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Global Businesses and The Three Bears Question

Three laternative models for companies with shipments of export cargo and import cargo in international trade.

Global Businesses and The Three Bears Question

Every kitchen sink startup has experienced the production crunch when orders go from zero to dozens, and mom-and-pop businesses fret over cash flow when considering adding a second location. Similarly, CEOs of multi-million dollar global businesses face these same issues (and more) with every expansion. Companies experiencing rapid growth—whether to boost margins, overcome competition, or take advantage of new market conditions—will likely face the following obstacles:

Scarcity of Talent. Even in normal, everyday operation, the finding, recruiting, and training of qualified talent can be a headache. This is exacerbated when you need to staff a new division or location quickly.

Scalability. Changing markets, shifting demand, raw material availability… these are just a few of the elements that can drive rapid growth. But what happens when it all changes again? Companies need to be able to ramp up and scale back production efficiently to accommodate the economic ebb and flow.

Company Culture/Morale. The sudden production demands caused by expansion can negatively affect existing employees, who are often tasked with additional work and extra duties to cover the shortfall of talent (see above). Disaffected staff members, if they even choose to stay with the company, do not work at peak efficiency.

Cash Flow Shortfalls. The capital outlay required to expand can overwhelm a company’s existing income streams. While loans can bridge the gap, missing even one payment can start a snowball effect that ends in bankruptcy.

Operational Inefficiency. Production schedules, supply chains, and even org charts can all be rearranged as a result of rapid growth, leading to missed deadlines, confusion, and frustration. And it’s not limited to the rank and file, either. CEOs, board members, and other upper management can get caught up in the minutia and lose sight of the bigger picture.

Customer Dissatisfaction. All of the above directly affects company employees, which indirectly affects customers. This can result in the loss of the existing business and goodwill which is underwriting—or even driving—your expansion.

Let’s examine the choices available to a fictional company as they contemplate an expansion in light of the above issues.

Golden Lochs, Inc. is a Scotland-based maker of cargo security, monitoring, and tracking devices. They have recently landed a very large contract as the exclusive supplier to a new shipping line that aims to deliver over 600,000 TEUs each year. Consequently, they must triple their current production rates.

Traditionally, Golden Lochs, Inc. has had only two choices available. These are the first two bears in the three bears question.

Bear #1 – Outsourcing Model. The company hires a third party to provide components, assembly, transport, distribution, etc. Advantages: Quick implementation, little initial investment, flexible scaling, available talent pool and shared risk. Disadvantages: Lack of direct control/ownership, poor process visibility and company culture not integrated.

Bear #2 – Captive Model. The company builds or develops all assets necessary to perform in the new market. Advantages: Company culture fully integrated, direct control of processes and full ownership/oversight. Disadvantages: Slow recruitment/training of talent pool, long implementation, high initial investment, lack of easy scalability, initial production inefficiency possible and all risks on company.

The CEO of Golden Lochs has three main concerns: to implement the expansion quickly, be able to scale back again if the demand disappears, and have direct control over the production process. Neither of the two traditional business models wholly meets these needs, but there is a third option.

Bear #3 – Hybrid Model. In a hybrid model, the physical assets/infrastructure and talent pool is provided by a third party, but these resources are under direct control of the company hiring them. Advantages: Quick implementation, little initial investment, flexible scaling, available talent pool, shared risk, company culture more fully integrated, direct control of processes and full oversight. Disadvantages: Can be inefficient due to redundancy of duties and may be complex to manage in-house and outsourced teams.

As you can see, the hybrid model addresses each of Golden Lochs’ concerns, and the potential disadvantages can be overcome with good management. And this model not only suffices for manufacturers of physical goods, it also works extremely well for those that produce intellectual property. For example, the not-at-all-fictional company of Indovance, Inc. is a world leader in using the hybrid model, which we call the Twin Engagement Model, to partner with architectural firms, civil and mechanical engineers, sign manufacturers, and companies with premedia needs, offering their clients dedicated teams to produce CAD drawings, site design, pre-press services, and more on a large scale. Indovance maintains the physical assets (buildings and talent), and their clients get direct control of scalable production capacity without threatening the existing revenue streams. We seek to become a true extension of our clients’ teams, fully taking on their work ethics, business goals, and culture, hence the term “twin engagement.”

Each of the above models has its place, but global enterprises facing rapid change can benefit most from the flexibility, fast implementation, and oversight offered by the hybrid model. When talent is scarce, scalability is a must-have, and the company culture is important, it’s the choice that is just right.

Sandesh Joshi is the president and co-founder of Indovance Inc. Prior to founding Indovance, one of the leading CAD and drafting outsourcing service providers in the world, Sandesh worked at SolidWorks Corporation as a senior R&D member.

