Why companies should focus on their core competency
November 10, 2015
When something is outside a company's core competency it's time to outsource in order to save time, money, and risk. "To outsource, or not to outsourc...
When something is outside a company’s core competency it’s time to outsource in order to save time, money, and risk.
“To outsource, or not to outsource?” is the key dilemma facing decision makers from start-ups to SMEs to corporate behemoths. In smaller scale organisations, the temptation to want to do everything themselves may well stem from their inception; when start-up funds were tight the last burden the fledgling CEO wanted to incur were additional expenses. The attraction of taking on learning a new task himself or delegating internal staff to do the same was naturally strong, and I speak from personal experience in describing how hard it can be to move away from that mindset.
I started in the embedded industry on the bottom rung of the proverbial ladder. As time progressed I quickly earned numerous promotions, and whilst performing new tasks I continued to simultaneously undertake my (technically) previous roles. Additionally, as new responsibilities were generated – tasks well outside my primary remit – I foolishly, enthusiastically, blindly volunteered myself. I describe this not as some nostalgic self-contemplation, but to draw you to the undeniable parallel this dilemma has at both the individual and organisational level. I eventually found myself working unsustainably long hours to encompass this unmanageable workload I had thrust upon myself. Far more importantly than the overall volume of work was the increasing detraction from my own core competency, which began to impact my personal success and has a parallel effect at the organisational level.
One poignant example I come across daily is companies involved in electronics often blindly insist on undertaking electronic design in-house. This may well stem from the same “we’ll do everything” attitude of the earlier cited start-up CEO, and in fairness this is understandable – after all, he set out to create an electronics company and this is an electronics task, isn’t it? Perhaps once upon a time, when the technology and tools were that much simpler, this would hold true. The reality today is electronics has exploded into an unfathomable number of highly specialist areas, most notably (for us) an entire ecosystem of embedded computing. The danger comes when those outside of that specific skills sphere, through lack of understanding of the complexities involved, have the temptation to attempt to undertake such design alone.
Doing so necessitates pushing inexperienced personnel up a very sharp learning curve and leaving them to the wolves to overcome the numerous challenges long since understood and resolved by existing specialists with decades of training and experience. It involves significant cost – be that for hiring new employees or training existing ones and buying the latest tools – time, and, of course, risk. With project competition greater than ever these are the three fundamental aspects one rarely has room to play with. Interestingly, the primary objection to outsourcing such work, sometimes alongside pride, is cost.
The cost differential of outsourcing may appear vast due to those evaluating not including their employees’ time as cost, nor appreciating that if internal staff take twice as long, they effectively cost twice as much – and a factor of two is usually understating the difference. It’s also easy to exclude the costs of financing that learning curve and investing in the latest tools that may well only be for a single project. Far more importantly, what if it all goes wrong?
A comparison I like to use is your family vehicle’s braking system. Most of us won’t mechanically touch our cars at all, myself included, but some fancy themselves as budding hobbyist mechanics. Very few have such confidence in their success that they’re willing to place their family’s lives at risk by undertaking work on the brakes. I’ve no doubt that my cognitive abilities could eventually learn how to successfully undertake brake repair, but the issue is that I can’t commit to the time to become an expert, and unless I was I would never place my family’s lives at risk through failure. Replace “brake repair” with “electronic design” and “family” with “project” and I hope I’ve made my point.
Beyond avoiding the risk of losing important customers, outsourcing frees up employees to focus on their own core competencies. Maximum benefit and success at individual and company level is derived from dedicating time to your strengths. Trying to save your business money by avoiding outsourcing may end up costing you far more than that project ever would.