Core Competency. Outsource the rest.

Apr 01, 2013

One of my clients provides specialty products to the military. My client designs and engineers the products. They contract out the manufacturing. Their core competency is the concept, the design and then specifying the engineering to their sub contractors. And oh, by the way, my client needs very limited investment in machines, so low leverage. A very profitable and fast growing company.

At the health insurance company where I worked, we knew that our core competency was underwriting and fast claim payment. So we did all of that internally. For other specialized industry work (actuarial, investments, legal) we maintained limited in house staff whose role was to oversee outside experts in these specialty areas. We focused on what we were good at and what was critical to our success. It worked.

Last example. One of the Firms that I have worked with over a number of years, specializes in the QuickBooks accounting system. They provide an outsourced bookkeeping/QuickBooks service to both large and small clients. There are a number of accounting systems that compete with, and provide similar financial reporting. The owner of the Firm is very clear. I asked her if her staff would handle non-QuickBooks accounting systems, if the need arose. Answer: “Absolutely not. We do QuickBooks. We do QuickBooks well. We will help them find someone who will work with their system. But we do QuickBooks. That’s all we do.” She’s right. They do QuickBooks, and well.

Stick with the core competency, outsource the rest. It works. Well.

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About the Author

Randy is a seasoned executive with 30 years financial and senior management experience. Industry background includes life and health insurance, manufacturing, wholesale and retail, among others.

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