Strategically flexible companies will use outsourcing to try out and adopt new business models more frequently, and in smaller bites. They may use outsourcing for transformation when their company has no better option, but they will also use it for innovation all the time. If transformational outsourcing makes a one-time
How would this work? Transformational outsourcing fills the gap between M&A activity and alliances in the CEO toolbox for strategic combinations (see Exhibit 12.3). It holds some advantages over both. Unlike an acquisition, executives need not buy a whole side of beef to get the tenderloin. They can secure precisely the operating capabilities and assets they need to execute their strategy—and ensure that the people with the know-how are leading them. In addition, because of the special structure involved in outsourcing, they are far more likely to actually achieve their objectives than with either an acquisition or a strategic alliance. So let’s
Exhibit 12.3: Outsourcing sits between alliances and acquisitions in the CEO’s strategic toolbox.
All of these techniques for revamping an organization’s portfolio of capabilities share a common assumption—one that limits them. They equate one organizational unit with one way of working. In short, they assume that business models are
This assumption fails to recognize the natural and inherent flexibility of people in organizations. Instead of seeing only the organizational structure, with its rules, roles, and boundaries, we should be looking first at the intrinsically variable capabilities of people working in groups and leverage their
Let me use an organic example. When researchers first started
When executives need to implement change, most rely on their favorite lever, organizational structure. They spin off separate business units to