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Who Remembers Peter Drucker; And Where Outsourcing Falls Apart

For those that received their MBA in the hay-day of MBA programs, Peter Drucker was the thought leader driving new managerial innovations. His central tenet of modern management was the belief every company should focus on core competencies and outsource everything else. No company should retain employees for cleaning offices for example. I can’t help but wonder if we have taken this successful efficiency strategy to the extreme and in the process allow finance to trump all other operational decisions. Incremental outsourcing eventually leads to the erosion of the core competency you are trying to maximize. Let say you build golf tees. You have a factory and spit them out like rain. And let’s say you decide to outsource the procurement of wood chips since your core competency is defined as having the machine knowhow to carve the best tee shapes. Disrupt the availability of raw material for your product and you are in trouble. Competitive strategy would require that disruption of raw material acquisition be a primary initiative.

Management Incrementalism is the process of stacking decisions over time that lead to an end result that would have rendered all the previous decisions as absurd. It is the cousin to Group Think.  The decision to outsource a function is made with the current information. Managers in the future will make more outsourcing decisions where, if known, previous decisions would be made differently.

Suggestions:

1. Differentiate and innovate at multiple locations in the value chain. Create barriers in distribution or packaging or brand position and not just in the core competency.

2. Partner with another company that creates a barrier through an exclusice leverage arrangement. I was always a fan of Keiretsu as a means to create a strong value chain of specialized companies.

3. Diversify your product offerings and then link them. What works for Microsoft and Google will work for you.

Richard
Richard
Richard Spangler is a leading business development consultant and recognized change accelerator who creates actionable results. An original founder of PlazaBridge Group, he has an intense desire to help growth companies migrate through the maze of issues and to help the executive/entrepreneur accelerate into success while minimizing errors. His expertise includes product strategy and management, entrepreneurship, mergers & acquisitions.Richard has over 25 years of experience in large corporate branding beginning with product management, corporate development and acquisitions for Compaq Computer Corporation. Following Compaq, Richard was the Program Director of Wireless Strategy at IBM, where he redefined the wireless application business. He continued at IBM as the Worldwide Brand Manager overseeing the Aptiva consumer product and new licensing programs for the IBM logo. After IBM, Richard leveraged his extensive experience in web merchandising, technology and strategic management to create 6 startups including Planet Portal Inc., Square Loop Inc., Creative Leadership Adventures, Interpretis Inc. and his current non-profit, PoleFlyers.Richard holds a B.S. from Guilford College and an M.B.A. from the University of North Carolina, Greensboro. Beyond the PlazaBridge doors, you can find Richard flying, golfing or playing the guitar with his band, The Headless Chickens.
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