The Only Sustainable Edge

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?

5 Comments

  1. Joe

    Great post. I am currently looking for a talented company to outsource a web development and design project. If anyone has had a good experience with a company please let me know.

  2. […] You may be saying to yourself “I am sick of my boss making all of the money”, or “I could do such a better job at running this business than my boss”. So you start your own business. You do a better job than your boss and you start getting clients. Next thing you know your working 70 hour weeks and the money starts flowing in. Unfortunately, your business begins running you instead of you running your business. Your start working long hours and you feel like your not getting anything done. Do you ever feel like all you do is put out fires? I sometimes feel this way. So what’s the problem….your staying busy right? I know that my problem at http://www.utahspy.com is that I try to do way too much myself. I do most of the investigations, marketing, collections, accounting, reporting, etc. I think many private investigator firms and businesses in general have this problem. Paul Allen talks about this in his blog about outsourcing everything that is not your core business. I think that I need to implement this idea more in my business and I’m sure my wife would appreciate seeing me more. […]

  3. I had always thought that in order to get my company off the ground, I needed to develop the manufacturing infrastructure. Then I ran across a manufacturing partner that allowed me to bookstrap the business into existence.

    Now 4 years later, I am still just a company of one with a manufacturing team of 10 that I only fund when I purchase product.

    The business is not where I’d like it today, maybe I need to invest in the marketing–but finding the right partner in a sea of so many options good and bad is daunting.

  4. I partially disagree with your statement

    “Outsourcing development and web design is even more difficult, in my experience.”

    I believe outsourcing development is quite easy since there are many qualified people who can develop a nicely written product. If you’ve done your due diligence with a qualified web(graphic) designer then developing the website is “robot work.”

    I do agree whole heartedly that finding a good graphic artist to design the right look and feel for your website is very difficult. A GOOD graphic artist(web designer) is worth every penny you pay them.

    I was personally quite satisfied with a number of projects I worked on with The Creation House(http://www.thecreationhouse.com) when I lived in Provo. Since moving away I haven’t found too many others I’ve really liked.

    **I just visited The Creation House Website and it looks like they’ve changed their name to GoddardHewett

    Paul, have you checked out Cambrian House (http://www.cambrianhouse.com/) In some respects Cambrian House is almost like taking an idea and outsourcing the entire idea to the “crowds.” What do you think of it?

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