Without partnerships I would have hardly ever had success — but I had to learn that from experience.
Working life has taught me a few lessons over the years, and although not all of them are worth mentioning, but I would like to share with you a key personal experience. It all revolves around a realization:
Focusing only on one's own abilities and doing everything yourself sabotages all the opportunities that can only be opened by other people.
If this is the only lesson you take away from me today, my job here is done. But If you want to know how an independent entrepreneur changed his mind about outsourcing, please read on.
Hurdles of control and competition
As I have noticed in many conversations with entrepreneurs and developers, I am not the only one who has relied exclusively on himself and the competencies of his own organization for too long. For most managers cooperation with external partners is an enormous hurdle. The decision-makers in top management are often worried about losing business secrets, quality or control over development and becoming dependent on external help. Developers are afraid that they will become competitors or even superfluous over time.
I understand both concerns very well.
Before I became entrepreneur and CEO of HSE, I was a passionate developer of molecular biological devices myself and finally on the board of a globally successful biotechnology company. Although I trained as a molecular biologist, I have always been fascinated by tools and technologies. I developed a PCR system during my doctorate and later launched the first microtitreplate-based nucleic acid purification system. As a biologist, I had no choice but to open fields of competence I knew nothing about. Moreover, I had to rely on engineers without being able to assess their expertise in detail.
With enthusiasm into the resource dead end
Nevertheless, at the beginning of my professional life I tried to implement any question myself.
My colleagues and I were so enthusiastic about our automation ideas that we were naturally convinced that no one could solve these tasks better than we could. This attitude can probably be understood by any passionate developer. Today I am convinced that this mindset is one of the main reasons why external partnerships and outsourcing hardly ever take place in many companies, even though their economic potential would be enormous.
So, like many others, we initially built everything ourselves, from purchasing to manufacturing milled parts, from final assembly and quality control to selling the finished product.
However, there are two obvious limitations to using only internal resources: the amount of manpower and knowledge available. As soon as the project volume exceeds the internal capacities or new technologies and markets emerge - which is almost always the case in a dynamic environment - the organization needs to expand.
Yet building new skills and recruiting new employees takes a lot of time and involves considerable risks. Indeed, retraining your team into an foreign area of knowledge is often accompanied by failures that cost time and money.
The market forced us to enter into our first partnership
In retrospect, my team and I have lost a lot of competitiveness because we tried to establish a device business in a biotechnology company without having all the necessary specialist knowledge. The fact that we were nevertheless able to further develop our business was due to the luck of being active in a very dynamic market.
Over time however, our strategy inevitably reached its limits. At a certain point, we were neither able to manufacture enough equipment nor continue to develop new products on our own. We were forced to look outside our organization for solutions.
Fortunately, one of my employees at that time had contact with a team of consultants specializing in production organization. With this team we were able to multiply the output of our production with simple means in a few days and achieve our sales target. I was impressed with how easily and efficiently we were able to solve the problem with a small team of external experts.
From deficit filling to recipe for success
Encouraged by the positive experience, we then started a complete device development with an external team. This is because our internal teams were involved in a large system development. Managing both projects by building up internal resources would not only have led to significant delays, but probably also to the failure of both projects.
Since the efficiency and effectiveness of outsourcing had given us enormous benefits, we have extended partnering to technologies and components over the years. Everything that was not core competence, we have nurtured through partnerships for our product developments. This enabled us to further accelerate our advancement and make our products more competitive.
Outsourcing and partnerships were therefore no longer just a complement to overcoming internal deficits but became a basis for sustained success. The loss of know-how was almost impossible, since the core competencies were clearly defined and limited to very specific technology areas and the development of entire systems.
The right management is the be-all and end-all
However, partnerships and project outsourcing are not self-running, but a competence, a skill, that must be acquired and learnt like any other. A partnership network develops over many years and the business relationship should always be built via long-term in order to achieve maximum benefit.
Step by step, we built up a partner management system so that we could control the network and expand it if necessary. The system included much more than simply purchasing services. We managed relationships in which the client determines the direction, while also appreciating the partner and their performance. This way even difficult phases are overcome, and the partner takes responsibility for his own mistakes.
I noticed that the commitment, the quality of the work and the gratitude for receiving the order is often considerably greater with external consultants, suppliers and partners than with many internal departments.
As a final note, successful outsourcing also depends on project management. Supplying companies must be managed in the same way as internal companies. Clear project orders, target agreements and project structure plans and responsibilities are basic prerequisites for fruitful and fail-safe cooperation. A company with both partner and project management under control can develop almost unlimited new skills through outsourcing.
I would love to learn how you have experienced outsourcing and working with external partners. Feel free to contact me via email:
Posted by Michael Collasius