This article demonstrates how a few leading edge companies have successfully implemented an outsourcing strategy to drive radical change and enterprise transformation. A strategy of transformational outsourcing seeks a rapid, sustainable, step‐change improvement in enterprise‐level performance. When should firms consider transformational outsourcing as a strategic option or imperative? Accenture research highlights at least four contingencies – for scaling up rapidly, for removing the constraints to break‐through growth, for catalyzing broad cultural change, and for radical renewal. A case study shows how by outsourcing their entire maintenance staff, the senior leadership at a large New Zealand pulp and paper mill initiated a two‐phase project to first reduce their workforce and then set the stage for a company‐wide change in their relationship with their unions. In “phase 1,” instead of continuing to battle with their heavily unionized maintenance workforce, mill management partnered with a global maintenance services provider that will take over the function. The deal set the stage for “phase 2,” during which the firm switched many of its other workers from hourly to salaried status. As a result the mill has taken a giant step forward in productivity, cost structure, and flexibility.
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