Global collaboration is a strategy for companies with shipments of export cargo and import cargo in international trade.

Global Collaboration – A New Outsourcing Strategy

To build a sustainable competitive advantage, leading companies are now using an advanced form of outsourcing dubbed global collaboration. For many companies, traditional outsourcing has led to significant cost savings and has improved their bottom-line. Today, companies are discovering even greater returns are possible and are using their global partners to drive top-line revenue with innovative new products and services, faster time‐to‐market and entrance into new markets. This shift from traditional outsourcing to global collaboration has become a competitive necessity which requires adjustments to the traditional outsourcing strategy and methods.

The process we’d like to showcase is a set of best practices that will help you develop the appropriate outsourcing strategy for your business to kickoff global collaboration.

Developing a global strategy can offer a variety of benefits for successful collaboration overall. Organizations that believe in this strategy not only view collaboration as a tool for reducing cost, but recognize how it can improve product differentiation through an increase in ideation. Successful organizations are able to achieve this by leveraging a partner’s superior capabilities and accessing their contextual knowledge. In combination with effective collaboration, this instant access to a repertoire of skills not available in-house enables you to lower costs, increase capability and take advantage of unique competencies. Viewing collaboration through this broader lens highlights how it can be used to support a firm’s strategy, which forces managers to understand the competitive implications of partner selection and assessing their merits on multiple dimensions.

Logistics, manufacturing can benefit
The logistics industry, including shipping, freight forwarding and manufacturing, can benefit greatly from the increase in innovation and resource sharing that comes from global collaboration. Many of the more agile companies within this industry have developed and implemented global strategies that have proven to be a valuable asset. Since the recent emergence of free trade agreements between nations, and a higher demand for goods and services than ever before, the logistics industry has grown exponentially. Logistics service providers that are able to create a transport and storage network that connects suppliers and customers across the globe tend to be able to perform at higher levels. Strategic and sound management along with applying the basic principles of global collaboration, where a network of people with different skills come together to achieve superior innovation performance, can provide them with much needed long-term viability.

Effective global collaboration requires defining the company’s goals, addressing employee concerns, adapting business processes and creating partner relationships. Open communication between teams is critical for cross-project coordination, problem solving and creating an environment of trust. Successful firms recognize the uncertainty in their innovation efforts and the need for senior management participation to seek mechanisms to overcome it. It’s important to understand that a more collaborative model is required to conquer these challenges. Firms that succeed in this area view partners as an extension of their development team, seek their participation in meetings and include them in internal communications. This ensures the tacit knowledge of a project’s context is retained, and communication between teams will likely improve. Understanding how to work together and appreciating the skills of each team member can also prove to be a huge advantage.

One of the biggest challenges in a global and virtual work environment is the inability to see how others are receiving our words across email, phone or instant messaging. Fortunately, video conferencing is now widely used in multinational companies and helps bridge communication gaps by conveying both body language and facial expressions. Staying connected with coworkers in other countries is essential to building rapport and it’s those bonds that create strong teamwork. The different time zones can also be used to your advantage resulting in around-the-clock business operations. This can speed up product development, reduce response time and enhance customer service.

New approaches to IP
Lastly, companies should look into the different options when it comes to the contract terms that govern the funding of projects and payment of rewards. Clear understanding early on of the projects cost and payout is important when aligning the incentives of both the client and partner. Ultimately, this will reduce the need to specify what is required from each on a daily basis, thus saving valuable time. When incorporating global collaboration at your company it’s essential to reward your partners’ ideas and not just the effort in developing them. In effect, you should give them a share of the pie, acknowledging that their ideas make the pie bigger.

Traditional approaches to IP (intellectual property) that assume a firm must develop, own, protect and isolate its IP are becoming increasingly outdated and the new trend is leaning toward a more flexible approach that outweighs the need for control. It’s undeniable that new ideas grow and develop through global collaboration. More and more organizations today are not only acknowledging the benefits that come from sharing those ideas, but are also encouraging them by offering additional rewards in the form of payouts.

In a rapidly changing business environment, organizations look to collaborative work processes to stimulate practices that will generate market value and gain a competitive edge. Individuals working together to create, share, and use knowledge are seen as essential to the effective real-time development and implementation of strategies that form the basis of organizational success. Adopting the most appropriate of these global collaboration best practices – strategically choosing global partners that complement the existing staff, forming open internal communication with new partners, and treating partners as an extension of the team – can expedite ideation and increase results by developing an individual or team to achieve current business goals, meet future challenges and build a capacity for change. In sum, collaboration is no longer a “nice to have.” It is a competitive necessity.

