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In the past, most companies assumed that the way to create value and, indeed, to win in the marketplace was to have the singular best internal capabilities—from research to innovation to development to manufacturing and beyond. Today, more and more companies know that the best way to bring greater value to customers is by finding, accessing, and taking advantage of innovation wherever it exists—which is, of course, frequently outside the company. They know, in other words, that the key to winning is to “externalize”.
But while the will to externalize is there, and many firms have taken various efforts to do it, most still haven’t truly captured the promise of externalizing. Why? Because while they espouse externalizing as a goal, they haven’t fully embedded the notion of externalization into their internal processes and behaviors. They’re stuck in an outsourcing mindset (at best), focused on ensuring that their internal efforts are as strong as possible and looking to partner only when they believe they have gaps or, perhaps, that there is some unique external capability that they need to leverage. External partners are viewed as a means of fulfilling a specific, targeted function or technology instead of fundamental elements of the company’s strategy.
To successfully capture the value promised by externalization, you need to change the way you think and the way you operate. That means shifting the foundations of the organization from an assumption that you need to win through your own expertise to an assumption that you will win through world-class partnering, broadly defined.
Once you’ve made the mindset shift to winning through partnering, the next step is to embed that mindset into every aspect of the organization—from culture to organizational structure to incentives to processes and tools to skills and behaviors. Otherwise, you’ll have only limited success. Below are just a few of the things organizations need to do to externalize successfully.
Successful externalization doesn’t happen on its own. Leaders need to explicitly define the change in their organization’s strategic assumptions, articulate the implications for the way people will work and how the organizational model will shift, and—most important—purposefully and methodically move the organization to the new, externalized model. Otherwise, externalization will remain nothing more than a nice idea at best, a failure at worst.