Knowledge transfer: extending the value of outsourced relationships
by KRIS COLBY, Ariba
Keypoints
• Make sure that the documented goals for your outsourcing initiative clearly include long-term considerations for knowledge transfer, training, intelligence repositories and the like.
• Ask for, and understand in detail, your provider’s approach to the engagement prior to signing the statement of work.
• Select a technology platform that can provide a full range of process, repository and reporting capabilities, in addition to the more execution-focused activities in sourcing and procurement. Above all, use it.
Companies have a significant issue to deal with when using external consultants or outsourcers for business processes, such as strategic sourcing. Organizations get great value from these relationships, but this value quickly degrades as most don’t have effective policies or procedures for ensuring that the knowledge generated from the engagement — such as how to buy certain complex categories or how to evaluate risk in your supply chain — gets transferred to the enterprise. As a result, the value of that activity is only temporary, as the company never gains the knowledge or skills to sustain the benefits and drive continuous improvement over time.
Making knowledge transfer stick — for a change
We all know the classic tale of outsourcing/consulting engagements:
· a group of smart people show up and …
· they take up a lot of your staff’s time and energy and …
· crank out an enormous amount of analysis and projects in a short period of time and …
· leave behind a pretty binder that sits on the shelf.
Your organization has spent large sums of money and probably seen significant short-term value from the projects. However, six months later nothing has really changed and all that knowledge has departed along with the provider on their way to the airport.
How do you keep your fair share of that knowledge in-house?
Given their experience and access to many world-class organizations, including your competitors, outsource providers can be a valuable source of knowledge and expertise if you can find a way to keep this information inside your organization once they are gone.
In order to make real knowledge transfer stick, you need to address the root causes behind why it often doesn’t happen, because there is:
· a focus on near-term results rather than longer-term enablement and training;
· a lack of a structured approach for driving change; and
· no platform to document, keep and embed the results, process and knowledge gained during the engagement.
Don’t focus on short-term results
In the initial scoping of outsourcing engagements, much of the attention from senior executives is focused on driving short-term results and/or cost savings. Typically, the organization is under significant pressure to “deliver numbers”. Discussions on knowledge transfer and change management are spirited and interesting, but those elements of the proposal are often the first to go when money gets tight during negotiations.
Example: A major US retailer had the competing goals of needing to drive near-term cost savings during a severe economic downturn, but also fix a purchasing group that had substantial structural issues. While there was significant pressure to reduce upfront engagement costs, the C-level executives involved in the deal recognized that this was an inflection point and an opportunity to make long-term changes on how spend management was done in their organization. An engagement was structured to address the short-term savings needs first and incorporate the learnings from those projects into goals for a more comprehensive change management and transformational engagement immediately following.
Lesson: Don’t let the very real pressures for short-term results displace your focus on the long-term needs of your organization. Make sure that the documented goals for your outsourcing initiative clearly include long-term considerations for knowledge transfer, training, intelligence repositories and the like.
Have a structured approach for change
While a certain amount of learning comes through “osmosis” during the engagement, enduring knowledge transfer needs to have a plan to happen. This plan needs specific knowledge transfer and enablement components, goals and tasks with proven approaches to delivery. See a sample framework Figure 1.
Example: During a multi-year engagement with a major international manufacturer, Ariba employed a structured framework that ensured that education, continuous improvement, repositories, reporting and other knowledge transfer enablers were embedded into the overall structure of the engagement. Rather than just doing a sourcing project for a customer, the engagement team followed a process that included:
· process design and mapping;
· embedding processes into technology tools for future use;
· side-by-side execution on early projects to ensure designed processes met needs;
· in-person training of customer staff on both process and technology; and
· design and implementation of continuous improvement processes to make it their own.
Using this framework, the program elements for enablement became as important as short-term savings. While steering committee reports and discussions obviously included project results, they also highlighted areas of both progress and challenge in embedding the long-term lessons into the organization. This provided additional visibility at the executive level to both the value and the challenges.
Lesson: Ask for, and understand in detail, your provider’s approach to the engagement prior to signing the statement of work (SOW). Make sure that the approach has specific goals around enablement and ways to measure progress, and is a “fit” for your organization.
Have a platform to embed results, process and knowledge
Technology is one of the key enablers for making knowledge transfer stick. By employing a robust platform for repositories, process management and execution, your organization can transfer the knowledge of your provider and keep that valuable information and expertise in-house for use at a later date.
Example: In developing and implementing an international purchasing office (IPO) for a major consumer products maker, Ariba focused on embedding all the new processes, category knowledge and sourcing learnings into the technology platform that was implemented as part of the engagement. In this way:
· resident knowledge doesn’t depart with the resident, it stays in the organization;
· ramp-up time for new resources is dramatically reduced, especially important in international situations where turnover is often very high;
· standard processes within the technology ensure that best-practice processes are being used across the organization;
· templates both help resources new to a category and avoid “re-creating the wheel” on projects that are done only periodically; and
· knowledge transfer and sharing can be done globally, since everyone has access to the same system, even if they’re not in the same office, and executives can more easily focus attention on the key messages through newsletters, online training and the like.
Lesson: Select a technology platform that can provide a full range of process, repository and reporting capabilities, in addition to the more execution-focused activities in sourcing and procurement. Above all, use it. Make sure your people are trained, expectations are set around compliance, and you report back on usage.
Finally, it is imperative that customers of these service providers recognize the inherent conflicts of economic interest. Depending on the type of service provider and your relationship with them, their incentives may be focused on keeping their team on the ground as long as possible. Look for a provider that specifically focuses on long-term enablement and make sure they have economic incentives to do so.
Conclusion
Making knowledge transfer stick in your outsourcing/consulting relationship has the potential to create just as much value for your organization as the initial engagement. In order to do so, you need to address each of the three core issues that typically impede long-term enablement: short-term focus, lack of a plan with goals, and inadequate use of technology. Thankfully, none of these issues are particularly complex; they require only awareness, a plan and follow-through to get it done right.
Kris Colby, Director, Spend Management Services, Ariba, Inc, Email: kcolby@ariba.com, www.ariba.com
About the author
Kris Colby leads Ariba’s retail/restaurant consulting practice, helping organizations design and execute sourcing, procurement, supply risk management, and overall spend management strategies that deliver sustainable bottom-line results.
