The title comes from a book I bought in London in December. It is a book by Peter Drucker with some of the worlds top thinkers within management, e.g. Jim Collins and Philip Kotler. I have read a few of Druckers books already and this book will be the next in line.

The book comes from Leader to Leader institute, which is an institute focusing on leadership in the social sector a.k.a. non-profit organizations. But I believe a lot of the content and questions this book raises are surely also relevant for normal profit seeking organizations.

As I have read the introduction, I understand that it is a re-print or 2. edition from a book with same title published in the 90’s.

The Five Most Important Questions are (according to Peter Drucker) these:

1. What is our mission

2. Who is our customers

3. What does the customer value

4. What are our results

5. What is our plan

Just initially looking at the questions, I understand that is was the same questions we were struggling to answer when we had our own company. They seem simple and writing a marketing plan is also straight forward. But going just a bit under the surface you understand the complexity in the questions and how they lead to other important questions that are crucial for your business.

I will try to read the book and give some short answers and views on each question in Peter Drucker’s book The Five Most Important Questions.

// Gyte Gedvilaite, is co-owner of Imaginess I/S, a danish company that assists other businesses in outsourcing their graphical activities while maintaining the comfort of communication and in-house quality. For more information, please visit http://www.imaginess.dk //

Crisis seems to be left the only topic in the business world. Saving expansion to the better times, laying of employees and sending “We do not look for an employee anymore” note to all applicants to the job opening become new trends. How to save costs while keeping sales up – that is the question.

Outsourcing is, of course, simple and well known solution to it and many Danish companies (according to Eurostat, highest percentage in whole EU) use it. Yet there is also a downside for it. Recent survey by Deloitte called “Why settle for less” shows that 39 per cent have terminated the outsourcing contract and came back to in-house operations. Extremely high number that seems to be caused simply by mismatched expectations.

In many cases a company, that decides to outsource any activity, chooses among usual outsourcing countries (mostly in Asia) and the only interest they have is price per hour. Unfortunately, overlooking such factors as quality understanding, efficiency, ability to work without control, meeting deadlines and amount of communication needed in order to finish the project often ends in costing more than expected. Sometimes so much more, that coming home and paying twenty times higher salary is cheaper.

That does not mean outsourcing is a no-go. Settling for less is. There are few more things to be noted:

• Do not go for usual “outsourcing countries”. They may be the cheapest, but they also know it. When price per hour is low, there is always a way to put on some extra hours. Try to negotiated price per whole project or get estimates of hours that will be used.
• It is not necessary just IT and manufacturing. Even though these two areas are among most popular ones in Denmark, it does not mean other activities have to be done at home. Many services are easy to outsource, for example creation and printing of marketing material, translations or data analysis. Our customers are always surprised, when we tell that it is cheaper to not only design and print, but also ship catalogues from Lithuania to Denmark ( as opposed to ship them from somewhere in Denmark to other part of it). Shipping is usually big additional costs when outsourcing to a country far away, but not in this case.
• Culture is important. From our customers and partners we have heard many stories about “different understanding”. Quality means one thing in Denmark, but not the same in Turkey, India or China. Generally, there are some studies that group countries in some clusters, where things are understood similarly. For example, Baltic region in Europe is considered one big cluster and we always advice our customers from Denmark to choose another country from this region. Salary can be 6-8 times lower, but efficiency, understanding of quality and need for specifications will be the same as at home.
• Language seems to be one of the key problems. Most of Danes speak English very well, but not being able to speak danish and having to translate specifications or tasks descriptions was named as number one difficulty by our customers. Search for a partner in similar culture and who can speak your language and outsourcing will be piece of cake.
• Start outsourcing smaller, routine tasks that are relatively not risky. Once the relationship is build and partner seems trustworthy, you can gradually go to more difficult jobs. Best out of this strategy is that it is totally a win-win situation: you minimize your risk and the company you outsource to has time to learn and adapt to you. Our most satisfied customers started exactly the same way: first outsourcing the simpliest tasks, then giving more difficult ones and finally using consultancy and advice.
• Pay attention to flexibility. It may give you way more value if the company you will outsource to can offer something else, not just low cost. Maybe they deliver so fast, that it is worth paying extra. Maybe they can be the ones that check let’s say spelling mistakes or quality of material. It surely requires trust, but can also take of lots of weight off your shoulders.

