White Water Outsourcing: How Outsourcing Helped to Save Williams

Part of the IDC Outsourcing Forum Midwest Report

IDC-main-grfx2The Williams Companies is a Fortune 200 energy company that currently distributes 12% of all the natural gas consumed in the United States and is a major employer in Tulsa, Oklahoma. Marcia MacLeod, Vice President of Business Process Outsourcing, and Karen Caldwell, Director for Energy & Utilities at IBM, explained how the company pulled a Houdini in the early 2000s, using outsourcing to survive a near-death experience in which its stock dropped from $48 to less than one dollar. This case reflected outsourcing’s potential in dramatic turnaround situations while confronting some outmoded stereotypes about its impact on local employment.

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The Future of Outsourcing Unveiled by ITO and BPO Analysis

Part of the IDC Outsourcing Forum Midwest Report

IDC-main-grfx2IDC analysts Brian Bingham and Barry Rubenstein cited extensive IDC research to describe how outsourcing is developing as a business practice. Although they didn’t explicitly delve into adoption itself, their treatment of ITO (IT outsourcing) and BPO (business process outsourcing) provided significant insight into how outsourcing is being adopted by global enterprises. ITO is several years ahead of BPO for several reasons, namely that IT has traditionally been managed as a support function and cost center in most enterprises and, as such, it has been a textbook candidate for outsourcing. BPO is often more intertwined with the business’s core competencies; in addition, it almost always requires sophisticated IT support. Clearly, ITO had well publicized failures in the early 2000s, but this proved to be part of the normal learning curve, and ITO successes have emboldened buyers and providers to push further into the business. This contrast between ITO and BPO patterns is particularly instructive.

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21st Century Drivers for Innovation and Collaboration

At the turn of the 21st Century, converging social, technological and political changes demand profound changes in how organizations relate to their customers. These changes question many of the assumptions on which 20th Century businesses are built. To turn this situation to their advantage, executives need to approach how they create value for their customers, quickly and proactively. They must build a collaborative network of partners to discover, design and deliver differentiated experience to customers.

The new meaning of customer experience

  • Pervasive e-business and global sourcing are creating new centers of excellence for knowledge, services and manufacturing around the world—these clusters of people and companies are technology-enabled, well educated and highly motivated. They will impact incumbents in several ways: 1) they represent new collaborative resources that can add significantly to the enterprise expertise network; 2) they are developing into high-growth consumer markets; 3) they will create new offerings that may change the rules of your business since their companies do not have legacy organizations and cost structures.
  • Web 2.0 is mobilizing customers in high-value mature markets—”Web 2.0″ technologies are user-friendly, collaborative tools and work processes that enable customers to connect with each other and collaborate spontaneously. Examples are weblogs, meetups, mashups, and free global phone applications with integrated chat/video. Yesterday, Amazonites reviewed books and music; today, they discuss in detail the performance and relevance of everything sold by Wal-mart, exchanging information about their experiences and advising each other on what to buy. Yesterday, the simple workaround to pick the vaunted kryptonite lock was first shown on a weblog; increasingly, product shortcomings are demonstrated in full-motion video.
  • Customer mobilization pressures the barely-adequate new product/service development processes—customers discover irrelevant new offerings and vapid product extensions overnight and pervasively. Most companies already have lackluster new product development track records, and they will perform far worse in this environment. There’s nowhere to hide.
  • Emerging market customers are technology-enabled by default—for example, in Chinese consumers’ practice of tuangou (“team purchase”), people meet on-line, collaborate on learning about a product’s strengths and weaknesses, pricing performance and availability. Then they approach the vendor as a large group and strike deals. Think of them as ad-hoc buying cooperatives. Practices like this will change the rules for entry into these ultra high-growth markets.
  • Consumer offerings will be forcibly unbundled through 2015, wreaking havoc with business models—As ultra-wired consumers grow in buying power, they recommend an ever-increasing array of products to each other. They will demand product and service componentization, so they can create their own products and services collaboratively. Yesterday’s music package was the “album.” Today, consumers buy songs, publish playlists and shuffle their songs at will. How much longer before book chapters go this way? Cameras? Amplifiers? Autos? Cosmetics? Consumers will specify components and force mass customization.
  • B2B markets follow B2C innovation—all B2B executives are consumers, and their expectations are set by their individual experiences. B2C innovation is extremely relevant in your ability to create rewarding experience for your B2B customers.
  • Emerging leaders will dominate by providing incomparable customer experience—Apple, Starbucks and Nordstrom create breakaway value by tuning into the experience a customer has; in fact, their “products” and “services” serve props in creating experience. Further, customers increasingly create collective experience; they describe their experiences and define how products and services are relevant to their experience. This will shorten product life cycles even more and pressure business models.
  • Increased collective consumption will drive further commoditization—As the portion of on-line consumers continues to increase, the commoditization of mediocre products and services (those that do not provide differentiated experience) will accelerate.
  • By 2015, 25-40%of enterprise business will be executed by global partner networks—The stand-alone computers of the 1980s are all but gone, and the enterprise will follow a similar path. It will be inseparable from its partner network, which will have redundant providers so that the enterprise will not be dependent on any node. And much innovation will come from the network. Outsourcing is a transitionary practice that enables companies to build collaborative practices while moving non value-add processes outside.
  • India and China will emerge as innovation and intellectual property leaders by 2020—Making the world’s products, services and living standards available in radically different means and social contexts will demand unprecedented innovation, and these countries’ talent, motivation and need will create the perfect storm for an explosion of creativity and IP.

