Exploit Operating Assets in New Ways


Some organizations make a concerted effort to wring more value out of their new tangible and intangible assets than they can get just by using them. These organizations leverage those new assets to create new revenue streams or to further improve the operating characteristics of their businesses. This is one common way organizations extend their business models effectively: They take an asset that supports the current business model and use it to edge out into new arenas.

Using a jointly created asset this way presents some unique opportunities and some unique management challenges. NS&I foresaw the potential for attracting new business with the operation it transferred to Newport Systems, but it went one step further. As part of its contract with Newport, NS&I arranged to share in the benefits if Newport could use staff and other assets for third-party work. If Newport is able to use staff employed on NS&I business for other clients, NS&I receives a rebate. If Newport sublets space in a service center to another company, NS&I is entitled to 50 percent of both the net rental profit and the improvement in spending on its own operation. This gain-sharing arrangement reflects the partners’ commitment to exploit their joint capability to improve their businesses, both separately and together.

The decision to open a single-company center to other clients should not be taken lightly. It is easier than turning an in-house center into a forothers operation, but it still raises important service-policy issues. The management teams of the original partners must sort out issues such as how priorities will be set when resources are scarce, how intellectual property will be shared, and whether staff will be dedicated to particular clients or pooled by function. In addition, they will want to mock up the first year’s gain-sharing report so people on both sides can come to grips with how the benefits will be distributed.

They should expect to encounter new pressures. Since the assets will be shared among several clients, the outsourcing provider will have opportunities to improve operating costs by moving to standard technologies and work processes. Together, the partners should evaluate the trade-offs in swapping a customized, dedicated unit for one that is standardized and shared. The questions in Exhibit 9.2 can assist in this analysis.[6]

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Exhibit 9.2: Should we have shared or dedicated assets?

[6]Jane Linder, Susan Cantrell, and Scott Crist, ‘‘Business Process Outsourcing Big Bang: Creating Value in an Expanding Universe,’’ Accenture Institute for Strategic Change research report, July 2002.




Outsourcing for Radical Change(c) A Bold Approach to Enterprise Transformation
Outsourcing for Radical Change: A Bold Approach to Enterprise Transformation
ISBN: 0814472184
EAN: 2147483647
Year: 2006
Pages: 135

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