Bailing out before you start

You've been working on a potential sourcing transaction for months. It's not going well and you have to at least consider giving up. Not a pleasant thought, but why is it so hard to make the decision?

Putting aside the personal embarrassment that can come with a decision to shut down any project, what are some of the things that make it so hard for companies to decide not to do a deal?

If we step back and think about the key hurdles that any good deal has to overcome, there are three. First, it has to have positive economics. Second, it has to be feasible to implement. And, perhaps most relevant to this topic, it has to have strategic positioning.

If a potential deal is floundering, it is often because of the economics or implementation feasibility. We can spend inordinate amounts of time trying, or to borrow that common phrase "turn a sow's ear into a silk purse", before we determine that in some cases, unfortunately, that just won't be possible.

That's when the real challenge begins. Given the strategic positioning that was anticipated from a deal, simply coming back with a "no" answer is insufficient; one needs another alternative. However, the skills and budget to craft that alternative are often not within the scope of the "deal project".

I wonder, is that what makes this such a difficult decision? It can seem like a decision to "give up", which has a distinctly negative feeling.

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Michael Rehkopf

Michael has more than 20 years of experience in operations, strategy and sourcing covering all major parts of the globe. He has also worked for Australian, Canadian, German and Japanese companies in both business process outsourcing and IT outsourcing.
Michael's industry experience includes the financial services, manufacturing, telecommunications and travel sectors. He leverages this diverse industry experience and his university background in accounting, IT and his Master of Dispute Resolution, to assist clients in the development of business strategies and the implementation of sourcing strategies. These include the associated evaluation, negotiation and organizational change.
Michael is currently a partner at TPI, the world's oldest and largest sourcing advisory firm. Prior to joining TPI, Michael held leadership positions with Siemens Business Services, OpenPlus International, Mitsubishi Electric and Netron.