Outsourcing is a Fad

Getting to ” Very Satisfied”Lewis and Brzykcy, fortysomething sisters with otherwise normal lives as a training consultant and a management consultant, respectively, in suburban Illinois, decided to channel their own mounting dissatisfaction as customers into a full-flung survey of almost 500 retailers. At home-improvement stores, gas stations, and fast-food restaurants, the sisters shopped, spent money, and took careful notes. And after a three-month, admittedly unscientific $5,000 spree, the duo came to this sad conclusion: Only 3% of their store visits had left them “very satisfied.” The remaining 97% failed mostly on the basics: lack of courtesy and skimpy product knowledge. Lewis and Brzykcy distilled their findings into a self-published booklet titled Beyond Taking the Customer’s Money (available for $5.50 [ “(extlink)Fast Company”:http://www.fastcompany.com ]

The low percentage of stores able to convince 2 customers that they were very satisfied brings to mind one of the key weaknesses of the outsourcing fad. There are 2 sides to profit generation: controlling costs and increasing revenue. Outsourcing addresses the first, but often at the expense of the second, which is why it will be a passing fad.

In many ways, outsourcing seems to be another reaction to the aggressive revenue seeking of the dot-com era. The natural effect of seeing so many high-flying venture capital money spending companies go belly up has been to again focus on controlling costs. In the long run though, that’s a lousy way to be successful.

Controlling costs by outsourcing, increasing productivity, and other means seems to have been very successful in the short run, as shown by the balance sheets of many companies as they’ve slashed workers, and seen their profits soar. What I don’t think we’re seeing is the effect that this minimal cost philosophy has on future revenues, by discouraging innovation and the development of new products or customers.

Much like the “scientific management” trend, or the “copy the Japanese” trend, I believe outsourcing will force some changes, but that it will pass. I think all we need are a few companies to have explosive growth through either superior product development, or the creation of a truly superior customer experience and service culture. Another Hilton Hotels, or Apple Computer launch could make innovation and building customer loyalty the new “cool” trend for corporate executives.

Judging by the success of design and style TV programs, I think consumers are clearly becoming increasingly focused on aesthetics and experiences. I think it’s only a matter of time before someone (hopefully me if I can polish of an idea… 🙂 capitalizes.

After that happens, we’ll finally be able to look at outsourcing as an option, but one only done when it makes real sense from a value propositions. We’ll see jobs go to India or China or Russia if they can be done better there, not because the idea of cheap labor is popular with shareholders.