Diagnosing Failure

In transformational outsourcing initiatives, senior executives pay a great deal of attention to implementation. As a result, their implementations succeed. They are often so absorbed in overseeing the transition to new systems, new organizations, new processes, and new facilities, however, that they do not pay nearly as much attention to changes in their company’s competitive environment. When they emerge from implementation hell, they can find that the landscape has shifted underneath their feet. What they originally set out to do is no longer what they want.

The obvious remedy is to review strategic assumptions periodically during the implementation-intensive years of the initiative. But this is easier to recommend than to do. Why? The transformational outsourcing initiative is like a stone rolling downhill. It has direction; it has speed; and it has momentum. It needs these characteristics to succeed. To stand in front of it without killing yourself, you have to drain out some of its energy. This imperils the entire program.

This is the time for war games. With the help of the company’s strategy and competitive-intelligence experts, the senior executive team of each major business unit should participate in a daylong competitive role- play at least once every six months—more often in a faster-moving industry.

Here’s how a simple war game works. The company’s managers form teams. One team takes the role of the company, and the others play the competitors. Colleagues from the outsourcing partner company should be included on each team. Groups of real stakeholders—customers, financial analysts, distribution channel partners—play themselves. Parent company executives and, in the public sector, influential politicians can also be brought into the process. Whether they participate as part of the competitive teams or judge the company as stakeholders depends on how close their relationships are with company executives. Putting them on the teams brings them into the inner circle; giving them a stakeholder role accords them respectful distance. It’s a choice that management should address in designing the experience.

In an open forum, each team has a chance to present its value proposition to the stakeholders. This should include products, services, price points, profitability levels, company growth, and other key characteristics of the company that make it appealing. The company’s own team portrays itself as if it were already transformed. The other teams use competitive intelligence and their own industry insights to portray competitors as they would portray themselves if they were in the room.

After hearing all the company and competitor value propositions, the stakeholders rank the companies. Customers base their rankings on which company they would most like to buy from; financial analysts consider how highly they would recommend each company to their clients; channel partners assess how likely they would be to carry and promote each company’s products; parent company executives and politicians rate their willingness to support the organization given this competitive context.

A facilitated discussion among all the participants follows the ranking exercise. As stakeholders explain the logic behind their rankings, company executives will learn whether their transformational initiative is likely to have the strategic results they envision. As a by-product, they will gain an in depth understanding of competitors’ positions and likely moves. To complete the exercise, the executives should summarize what they learned and what they intend to do about it. This will give them the opportunity to adjust their strategic direction if necessary, to shore up gaps in their value proposition, and to improve stakeholder commitment. If the company’s transformation is on a path to failure, this will provide enough early warning to correct the course.