This week I came across a video for the book, “The 4 hour workweek“.
Now, may I be the first to suggest this is not suggesting that working 4 hours a week is on the cards, or even possible for us mere mortals. Let’s face it for many folks, 40 is normal and sometimes more I suspect.
However, the video did tweak an interesting idea, the concept of relative value.
To explain I am going to illustrate with something close to home. Should I cut the grass in front of my house, or pay to have someone do it for me?
Of course, I normally mow the lawn myself. This is usually on a free afternoon, at the weekend, with the grass normally at ankle height!
It is a bit of a chore and not that much fun. It is just something that needs to be done (albeit halfway through an audiobook, which is a plus).
But back on campus
However, now let’s assume we are not at home during a lazy weekend, but at work on a Tuesday in a busy week and the lawn outside the building needs mowing. Would you do it? Nope, most of us would likely outsource it.
Cutting the grass at work, requires investment and maintenance of machinery, training to operate and some skill to make it look good.
Also, then if invest in all of this, it would soak up valuable work time. Time which could be being used to earn revenue and help customers elsewhere.
I could be actually losing money, by trying to save money.
Most of us do not work on campuses anymore, nor do we run gardening companies, but how different is this example from many other tasks we do at work. For example, running an operation or call centre, decision science, collections strategies, business intelligence, finance, HR or even credit risk, each of these tasks can be outsourced
Why would I even do it?
Of course it feels good to have a large team around you, develop your own software and be in control of all elements of strategy. It is a bit of a comfort blanket, the idea of self-sufficiency making one feel somehow safer.
However, unless we are running a sheep farm in rural Patagonia, the reality is we are already pretty interconnected these days. Most businesses run on this interconnected interaction between people and systems, whether you are inside the company or not. Unfortunately, any sense of self-sufficiency is largely an illusion I fear.
By considering outsourcing of processes or process elements, it can free up time to focus on other revenue-generating areas, in your core area of expertise.
If you get this judgment of relative value correct this can result in more revenue, cash flow, as funds to invest in greater customer satisfaction/return.
When not to do it?
Of course, let’s not be naive too. If the process you are looking to outsource, is also your strategic advantage and USP, then maybe outsourcing this to another company, is really not such a great idea. (as arguably Dell discovered outsourcing computer part production to ASUS in Taiwan, who then ate their lunch, becoming a competitor).
The other reason for caution is if actually are sitting around doing not much, then the sunk costs of doing some of these tasks (off the side of a desk) falls to zero. Sometimes we just need to get one with it, and who knows if you get good at it, maybe you can do it for other people… a new product line.
Get time back, maximising your relative advantage
However, if you have processes or sub-processes that are shrinking in size or no longer offer a strategic advantage, or processes and technology which has become commodified, then this is well worth considering.
Fundamentally this comes down to, what am I good at, and where I am not can I get time back or an increase in relative value by outsourcing to someone else.
Certainly something worth thinking about Monday…. but for now it is still the weekend, so in the zero sunk cost zone, which means I still have to cut the grass… sigh.
Have a good week everyone.