General Motors Has Not Made a Car in 70 Years
And I respect GM for that. It would be foolish of them to not know the advantages of outsourcing and do the whole job. Let me explain.
GM does what is strategic and outsources the rest – as it should. The company designs cars. It details the specifications for its powertrains, brakes, lights, electrical systems, tires, etc. but – and this is a big but – it doesn’t make any of them. It buys its tires from the big tire manufacturers. It buys its batteries from the big battery companies. It buys its brakes from the best-of-breed brake manufacturers. But it doesn’t even try to compete with companies that are superb at making the components of a car. Instead, it buys from them.
To Get the Advantages of Outsourcing you Must Understand Core vs. Context
GM understands the difference between core and context. Core are functions that make a genuine difference in the marketplace; context is everything else. Context are the things that need to be done well but don’t deal directly with marketplace success.
Office buildings are context. Accounting is context. Designing windshields is core but manufacturing them is context.
Successful companies intuitively recognize the difference between core and context. They focus their energies on what really makes a difference and they outsource the rest.
Marketing Strategy is Core; Marketing Operations are Context
Only management can decide which markets it wants to pursue and how it wants to pursue them. Only management can determine its product and service pricing. Only management can develop the company’s marketing strategy. Its marketing strategy is core.
But the company is not going to be recognized in the market for its excellence in installing and operating SalesForce.com. No company will generate great profits because it did a good job scrubbing its email lists. The company’s stock price will not budge because it wrote a good piece of marketing collateral that an agency could have written.
A prudent company will focus its energies on marketing strategy and outsource its marketing operations. The reason is simple. One of the advantages of outsourcing marketing operations is that companies that focus on marketing operations need to be expert at it. They need to know how to write compelling copy, layout a persuasive website or brochure, and deliver the corporate message cost-effectively through a wide range of channels. They need to understand the full range of digital software sales and marketing tools and know exactly where they fit in a campaign. Some of these tools are best for small companies and others are best for large companies. Marketing operations experts know which is which.
Most companies, particularly small and medium-sized ones, can’t afford to develop this expertise – and they shouldn’t. Just as those companies outsource their legal work to legal firms, outsource their accounting work to accounting firms, and outsource their janitorial work to janitorial companies, they should also outsource the implementation of their marketing strategies to boutique firms that live and breathe this sort of work.
It just makes sense. Companies should only do what they do best and makes a difference in the marketplace. The rest should be outsourced.