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CORE BUSINESS? WHAT IS REALLY CORE?

Escrito el 30 abril 2011 por Jesus Guerro en General

 If we would ask anyone what is the definition of Outsourcing, most probably answer that it is the delegation to external providers of activities that do not add value, so those functions that are not CORE.
However, this definition since some time ago, should be taken with some skepticism.

Firstly, it is of dubious veracity that Outsourcing practice takes place only on those non-value added functions, which in itself is as contradictory as all that all necessary, adds value, brougth either by the output of the process or by the way it is implemented in terms of operational efficiency / organizational and cost, which will suppose an opportunity of competitive advantage to a greater or lesser degree.

Moreover, determining what is Core and what is not is a chance at least, uncertain.
Then we must ask ourselves what we mean by CORE. If we ask this question to the same person we did before, he/she may reply:
“That is which is strategic, what is part of the know-how of the company.”
And we turn to be in a mess again. What is strategic?, what is know how?

Under this approach does not make sense for a company delegate its sales function to a distribution network, or to commission the development of differentiating components to a supplier, or to trust an outside contributor mission to select their future leaders or to deal with specialized financial or tax advice. then are these functions  non CORE for the company?

Answering NO would  be at least, suspect of some degree of irresponsibility.
In a competitive environment in which product differentiation is becoming increasingly complex, technological life cycles are shorter and the need to reduce time to market is more critical, it is not possible to sustain this strategic basis without an efficient partnership not only between internal departments of the company but the integration of knowledgeable partners regardless of their number and responsibilities, as if all of them comprise an unique entity.

Therefore It is pertinent to ask themselves whether a contractual relationship of different types employee or professional,  should diverge on the framework of  its applicability.

Probably not. Pretending to excessively protect know how could be presumptuous and even risky. In a world that moves at breakneck speed and where the inventions should be applied quickly to achieve range of innovation, the strategic focus should be directed to the mission, purpose, method and implementation, rather than on what kind of contractual relationship governs the relationship between the parties.
Experience has shown that collaboration with partners in reducing development cycles and product launches acquires a fundamental nature, since only those that can run activities in parallel speed up new creations in anticipation of the competition, so gaining market share and enjoy profitable margins, at least until to being imitated or allowing others to do it paying royalties on patents as result.
Companies today face two major challenges: (i) Open and spread the Access to Customer and (ii) Ability to Organize, integrate departments regardless they are rewarded through payroll or invoice.
Thus, modern companies focus on Brand Building. The rest is organization, which has been called Orchestration, especially when the company deploys global operations where the participation of service partners is critical to keep the promise of the value proposition. Technical services, customer care, logistics .. Returns ..

Considering these premises among others,  what is really CORE? Are there functions or activities that should never be outsourced? Is It really important who does what in terms of organizational boundaries?

Comentarios

Abel 15 octubre 2012 - 15:07

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Abel

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