Finally, remember that outsourcing is not always an answer. Consider “what” and “how” before seriously making the decision. But if you do your homework and plan actions carefully, very high chance that the day you decided outsourcing will always be marked by a happy face on your calender.

Peter Drucker has over the past 50-60 years been leading on thoughts on business, entreprenourship, innovation and management. Born in 1909 he had closely followed the change from industrialization and into our known knowledge society. He wrote a ton of exciting books and articles until his death in 2005.

From Wikipedia I have gathered some of his key points:

Several ideas run through most of Drucker’s writings:

• Decentralization and simplification. Drucker discounted the command and control model and asserted that companies work best when they are decentralized. According to Drucker, corporations tend to produce too many products, hire employees they don’t need (when a better solution would be outsourcing), and expand into economic sectors that they should avoid.
• A profound skepticism of macroeconomic theory. Drucker contended that economists of all schools fail to explain significant aspects of modern economies.
• Respect of the worker. Drucker believed that employees are assets and not liabilities. He taught that knowledge workers are the essential ingredients of the modern economy.
• A belief in what he called “the sickness of government.” Drucker made nonpartisan claims that government is often unable or unwilling to provide new services that people need or want, though he believed that this condition is not inherent to democracy.
• The need for “planned abandonment.” Businesses and governments have a natural human tendency to cling to “yesterday’s successes” rather than seeing when they are no longer useful.
• A belief that taking action without thinking is the cause of every failure.^[18]
• The need for community. Early in his career, Drucker predicted the “end of economic man” and advocated the creation of a “plant community” where individuals’ social needs could be met. He later acknowledged that the plant community never materialized, and by the 1980s, suggested that volunteering in the non-profit sector was the key to fostering a healthy society where people found a sense of belonging and civic pride.
• The need to manage business by balancing a variety of needs and goals, rather than subordinating an institution to a single value.^[19][20] This concept of management by objectives forms the keynote of his 1954 landmark “The Practice of Management”.^[21]
• A company’s primary responsibility is to serve its customers. Profit is not the primary goal, but rather an essential condition for the company’s continued existence.^[22]
• Organization should have a proper way of executing all its business processes

Many of these points inspire me as a manager and as a person. His views are often deeply philosophical and challanging the perception of normal business.

I appreciate particularly his views on corporate social responcibility and his question of the motive of a business. Is the purpose profit or lies there deeper purposes behind the excistence of business. He and I believe so. Businesses have a deep purpose in every person daily life. Work gives value and meaning to workers, products create satisfaction above the plain marketing message.

I will over a range of posts take out each keypoint and give my ideas to it as well as Druckers. I hope you will enjoy it, as much as I…

On a daily basis I try to run a company. I am co-owner together with 2 partners. It is the company Imaginess design & dtp.

We have been doing this for a year now and I would say we have a steady growth. Our core concept is to outsource graphical design for Danish companies to our Lithuanian company. We started out outsourcing directly to Lithuanian freelancers – but have realized that we need a steady base of work. Meaning full time designers. We have now some nice office spaces in the artsy quarter of Vilnius.

Challenges

The challenges are many and I can divide them on a internal and external level.

1. Communications: First of all, I and one of my partners live here in Copenhagen. It makes communication internally very difficult. We try through Skype and mail – but hard it is.

2. Competences, ressources and capabilities: Our business strategy is highly based on minimizing risks. This means that we have not invested any money in the company. It also means that growth through economical ressources is going slow. We would do miracles with 10 million Euros.

It also comes to the personal competences. A small company is depending on that everyone has a drive and very broad competences. Designers should be business managers and business managers should be designers. And everyone should be skilled in project management.

So when it comes to big organizational capabilities, it is difficult. I see myself as a good strategist, but it is hard to think strategy in a small company where financing is low and most of the time goes with doing daily stuff.

3. External comes when we face costumers – or potential ones. It is hard work to do B2B – mass marketing does not work. And it makes it even harder when there is a high mistrust to your product from the decision makers.

Outsourcing can be dangerous and many concerns arrise with the client. We try to do what we can to reduce these uncertainties, but it is difficult. Therefor we are preparing to hire an external sales consultant to work for us. We realize that as entreprenours we are not professional sales persons. Our sales corner is not working as effective as it should.

So we hope from 2009 that we can have a highly effective outsources sales corner.

Additionally I have also a few other concepts “in the lake” – but let’s take them another day…