Unlocking growth - a debate
From global giants to aspirational start-ups, organisations consciously choose outsourcing as a means of enabling growth. If growth – rather than cost cutting – is top of the agenda, then what is the starting point, how do you find the right vendor to make growth happen, and what role does culture play?
Arvato invited five leading experts from the worlds of outsourcing and business to share their views on the links between successful outsourcing partnerships and business growth.
Punit leads Deloitte's finance & accounting BPO consulting practice, advising end-users and outsourcing providers on how to best structure and implement large scale transformational BPO partnerships.
Kristian is managing director of Firebox, one of the best known e-commerce brands in the UK. Firebox recently entered an e-commerce fulfilment partnership with Arvato as it looks to grow the business internationally.
Martyn founded the National Outsourcing Asseciation in 1987. It has become the UK's official industry body for business outsourcing. He has been involved in information and communications technology for over 30 years.
Debra is responsible for Arvato's public sector business in the UK, overseeing complex public-private partnerships and driving new BPO growth areas, including central government, public healthcare and beyond.
John is the founder of analyst NelsonHall and has been CEO since its inception in 1998. John has developed the company to its present position as the leading BPO analyst firm globally.
Open Outsourcing: This issue of Open Outsourcing is about enabling growth; what do you think are the key factors that affect organisational growth?
Kristian Bromley: A lack of fear and clear goals are essential. Confidence in your ideas, your people and the courage to take a few risks. There are so many things you can’t control, that it’s vital you focus on those you can.
Punit Bhatia: I actually think leadership is the most important factor, because successful leaders play the most pivotal role in driving an organisation’s strategy, culture, people and innovation.
John Willmott: The organisation needs to become a “living thing” adapting both proactively and reactively to its business environment, so innovation at both the day-to-day level and at the more strategic level needs to be embedded into its culture and processes.
If an organisation is considering to outsource to help with its growth plans, what type of growth can they expect?
Martyn Hart: Outsourcing can help with all business stages and growth. You need to clearly focus on your core competencies, once you’ve understood these and how they align to your business strategy then effectively you can allow outsourcing to do the rest.
Punit: It can be critical in supporting geographic expansion by allowing organisations to focus solely on setting up local management and sales teams; rather than IT, finance and administrative functions.
Debra Maxwell: I agree, outsourcing can support growth in many ways, from establishing a presence in a new geographic market, to targeting a new customer group or to provide back-office support when developing new products or processes for servicing customers. The question is whether growth is the primary goal or just a by-product?
In your experience, are there certain sectors or industries in which organisations turn to outsourcing primarily to achieve growth?
John: We have seen a marked increase in outsourcing by the retail sector as the sector has moved from bricks-and-mortar to online retailing or e-commerce and this has primarily been in response to the need to drive business growth in their new multi-channel and social media-enabled environment. Similarly the high-tech sector has long been a user of outsourcing in support of its online business.
Punit: I think it can be applied anywhere to support growth, but there are sectors where it is far more common. Any industry undergoing disruptive change, like today’s music and publishing industries, is likely to benefit. As they look to fundamentally alter the way they operate, such as by shifting to e-commerce, outsourcing can provide ready-made models for rapid deployment.
Martyn: New market entrants catching up with competitors can gain from an outsourcer’s established network. If one is launching a competitive product or service that has to be kept secret, using an outsourcer can be a good way to surprise the market.
It sounds like flexibility and speed are key. Do you think outsourcing can or will change the culture of the business, so that it can become more entrepreneurial?
Punit: Organisations that have been delivering all services internally can often lack the pressure to get better every year. There may be budget targets, sure, but the nature of outsourcing relationships places a comprehensive set of performance goals on the provider where incentives to improve are actually critical to their own revenue and profitability.
John: The culture of an outsourcer is absolutely critical both in terms of compatibility with the client and also in contributing to client innovation. Vendors need to be prepared to sacrifice short-term revenue in the interests of a longer-term relationship and be prepared to commit senior management resources to understanding the client’s strategy.
Kristian: I’m not so sure ‘entrepreneurial culture’ really means anything specific anymore. It’s become a bit of a catch-all for wide ranging ideas. If by ‘entrepreneurial’ we mean – not being afraid to fail, questioning the way things are done and hustling everyday then I agree those are cultural elements worth nurturing. However, other parts of an organisation’s culture interest me more – hard work, teamwork, respect, creativity.
Can you think of an example where outsourcing was successfully used to enable growth? Was ‘growth’ a goal from the outset, or just one of several by-products of the partnership?
Punit: I have worked with a major energy business for which its outsourcing model was critical to years of massive sustained growth by providing it with the flexible infrastructure it needed. For example, when they were expecting to grow in China, they used a BPO provider to provide it a rapidly scalable finance infrastructure to support the growth.
Debra: Setting the right goal is key, as it helps both partners to focus on the outcomes. Interestingly, our most recent example comes from the public sector where our partnership with the Department for Transport is supporting the Cabinet Office’s aim to create a market for shared services within central government.
How can outsourcing relationships be designed from the outset to support the growth objective?
Punit: The structure of the contract is very important. If the pricing model is all about unit cost, then you won’t get the support you need for growth. By the same token; trying to make contracts so watertight that they legislate for every possible scenario will stifle the partnership’s flexibility and, as a consequence, its ability to help you grow. A good contract will get you part of the way – but governance is crucial. Partnerships need to be exactly that – supportive, mutual relationships established on trust and understanding.
John: It’s absolutely critical to align outsourcing with key business performance indicators from the start of the contract. When organisations are seeking for example revenue growth, then it is important that revenue growth is measured and reported and that the “process”, “people”, and “technology” factors driving growth and impeding growth are monitored and managed on an on-going basis.
Kristian: Outsourcing is just like any partnership. If both parties fit culturally and share the same goals, then there’s great potential to succeed and grow. Growth can only come through learning and so it’s important to outsource to people who can offer you as much as you can offer them.
What should organisations hoping to secure growth through outsourcing look for in a potential vendor?
Martyn: All outsourcers can help an organisation achieve growth if engaged in the right way, but there are some good points to look for. Look at the contract, it might allow for some form of innovation that reduces their cost to you, but do they contract to help you grow? Can you tell them that by supporting you they are able to reach a new market for them, which is good. Maybe you can be a reference customer for them - it might not reduce your costs but it’s likely to make sure you get first class attention.
John: Business analytics are becoming critical in driving growth, both in terms of process analytics to enhance the means of achieving growth, and customer analytics to identify buying signals, retention opportunities, and up-selling and cross-selling opportunities. And finally of course, much of this may need to be technology-enabled with appropriate tools.
Debra: A vendor’s capability and technology need to match your requirements, that’s a given. It’s the cultural alignment that will make the partnership work. Trust your gut feeling that you get from the way a vendor responds to some of the examples Martyn mentioned, as this will show you how flexible and committed a potential partner is to achieve your growth objective.
Punit: If you look across the BPO landscape it is hugely high-growth itself. The key reason the sector is successful is because of its own leaders, and they way that they have been personally engaged in their partnerships. These leaders are actively involved both in the sales process and then on-going delivery, and are in sync with their growth-minded opposite numbers within the partnership. This alignment of leadership teams is vital.