Chapter 10: Ending and Renewal

Overview

Transformational outsourcing initiatives ultimately end. That is as it should be. The company achieves the changes that it sought, or it runs out of time. These changes pay off strategically, or they don’t. No matter which of these paths a company follows, it must wrap up its transformational initiative and enter a new strategic phase. When the initiative has failed, the outsourcing partner is usually tossed out along with the senior executives who orchestrated the initiative. That’s adefinite end. In addition to the clear and obvious failures, some companies’ results fall in the gray area. In these cases, the organization must decide whether to push on or pull the plug. Again, it may need to adjust the relationship in the process.

A wide variety of stakeholder changes can also interfere with a transformational agenda. The company’s transformational champion, or vital member of his or her team, can leave. The outsourcing provider’s key people can be replaced. Either of the partner companies can experience ownership changes. In the public sector, elections can empower a new political administration. In some cases, these changes can make it a whole new ballgame.

Finally, when executives have achieved their transformational objectives, they shift to operating the business rather than turning it inside out and capturing value from new capabilities. Of course, every business must keep changing to compete, but the nature of this change, well, changes. Sticking with sports analogies, it’s like the difference between the Kansas City Royals and the Yankees. The Royals’ longtime owner died and left the team under the direction of a nonprofit committee divided by in-fighting and acrimony. Predictably, the team’s performance tanked. When David Glass bought the team in May 2000, he had a turn-around on his hands. For three years, he cut deals to bring more money into the franchise, brought in new management, and invested in new capabilities. The Yankees, on the other hand, are currently at the top of their game. They are building on their strengths, shoring up their weaknesses, and keeping their eyes on the challengers. It requires an entirely different balance of creating new capabilities and capturing value from existing ones. There’s no guarantee that these two teams won’t find their positions reversed in a few years. That doesn’t change the point: Dominant organizations manage change differently from those in a turn-around situation.

Every transformational outsourcing relationship will change its character at some point. Exits, endings, and renewals are processes, not events. They work better if they are both planned for and managed well. This chapter talks about how to do both.