Using Outsourcing to Stay Relevant to Your Customers
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Episode 55 Transcript:
Chris Curran: Growth Igniters Radio Episode 55: Using Outsourcing To Stay Relevant To Your Customers. This episode is brought to you by Business Advancement Incorporated, Enabling successful leaders and companies to accelerate to their next level of growth − on the web at www.businessadvance.com. And now, here’s Pam and Scott.
Pam Harper: Thanks, Chris. I’m Pam Harper, Founding Partner and CEO of Business Advancement Incorporated, and with me as always, is my business partner and husband, Scott Harper. Hi Scott.
Scott Harper: Hi Pam. Once again it’s really great to join you for yet another episode of Growth Igniters Radio, and if this is your first time listening out there, our purpose is to spark new incites, inspirations, and immediately useful ideas for visionary leaders to take themselves and their companies to that next level of success. So Pam, what are we taking on today?
Pam Harper: Using outsourcing to stay relevant to your customers.
Scott Harper: Okay.
Pam Harper: Those of you who know us may recall our 2012 study where we asked 89 CEOs and senior executives in companies of all sizes about 3-year trends related to strategic alliances. Now at the time, we were surprised to find that over half of our respondents considered outsourcing to be a form of strategic alliance, and almost 3 quarters of the businesses under 100 million in revenues projected outsourcing would become a greater part of their gtowth strategy over the next 3 years. Fast forward − here we are it’s 2016…
Scott Harper: That’s happened…
Pam Harper: Mm-hmm (affirmative), and yet for as much as that is happening, there are still a lot of nuances to the decision about what to outsource, as well as what it takes to lead an organization that depends on outsourcing so that it truly is relevant to their markets and customers.
Scott Harper: That’s absolutely true. Those easily overlooked nuances are pretty much certainly behind the fact that still, after all these years, only about half of all outsourced relationships meet responders’ expectations.
Pam Harper: Which is relevance.
Scott Harper: That’s absolutely true. You can access this study by going to the resources section on Growth Igniters Radio, Episode 55.
Pam Harper: This whole focus on relevance is why we are so glad to be bringing back today’s guest, Jim Blasingame, author of the award-winning book The Age Of The Customer: Prepare For The Moment Of Relevance. For those who haven’t yet heard one of Jim’s previous episodes of Growth Igniters Radio, he is one of the world’s foremost experts on small business and entrepreneurship. He’s the creator and host of the weekly radio program The Small Business Advocate Show, which is on the air 5 days a week since 1997. I am proud to be a member of Jim’s brain trust for a long time now. You can see Jim’s complete bio by visiting growthignitersradio.com episode 55. Jim, welcome back again to Growth Igniters Radio.
Jim Blasingame: Hi Pam, hi Scott. How you guys doing?
Scott Harper: Doing real well Jim, thanks.
Pam Harper: We are doing great. You sound great today.
Jim Blasingame: Thanks for having me here. I’m looking forward to our visit.
Pam Harper: Let’s start out by discussing the whole value of outsourcing, especially for small companies. In your book, The Age Of The Customer, you call outsourcing “the mother of niches.” Why is that?
Jim Blasingame: As you know it’s my nature to − as old as I am − to go back and see the origin of things. In the 70s, corporate America began what I call the great downsizing, and that went through the 80s. This is where they were trying to shed expenses and operating obligations, especially payroll. It hit an awful lot of folks, many of you remember that, but here’s what happened. When they laid off someone who used to do a major significant part of their work, that didn’t mean that the requirement for the job went away. They still needed that work to be done. They downsized the job and pushed that off of their operating statement, but they brought the work back on in the form of a contract with a smaller company.
Over the years − now the decades − all of that activity that disruption … Remember all the disruption of all the downsizing of the 70s and 80s? It was a horrible time for a lot of people − but many of those people who were downsized turned right around and created small businesses to fill the requirements of their prior employment. That’s what has created this growth of the small business sector over that last 30 or 40 years. In fact, I’m going to say 99% of business-to-business small businesses are outsourced companies, and basically they were born from the disruption of the downsizing. Now we call it “outsourcing”.
Scott Harper: Jim, how have you seen visionary leaders of small companies, or large as well, use outsourcing so that they can enable their companies to be more relevant to their customers as business conditions change?
Jim Blasingame: That’s an excellent question, Scott. As I said, in the early days it was a reaction to − in my opinion − the recession of 1974, and then the ’81 recession and the ’83 recession. They were reactions, but then the reaction and the disruption became a business practice. It was making sense for folks. What they were noticing was, “okay, our customers really don’t pay us to keep our books, our customers really don’t pay us to manage our trucks, our customers really don’t pay us to mow our yards, paint our walls. They pay us to deliver what they use.”