Sandesh Joshi is the president and co-founder of Indovance Inc. Prior to founding Indovance, one of the leading CAD and drafting outsourcing service providers in the world, Sandesh worked at SolidWorks Corporation as a senior R&D member.

Outsourcing may be useful for designing products that may end up as shipments of export cargo and import cargo in international trade.

Advantages of Outsourcing in the Global Marketplace

Although it’s developed a bad reputation over the years, outsourcing is on the rise. And with good reason: it’s a solid business strategy. In today’s competitive global marketplace, the ability to outsource can mean the difference between staying in business and closing up shop—permanently.

Today, businesses looking to be more cost and quality efficient seek to outsource to companies in destinations like India, for example. Not only does outsourcing expedite product development and improve efficiency, but it cuts costs while enabling companies to increase their bandwidth, productivity, and output. It also allows companies to scale projects by tailoring their approach for different needs and requirements, while providing services that are outside of their core offerings or expertise.

But while outsourcing is quickly becoming a popular practice, it’s still fairly new to some businesses. Understanding outsourcing and what it can do is important, as it can play a large part in a business’ success and growth.

Core Benefits of Outsourcing

Cost efficient, quality work. Outsourcing offers businesses the ability to produce quality work at a lower cost. In fact, the cost savings for outsourcing business functions can be close to 60 percent. While many might associate low cost with low quality, the quality of the outsourced work is more often far better than work completed in-house.

Increased bandwidth, productivity, and expertise. Eliminating the need to recruit and train in-house resources, outsourcing companies function as an extension of a business’ internal team. With a pool of highly educated, trained and skilled professionals, outsourcing produces quality work, while increasing overall productivity and efficiency.

Expedited product development. There are also benefits to a business’ outsourcing partner being located in another time zone. For example, while businesses might be closed in the U.S., outsourcing companies in India are working to make sure projects are completed on time and to the highest standard of quality.

Focus on core competencies. Businesses don’t always have the expertise to offer everything a client needs or have the internal resources to get certain projects done. Outsourcing allows businesses to focus on their core competencies and build their brand, while fulfilling all client needs.

Risk sharing. Outsourcing companies not only undertake design and drafting work, but also share the risks with the clients involved in the project. This support team can absorb pressures such as tight deadlines and the sudden occurrences of extra work. In this capacity, outsourcing companies can be an offshore ally to global businesses.

Outsourcing Trend: Scalability

To remain competitive in today’s crowded and competitive market, it is crucial to offer in-demand products and services in a way that is attractive to businesses of all shapes and sizes. What sets some outsourcing and external firms apart are their ability to individualize projects based on their clients’ specifications. Known as scalability, it is a company’s ability to tailor efforts to meet each projects’ needs and accommodate growing requirements.

No two companies are exactly alike and neither are a company’s projects. The scope and approach that was successful for one business could be completely wrong for another. Scalability allows each project to receive individual attention, and decreases time and money spent on approaches that will not garner successful results. As a result, companies are lowering costs and increasing efficiencies while maintaining the highest standards of quality.

In order for scalability to be successful, communication needs to be the first priority for both the company—or client—and the outsourcing firm. The firm’s remote team of engineers must work with the client’s internal team to keep project objectives in mind at all times, and make sure the project scope reflects those goals.

Outsourcing and the Engineering Industry

In today’s global economy, the trend toward outsourcing is especially increasing with engineering companies, big and small. In fact, in recent years, computer aided design (CAD) has become one of the most outsourced services in the world.

No matter where a business is located, it can leverage the expertise of skilled and talented engineers by partnering with CAD outsourcing companies to set up a remote, dedicated team of designers that complement internal staff with reliable and affordable CAD services. This technique works for businesses around the world to manage outsourced projects in industries such as architectural design, mechanical engineering, civil engineering and publishing.

While many companies can be wary of employing an outside partner, many common concerns are myths. For example, some believe there is risk in exposing confidential information. However, a simple non-disclosure agreement should be in place before any partnership and will legally protect the company. Likewise, a good partner with a trusted reputation will have a clear contract in place detailing the fees so there are no surprises or hidden costs.

In general, CAD outsourcing can help lower costs and save time for compact design teams while maintaining the highest standards of quality for all projects—an important asset in today’s fiercely competitive global market. In fact, outsourcing design work can save companies 40 to 50 percent compared to in-house hires and eliminates the additional costs of computers, office space, software and benefits.

Sandesh Joshi is the president and co-founder of Indovance Inc. Prior to founding Indovance, Sandesh worked at SolidWorks Corporation as a senior R&D member. He has an M.S. from North Carolina State University with a specialization in CAD.