OF AN AUTO:
A complex product such
as a car can be decom-
posed at different levels
of granularity, from large
chunks (e.g., the front
end, including bumpers,
lights, radiator, etc.) to
small components (e.g.,
a brake disc) up to little
What happens When you
outsource too much?
With complex products such as automobiles, integration is a
key element of performance. That means managers must
understand which activities and competencies they can safely
outsource and which they need to keep.
BY FRANCESCO ZIRPOLI AND MARKUS C. BECKER
WE LIVE IN AN ERA in which business disaggregation is the norm. In industry after industry, managers have taken deliberate steps to separate their value chains and shift important activities and functions
to outside suppliers. The outsourcing trend became increasingly visible during the 1990s, when companies such as IBM began to outsource not just manufacturing but also design activities. The trend reached
its peak within the past decade, when even companies such as Boeing started outsourcing innovation activities. But what happens when companies become too dependent on outside suppliers and cede them
too much control if they lack the same degree of understanding and awareness about how important
product or service elements fit together and what’s necessary? Once management lets go of critical internal
levers, how does it go about reestablishing them?
make the right
; Keep activities
in-house that have
direct impacts on
; Maintain control
over activities that
are highly interdependent with the
impact on the performance of the
courtesy of hyundai motor co.