Outsource digital functions? The answer is no, and yes

As published in the Mint On Sunday on November 19, 2017

If you’re going to outsource digital entirely, you may as well outsource your entire company strategy

Acme Consumer Products announced its decision to outsource all of its finance- and accounts-related activities to an external agency. From this point forward, the company declared, it will no longer be engaged directly in any activities related to finance and accounts. This not only includes the management of its cash balances, invoicing, receivables or payables, but also price negotiations with vendors and compensation levels of employees.

“We are not finance people,” explained the CEO. “We don’t understand it, nor do we have prior experience in it. So why not hand it to the experts, who know better.”

Sounds absurd? Well, similar logic is often used today, when it comes to the application of digital technologies to businesses.

Now, I wouldn’t argue that digital is as fundamental to business as money (leaving aside for the moment that digital crypto-currencies are threatening to alter the nature of money itself). But just as digital is embedded in every aspect of consumers’ lives, forward-thinking companies are embedding digital technologies into any activity where it helps achieve business objectives.

But, what exactly is ‘digital’?

Digital technologies can be applied to multiple functions in a business. In reality, however, when most people think of “digital”, they think “digital marketing”, and really, they mean “digital promotion”.

But marketing goes a lot deeper than promotion, as it includes customer understanding, brand strategy, product definition, distribution channels, pricing and customer advocacy. “Digital” is applicable beyond marketing, including supplier and partner management, HR, finance and operations.

Who knows your customer better than you?

Venture capitalist Mahesh Murthy tells a story about Carwale, the car shopping website, in its early days. Its founders would ask for approval at every board meeting for a large promotional budget, and he would turn them away each time, exhorting them to improve their product instead.

Pushed to think rather than spend, they built a tool to answer a simple and ubiquitous question—”what is my used car worth?”—that drove website traffic far exceeding any estimates from their proposed promotional campaign.

This was a case of taking ownership of your digital strategy, rather than outsourcing it. A marketing agency would have happily taken charge of Carwale’s promotional budget, perhaps effectively enough for the campaign to be deemed a success.

But only Carwale understood its customers well enough to think holistically about their car buying and selling journey, and create a solution without regard for the traditional boundaries between product and promotion.

Even if this customer insight had occurred to a marketing agency, it would have been loath to sacrifice its revenue stream, which is dependent on a client’s marketing spend, in favour of this product change. But beyond saving money, this product feature gave Carwale ongoing leverage, as unlike promotional campaigns that grind to a halt when the spending tap is turned off, product improvements endure, much like a gift that keeps on giving.

Who knows your brand better than you?

Lest you think lessons from Carwale only apply to online businesses, consider the example of UK-based Innocent Drinks, producer of natural bottled juices and smoothies.

Since 2003, Innocent has organized “The Big Knit”, annually. Its customers knit small, wooly bottle caps and send them in to the company. The visible, colourful caps are sold atop bottles in stores, and the extra 25p charged for the caps is donated to Age UK, a charity for the elderly.

The campaign has raised nearly £2 million for charity, and is an important reason that Innocent is now the largest chilled juice brand in Europe, ahead of Tropicana, and growing faster than Red Bull.

The internet is central to the campaign. The Big Knit website serves as virtual campaign headquarters. Besides driving awareness, the website also features knitting designs, with detailed instructions, to inspire and guide would-be knitters.

The finished products—tasteful, witty, cute or outlandish—are posted proudly on Instagram and Pinterest, driving further exposure, brand appeal, conversation and customer identification with the brand.

Could an agency have captured and communicated the essence of Innocent’s brand values—its harkening back to an earlier, simpler, more innocent time—with, of all things, an online knitting campaign? Would an agency have the courage and insight to suggest that consumers in the digital age are not just recipients of promotional messages, but can also co-create your in-store product? Would an external agency have executed the programme with the same passion and ownership as Innocent’s own employees?

One suspects most agency proposals would have been considerably more banal—along the lines of a laundry list of online banners, social media posts, and search engine marketing.

