6 Easy Tips to Successfully Outsource Expertise
A Foolproof Way to Success
Think its too expensive to hire outside consultants? Worried that you might get locked in or pay too much? These are all legitimate concerns and unfortunately many companies block their journey to success by not learning to use outsourced expertise effectively.
In our consulting practice, we have observed that the companies performing the best are the ones who understand where they have expertise gaps and fill them in two ways. Over the long term they develop the in-house skills and over the short term they outsource the skill.
1. Get Free Expertise from Vendors
If you're worried about the cost of outsourced expertise you don’t necessarily have to pay direct cash. One way to get this expertise is to use your vendors. Vendors have particular skill sets that you can tap into. For example, if you buy a machine they will often include machine training or technical support. A financial institution may also provide free training programs for certain skills. Some accounting firms also have free training.
2. Seek Out Business Partnerships
Another way to gain outside expertise is to use business partners. For example, in businesses I have run and others that we have observed, outsourcing non-critical manufacturing can provide the resources you need at low cost.
In a former company I owned, we sought the help of partners to solve particular customer issues like "corrosion." We had no expertise in this area and it would have been very expensive to obtain and maintain that expertise. Instead, we developed a partnership with a coatings firm that knew all about the issues and how to solve them.
By bringing them right into client meetings they could directly learn about the client's issues. We weren’t worried about losing the client relationship because we owned it and the corrosion issue was a small part of the final product. The coatings company loved the relationship because they had access to a client they wouldn’t previously have had and they weren’t losing anything because they already had the expertise "in-stock."
Partners are also great for developing new business at low cost. The airline industry does this a lot. They will set the general high level specifications for a new plane and then hand off the design and manufacturing of landing gear to a vendor partner. The partner performs all the design and builds the landing gear components. The jet manufacturer then assembles these various components into the final plane. The car industry does this as well.
3. Determine Your Areas of Weakness
The important thing here is to realize what weaknesses or gaps you have so that you can address them. This can be done using a capabilities matrix similar to what you would use for employee development. Put the skills you need to run your business down the left hand column and personnel along the top and see where the gaps are.
4. Hold Consultants Accountable
Finally we get to consultants. You have to pay money for consultants so you need to be very specific about what your needs are and then hold consultants accountable for meeting them. Some consultants, like our firm, will help you determine your needs and where you have gaps for free. For example, before we sign a contract to work with a client we spend up to 3 weeks analyzing them.
From this, we develop a document that points out the client's strength and weaknesses. We then have a discussion on what it would take to fill these gaps, what it would cost and most importantly, what the return or payback would be.
5. Seek Out Performance Guarantees
Be wary of consultants who charge for assessments and the like. In our minds, this is a money grab that doesn’t benefit the client. We adopted this policy because when we ran our own businesses, which a lot of consultants have never done, it always bothered us when huge amounts of money were spent to find out stuff we usually already knew. We wanted to partner with someone and change things quickly and not wait months for assessments.
Finally, get clear specific targets from your consultant and hold them accountable to those targets. If it's cost reduction then you should see the savings there. If it's revenue generation the same thing - you should see results there as well. Reputable consultants will provide you with a performance guarantee. If the targets are not met, you don’t pay.
6. Expose Yourself to New Ideas
The other extremely important thing about outsourcing expertise is that it opens your company up to all the ideas available to you in the world. When you think about it, what are the odds that your firm, out of all the companies in the world, would be the only company with the only people to develop the one best practice for something. Almost impossible.
The open source community has learned and benefited from this. I love the mining company that opened up its geological data to the world and gave a prize or fee to the person or group who figured out where gold was. For very low cost the mining company involved external resources to help them find a solution to the problem.
What we learned:
- Outside expertise is important
- Determine your expertise gaps
- Use vendors, business partners and consultants to fill these gaps
- Create targets
- Track metrics to ensure accountability
- Demand performance guarantees.
Don't forget to read up on the 9 Ways Running a Business is like Alligator Hunting.
CREATING BETTER COMPANIES, EASILY AND ON YOUR TERMS
Connect with Zvi Andrews Pardes or Phil Uglow today.
Zvi Andrews Pardses Phil Uglow