The new importance of innovation and collaboration

  • Innovation is a repeatable process that creates discontinuous new value—it breaks the mold by: 1) catalyzing new thinking about customer experience; 2) structuring new thinking into actionable ideas and solutions; 3) testing the solutions’ ability to create the desired experience; 4) scaling and delivering the experience. Information sharing makes or breaks the process, and new collaborative Web applications and work processes can speed them up and increase accuracy.
  • Collaboration is a style of interaction in which diverse parties work together to innovate—enterprises can collaborate by assembling cross-boundary networks of value chain partners and customers to operate short-cycle innovation projects that address all aspects of customer experience: design, service, disposal, collateral products/services vital to the experience, etc.
  • Innovation is widely seen as the means to drive the top line, the traditional model fails consistently—innovation has rarely been practiced as a core competency due to the Industrial Economy’s long product life cycles. 96% of corporate innovation fails* because companies have practiced it as a secret process conducted by specialized experts, in internal “labs.” These experts too often did not understand customer experience.
  • Customers demand true insight into their experience—marketing’s focus groups and database analysis take too long and are too error-prone because they don’t deliver a holistic view of experience. They are product-focused, not experience-focused. There are too many layers of management involved in “product development,” which, like technology commercialization, consistently fails because the process is too ponderous and do not invoke real customer insight.
  • Leaders will engage customers to design their own products and services—and this process will attract customers to participate in innovation networks, which will pair diverse customers with various experts. The knowledge of each participant is vital, but the secret sauce will be orchestrating the knowledge to produce short-cycle, actionable results consistently.

The bottom line is that mobilized customers accelerate success and failure, and leaders will thrive by creating collaborative innovation processes.

Executive Summary: Strategic Corporate Transformation Trends Unveiled at IDC Outsourcing Forum Midwest

Clear Outsourcing Adoption Curve Emerges

IDC-main-grfx2The IDC Outsourcing Forum Midwest convened sourcing thought leaders from global enterprises, world-class outsourcing providers and IDC’s leading analysts in Chicago September 11-12, 2006. They shared pioneering experiences that are pushing the transformational boundaries of outsourcing, one of the most important management practices to emerge in the 21st century. Case studies from the Williams Companies, AOL, Lucent, Barry-Wehmiller and Procter & Gamble explained how to use outsourcing to satisfy multifaceted business objectives, and a clear adoption curve is emerging that describes how outsourcing is reshaping the world’s largest organizations.

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Sneak Preview2: Surprising Manufacturing Case Study to Be Presented at IDC's Outsourcing Forum

Surprising Manufacturing Case Study Featured at IDC Outsourcing Forum shows how outsourcing is creating more onshore manufacturing jobs.

