Medical device OEMs face ongoing pressure to develop and commercialize innovative products faster, at lower costs, and in compliance with increasingly stringent regulatory standards. As in other industries, device manufacturers often look to partner with outsource providers to fulfill both core and non-core functions within their product life cycle. OEMs from startups to Fortune 100 companies leverage outside resources to reduce fixed costs, benefit from external expertise, and mitigate business, technical, and regulatory risks.
As with any business approach, along with benefits, there are also challenges and trade-offs. Without preparation and careful execution, outsourced projects and outsourcing relationships can leave companies questioning their partners and even the outsourcing model. Successful outsourcing is about much more than finding someone who has “done it before.” Effective outsource relationships rely on setting clear expectations, selecting providers that fit a company’s needs and approach, and actively collaborating with partners throughout a program.
Establishing Goals and Expectations
In business and in life, people often dive into solutions without spending sufficient time defining the problem at hand. Einstein is quoted as having said that if he had one hour to save the world he would spend “55 minutes figuring out how to formulate the question and five minutes solving it.” (Cracking Creativity, Michalko, p. 23)
When considering outsourcing, it is important to ask “what and why” before jumping into “who and how.” Outsourcing can be an ideal solution for many development and production needs, but it is not optimal for all needs at all times. Likewise, in some instances, expanding the scope of outsourced activities beyond initial plans may be prudent. Being deliberate about which elements of the product commercialization process to outsource and what outcomes and benefits are expected is an important first step in the process. Even when the scope of an outsourced effort is obvious, companies can benefit from clarifying their goals and retaining this information for use during the selection and execution phases of their programs.
It is also valuable to establish realistic expectations for outsourcing and to identify potential challenges and risks up front in the process. Carrying unrealistic expectations regarding near-perfect performance or a hands-off relationship can generate friction and conflict throughout a program. Outsourcing by its nature implies partnering with another organization that has a different mission and vision, not to mention the likelihood of differences in structure and culture. These differences may in many cases contribute positively to the outsourcing process, but may also carry potential risks to successful outcomes for both parties if they go unrecognized.
As a starting point, OEMs can benefit from documenting program and relationship expectations and associated risks. Items captured pre-project might include budget and schedule expectations, partner responsibilities, documentation and communication assumptions, and risk and reward sharing concepts, among others. With each assumption and project expectation, associated risks can be identified along with contingency and mitigation approaches. Upfront expectations and assumptions will likely benefit from some iteration with the selected provider, and to be most beneficial, should be developed and viewed by both partners as useful guidance to chart the course, rather than burdens or hurdles to struggle through. In the long run, the best scenario for outsourcing is to build a foundation for a “win-win” outcome, where both partners in the relationship are motivated to achieve common outcomes and share in the rewards of a successful effort. Setting the foundation begins before a outsource provider is selected, by developing an understanding of the motivations and expectations for outsourcing.
Selecting an Outsource Provider
With plans and expectations in place, the next step to successful outsourcing is selecting a provider. Many companies that have experience with outsourcing have developed systematic approaches to the selection process, including criteria grids with numeric rankings and formal Request for Information (RFI) and Request for Quote (RFQ) templates. These are useful tools, both because of the consistency they promote as well as the required preparation, planning, and intentionality required to use these tools.
From a process standpoint, selection typically involves finding a pool of candidates; gathering initial information from each potential provider; developing a short list of contenders; conducting indepth interviews with short-list candidates; requesting and reviewing proposals and quotes; and finally, selecting and finalizing business agreements. Throughout the process, candidate providers will offer feedback and questions on the scope of work being quoted. While some of this feedback may be simple questions warranting clarification, questions and input from potential providers can often be invaluable in refining both the selection process and the scope of work being quoted. As noted, structure in the selection process, through, for instance, formal RFQs and criteria, can be very valuable. Likewise, flexibility in processing information from candidates and adapting the selection process can lead to better insight into providers and, ultimately, more effective program execution.