We have reviewed four major ways to use outsourcing for transformation, some choices of horizon, and a host of potential benefits. Now we want to help you determine how to craft an outsourcing initiative that fulfills the strategic agenda you have set for yourself.
In the past, executives have used an adversarial negotiating process to create the terms and conditions of a relationship. The assumption behind this process is that each company will ensure its own well-being. This process doesn’t provide a sound enough foundation for a transformational outsourcing relationship. No executive should enter such an important outsourcing deal unless he or she is convinced it can be sustained for the duration of the commitment. That means explicitly designing a business model—actually a joint business model—that benefits both partners.
Many executives use the term ‘‘business model,’’ but they frequently have difficulty defining it.[1] Let’s agree that a business model is an organization’s core logic for creating value (see sidebar below, ‘‘What Is a Business Model Anyway?’’). It is:
A set of value propositions and operational processes for delivering on them, designed as a system that relies on and builds tangible and intangible assets in order to create value.
A business model is an organization’s core logic for creating value. It is a set of value propositions and operational processes for delivering on them, designed as a system, that relies on and builds tangible and intangible assets, capabilities, and relationships in order to create value. In a for-profit company, creating value usually means making money.
Since organizations compete for customers and resources, a business model must highlight what’s distinctive about the company: how it wins customers, woos investors, and earns profits. Effective business models are rich and detailed, and the components reinforce each other; change any one component, and you’ve got a different model.
Leaders create viable joint business models in three steps:
Stakeholder analysis
Business model design
Scenario planning
[1]I did much of my work on business models with Susan Cantrell. See ‘‘So What Is a Business Model Anyway?’’ Accenture Institute for Strategic Change research note, March 2000; ‘‘Changing Business Models: Surveying the Landscape,’’ Accenture Institute for Strategic Change research report, May 2000; ‘‘Carved in Water: Changing Business Models Fluidly,’’ Accenture Institute for Strategic Change research report, December 2000.