One of the most common ailments afflicting outsourcing arrangements is the Zero-Sum Game; outsourcing companies play this game when they believe, mistakenly, that if something is good for a contractor, then it’s automatically bad for the outsourcing company (and contractors play the game, too). Company executives who play this game fail to understand that the sum of the parts actually can be better when they are combined effectively. That was proven by John Nash’s Nobel Prize-winning research, commonly referred to as “game theory.” The basic premise of game theory is that when individuals or organizations play a game together (work together to solve a problem), the results are always better than if they had worked separately (played against each other).
We all have played games in business school and simulations that prove this concept (e.g., the “supply chain beer game” or the “astronaut on the moon game”). The first step in overcoming this ailment is to recognize that participants in an outsourcing relationship should actively seek win-win solutions. Unfortunately, many outsource providers that try to cure this condition often have customers that are suffering from the Activity Trap or the Outsourcing Paradox. They want to be proactive – but they are forced into business relationships in which the contract’s pricing model offers incentives to perform non-value added activities, or in which their customers do not allow them to bring proactive solutions to the table.