company's survival, then transformation outsourcing might be the answer. This bold new approach not only eliminates non-core functions and reduces costs but also transforms the entire company's operational model, thereby increasing stock prices, market share, and profit margins. Based on the author's in-depth research, the book details the transformation outsourcing processes of companies such as National Savings and Investment Company, Thomas Cook Company, and others, as well as examples of companies that failed to adjust in time with strategic needs, leading to failed transformation efforts. In this book, you will find:
- 7 questions to help you determine whether your institution needs transformation outsourcing.
- Ten key leadership skills to help you achieve the results of the reform.
- Four ways to help your company smoothly undergo transformation outsourcing.
- Three key components to help you successfully outsource and build highly loyal relationships.
- Guidance on business models to achieve strategic goals.
- Techniques to avoid chaos caused by personnel adjustments.
In the business world, major reform movements often have a terrible track record, a prominent reason being poor execution. Among the 20 companies tracked in this book, 17 achieved significant success in their transformation outsourcing, and its impact was deeper and more lasting than many had anticipated. Transformation outsourcing can become your secret weapon for survival and prosperity in the fierce competition of the 21st century.
Transformation outsourcing is now trending. As a result, many outsourcing service providers boast that they sell transformational businesses. But in most cases, this is not the reality. And this excessive promotion only confuses managers about what outsourcing is and how it actually works. If you search the internet for "transformation outsourcing," you will find that companies like Compaq, Cognizant, Schlumberger, IBM Global Services, Alltel, Collaboratech, Ernst & Young, and others claim they can use new technologies to transform their clients' businesses through outsourcing. But the reality is different. Transformation outsourcing often requires implementing new technologies, but the key factor is not the new technology but the conscious adoption of outsourcing to bring about significant changes in the entire enterprise. Some examples can help illustrate this definition. National Savings and Investment Company is not the only example of successful transformation outsourcing, but it is a great starting point. The management team of National Savings and Investment Company consciously adopted outsourcing to achieve the changes the institution needed. This, of course, required rapid reform: the CEO's goal was to transform the institution from nearly last place in the industry to a leader within three years. The impact of this is clearly reflected in the company's financial statements. A multinational financial services company we call Archer Financial Group painted a similar picture for private enterprises. In 1997, the company faced de-trustification and public supervision. The board had determined that the company was sliding from a market leadership position to a middle position, with agile competitors forming a trend to capture its profitable customer base. To turn the situation around, they brought in a new CEO and demanded that he reverse the trend within three years. After a comprehensive survey of the company and its resources, the CEO designed the company's overall development blueprint. Meanwhile, he found that the company lacked the culture, IT capabilities, and management level needed to achieve the transformation. He decided to position IT as the engine of the transformation. Although most of us believe that IT plays a crucial role and enjoys absolute priority in financial services companies, the CEO's push marked a significant shift in the status of IT within the company. At the beginning of the reform, the company's IT infrastructure was weak, its relationship with leadership was passive, and its costs were high. Archer outsourced its entire IT operations to a global management consulting and technology services company. The CEO correctly recognized that if he forcibly reformed the company's systems, it would affect the complacency and power struggles among his senior management team. He used this opportunity to reconsider his marketing strategy, value orientation, product lines, and reward and compensation measures. In short, through outsourcing, he brought about a complete transformation of the company. Working with his outsourcing partner, Archer created an independent IT operations center as a shared service center. They started from the basics: avoiding redundant network processing and streamlining workflows. Then, the CEO and the supplier abandoned technical transformation programs designed to cut inefficient institutional structures and shifted the company's focus from regional protection to performance improvement. At the same time, they implemented a performance evaluation system to measure contributions to achieving strategic goals. What was the result? Three years later, the company's operating profit increased from $150 million to $370 million, its market share grew from 19.1% to 28.1%, managed assets increased by 64%, and its stock price doubled. As these two examples show, outsourcing provides a viable method for achieving radical changes in a company. P26-P28