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Start-ups and outsourcing: How to achieve growth and innovation

Posted July 14, 2015
Start-up light bulb surrounded by thought bubbles

Over the past couple of years, we’ve noticed a number of experts in start-ups, innovation and venture capital discussing the potential benefits of outsourcing customer service and other non-core business functions.

A  post in the Wall Street Journal called “Start-ups Cannot Live Without Outsourcing” caught our eye in particular. In it, private equity investor and advisor David Drake explicitly preaches the potential benefits of outsourcing.

Drake’s message for fast-growing start-ups and established companies alike is the same: when you’re consumed with getting your product out the door (or raising capital, or building your team, or working to grow your market share), the last thing you want to be concerned about is customer service.

Jack of all trades?

You’re talented, no doubt, and if you had the time and resources to devote to it, you could become an expert in customer experience – or tax law, or benefits administration, or any number of specialized functions necessary to most businesses.

But why would you? In his article, “Think about outsourcing as an early stage start-up,” Conner Forrest of TechRepublic implores executives to look inward at their company identity. “The key to understanding what you shouldn’t outsource lies in understanding what core business practices make your particular offering unique,” he writes.

You know how to build the most efficient video compression algorithm, or how to design the best user experience in online video, or how to build a virtual community of taxi drivers. Why add contact center manager to your resume? As Drake says, “When you start as a one-man show and have to do all things by yourself, you find out soon enough that some things you cannot do as well as others.”

That’s why outsourcing was invented in the first place, along with some obvious cost savings and labor arbitrage that came from outsourcing to lower-wage geographies.

Outsourcing as a strategic partnership

But times have changed. The value that can come from combining perspectives, enlisting subject matter experts and partnering to gain access to previously unavailable skills and insights can be a game changer for companies that approach outsourcing in a strategic way.

Another post by Vivek Wadhwa, a fellow at the Arthur & Toni Rembe Rock Center for Corporate Governance at Stanford University, called “Outsourcing Will Grow and Even You Will Do It” continues this thread. “Outsourcing was the Bogeyman of the 90s,” writes Wadhwa. “Protectionists portrayed it as an evil that would take American jobs away. And yes, some jobs did go offshore as people feared, but it made the global economic pie grow bigger.”

Wadhwa goes on to describe how outsourcing is melding with crowdsourcing in a powerful way:

“This is the new era we have moved into: one in which we can harness the brainpower of humanity to help us solve small problems, as well as large. Distance, location, and borders are no longer barriers. We will soon be crowdsourcing solutions to world problems.”

In order to progress in the modern world, argues Wadhwa, individuals, companies, governments and institutions of all kinds will reach their potential only by ignoring geography and tapping into the vast networks of brainpower and innovation made available by technology.

Outsourcing to boost quality and productivity

But even some formidable business minds can still look at outsourcing through too narrow of a lens. Drake says that, “when outsourcing, go in with the intent to decentralize operations and lower costs, but without hampering quality or productivity.”

To us, it sounds like Drake is setting his sights too low. In the modern world of customer experience outsourcing, there are loads of ways to absolutely increase and enhance both quality and productivity. In fact, the right kind of client-vendor partnerships actually feel closer to two divisions of one company than two different firms.

For instance, ramping a customer service program is one thing. Serving as a strategic partner to the management team as they scale the entire company is another thing altogether. One of the ways to achieve such a partnership is to hire incredibly sharp and tech-savvy folks as customer service agents, and then turn them into super-users of the customers’ product.

Those agents will be able to feed product and service enhancements back to the company, pre-empting many future customer complaints, while informing future product iterations in the process.

The key: engaged team members

To get the kind of value mentioned above, you have to engage frontline agents in a way often ignored by companies that outsource. Above all, start-ups need to work with an outsourcing partner with experience working with early-stage companies, with a culture that values the people and communities where they live and work.

Another post from Entrepreneur.com called “Should You Outsource Your Customer Service?” offers perhaps the simplest bottom-line takeaway from this discussion. “Remember, in order to grow, you’ll need to relinquish control to a third party — not always easy,” writes author Joanna L. Krotz.

The era of insularity is over, argue Krotz, Drake and Wadhwa. Ceding some control to outside expert partners, though scary, is the only way to be successful in today’s modern connected world. Growth, increased innovation, and success await those companies who embrace strategic outsourcing partnerships.

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