In a recent post on strategy, "A Review of the McKinsey "Strategy Building Blocks"", I advocated for a simple three step approach to strategy inspired by Napoleon:
- Pick the part of the market you want to dominate rather than fighting with the entrenched competition
- Execute a strategy that plays to your special strengths and expertise
- Bring sufficient resources to succeed
If we examine "special strengths and expertise" we realize something important about startups. Startups should only invest to establish and develop their special expertise, such as customer experience, sales, product design and development, programming and not much more. These are the key areas where a product is differentiated. Everything else should be outsourced... and I mean everything...and even design and programming could perhaps be partially outsourced.
Too often companies default to doing things themselves because that is the way it is done or it is perceived to be cheaper. After factoring in the cost of management time, few of these cheaper things are so cheap. If you cannot outsource the activity because you are in sub-Saharan Africa, then the default should be to convert an expense to a marginal as opposed to fixed cost.
So to make this simple, when you start a company you make a quick list of every person and task that is required to operate and then identify which are important. Everything not important should be outsourced. It can be if you work at it.