Outsourcing non-core activities to specialist on and off-shore third parties is a “business as usual” approach to the way many of us now operate, to drive efficiencies and cost savings in a tough climate. What’s newer is the rapid evolution of the “virtual business”, with headline grabbing companies like lnstagram (which has a tiny team), being sold to Apple for around £597m. This trend is set to continue and I am sure it will become part of the mainstream.
For the rest of us, whilst we may be pretty good at identifying our non-core activities, it has to be worth questioning how well we really understand what our core is/should be and build it into a competitive advantage. lf you set up again tomorrow as a virtual business and in theory could outsource every activity, try asking yourself what would you retain as your core?
I am both surprised and alarmed by how many businesses I come across that are like “bagels” with an empty hole in the middle (where there core should be), when evidence shows that the greatest businesses are like “donuts” with the best bits at the centre!
Let me put into context how I think it occurs. Most ventures start with an entrepreneur spotting an opportunity, a gap in the market, an untapped need. They design a solution, whether that’s a product or a service and start selling it. lf it’s successful, the business grows, they employ more people, the entrepreneur becomes MD and they build functional teams responsible for sales, marketing, service, production etc, some of which might be through partnering and outsourcing.
I have witnessed this numerous times in the technology sector and the same thing happens in almost every other sector l’ve looked at. The focus of the business becomes how well its functional teams operate, but the one area that too often gets neglected is the role that the founder originally held. This gets exacerbated even further when acquisitions are made, as generally founders don’t stay for long and so this neglect can spread like an epidemic.
The role generally occupied by the founder is Product Management, even if that’s not what it is always called. This is quite distinct from Product Delivery or product Marketing. It is Product Managers, who identify closely with the needs of customers and prospects (i.e. the market), as well as spot trends and translate these into requirements for products and services (both new and enhancements). Some companies have this role but sadly it’s not what they do, whilst others don’t have it all. Great companies like Apple excel at it, hence their success. To me it is the only true core and needs to be the greatest area of strength.
So if you run a business without genuine Product Management, my challenge is that there is a high risk that your organisation is a bagel rather than a donut!
Martin Leuw is a serial entrepreneur and former CEO of IRIS, the UK’s largest private software house.