Digital extends beyond consumer products and marketing

But this is not just about consumer products and marketing. Companies are applying digital technologies and services across functions to drive growth and efficiencies. They talk to suppliers through apps—Uber or Ola’s apps for its drivers being the most visible example for most of us. Large companies such as Adidas, P&G and Starbucks use Hyderabad-based HighRadius’ artificial intelligence-powered platform to optimize cash flow in accounts receivables and payables. Small to mid-sized businesses use online and app-based platforms such as Trukky to obtain dynamic pricing and connect with truckers for small shipments (disclosure: the author is an investor in Trukky).

Large e-commerce companies including Myntra, PepperFry and Grofers are using Bangalore startup Noticeboard’s app-based platform for communicating with, and training, their mobile workforce of delivery personnel. I spoke with Vishal Gahlaut, co-founder and CEO of Noticeboard, to get insight into how Myntra is using his company’s product.

In a dynamic and innovative industry, prior to its adoption of Noticeboard’s platform, Myntra was repeatedly, and expensively, rolling out new policies to about 2,000 delivery staff in over 200 locations across India. Myntra’s trainers had to travel extensively for these roll-outs, which took as long as six weeks.

With Noticeboard’s app-based communication and training platform, optimized for the kinds of low-end phones carried by blue collar workers, training time has been cut down to only a few days. Further, Myntra can ensure training is reaching larger numbers of staff, as previously, attendance levels at one-time, in-person training sessions would reach only about 75%. Online training in contrast, available in the form of scenarios, case studies and quizzes, reaches a larger proportion of the staff, and can easily be audited for “attendance”.

A positive and unforeseen side-effect of this digital implementation has been higher engagement of this dispersed workforce with the company. Myntra headquarters used to be a distant mirage, out-of-sight and out-of-mind, for delivery personnel. Today, the delivery team regularly engages with management for policy clarifications and giving feedback on process, while also sharing images of happy customers, best performing delivery staff, and staff birthdays.

So, is there a role at all for agencies and outsourcing?

It can and does make sense to outsource aspects of your digital execution to an agency or outside vendor. For instance, operational and technical execution of marketing via search engines, social media, ad networks and ad exchanges can be complex, and may be better handled by specialists. Or your requirements in a non-core functional area may be fairly standard, in which case outsourcing can save you effort and time. This is no different from, say, using a payroll vendor in your accounts department.

End-to-end ownership of your digital strategy, however, cannot and should not be outsourced, as there is no such thing as a “digital strategy” per se, any more. “Strategy in a digital world” may be a more helpful way to think about navigating a world where digital is everywhere. If you’re going to outsource digital entirely, you may as well outsource your entire company strategy.

Furthermore, the heart-and-soul of communicating with customers and key suppliers cannot be outsourced. I cringe when I hear of companies outsourcing their entire social media presence, including content creation and conversations with customers. Social media is all about representing your brand with authenticity and a point of view. How can you possibly outsource your own voice?

There are skilled and strategically oriented customer-centric agencies out there, that can collaborate with you effectively to brainstorm, define and evolve your strategy in this new world, including bringing in new ideas based on their digital experience with multiple clients and situations. But ultimately, the digital buck—or should I say the bitcoin—stops with you.

So how does a tech neophyte do this?

If you are not a digital native, taking ownership of your digital strategy can feel daunting, but it doesn’t need to be. I suggest the following:

1. Get educated, stay educated

Whether it’s reading, courses, or conversations with knowledgeable colleagues and friends, keeping on learning about digital is a must. My earlier column provides guidance on how.

2.Trust your instincts about your own business

Digital has enabled deeper customer engagement at every level, but it hasn’t fundamentally changed what business is about—delivering value for your customers. Let your value proposition drive your digital activities, rather than allowing the digital tail to wag the dog.

3. Hire digital talent

Figure out what it takes to get great digital talent into your company, by emulating other companies that have done this successfully. Attracting great young talent can involve significant changes in company culture and management norms. See an earlier Digit Spinner column, for more on this topic.

Yes indeed, the times they are a-changin’. Embrace and own the change, don’t just outsource it.

Nish Bhutani runs an education and consulting company specializing in digital strategies and transformation. His fortnightly column, Digit Spinner, addresses the digital capabilities of consumer businesses. Read previous columns here.

Nish publishes on his blog, and can be reached at nish.bhutani@gmail.com for feedback on this column.

Comments are also welcome at feedback@livemint.com

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