Surprising Manufacturing Case Study Featured at IDC Outsourcing ForumReaders of U.S. and European press are too familiar with the plight of manufacturers—and how outsourcing is increasing cost pressures and sending even more jobs overseas. What is less known is that leading edge manufacturers are beginning to use outsourcing to increase local employment by making local companies more competitive.

Forum attendees will hear how Midwest U.S. manufacturer Barry-Wehmiller, which was featured in BusinessWeek’s The Future of Outsourcing, is creating a new business that turns around manufacturers by improving their business processes, which makes them more competitive and ends up increasing local employment in many cases. Forum presenter Vasant Bennett is President of Barry-Wehmiller International Resources (BMIS) and a chief architect of BWIS’s emerging service offerings. He spoke to the Global Human Capital Journal last week.

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Sneak Preview: IDC's Outsourcing Forum Will Debut in Chicago September 11-12

Part of the IDC Outsourcing Forum Midwest Report

IDC-main-grfx2Midwest executives will have an excellent opportunity to learn how to take their outsourcing strategy to the next level next week, when IDC will bring their Outsourcing Forum to Chicago. Themed “Reinventing your business through BPO and ITO,” the Forum will feature speakers from Proctor & Gamble, Lucent, The Williams Companies, NiSource, Goodyear, Barry-Wehmiller and Hydro One Networks. In addition, world-class outsourcing providers such as Capgemini, IBM, Hewlett-Packard will offer practical advice, and several of IDC’s lead analysts will offer their insights.

I was able to catch up with event chairman Bob Welch, who previewed some of the Summit’s key themes. I also have information on a special registration deal.

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The Silver Lining in India's Infrastructure Gap

The Silver Lining in India’s Infrastructure Gap posits that India’s poor infrastructure face force it to develop more lucrative Knowledge Economy assets.

India is often described as a mixed proposition with respect to its future promise. Although few would question its brilliance as a “burgeoning technology economy,” most people temper this with somber remarks about its lack of “infrastructure.” However, I will argue that India’s limitations with physical infrastructure will actually help India get further ahead than if it didn’t have such problems.

In the popular view (see Indian Raj and its quote of The Houston Chronicle), India’s technology expertise, language skills and legal sensibilities are its trump cards, but this is compromised by its lack of roads, transportation of all kinds, network infrastructure, electricity, and so on. High tech companies have to build their own generators and network infrastructure, and leading providers have created islands of world class capability to assure their global clients that they don’t depend on the country’s infrastructure. China, on the other hand, is generally seen as a paragon of world-class infrastructure, especially physical infrastructure. Woe is India.

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Agility on Tap: Demystifying the Virtues of Virtualization

Bryan Doerr, CTO of IT services powerhouse SAVVIS, pulled off quite a feat at the Technology Executives Club Outsourcing Update in Chicago last week: in 30 minutes, he explained how visionary CIOs were increasing the value of “IT” by making it vanish. “IT” is not merely being commoditized but must entertain an even more ignoble fate—being virtualized—and this is an exceedingly good thing. Continue reading Agility on Tap: Demystifying the Virtues of Virtualization

Marketing Rosetta Stone Revealed at BIGfrontier/Mobium Creative Group's New Paradigm Series

Dr. Clotaire Rapaille served a delectable elixir to a packed room of B2B marketers at BIGfrontier yesterday. His talk spanned business in China, investing in India, a new value proposition for shampoo (think “breastfeeding”), why people drive Hummers to the mall, why French people don’t work and myriad others. Rapaille (“Rah pEYE”) lists half of the Fortune 100 has retained clients because he has a track record with helping them understand the inner structures of consumers’ minds and, therefore, how to communicate with them. Moreover, many of these inner structures hold true across cultures which can enable companies to develop offerings that will hold true globally. Sound impossible? Read on.

As usual, I will share my notes from the meeting and follow those with some of my insights but, unlike the usual custom, I have also interspersed some material from one of his major books to fill gaps. The topics he addressed were intricate and complex, and there wasn’t time to delve into the details of the background research.

Background

Rapaille, a Frenchman who subsequently became virulently American, began his career as a psychoanalyst working with autistic children in Switzerland, which gave him insights into how the brain worked and developed. He later came to the U.S. and applied his learnings to marketing and, for the past 30+ years, he has led studies (“discoveries”) of consumer behavior, which are sponsored by corporations, that aim to reveal specifically how consumers experience cars, shampoo, coffee, etc. Here are some of the key concepts behind how it works (for more information see 7 Secrets of Marketing in a Multi-Cultural World, The Culture Code, which is just out this month, or his consulting firm’s website).