Scott Harper: Right.
Jim Blasingame: We started focusing on what we call the core competencies. I have my core competencies in my business. That’s what my customers pay me for. You have yours, corporate America has theirs. As people started realizing, “wait a minute, what am I really in business for, am I in business to have an accounting firm or am I in business to be delivering products to services?” − when that was fully understood, people started saying “Okay. I’m going to focus on the things that are my core competencies. I’m going to let people who are professionals in these other areas do that work, and I’ll do that in the form of contracts with them.” That’s the motivation for outsourcing, is to be able to focus on your core competencies. When you do that, you can put more of your team’s management and energy and engagement and your capital and your innovation behind what makes you different from your competitors, and more relevant to your customers.
Scott Harper: That’s true. We’ve also seen another wrinkle − you talked about how outsourcing started as shedding capitalization − we’re seeing for businesses of many sizes that it’s also now being used as a way to scale. I want to grow bigger. Rather than capitalizing, I’m going to partner or outsource that so that I can scale my business without taking on additional capital obligation.
Jim Blasingame: That’s exactly right. If you’ll notice, they’re not scaling their core competencies.
Scott Harper: Right.
Pam Harper: That’s true.
Jim Blasingame: They’re probably scaling the support areas. Consequently you’ll see, this is where if you go back I’m sure plenty of research has been done on this, you’ll see a company that started out as a support outsource company for a big company, turns into a big company who works all across the country in that outsource role. What was once a small outsource company becomes a big outsource company in support of their bigger customers.
Pam Harper: It’s an interesting thing, to reflect on how it’s all grown. Of course today outsourcing, as you put it, it’s neither a fad nor a trend. It’s fully proven and integrated into the marketplace, it really is, and yet it’s still interesting to me that it’s a struggle for many companies to decide whether to outsource or whether not to outsource. Why do you think that is?
Jim Blasingame: Well, a lot of it is ego, a lot of it is control. I’ve been accused of being a control freak. I’m a control … maybe something else, but I can rock control too. Have you noticed how hard it is for a lot of people to delegate?
Pam Harper: Oh, sure.
Pam Harper: Yup.
Jim Blasingame: And that you don’t really become an effective CEO until you can become a good delegator? Well, delegating is very much like accepting the outsource premise, because if you delegate you got to release a little control. If you outsource, you have to release a little control. I think people who are hesitant to outsource, someone hasn’t given them a proper proposal to show them the benefits and the exposure, both sides. We’re talking about the benefits, I mean why would you employ 20 people that you could have work for you under a contract through a vendor and they’d be better prepared, better trained, and more efficient and you could control their outcome more than if they were your employees. Why would you manage a person who was managing 20 people that are not part of your core competency? If you can find competent outsource vendors to provide that service, why would you do that?
Pam Harper: Well, I think there are a lot of considerations, and we’re going to talk about that in the next segment. We’re going to take a quick break, and when we come back well talk more with Jim Blasingame, author of The Age Of The Customer, about using different types of outsourcing to increase customer relevance. Stay with us.
Scott Harper: You are listening to Growth Igniters Radio with Pam Harper and Scott Harper. Brought to you by Business Advancement Incorporated, on the web at www.businessadvance.com. We enable successful companies to accelerate to their next level of innovation and growth. If you like what you’re hearing, spread the good word. Go to growthignitersradio.com, select episode 55, and use the share links for Facebook, LinkedIn, and Twitter at the top right of the page to tell your social media communities all about us. While you’re there, sign up for our weekly alert of upcoming episodes so you’ll always be up-to-date.
Pam Harper: Welcome back to Growth Igniters Radio with Pam Harper − that’s me − and Scott Harper. Scott and I are talking today with Jim Blasingame, author of The Age Of The Customer: Prepare For The Moment Of Relevance, and host of The Small Business Advocate Show, about outsourcing as a way of increasing your relationship with your customers. Jim, how can people find out more about you and your book?
Jim Blasingame: Well, thank you Pam for that, and my website is www.smallbusinessadvocate.com. That’s how you can find out about all the things that we do, including all the great interviews that you and I have conducted over the years as you’ve been on my show. You’ve got a great suite of resources that you provided us over the years there. That’s my main website, also my book website is www.ageofthecustomer.com. People may see my articles on forbes.com and bizjournals.com and different places like that. I get around a little bit.
