Chapter 9: Leveraging Capabilities

Overview

A transformational outsourcing initiative can look and feel like a snake that swallowed a gopher. The gopher looks tasty, but immediately after the meal, the snake’s body is stretched and distorted. Digestion takes some time, and during that time, the snake isn’t good for much else. Once the gopher is digested, however, the snake isn’t the same. It’s bigger and stronger.

For most companies, the transition process that comes with outsourcing holds many benefits. Managers learn how their processes work, and they make vast improvements. They use their partner’s distance and expertise to make organizational changes that they never would have done on their own. They establish valuable new skill sets, operational assets, and relationships that they can use to fuel growth in their businesses. And they create organizational momentum: they lift their companies off the dime or out of the downward spiral and get things moving in the right direction. As transforming companies move through their planned transitions, they put the support structure for their new business models in place—the capabilities, physical assets, know-how, and relationships that they need and the appetite to use them. We talked about designing business models in Chapter 5; in this chapter, I want to talk about how organizations actually enact their models and leverage their new tangible and intangible assets to prosper.

As we discussed earlier, companies hold different aspirations for their transformational initiatives. Some executives just want to put their companies into a new competitive position. Others want also to establish an entirely new growth trajectory. Executives’ aspirations color the intensity with which they leverage the new capabilities they have. Let’s talk about three general approaches they take:

1. Actually using the new tangible and intangible assets they have developed

2. Exploiting the new assets to get more out of them than originally envisioned

3. Expanding the partnership to find additional ways the partners can collaborate to create even more value

We will also want to talk about the strategic failures: those situations in which the transformation initiative helped a company build assets and capabilities that ended up being poorly aligned with its strategic needs (see Exhibit 9.1).

Exhibit 9.1: Three levels in leveraging joint assets.