The Three Brains

Humans have three brains, which are like concentric circles. The interior is the “reptilian” brain, which chiefly deals with survival and procreation. The next layer is the “limbic” or emotional brain, which is concerned with love, relationships and seduction. The external part of the brain is the cortex, which is the intellectual, rational, layer. Guess which brain wears the pants of the family?.. right, the reptilian brain. Second, guess which brain we like to believe makes the decisions?.. right again, the intellectual brain. We humans like to think that we live life rationally, and marketers create offerings based on their research that appeals to how people say they act. However, by understanding the reptilian brain, marketers can relate to the real decision maker. We are born with the reptilian brain, the emotional brain develops when we are children, and the intellectual brain begins to develop around age seven.

Furthermore, each culture—he mentioned U.S., French, German and Eskimo examples—is a survival kit for how to succeed in life, whatever that culture’s vision of success is. Most relevant to marketers, each culture collectively experiences things in different contexts and has different expectations. Love, for example, is viewed as a “temporary disease” in Japan. Parents are respected for their knowledge of the world, so they are much more qualified to pick a good spouse, as young people know so little. The U.S. is a divorce culture—not a love culture—with over half of marriages ending before they begin (ample prenuptial agreements to ease the transition ,^). This is relevant because many products and services are tied to a culture’s experience of “love.” Another interesting example was the Eskimo daughter who would embarrass her mother if she revealed that she was in love with merely one man. In that culture (he didn’t specify the tribe), being in love with three men at once was desirable, and five would be even better. Winters are obviously long and lean, and women, who care for the children, fare much better if they have several men bringing food. Many men die hunting, cutting off the food supply, so redundancy is prized.

Everything that is in a culture’s experience is “imprinted” at a certain time and context and therefore has a different meaning in each culture. Imprinting is a process in which the brain forms impressions. Over time, it makes mental pathways that, once made, are difficult to change. Each culture has a collective unconscious, which is a set of shared imprints that helps its members to understand the world and that molds their behavior. Moreover, emotions are the mechanism that creates imprints. Autistic children had trouble imprinting because they had trouble feeling. There is a logic behind the emotion of a culture’s imprint, and understanding the logic is critical to communicating with that culture. Of course, most people are unaware of these imprints.

For U.S. citizens, the smell of coffee is imprinted during infancy, and Americans like the aroma far more than the taste. It means breakfast prepared at home, mother and comfort. Client P&G tested the study’s findings several times before changing Folger’s value proposition as smell, not taste. Safety is a key motivator to the reptilian brain. Another example is the Boeing (the client) and the Airbus rivalry. Americans are generally invested in being the biggest in everything, so not competing with Airbus to build the biggest airliner was hard not to do. But they concentrated on small, point to point design—and safety. Speaking to the reptilian brain, some key messages were, “In a plane crash, would you like to try to get out of a plane stuffed with 900 other passengers or one with 300?” Air quality is important, so the 787 has temperature and humidity controls at each seat. Safety/immediacy: a smaller, fuel-efficient plane goes point to point without stopping. It is safer and faster, with fewer things to go wrong. Large planes depend on hubs and making stops.

Returning to the three brains—I’ll read between the lines here—people make up their minds with the reptilian brains, and their feelings about their decisions are colored by their imprints and emotional brains, but they explain their decisions with the intellectual brains—even to themselves. Marketers, therefore, need messages that appeal to the reptilian, but they also need to feed the emotional and intellectual brains’ need to be heard; they need to give the reptilian brain “an alibi.” Moreover, the reptilian brain “wants it now.” “One step marketing” delivers a far higher response. If you need two steps to buy, you will lose 50% of the audience, 75% with three steps.

