Failure, Success, Entropy, and Outsourcing

Spend any time surfing the blogosphere and you’re likely to come across Seth Godin, a blogging pioneer and virtual legend in the virtual world of cyberspace.

Godin has written 10 books, is an entrepreneur and is described as an “agent of change.”

I’d call him one of the Internet’s foremost philosophers of the moment and an adviser on subjects such as personal and corporate responsibility, thinking beyond the box, taking risks and doing it all ethically and collaboratively in a world that often seems to be moving rapidly away from those values and is stuck instead on self-interest and greed.

His message has great resonance for me and for the transformational potential and message that Vested Outsourcing brings to business and outsourcing.

His posts are usually pithy, very much to the point and often quite profound. For example one of his recent posts on ‘Failure, success and neither’ talks about the magical math that comprises failure or success: “You can pile up lots of failure and still keep rolling, but you only need one juicy success to build a career.” But the thing that kills the equation is accomplishing neither: “If you spend your days avoiding failure by doing not much worth criticizing, you’ll never have a shot at success … and yet we market and work and connect and create as if just one failure might be the end of us.”

In another post from last year called ‘Dancing with entropy,’ Godin wrote that it is “far easier to mix up a Rubik’s cube than to solve one. People are often paid to enforce compliance. The job is to ensure that everything is in its place, that errors are zero; that things are delivered on time and as expected. The random event is a problem, something to be feared an extinguished.”

Godin’s thought meshes with one of the 10 outsourcing ailments that I call the Activity Trap (#3), which can make a transaction-based outsourcing contract less than successful and less than satisfactory, neither an outright failure nor a success.

What usually happens in many strictly-controlled, transaction-based arrangements is that the more transactions that are performed, the more money the outsource provider will make, so there is no incentive to reduce the number of transactions through innovation, creativity and the maximization of tools, efficiency and expertise, because that will result in less revenue for the outsource provider.

No contract, taken in isolation, can be perfectly written or ordered, nor can it account for every outside market change, political event or natural variable. Things change; a transaction-based deal that works fine one month might be totally inadequate 10 months later.

That’s because entropy is inevitable, no matter how carefully planned or constructed a system may be. Entropy is a term that describes how organized or disorganized a system is – it increases as information declines, for instance; as random variables increase, so does the amount of uncertainty. Basically, in an isolated system, be it in nature or a contract, there’s a tendency to move from order to disorder over time.

Godin says that the people with the best jobs “are in the business of dancing with entropy, not creating it.”

That’s the secret inherent in Godin’s message and in committing to a vested, collaborative and outcomes-based relationship: “Take what comes, sort it, leverage it, improvise and make something worthwhile out of it.” That can’t happen very smoothly in a transaction-based, zero-sum, junkyard dog relationship.

“The secret of dancing is that you must respect and admire your partner,” Godin continues. Entropy needn’t be the enemy, because without “random events, there is no dance.”

And no fun. So my advice is not to change partners if the steps become too random, uncertain or difficult: exercise some trust and rationality, and find the best way to dance with them.

Comments

  1. Ernie Zibert says:

    Dear Kate,
    Two points. Contract Management is old school and signals the wrong behaviour. We use Agreement Management and Agreement Compliance. The former has Key Success Factors of having a current copy of the Agreement available to stakeholders and ensuring that changes are reflected in the Agreement and understood by those stakeholders. Agreement compliance is just that, managing the list of promises/activities identified in the Agreement. My second point is that the debate to me is not simply about Contract Management. It is simply one of many relationship governance processes that we need to understand and effectively manage to support the WIIFW rule. I have one idea for this set of processes and would like to understand how you view the importance of these for Rule #5 – Insight governance.

    Regards,
    Ernie

    • Kate Vitasek says:

      Ernie

      I agree with your comments. A good governance structure goes way beyond contract mgmt. I define governance as how companies manage the business and the contract. The best ones I see have include
      – change management process (not just agreement compliance – because a good transformational Vested Outsourcing arrangement by design creates innovative change). We should EXPECT by design to proactively be making changes to the contract as transformation initiatives are created and approved
      – a escalation and innovation management process (how do we fix the bad quickly and promote the good quickly). And what is the agreed upon approach for how the company and the service provider will evaluate ideas for adoption.
      – performance management process (how do we keep track of how we are doing against where we are headed). This is much more than just a supplier scorecard of how the provider is doing against the SLAs. In fact, SLAs by design should be benchmarked and expected to change over time. 95% performance level against an SLA might be good today – but benchmarking may show that 98% is the right target in year 3. Good performance management processes also have some formal continuous improvement approach such as 6 Sigma, PDCA, or other ways to help companies aggressively manage out waste and failures.
      – communications process. What are the communications methods and frequencies for managing communications, updates, etc.
      – formal management structure for managing the business between the company and the service provider. Good governance structures typically use a reverse bow tie vs a single point of contact approach.

      A key point to remember is that companies should avoid micromanaging their suppliers (oversight) and put in governance that will actively manage the joint work collaboratively – with the expectation that the business world (and the work) will change as the organization try to adopt optimizing methods for performing the work.
      Thanks again for your comment.

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