Industry insight
part from cost- and innovation-related outcomes, scholars have frequently referred to
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Week 5 framework
3.3 Greater focus on core competencies
Apart from cost- and innovation-related outcomes, scholars have frequently referred to outsourcing as a key mechanism to transfer out non-core activities and utilize the freed resources to advance the core competencies of the organization ( Boguslauskas and Kvedaraviciene, 2009 ; Dess et al., 1995 ; Gilley and Rasheed, 2000 ; Quinn and Hilmer, 1994 ). When a firm outsources its non-core functions to external suppliers, lower cost and access to best-in-class innovations in those functions are obvious benefits; more importantly though, key resources like financial and managerial bandwidth can then be more gainfully used into those activities where the firm scores over its competitors ( Dess et al., 1995 ). A notable example quoted in support of this argument is the experience of Nike and Reebok, which focus on design and marketing of footwear, their core-competence, while outsourcing manufacturing activities. For Dess et al. (1995) , the key is to correctly identify the core competencies and areas that will be important in the future. Quinn and Hilmer (1994) admit that confusion abounds around what “core” really is. The authors also identify risks associated with the espoused approach of outsourcing the non-core while investing only in the core activities within the firm. Either because of technical or strategic reasons, the suppliers might not be able to or might lose interest in investing towards the focal firm’s progress. If by this time the focal firm has lost familiarity with relevant technical skills to retrace its steps and insource the process, there could be significant threats to continued competitiveness. Another possibility which could be impacting the focal firm’s competitiveness is the possibility of the supplier itself entering the market as a competitor ( Bettis et al., 1992 ). Researchers speak of keeping the competitor sufficiently isolated from the real expertise and of investing on strong brands and utilizing the brand equity to counter threats of opportunism ( Lim and Tan, 2009 ). Yet, Bettis et al. (1992) warn us of the risks of assuming that design expertise, market knowledge and brand equity are separable from manufacturing and argue that over a period of time, both market knowledge and design expertise inevitably diffuses to the supplier, especially when the supplier is pursuing a focussed learning agenda. Firms are known to generate new knowledge by novel combinations of existing bases of knowledge in various functions ( Kogut and Zander, 1992 ). Outsourcing also carries the risk of losing cross-functional skills, thus inhibiting the combinative capacity of knowledge bases unless the firm finds ways of communicating and coordinating with the suppliers to create new knowledge mirroring the process which was possible within the confines of the firm ( Quinn and Hilmer, 1994 ). Scholars have been vocal about their prescription of not outsourcing the core-competence of the organization in the search for lower costs and improved innovation capabilities ( Barthelemy, 2003 ; Bettis et al., 1992 ; Chesbrough and Teece, 2002 ; Quinn and Hilmer, 1994 ). Prahalad and Hamel (1990) describe core-competence as the collective learning of the organization, as the communication, commitment and 231 Framework for performing outsourcing capability involvement of its members of working across their functional boundaries. Hendry (1995) laments that while Prahalad and Hamel (1990) called for celebrating and rejoicing in the organizational complexity and the unique combinative capacity of its functional strengths, the proponents of outsourcing while calling for outsourcing the “non-core” elements seem to be ignoring the power of whole in comparison to the strength of its individual parts. With processes branded as non-core and being outsourced, a chunk of shared understanding is also divested reducing the combinative and perceptive abilities of the organization ( Hendry, 1995 ). In a study of the call centre operations of Vodafone’s Greek subsidiary, Tsoukas and Vladimirou (2001) find that even in the presence of thickly documented user-manuals, the importance of shared stories in the community and the informal storytelling helped operators draw upon the existing knowledge about responding to customers. The company culture which laid emphasis on high-quality service propelled the operators to use their tacit knowledge in diagnosing the specific needs and moods of customers, all by a nuanced understanding of their voice and tone, an activity which went well beyond the demands of the hardcoded manuals. Highlighting the importance of shared communication codes and cultural beliefs in such processes, the authors found that operators generated knowledge about customers in myriad ways and then used the informal communication channels to transfer it across the organization. Download 329.89 Kb. Do'stlaringiz bilan baham: |
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