Contrasts in Culture

A little 787 vignette: since Japan Air Lines was an early customer, 25% of the 787 is built in Japan, by a U.S.-Japanese team. It was a new design, all the plans were made and all workers assembled. The Americans were leading the project and announced the start, but the Japanese didn’t move. The Americans announced again with the same result. This cycle repeated several times, with the Americans thinking that they hadn’t been understood and varying the language slightly each time. Finally they asked the Japanese why they weren’t starting. The Japanese leader said, “Only Americans can start to do something they don’t know how to do.”

Therein lies a strength of the U.S. culture: Americans learn by making mistakes. It’s okay to make mistakes in the U.S. You get up, dust off your trousers and begin again, and this is accepted. Underdogs and comebacks are deeply embedded in the U.S. culture. In Japan, hara-kiri. One dearly pays for mistakes, so one considers very carefully before starting something. In Japan, the sense of the “present” includes three generations before and after current decision makers. In the U.S., money is highly desirable and openly sought after (if you equate money with happiness, which is implicit in the culture, it’s even in the Constitution as the “pursuit of happiness”).

In French culture, money is seen as vulgar because power in France coalesced during the Middle ages—before the mercantilist state, during feudal times. Power comes through money in the U.S. and through privilege in France, where working is for peasants and is not desirable. Today, the unions and socialists have become the new aristocrats, as they insist on their privilege. He counsels companies to do business in France as long as they wish, but not to own anything there. Je pense, donc je suis, Descartes’ famous contribution, reflects the deeply-embedded French belief in thought as an end in itself (“I think, therefore I am”), and French people believe that they think for the world. Americans, on the other hand, are people of action. Shoot first, aim second. It’s not too difficult to see how these differences produce conflict!

Marketing to the Reptilian Brain

Most of the context of Rapaille’s remarks was B2C, but as every B2B marketer knows, everyone is a consumer. Everyone has a reptilian brain. To communicate with the reptilian brain, structure is more important than the content. If you direct messages to the structure, you will succeed more often. For instance, Pantene made a breakthrough some years ago. Every decent marketer knows that women buy most of the shampoo, regardless of country. In addition, women usually are the nurturers of the children. However, shampoo was marketed as a cleaning product. Based on their studies, Pantene decided to try marketing shampoo as a way to nurture the hair and make it grow longer and more healthy, which resonated with women’s nurturing instincts and the reptilian brain. They created a completely new value proposition and were highly successful.

Another example of the reptilian brain’s logic is the popularity of large SUVs in urban areas, the “driving the hummer to the mall” phenom. From an intellectual point of view, it’s complete nonsense. Although Rapaille didn’t share this at the meeting, his books address it: the reptilian, being about safely/survival, wants to feel secure, and we live in an increasingly insecure world. Many countries in the world with long histories of terrorism cannot understand that the “9/11” attacks in the U.S. were a turning point. Americans had been very isolated and protected and, like all people, they want to feel safe, and “war vehicles” confer a sense of safety. In addition, Americans are preoccupied with power, and large vehicles satisfy that desire.

Ventures in China, Investments in India

Rapaille’s consultancy recently completed “discoveries” of China and India in which numerous multinationals participated. Moreover, he led a “discovery” in Venezuela pre-Chavez and recommended that companies exit immediately. He sees many parallels in China and cautions foreign business to take care when venturing into China. According to Chinese beliefs, China invented everything, and Europeans plundered China during the imperialist era. Today, Chinese are simply taking things back. This is a deeply held, unconscious rationalization that operates within Chinese-foreign ventures. According to Confucius, a key operating principle between peoples is “reciprocity.” Foreign companies should insist on reciprocity when forming ventures in China—and in the same time window. Chinese will complain but they will respect their partners. He repeated that China was a communist state, and he would neither predict nor be surprised if the state repossessed foreign holdings at a certain point, as Chavez is currently doing. He insists that it is extremely unwise to invest with a ten year ROI. Insist on a very tight ROI. Don’t allow ideas, technologies, and business techniques to be appropriated.

India is a different story. The country is a mess from an infrastructure perspective, but it is an excellent investment. Its culture does not contain China’s deep suspicion and hostility to foreigners. It looks like a much riskier investment in the short-term (than China, which is rapidly becoming a gleaming infrastructural beacon of progress), but investments should produce very handsome returns in the long term.