Pam Harper: You sure do. Of course you can see all of this and the study that we were referencing by visiting www.growthignitersradio.com, episode 55. Now, let’s get back to our conversation. Jim, in your book you talk about “internal outsourcing”. We were talking before the break, I should say, about why would somebody outsource; well, there are reasons to outsource and reasons not to outsource, wouldn’t you agree?
Jim Blasingame: Well, yes. The only reason to not outsource is if you can’t find a vendor that can do a better job than you can do internally, or if the economics don’t work. If you find a vendor, but they’re too expensive, or you think you can do it better in-house, or for whatever strategic reason you think you need to control that activity, then that’s the reason to keep it in-house. You’ve got to ask this question − and this is the magic outsourcing question − get your people together, put all the things that you do − delivery, warehouse, purchasing, accounting, payables, payroll, whatever, put all those different tasks up on the wal,l and then on each one of them ask your team members this question and then answer it honestly: must this be done in-house? That’s the magic question. If you can’t come up with an absolute hard-and-fast rule why it must be done in-house, then start looking around for someone to do it for you so you can manage it. You’d rather manage a contract than you would 20 people or 10 people or 5 people.
Pam Harper: So you’re talking about “internal outsourcing” right now…
Jim Blasingame: Yes, internal outsourcing − that’s you deciding to release some of your competencies, some of the requirements of your work − accounting, whatever − to an outsource vendor.
Pam Harper: Okay. Are there times though [when outsourcing is not the best way to go], because we know that there are situations where sometimes you outsource, and there are some companies that are bringing some functions back and saying, “That wasn’t the right function to outsource.”
Jim Blasingame: I’m not saying that it’s hard-and-fast, I’m not minimizing anyone or being … Anybody who doesn’t want to outsource whatever it is − that’s their decision. I just encourage people to look at it, and especially small businesses. I’ll give you an example Pam; in my business I have 4 employees under my roof, but I have about 10 people who work for me through contracts. I couldn’t do what I do in my business if it weren’t for outsourcing. It’s not for everybody, but it’s probably, as you found out in your research, it’s probably for a lot more than the people who actually do it.
Scott Harper: Now Jim, you and Pam were talking before the break about some of the reluctance that goes with outsourcing, and maybe [the thought of] “I’m not sure I want to do this.” One of the things that we’ve seen many times is that outsourcing requires a special type of leadership competence. It’s not just “I send it out there and it gets done.” That really impacts upon the quality of that internal outsourcing enterprise. Would you say that’s true?
Jim Blasingame: Yes, I would. Some people are not used to managing with contracts, right? Some people, they just need the control and they would rather walk into an office of an employee or manager and talk to them about how to do it rather than give the assignment to a vendor partner, perhaps through a contract, and just say “Okay, I expect you to deliver and send me the bill for what you do. Periodically we’ll give you feedback on how you’re doing and you can make adjustments. We’ll work together in this way under a contract.” Some people aren’t comfortable with managing contracts.
Scott Harper: Well that’s true. Now let’s look at the other side − what you call “external outsourcing” − the people who provide the service. Part of that comfort [with the outsourcing relationship] has to come from them being able to be a good partner. Talk about some of those considerations, especially related to finding and strengthening niches so the outsource provider has a closer relationship with their customer.
Jim Blasingame: Well, exactly. Internal outsourcing is an operational thing that every company needs to consider for themselves. Even companies who provide outsourcing services will have internal outsourcing decisions. What I call “external outsourcing” is another way of saying an outsource business model where you’ve built a business around providing these services. Just like I was telling you as we were talking earlier about the guy who got laid off from painting at the factory he worked at for 20 years, then he opened up a painting business, − went right back to the company to provide them with painting services − right? That’s what I call external outsourcing.
I just use those terms to kind of make it simple to help people understand thebusiness model. If you’re going to have that business model, you have to realize that you’re providing contract services and that you’re going to have to perform on the contract. You’ve got to find a way to work with the customer in a way that makes them comfortable, and makes them feel like they’re getting at least what they would’ve gotten with employees, but with more efficiency, more professionalism, more accuracy perhaps, and maybe even save them money.
Pam Harper: This goes back to that study that we were conducting, where we were saying at the beginning that there was this dissatisfaction, where there wasn’t that feeling that the outsource provider was [satisfactory, and therefore] relevant. How then can we address that best? What would you suggest?
Jim Blasingame: So you’re saying that in the study that there was dissatisfaction with what people were finding?
