Can You Value Price for Commodities?
Source: VeraSage Institute
In response to the question above, Ron Baker says anything can be differentiated. In his blog entry of October 9, 2008, he includes an article that recommends outsourcing those services your clients perceive to be commodities. Here is an excerpt from that article:
How do you decide what services to handle in-house and which to outsource? Spend a morning with your leadership team and take them through an exercise of listing all the services and capabilities needed by your customers, then rate these services on a scale of 1 to 10 based on the following:
- Value: How valuable is this to our customers?
- Differentiation: To what degree does this service help us truly differentiate our firm?
- Performance: How would we rate our performance in this area?
- Investment: If we were not already excellent in this area, how much of an investment (time, money, resources) would be required to achieve excellence?
- Repeatability: Are the outcomes of this activity or capability inherently repeatable and predictable (in terms of time, cost, quality, etc.)?
Based on your analysis of the above, each of these services and capabilities can be assigned to one of four groups:
- Core: Done in-house as a core competency of the firm.
- Partnered: Performed in partnership with another firm.
- Outsourced: Assigned to an outside resource with little supervision from you.
- Automated: Turned into an automated service using technology.
If you choose to simply do everything for your customers yourself, you will continue to dig yourself deeper into a hole, i.e., “high-volume, low margin” business.
To read the entire blog entry, click here and read “Big Brains, Small Machine,” October 9, 2008.
From VeraSage Institute, http://www.verasage.com/index.php/community/, October 9, 2008.
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