Rising Fascism in Europe

Dr. Rapaille made a comment about the rising fascism in Europe, but time didn’t allow for a thorough explanation, so I’ll offer one here by sharing some ideas from “7 Secrets,” which addresses the issue. First, a culture is distinct from a country. The failure to recognize cultures is one of the key problems in the world today, and the problem is increasing. People confuse the concept of a country with the concept of a culture all the time (Kurdish people v. Kurdish culture). Countries have significant rights but cultures have few rights. As globalization strengthens, people all over the world are afraid of losing their cultures. In many parts of the world, globalization is seen as a potential destroyer of culture, and fascism offers a solution. Rapaille clearly believes that we need to address the root cause by explicitly giving cultures rights. This could address insecurities directly and avoid violence that fascism brings.

Comments on Issues in Global Leadership

This part of the presentation was very short and conversational, so the facts behind the statements were few; however, from reading”7 Secrets,” I know that there is significant research behind them, and I’ll share my notes even though they are sketchy.

The world is currently experiencing a leadership crisis. The U.S. culture is deeply adolescent: Americans don’t want to be limited, to age, to grow up. Their culture is full of ambition, big dreams and fantastic accomplishments. Yet, the U.S. is currently the world’s sole superpower, which creates a kind of vacuum because Americans don’t want to adopt a parental role. They are most interested in their own ambitions and accomplishments. The U.S. does not have an ideology as did the USSR; the U.S. is an ideology, and it exports its culture and ideas for widely, profoundly and quickly than any previous culture.

There is an emerging shift in leadership as women and female psychology wax in influence. Here, Rapaille goes into how biology affects sensibilities and strategies of each gender, and (implied) one should not understand these things literally, but rather as profound causes of underlying operating principles of each gender. In most western cultures (this was implied), men have had the most decision making power in business and political affairs up to this point. Males have billions of seeds that die quickly, so they are driven by quantity and speed in everything they do. Females are born with 300 seeds, which leads them to consider, delay and reflect. To procreate, males have to go outside themselves while females take in the males’ seeds under certain carefully selected circumstances. The male does not change in procreation, while the female is transformed during pregnancy. The female, in nurturing the young, has a very long-term outlook while males have a short-term outlook. Males define things through elimination while females do the opposite, through inclusion. Rapaille therefore thinks that the human race has more hope of survival if female influence continues to increase. He noted that female power lags significantly in many Third World countries, especially the Middle East.

Technology, Science and Religion

In the U.S., technology’s value proposition is “magic.” (I surmise that this is because the U.S. emerged as a country and as a culture during the Industrial Revolution, which has delivered an incredible string of technological wonders that have changed people’s lives profoundly (pervasive electricity, medical advances). I.T. is simply the latest technological wonder. It’s already possible to send your oven an SMS to ask it to begin cooking something, and these things will soon be pedestrian.) Americans see technology as salvation.

Science, on the other hand, is increasingly mistrusted around the world. It raises disturbing questions and offers no certainly. It only raises anxiety levels. As it wanes in influence, religion waxes, and we have a marked resurgence in religion around the world.