Pam Harper: A number of these CEOs and senior executives, in companies of all sizes, were saying that outsourcing was not meeting their expectations as often as they wanted it to. I think it’s a relationship myself. I say it’s not one side or the other side, I think it’s mutuality. That was what we talked about in the study, but I’m curious about what your take is.
Scott Harper: Well if you remember, I talked about the fact that this doesn’t work if you can’t find a vendor that can do the work for you. These vendors don’t drop out of heaven, right? They’re operated by human beings, and so sometimes you can’t find a good fit. If you can’t find a good fit in your area, your region, then do the work in-house.
Pam Harper: There has to be an appreciation, I think, of what the vendor can do as well as the vendor appreciating the company. It’s a relationship really, isn’t it?
Jim Blasingame: The 2 things are, can you find somebody that, number 1 − that can do the job, and number 2 − are you capable of working with them under that contract relationship. As you said, a relationship requires two people to do the right thing.
Pam Harper: At least, right? At least two people.
Jim Blasingame: Both sides of the contract, right? You could have a great vendor, but if you’ve got a CEO that’s reluctant to outsource, and his or her managers are wanting to do this, that CEO’s going to find all kinds of reasons not to do it, right?
Pam Harper: Well, that’s true. There are a lot of leadership aspects to this, which we’re going to explore in the next segment. And right now we’re going to take another quick break, and when we come back, we’ll talk more with Jim Blasingame, author of The Age Of The Customer, about actionable steps you can take to increase customer relevance through outsourcing. Stay with us.
Scott Harper: So Pam, can you tell our listeners why clients engage us to speak at events, conferences, and company off-sites?
Pam Harper: They’re seeking new insights for dramatically accelerating company transformation and growth, and they’re also seeking new leadership insights about themselves, their teams, and their organizations so they can make bold new decisions about strategy and implementation. It’s been especially rewarding to find that some of our company off-sites have resulted in breakthrough decisions that have generated as much as 10-fold growth over 5 years.
Scott Harper: That’s really satisfying to us, and of course to our clients. Contact us today at www.businessadvance.com to arrange for a brief call to discuss your needs and options for helping you achieve your most important goals.
Pam Harper: Welcome back to Growth Igniters Radio with Pam Harper and Scott Harper. Over the last 2 segments, Scott and I have been talking with Jim Blasingame, author of The Age Of The Customer, and host of the Small Business Advocate Show, about outsourcing as a way of increasing your relationship and relevance with your customers. Jim, tell us again − how can people find out more about you and your book?
Jim Blasingame: Thanks Pam. My websites are www.smallbusinessadvocate.com and the one for my book is www.ageofthecustomer.com. I appreciate that very much. Everything there is free, except if you want to buy a book, we’ll charge you for that. But if you spend enough time on my websites you can get almost everything in the book from the websites. We like you guys − we make it easy for everybody to get what they need.
Pam Harper: That’s wonderful. You can access this also by visiting www.growthignitersradio.com, episode 55, and we’ll also have other episodes featuring Jim Blasingame. Jim you’ve been on three already, I think.
Jim Blasingame: It’s been fun, I love it. I love being with you guys.
Pam Harper: It is − it’s great fun. This is such an important topic, this whole concept of outsourcing and staying relevant to our customers. Now, let’s talk very specifically about how to more effectively lead an outsource relationship, whether it’s internal outsourcing or whether it’s external outsourcing as a business model. What would be the first thing you might advise?
Jim Blasingame: I’m going to keep coming back to − from an internal outsourcuing standpoint − you’ve got to go around asking the question, “must this be done in-house; must this task be done in-house? What are our core competencies [we need to keep for ourselves]?” Obviously the prime core competency would be selling to a customer, closing the deal. I’ve got to believe that’s a core competency.
Pam Harper: There are some companies, actually, that outsource that, too.
Jim Blasingame: Some do. That would be where they, Scott, they’d have to pry my cold dead fingers off that barrel, right? I’d be holding onto that one myself; I’m such an old salesman. But you’re making a good point, Pam; it depends on the company, but every company has their core competencies. Whatever you’re known for, that’s your core competency. Whatever customers write their check for, that’s your core competency. Everything else is subject to “must this be done in-house.”
Now on the external outsourcing side, where it’s your business model, then the question I think that you have to ask customers − if you want to become more relevant to them with regard to how you would serve them − just ask them the simple question: “where’s your pain? Tell me where you’re stuck, where’s your pain.” If you’ve got a customer who’s doing business with suppliers, for example, and you’d like to be a little it more integrated, then you could say “Okay where’s your pain?” And they would say “Well, it’s not in buying wrenches. I can get all the wrenches I want. The problem is managing and inventorying them and getting them out on the floor where my guys need them.” Then you would say, “Okay we can solve that problem. We have those services.” Find out where their pain is beyond just buying stuff. More and more people need help with their systems between the products, the connective tissue between the products. That’s where they need help.
