Friedman's, "The World is Flat," How Companies Cope, Lesson #6

The best companies outsource to win, not to shrink. They outsource to innovate faster and more cheaply in order to grow larger, gain market share, and hire more and different specialists -- not to save money by firing more people.

Friedman argues that outsourcing is a growth strategy. As noted earlier, anything a company can do to enhance its core competencies will benefit the long-term success of that business. Outsourcing then becomes a way to grow your business. Some CEOs, unfortunately, have taken a narrow view and used outsourcing to generate short-term profits at the expense of long-term corporate health.

That is a systemic problem more than an individual one though. Information technology became a panacea for many corporations. It was relatively easy to save money by investment in I.T. and this strategy became a standard tool to boost profits when, actually, the company was in a downward spiral. The very people a business might depend on for innovation and commitment to corporate well-being were decimated by often indiscriminate mass layoffs. The US auto industry comes to mind as an example.

Toyota and Honda used their much more cohesive employee social structures to reinvent the way cars are built. In response to the early days of the Japanese auto threat, US industries looked for efficiencies in I.T. rather than in understanding how to better compete with the Japanese. The US auto industry's latest dismal performance reflects the sad truth that, among other business performance issues, they never did understand lesson #6.