Staying competitive in your marketplace means you must constantly look inward and examine the opportunities to improve processes, systems and ultimately, results.
Outsourcing a business process is a quicker, more effective way of achieving the same, or even better, results as reengineering.
The Outsourcing Institute considers outsourcing to be a central management tool for the fundamental reengineering and reenergizing of businesses, and have found that accelerated reengineering benefits is one of the top ten reasons companies outsource non-core business processes.
Reengineering is one of the main strategic tools for staying competitive. It began in the 1980’s as large corporations began to re-think the way they did business in order to adopt the powerful new computer systems that were emerging. Reengineering, as a label for what was happening, was introduced by Mike Hammer in his groundbreaking article “Reengineering work: don’t automate, obliterate” in the Harvard Business Review.
The definition put forward by Mike Hammer, “Reengineering is the radical redesign of business processes for dramatic improvement”, defined the nature of reengineering as a radical change. Since he coined the phrase, reengineering has played a large part in improving the competitiveness of corporations.
At the same time, the mere mention of Reengineering often invokes fear. Not just because it means change to the status quo and a potential risk to individuals within the company, but also because since the 1980’s, business has come to realize that it is more difficult than it seems to get the results they need from reengineering, and the task itself consumes a great deal of resources. This is because since reengineering took root, the importance of change management as part of the reengineering initiative has come to the forefront. It was no longer just about technology and processes – it’s also about people – and the reality of dealing with the human element during the initiative is what made reengineering a real challenge.
Despite this, applying sound reengineering principles to your core business may still make sense, since your core business is what makes your company successful, and is often the most important part of your competitive advantage. For non-core parts of your business, however, there is an easier alternative for getting better results. Increasingly, organizations are reengineering non-core areas of their business by outsourcing. In one fell swoop you can change everything, without the long drawn out process that re-engineering entails.
Outsourcing a business process is a quicker, more effective way of achieving the same, or even better, results as reengineering. The Outsourcing Institute considers outsourcing to be a central management tool for the fundamental reengineering and reenergizing of businesses, and have found that accelerated reengineering benefits is one of the top ten reasons companies outsource non-core business processes.
Essentially, outsourcing means turning over the business processes to an outside service provider as part of a contractual relationship. This means turning over both the work and the management of the work, in such a way that it still integrates with your core business.
By bringing in a service provider who has already engineered their processes and management to world-class standards, your company benefits immediately. Since your service provider’s core business is the service they are providing to you, they have already designed it to be as efficient and effective as possible. In addition, the scope and scale of most service providers ensures both efficiency as well as access to enterprise systems, technical knowledge and resources, including personnel, you may not otherwise have access to.
How do you know what to outsource and what to reengineer? It’s simply based on your core business. A core business is your primary purpose as a company, that which gives you the advantage over your competitors. And it’s not always what you think. For instance, you would think Motorolla’s core business is making devices such as radios, cell phones and pagers. In fact, much of their manufacturing is outsourced. Their real core business is designing products that consumers will want and then convincing the consumers to buy them.
Non-core elements of your business include all the internal services that support your core business. What those services are will depend on your business. For property managers, this may include IT and payroll, for instance, while for property owners, it often includes the full range of Property Management or Facility Management services, depending on whether they occupy their own space.
Of course, successful outsourcing takes some effort too, just not as much effort for as long a period of time as a re-engineering initiative takes.
One of the difficult parts of change is always culture. While re-engineering usually retains much of the built-in culture, an outsourcing initiative results in a change in culture very quickly. Along with this comes a true sense of customer service, since the people now providing your non-core internal service are part of a different organization, your service provider. The difference is that they are governed by not only a contract, but a true business relationship that requires all the elements of a service culture to be in place, something not easy to achieve with internal services.
Implementing an outsourcing initiative as a reengineering tool means you only need to focus on the inputs and outputs of the business process, and the related results you need for your core business to be successful. Internal process, technology, training, personnel and all the other management issues no longer need to consume time and effort that you can direct to the core business that makes your company successful. Of course, you will need to deal with employee issues related to outsourcing your staff, but the extensive change management required for a reengineering initiative is reduced significantly.
It still takes planning and a certain amount of time to implement an outsourcing initiative, however it generally takes less time and fewer resources than reengineering.
To be successful, you need to consider a number of elements that are necessary when outsourcing:
- An effective Stay-Back Team to manage the outsourcing relationship.
- Well Defined Scope and Contract provisions that also give you flexibility as your company changes.
- A procurement process that ensures the Service Provider selected can deliver the results you expect.
- Effective performance measurements that focuses on the results and provide management tools to both the Service Provider and your company.
- A Transition plan to smoothly shift people, processes and other resources over to the new way of operating.
Like reengineering, successful outsourcing has to be looked at as a project with clear objectives and a plan to get there. By using the above elements as an anchor point, your outsourcing initiative will get you where you want to go sooner, and get you the results you need.
Staying ahead of your competitors is the only way to be successful. Rather than focus your time and energy reengineering non-core areas of your business, consider the option of outsourcing and then spend your own resources improving your company’s competitive advantage – your core business.