It’s one thing to learn about a powerful strategy or management technique that works and it’s another thing entirely to actually implement it.
One of the best books I’ve read in years is The Only Sustainable Edge. It suggests that trying to do everything inhouse won’t work anymore. That to be competitive you not only need to outsource everything that isn’t your primary focus, but you also need to outsource to the firms whose capacities are increasing faster than others, and to partner with firms on the edge of your business.
A recent Business 2.0 article describes how tiny companies with just a few employees have been able to become huge revenue generators almost overnight by outsourcing the design and manufacturing of their products to the right people and then focusing on building sales and marketing channels. I blogged about this Concept to Contender Overnight article last December.
But I think the most natural thing for any startup company to do is want to hire people immediately. We’ve got more projects to do, so we hire more people. We keep adding people, because there are never enough people to get all the projects done. So the burn rate grows and grows, and soon there isn’t enough capital left to make it cash flow positive.
I’ve been through this process many times myself, including recently.
So I feel that the Only Sustainable Edge principles really do need to be followed. I think a startup company should spend enough time looking for the right companies/individuals to outsource to/partner with. I’m seeing more of this kind of thinking within our portfolio right now.
FundingUniverse.com recently hired an outsourced marketing firm to help them reach more investors. LDS Media is outsourcing its pay-per-click marketing to WebEvident and is interviewing someone today who runs affiliate marketing programs. Many Utah companies, including several of my own, have used the excellent services of Kent Thomas at CFO Solutions. They provide outsourced, part-time CFO-type help. 10Speed Media is developing relationships with many fine video production companies so we don’t have to build all our capabilities inhouse. And I am meeting soon with a company that specializes in call center services for online subscription companies (this could help WorldVitalRecords.com and LDSLibrary.com.)
If you outsource to the very best partners, the ones who are super competitive in their space and increasing their capacities faster than their competitors, and if you set up efficient coordination mechanisms, you can save money and be far more productive than if you try to build everything internally from scratch, the way so many startups do. The hard part is finding the "very best partners". Especially in fields that you’re not a specialist in. For example, there are hundreds of SEO outsourcing firms. How does a non-SEO expert choose the right one? If you’re not a developer, how do you trust which web development firm really has the best people, technology and methodologies?
MarketingSherpa publishes some guides to SEO firms and Email marketing firms/technologies. It’s important to review these, but probably even more important to talk to real customers before using any service. It’s easy to make a poor decision in haste without looking at the best alternatives.
Outsourcing development and web design is even more difficult, in my experience. There are tens of thousands of freelancers out there and thousands of firms all over the world who want your business. How in the world can you choose well, other than by taking with other customers who have already hired them? This is not an easy task.
Even some of us who’ve been doing this for 16 years keep making this mistake of trying to do too much inhouse.
What is the smartest outsourcing decision you’ve ever made? And who was your partner that brought you success?