Analysis and Conclusions

  • I think that likening the reptilian brain to the Rosetta Stone is useful because the reptilian brain is what unifies people, regardless of their cultures and living places. By understanding it and how it interacts with the parts of the brain that are culturally-dependent (the limbic and cortex), we can communicate more effectively and efficiently. Marketers and politicians who do not understand it are much more prone to make mistakes. By the way, because the Rosetta Stone was inscribed in two languages, Egyptian and Greek, and three writing systems, hieroglyphics, demotic script (a cursive form of Egyptian hieroglyphics), and the Greek alphabet, it provided a key to the translation of Egyptian hieroglyphic writing.
  • Of course, the idea of understanding people’s deep motivations can be disconcerting because, like all insights and understanding, it can be abused. In this era of transparency, companies are learning that open and honest communication with customers is not only ethical but good business and truly serving the customer means engendering rust through respect.
  • The distinction between culture and country is profound. Countries are the current context for political power in the international context. In addition, countries are largely defined by geographical boundaries (their languages and laws apply within those boundaries). Having countries defined by land boundaries is a legacy from the Agrarian Economy. In our emerging era of networks and global collaboration, might the nation state prove to be a legacy structure? Perhaps culture could become more relevant, and country less. If we developed a way to decouple cultural rights from land (countries), that might significantly decrease the need for conflict to secure territory. The territory is only the means to the end, to have cultural rights.
  • Rapaille’s brief mention of the French imprint of privilege bears further investigation. If, as I surmised, this is due to the French coming of age during feudal times, it might also be applicable to other countries with strong feudal traditions. What about Russia? Regarding countries, I observe that understanding the historical context of their inflection points is very insightful (see Global Inflection Points). Rapaille would call them imprints while Adam Hartung would term them “lock in.”
  • Rapaille’s remarks on male and female proclivities and ramifications for leadership may seem quaint at first blush but can actually be far-reaching. Today, we make constant references to how “small the world is getting.” For most of the history of humankind, however, the world has been large: there have always been oceans to cross, lands to conquer and resources to plunder. We are coming to the point at which all of these things are finite. According to Rapaille’s theory, a finite world would represent a crisis for male-oriented leadership, which is focused on the external. I postulate that a small, finite world will necessarily become internally focused, which would definitely call for more female-oriented leadership.
  • In general, Rapaille’s subject has deep and broad ramifications for anyone who wants to communicate with and understand people. Many people in the audience were fascinated, and I hope their fascination leads them to delve more deeply into his work because it’s difficult to fully appreciate it in a one hour talk.

Transformational Promise for Outsourcing

Accelerating Forces Buffet the Enterprise

Volatility of customer wants and diversity of markets around the world will increasingly demand that enterprises innovate if they want to remain relevant because their current product introduction and innovation processes are woefully insufficient. In addition, several “structural enablers” are driving down the cost of collaboration—globalization, enterprise software maturation, e-collaboration tools and BPM solutions. I think it’s beyond dispute that “emerging” markets around the world look at India as a model, and there will be a cascading wave of new outsourcing providers entering the market in the years ahead, keeping downward pressure on supplier prices and forcing increased innovation across the supplier value chain. For example, many educated young people in these markets are native with e-collaboration tools, which should lead to new models of collaboration. SOA and Web services are increasingly ingrained in enterprise software, opening up legacy and new solutions to web-based, granular sharing of information. BPM, because it digitizes an increasing spectrum of the business process, is an enabler of outsourcing.

Reposition Outsourcing as Iterative Transformation

Outsourcing in 2006 is where e-business was in 1998, when the Internet was a tech playground in the mid-late 90s. The mission of “e-business strategy” was repositioning the Internet in the C-suite, explaining the vision, helping to create a future state and working with clients on their adoption processes. A similar repositioning needs to be done with outsourcing in the next 2-4 years, and early adopters will begin now. Outsourcing is not currently practiced at the enterprise level as a transformational activity. There is an opportunity to reposition it for the CEO agenda. Outsourcing can be an iterative approach to achieving agility by harnessing the drivers listed above to increase innovation, efficiency and responsiveness.

Missing Gold Pieces

The missing pieces are golden opportunities—if core represents 50% of an enterprise’s activities (methinks this is on the high side, but some companies claim theirs is), that means theoretically much of the rest could be outsourced, even allowing for Sarbox and other regulatory constraints. However, using current practices, companies can’t even come close to the potential because they can’t effectively manage the vendors they already have, let alone increase the number and diversity of vendors. Some “missing piece” opportunities are:

  • Transform vendor management by borrowing from best practices in developing distributed systems (with outsourcing, the enterprise’s processes will become more distributed).
  • Build business architecture to manage the increasing distributed nature of the enterprise. Apply best practices from distributed systems to business structures. IBM has some brilliant insight into this: it’s called Component Business Models (CBM).
  • Grow knowledge-based practices and culture. The fundamental tie between high-performing collaborative partners is actionable knowledge exchange. Most companies are ineffective at this now. The industrial enterprise is, in general, a poor collaborator because command/control is a deeply ingrained management impulse.

The Two-fold Value Proposition

There is a rare opportunity to offer a fantastic value proposition: the “traditional” outsourcing value (save money, increased efficiency) plus the “missing pieces” in a continuous, iterative process that can deliver tactical cost and efficiency savings while building strategic adaptiveness to drive competitiveness for the long term.