For example, they might not know how to hire the right people to do a certain thing in a certain industry. If that’s your industry, you know exactly how to hire the right people, and you can deliver those people wherever they need it better than they can. You show them that in a proposal.
Scott Harper: The ability to really have a rich conversation, and to get to some of those insights to create the trust that will allow the customer to open up, that’s a really key part of this effective external outsourcing.
Jim Blasingame: No question, and that’s the reason why, Pam, I would say that that’s what sales people do. That’s what the nurturers do, and that’s the reason why I would say that would not be outsourced. In my business, that would never be outsourced, as much as I’m a devotee of this. So yeah absolutely, Scott. The idea is that I want to call on you and I want to say “Okay, tell me about your business, tell me where your pain is, tell me where you’re stuck.” You ask any CEO those two questions − where’s your pain, where are you stuck − and you’re going to get some information you can use.
Pam Harper: Do you think, Jim, that there would also be value, especially when we’re talking about visionary CEOs, where somebody might ask “What are your dreams; where are you trying to go? What are you trying to provide for your customers so you can stay more relevant to them?” I know you talked about this in your book so much − helping them to help their customers.
Jim Blasingame: Well that’s exactly right. You just ask “What are your dreams?” [They might say,] “My dream is to double the size of my company in the next 3 years.” And you’ll say, “Okay, what’s holding you back?” “Well, the people quota of this whole thing; I can’t find the right people.” “Well, why would you focus on all the people when all the people you need aren’t part of your core competency? Why don’t you focus on finding the right people in your core competencies, let me focus on finding the people in my core competencies?” Now I’ve taken on part of your work, and it’s an example of healing your pain, of getting you unstuck.
Scott Harper: Okay, so we’ve talked about looking for things you can outsource through internal outsourcing. We’ve looked at talking to your customer. What’s a 3rd practical thing that people can do?
Jim Blasingame: Well, I think that every organization has it’s own culture, and in cultures there are firewalls. If you believe that there’s an opportunity to be more relevant to customers if you could be little more versatile, a little more nimble, especially with your core competencies − if you believe that that’s the case, and you’re not getting it done, then maybe you’ve got some firewalls in your organization, and you probably need to start looking internally and saying “Okay, what’s our culture? Is our culture such that we feel we must do everything in-house, or is our culture more innovative and more receptive of being more versatile and bringing the company more into what I call the age of the customer?”
Pam Harper: Right. That really takes us back to talking about the fact that’s it’s a relationship. At its core it’s a relationship, and everybody on both sides bears accountability for making sure that they’re easy to do business with and work together. It’s a different kind of work flow, and you’ve described it so well.
Jim, any final thoughts you can leave with us with regard to leading an outsourced organization to stay relevant to customers?
Jim Blasingame: The two main areas of obstacles are the leadership and the staff; you may have obstacles in either place. Make sure that the leadership is on board, and then make sure that your staff are on board. If you don’t feel that they are, I would recommend that you not try to outsource until the team is comfortable with it, because otherwise you’re probably going to be unsuccessful.
Pam Harper: Everybody has to be ready for it; everybody has to be of a mindset where they’re able to effectively engage in this relationship, in a new way of working.
Jim Blasingame: Yeah, for example, if your CFO’s paradigm is I have to manage 20 accountants and that person can’t say “I’m okay with managing a contract for that work,” then you’ve got a problem with your CFO.
Pam Harper: Well Jim, this is a lot of food for thought. As always, thank you so much again for joining us.
Jim Blasingame: Thank you for having me. I always enjoy being with you guys. You do great work, and I’m proud of you.
Pam Harper: Thanks.
Scott Harper: And same to you Jim. Thanks so much, and thank you out there for listening to Growth Igniters Radio with Pam Harper and Scott Harper. To check out resources related to today’s conversation, share on social media, find out about upcoming episodes, read Jim’s bio, or open a conversation with us, go to www.growthignitersradio.com and select episode 55.
Pam Harper: Until next time, this is Pam Harper…
Scott Harper: And Scott Harper…
Pam Harper: Wishing you continued success, and leaving you with this question to discuss.
Scott Harper: How can we apply outsourcing as a strategy to increase our relevance to customers in this dynamic business environment?