Foreword

I have recently done some research and coauthored a book^[*] on managerial innovations in businesses and organizations. Using outsourcing to bring about strategic and radical change in organizations certainly qualifies as a managerial innovation. It has all the key attributes, including the potential to improve organizational performance, the fact that most organizations aren’t familiar with it, and the preexistence of some of the components of the idea.

Certainly the notion of turning to outsourcing providers for radical change holds the potential for improved organizational performance. It seems quite logical that specialists in certain business processes could take over other companies’ activities in those areas and make them substantially better. In fact, this type of outsourcing actually encompasses a variety of other business-improvement approaches. Instead of a company’s doing its own reengineering, customer relationship management, or supply-chain optimization, it turns those initiatives over to other organizations that specialize in them.

Our research suggested that, in business and management ideas, there is nothing totally new under the sun. Supposedly ‘‘new’’ ideas almost always consist of previously known components. However, innovative leaders can shape and recombine them to solve new problems.

Using outsourcing for radical organizational change is a new concept, but its underlying components are familiar. The idea of outsourcing is hardly new, and the idea of radical organizational change is certainly not novel. But taken together, they represent a management approach that is quite unprecedented. Plenty of organizations outsource, but they typically do so for marginal or nonstrategic processes that don’t matter to their business success. And many organizations need radical change, but they rarely think of entrusting that objective to a third party.

Jane Linder’s research for this book suggests that this approach is not only innovative but also effective. It has an advantage over more experimental management concepts. It actually works in the great majority of situations Linder has observed. My guess is that outsourcing radical change projects actually leads to a higher degree of success than when companies undertake radical change situations on their own.

Why is this approach more successful than many unfamiliar management approaches? Again, it is based on proven components. Experienced companies know how to use outsourcing effectively. Outsourcing providers know how to deliver sophisticated services effectively. While it may be a large conceptual leap, it’s a small operational step to use outsourcing for enterprise transformation.

In our research on the implementation of business ideas, we found that ‘‘idea practitioners’’—people who make it their responsibility to bring in ideas and make them a reality—are critical to the success of such initiatives. A key reason for the success of outsourcing for radical change is that the idea practitioners who champion the approach within an organization are the company’s senior executives themselves. As idea leaders, they do more than simply create a healthy environment for new ideas. They personally drive outsourcing-based transformation from concept to results.

The other key idea practitioners in the picture are the senior executives’ counterparts at the outsourcing providers. These individuals don’t just recommend new ideas, as consultants typically would. They have the opportunity and the responsibility to implement what they think up. Therefore, the linkage between idea and action is straight and direct. Most of the outsourcing initiatives described in this book received a particularly high level of attention from provider executives because they knew that this form of project was something new for themselves and for their companies. There’s nothing like this level of focus from senior people to overcome obstacles and ensure that needed changes get done.

This is an important book, not only because of the approach it describes but also because of the larger implications of that approach. Many business theorists have argued over the years that a company’s identity is based heavily on the core competencies that it maintains. But if key competencies in a company’s strategy are provided by other organizations, what does this mean for identity and culture? Linder’s research begins to suggest that the ability to work creatively and collaboratively with external providers may be more important than any other single internal capability.

Jane Linder is well equipped to describe this phenomenon. With a background as both an academic and a practicing executive, she looks below the theoretical surface to how things get done in the real world. As soon as outsourcing for transformational change began to be adopted by companies, she started doing both executive interviews across many organizations, and detailed case studies of the most path-breaking outsourcing situations. The book is therefore both timely and based on solid evidence. Her role as an Accenture researcher gave her unique access to the company’s important outsourcing engagements, but she also worked with nonclients and companies that had chosen other providers. It is highly unlikely that we’ll see a better book on this topic anytime soon.

—Thomas H. Davenport

^[*]Thomas H. Davenport and Laurence Prusak, What’s the Big Idea: Creating and Capital- izing on the Best Management Thinking (Harvard Business School Press, 2003).