If you follow this column you know I am a fan of some of the behavioral and transaction cost economists, including John Nash and Oliver Williamson. This month I am adding Dan Ariely to my list of big thinkers.
Outsourcing involves major changes in your business model, your teams, your approach to core and non-core business lines and cultural mindsets.
That aspect of the outsource decision – change – is inherently psychological because when you come right down to it, it’s always about your people, their relationships and attitudes, and the way they adjust to new thinking and new patterns that will make or break an outsourcing partnership.
This article originally appeared in Outsource Magazine Issue #27 Spring 2012
Deciding to outsource demands a thorough make/buy analysis. However, far too many companies take the concept of make-or-buy as black and white. Dr. Oliver E. Williamson challenged the traditional make/buy decision process with his Nobel Prize-winning work in the area of transaction cost economics. Williamson received the Nobel Prize in 2009.
This month’s column remembers Julian L. Simon, a PhD business economist. Simon is famous (or maybe infamous) for being ‘The Doomslayer’ because he devoted his life to counter the purveyors of doom and gloom who bemoan global deterioration from overpopulation and resource drains.
By design this column has, for the most part, examined the theories and research of academic and economic luminaries that have helped form the basis of modern outsourcing and my own research and development efforts in the realm of collaborative outsourcing.
The (r)evolution in the outsourcing industry is happening. Innovative win-win outsourcing relationships are replacing traditional cost-focused procurement methods. The University of Tennessee calls these innovative approaches “Vested Outsourcing,” because the company and the service provider work together to align the success of the service provider with the achievement of success for the client’s business. Each party employs its core competencies to accomplish what each could not achieve on its own.
I hope you have enjoyed the last columns focusing on the “economics of outsourcing.” I promised to explore other scholars and how we can learn from their leading work. For the next several columns I’ll be featuring the most influential “Big Thinker” psychologists that have directly or indirectly influenced the development of modern outsourcing.
My last two columns on Umair Haque and Joseph Stiglitz have shifted the focus a bit to the adaptations that global businesses face as more and more challenges to the traditional ideas surrounding capitalism and globalisation emerge.
For the most part this series has examined the big thinkers in economics who have influenced the development of modern outsourcing. This week I want to focus on Joseph E. Stiglitz, whose work has the power to influence how companies think about globalisation.
Do you suspect that there’s something wrong or at least severely amiss with modern capitalism, and by extension the way we outsource, think about value, construct our supply chains and do business? Can’t quite put it into words and context? Umair Haque has many thought-provoking insights for you on the subject.
Haque is Director of the Havas Media Lab and author of The New Capitalist Manifesto: Building a Disruptively Better Business. He also writes a provocative and entertaining posts for the Harvard Business Review Blog Network.
A major focus of this series is on how academics and economists have transformed modern thinking about the nature of the business and outsourcing contract, from its relationship to the firm and how it is used and governed to its relationship on pricing and total cost.
It’s long past time for a change in the way outsourcing contracts are negotiated and managed. In 1968 the legal scholar Ian R. Macneil observed that most contracts are ill-equipped to address the reality of business needs.
Common sense tells us that businesses grow when they innovate. And that those with the greatest amount of innovation benefit the most.
Next up in my series of columns about the great academic thought leaders who were seminal in the development and success of modern outsourcing are two of my favorite game theorists: the mathematician and Nobel laureate John F. Nash, who took economists a step or two beyond Adam Smith with his ideas on game theory and the art of collaborating, or playing together nice, for the win-win; and Robert Axelrod, who verified the beauty of cooperation through his early work with computers to solve a classic game theory behavioral experiment.