How do you ensure outsourcing has a positive impact on your startup?
For almost 70 years, there has been a question which all businesses have struggled to answer — what makes a perfect, high performing team? Google undertook the largest global study on team construction and dynamics, called Project Aristotle. Through this, they tried to understand millions of data points ranging from deep psychographic profiles to how and where people had lunch. Combining a meta-analysis of over 50 years of academic research with millions of data points across their globally distributed workforce, their answer was this — there is no pattern which makes any significant difference. Think about that. The individual profiles in any high performing team studied could not be correlated.
Why is this important? Well, when starting a new company there are always gaps in the skill set. You cannot do everything yourself and so will rely on external help to help build out certain parts of the business. This could be sales, marketing, or as is the case with the three businesses I spoke to this week, product building and engineering.
Contracting out core development work can be seen as a negative, but if you can do it with the correct structure in place, it can be a positive force for early-stage companies — helping them cement a strong partnership which can often endure as the company grows in size. Your development partner can become an unlikely part of the high performing team.
So, how do you ensure outsourcing has a positive impact on the success of your startup?
I spoke to three Propel 2020 founders whose experience on the topic ranges from developing technology, creating hardware and building concrete:
- Elizabeth and Kieran Gilligan, co-founders Material Evolution — changing the way cities are built by enhancing the materials used for construction.
- Ben Lindsay, co-founder of Stand — discreet smart jewellery that gives users confidence and peace of mind.
- Paul Buckley, co-founder of Dotmaker — influencer led online home furnishing retailer and content publisher.
Expertise
The founding team at Dotmaker share a background in the furniture industry which sparked their idea for their startup. The premise of the idea is that customers are inspired by the interior design based content featured on the site and follow items seen in these real-life set-ups through to purchase. They can see how different pieces might fit together in a room and directly shop the furniture from the Dotmaker website.
Co-founder, Paul Buckley explains, “It’s a super convenient way to shop. The problem we see at the moment is that when people are shopping to furnish their house, they’ve got to go to numerous different websites.” With Dotmaker, you can browse interior inspirations, add the whole look to your basket and have it delivered to your door all from the one site.
In terms of outsourcing, Dotmaker needed someone to build the back end of the website so that it was fully functioning in line with their vision.
“We got some grant funding that enabled us to use an external source. We’re great believers in hiring expertise. If somebody can do something better than you — and admitting that will give you results — then why not? It means we can focus on developing our core business.”
Their key takeaway in working with external sources relates to the level of trust among teams. “I think reliability is a keyword. When you’ve got a working relationship with a third party, everyone’s got to be open with each other. You’ve got to have a very open communication channel. Recommendations from a trusted source is a very valuable thing.”
“Recommendations from a trusted source is a very valuable thing.”
Time
At Stand, through the development of discreet smart jewellery, founders Ben and Emma are working on delivering peace of mind and safety to their users. “If you find yourself in an uncomfortable situation, you can hit a button on the inside of the device that sends a text and location to a number of preset contacts, almost completely without your mobile phone,” Ben explains. The idea came from personal experience for each founder. For Emma, she experienced feeling unsafe while walking home alone at night while Ben noticed his grandmother’s difficulty in using her personal alarm at home.
“It mirrors what happens with rape alarms, where people are handed these big red buttons — or in my grandmother’s case, an embarrassing medical device that says, ‘I need to be taken care of; I’m not ok to be by myself’ — which is a really horrible thought. Imagine giving your grandmother a nice brooch instead of something like that and the way it gives people peace of mind without embarrassing them.”
When it came to the tech and hardware elements involved, the Stand team made the decision to invest in the expertise of others to build the product.
“Ideally, if we could do it ourselves we would. We come from a mentality that you probably can do anything if you put your mind to it and work hard enough. The balance comes between the time it would take us to learn the skills to do it ourselves and whether our time is better spent doing other things that need to be done in the business. So our focus, initially at least, was outsourcing the tech that would have taken us a really, really long time. When you outsource, you have access to a wide range of people that have good expertise in a certain area, as opposed to hiring someone in your team who has a mixed bag of skills.”
“When you outsource, you have access to a wide range of people that have good expertise in a certain area, as opposed to hiring someone in your team who has a mixed bag of skills.”
Expansion
Right now, the founding team at Material Evolution holds a lot of the power without a need for outsourcing but that will soon have to change. Based on PhD research by co-founder, Liz Gilligan, Material Evolution is based on how we can change the world through the materials we use for construction. “The construction industry equates to 40% of our CO2 emissions. That’s a huge impact. We make sustainable concrete which reduces the carbon consumption by 85% and is made from 90% waste materials.” As it stands, Liz and the team build the concrete themselves, but in the long run they’ll need key partners for concrete production to reach a worldwide audience. Their decision to outsource came down to being able to scale the product effectively. “We don’t want to be stuck in a location. I think the whole idea of changing the construction industry is about making it dynamic.”
Their decision to outsource came down to being able to scale the product effectively.
“For us, the key is finding the right partnerships and finding the right people who realise that this is a great opportunity; showing them that you can make money from this; and that we can become a big player in the industry. Also, once you’ve scaled to that sort of size, making sure we’ve still got the quality control that we expect. I think the biggest impact we’re going to have is if we are nimble and don’t stick ourselves to one factory.”
It’s for these reasons, that unlike Stand and Dotmaker, outsourcing is part of a long-term plan for Material Evolution as it’s unlikely that all of the production will ever be brought in-house.
In summary–the resounding argument from all three related to the importance of building a strong team to start with. However, if that team lacks particular expertise necessary for startup success, founders shouldn’t allow this to stop them from pursuing their vision and, instead, should remain open to bringing in that expertise if necessary.
- Follow the team’s progress on Twitter (@IgniteAccelNI).
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